FRA Announces $318 Million in CRISI Grant Funding Availability

Last week FRA issued a notice of grant funding of $318 million for rail infrastructure and safety improvements through the Consolidated Rail Infrastructure and Safety Improvement Grants Program known as CRISI.  The deadline for applications is September 17, 2018.

CRISI grants are designed to assist with financing passenger and freight rail system improvements to achieve safety, efficiency, and reliability benefits.  Eligible applicants include states, public agencies, Amtrak, and Class II and Class III rail carriers and railroad or equipment manufacturer working with eligible applicants.

FRA will consider CRISI funding for intercity passenger rail service, to reduce rail congestion, and to improve short-line and regional rail infrastructure; projects to enhance passenger or freight multimodal connections; and  other safety improvements, including deployment of non-PTC safety technology.

FRA’s share of total costs for CRISI projects is not to exceed 80%, but  FRA prefers applications where the Federal projects costs is under 50 percent.

This is the second round of CRISI funding this year.  In May, FRA issued a funding opportunity for $250 million in CRISI grants for Positive Train Control.

FTA “Dear Colleague” Letter Raises Concerns Regarding Federal Share Treatment of TIFIA and RRIF Loans

The Federal Transit Administration (“FTA”) recently penned a “Dear Colleague” letter regarding the Agency’s implementation of the Capital Investment Grants Program, stating that FTA will consider federal loans or financing tools in the context of all federal funding sources for a project, implying that such financing assistance will be calculated as part of a transit project’s federal share. Other modal agencies consider federal loan programs, such as TIFIA or RRIF, to be part of a project’s non-federal share.[1]

The letter has caused a significant amount of discussion in the industry and on Capitol Hill. Treating federal loans as part of a transit project’s federal share would make it more difficult for project sponsors to meet federal-share requirements or to present a favorable benefit-cost ratio.

In response to FTA’s letter, Representative Peter DeFazio (D-OR) and Delegate Eleanor Holmes Norton (D-DC), the Ranking Members of the House Transportation and Infrastructure Committee and Highways and Transit Subcommittee, respectively, sent a letter to Secretary Chao saying the policy “directly conflicts with section 603(b)(8) of title 23, United States Code, which clearly establishes TIFIA as a non-Federal share of project costs if the loan is to be repaid with non-Federal funds.” House Appropriations Committee Chairman Rodney Frelinghuysen also sent a letter to Secretary Chao requesting clarification on the issue.

As we have noted often, the U.S. Department of Transportation has prioritized innovative project delivery approaches and leverage of federal funds in its administration of discretionary transportation funding programs. If FTA treats TIFIA and RRIF assistance as part of a project’s federal share, this would work at cross purposes to the Department’s broader efforts to promote innovative project delivery solutions, many of which rely on these low-interest federal financing tools.

 

[1] The Federal Highway Administration guidance on non-federal share states: “The proceeds of a secured TIFIA loan may be used for any non-Federal share of project costs required under Title 23 or Chapter 53 of Title 49, if the loan is repayable from non-Federal funds. See 23 U.S.C. 603(b)(8) on the terms and limitations of a TIFIA loan.” (https://www.fhwa.dot.gov/ipd/finance/tools_programs/federal_aid/matching_strategies/).

Federal Maritime Funding Opportunity Prioritizes Innovative Project Delivery

Sponsors of critical maritime transportation projects received welcome news this week, as the U.S. Department of Transportation (“USDOT”) published a Notice of Funding Opportunity (“NOFO”) for America’s Marine Highway Projects. This notice makes available roughly $7 million in recently-appropriated funds for the Short Sea Transportation Program (46 U.S.C. § 55601), commonly referred to as America’s Marine Highway Program (“AMHP”).

The U.S. Maritime Administration (“MARAD”) is in charge of this important, but perhaps not well-known, program:  “The America’s Marine Highway System consists of our Nation’s navigable waterways including rivers, bays, channels, the Great Lakes, the Saint Lawrence Seaway System, coastal, and open-ocean routes. The Marine Highway Program works to further incorporate these waterways into the greater U.S. transportation system, especially where marine transportation services are the most efficient, effective, and sustainable transportation option.”

Eligible projects include expansions of documented vessels or port and landside infrastructure that USDOT has previously designated as a Marine Highway Project. A current list of designated projects is available on the AMHP website. The NOFO encourages projects sponsors of designated projects to submit applications by the October 5, 2018 deadline.

In a continuation of this Administration’s efforts to use all available tools to incentivize innovation and efficient project delivery methods, this NOFO encourages project applicants to develop public private partnerships. Furthermore, the NOFO sets a maximum federal share of 80% for projects receiving AMHP grants, but stipulates that projects providing a larger non-federal share will receive preference.

In what is becoming a familiar set of key federal objectives (see, e.g., USDOT’s recent NOFOs for the INFRA and BUILD programs), this NOFO states that USDOT will consider the following when analyzing AMHP applications:

  • Supporting economic vitality at the national and regional level;
  • Utilizing alternative funding sources and innovative financing models to attract non-Federal sources of infrastructure investment;
  • Accounting for the life-cycle costs of the project to promote the state of good repair;
  • Using innovative approaches to improve safety and expedite project delivery; and,
  • Holding grant recipients accountable for their performance and achieving specific, measurable outcomes identified by grant applicants.

AMHP plays a critical role in moving people and goods throughout the United States using the country’s navigable waterways and is closely integrated with other elements of the U.S. transportation system.  The NOFO shows the USDOT’s commitment to encouraging innovation across the various types of the nation’s transportation infrastructure.

Q & A – Rail Infrastructure Needs at Ports

The American Association of Port Authorities (“AAPA”) recently released its State of Freight III – Rail Access and Port Multimodal Funding Needs Report.  For its report, AAPA surveyed its members to determine what aspects of rail infrastructure ports most need.

We thought it would be informative to talk with John Young, AAPA’s Director of Freight & Surface Transportation’s Policy, about the survey results and the report.

Courtesy of the American Association of Port Authorities

Nossaman:
John, thank you for taking the time to speak with us.  Can you please tell us a little bit about the AAPA?

John Young:
AAPA represents 130 public port authorities in the U.S., Canada, the Caribbean and Latin America. For more than a century, AAPA membership has empowered port authorities and their maritime industry partners to serve global customers and create economic and social value for their communities.

Nossaman:
The State of Freight report AAPA recently released is the third of a series.  Could you summarize for us your previous State of Freight publications?

John Young:
In AAPA’s 2015 State of Freight report, the focus of that survey was on intermodal connections.  One third of respondents said congestion at their port’s intermodal connectors caused port productivity to decline by 25% or more over the previous 10 years.  A large majority (80%) of respondents said they require at least $10 million for intermodal connectors through 2025, while 30% of respondents anticipated a need of at least $100 million.  In the 2015 report, respondents also stated that $28.9 billion was needed for 125 port-related freight network projects.

State of Freight II followed the 2015 passage of the FAST Act, which enacted many of AAPA’s top freight policies, such as providing dedicated funding for freight projects.  In 2016, AAPA, in partnership with the American Association of State Highway and Transportation Officials released the State of Freight II.  The results of this report established a baseline of freight infrastructure need to be $287 billion to build out a 21st century freight network.

Nossaman:
State of Freight III discusses the need for improved rail access — efficient transfer of containers and other bulk goods directly from a maritime vessel to a rail car and vice versa.

What did your members identify as the greatest barriers to improved rail access at ports?

John Young:
Sixty-seven percent of our members report that funding and financing options are significant barriers to improved rail access.

Nossaman:
We understand that ports are eligible for the U.S. DOT’s INFRA grant program (the rebranded “FASTLANE” program).  We noted the recent funding announcement awarding a $25.5 million grant to the Philadelphia Regional Port Authority to improve the Packer Avenue Marine Terminal.

What other federal funding tools are available to ports for land-side infrastructure improvements?

John Young:
Ports may utilize BUILD grants for landside infrastructure projects and in some cases TIGER in the past has been used for berth dredging projects.  In April of this year, U.S. DOT issued a Notice of Funding Opportunity making eligible $1.5 billion in grant funding.  The deadline to submit an application for a FY 2018 BUILD grant is July 19, 2018.

The BUILD program is this Administration’s rebranding of the TIGER grant program.  In 2018, port-related infrastructure projects received $72.7 million in Transportation Investment Generating Economic Recovery (“TIGER”) grants.

Ports also may apply for grant funding under the Consolidated Rail Infrastructure and Safety Improvements Program (“CRISI”).  In 2017, Congress authorized $65 million for a variety projects including highway-rail grade crossing improvement projects and projects to enhance multimodal connections.   Ports that are public agencies or a publicly chartered authority are eligible for CRISI funding.  CRISI applications are due June 21, 2018.  We are also working with Congress on revamping the Maritime Administration’s (“MARAD”) Strong Ports grant program.  We intend to make it more user friendly and to focus on small multimodal projects that connect both the landside and waterside networks more seamlessly to ports.  We believe this will better augment the current Marine Highway Program and the FAST ACT freight programs as well as BUILD and CRISI on enhancing connectivity to the marine network.

Another federal program that impacts port landside infrastructure is the Port Security Grant Program (“PSGP”).  Under the PSGP program, Ports can access federal funds to implement security measures that protect critical port infrastructure.  We will be releasing a report on the PSGP in the coming month.  Increasingly, when we talk about infrastructure investment we are also talking about supply chain security.  As our freight network is built out and the supply chain becomes more integrated with the infrastructure we must make the investments to secure it. Ports are the logical place to start.  Right now the federal government invests $100 million in the PSGP to protect 26% of the GDP that moves through our nation’s ports.  That’s a good deal right now, but the new report will illustrate that security challenges don’t stop, but evolve.

Nossaman:
Did your members identify any infrastructure barriers to rail access?

John Young:
Yes, 37% of respondents identified at-grade rail crossings and clearance restrictions (overpasses and tunnels) as major barriers to rail access.

42% of respondents cited grade separation and 23% cited overpass/tunnel heightening as pressing rail project needs.  Grade separation is important because it allows trains to cross over roads or other railroad tracks to eliminate congestion caused by blocked crossings and raising the heights of overpasses and tunnels allows taller trains so that carriers may double stack containers allowing for the more efficient movement of goods.

Nossaman:
What are the large infrastructure projects that survey respondents identified to improve rail access?

John Young:
On-dock rail facilities are the big ticket projects.  They allow containers to be hauled directly to and from docks, eliminating truck drayage.  Forty seven percent of respondents identified on-dock facilities as a pressing infrastructure need.

Nossaman:
How would much would on-dock facilities, eliminating grade crossings, and raising the heights of overpasses and tunnels improve throughput capacity at ports?

John Young:
Forty-three percent of our members report that improving rail access would contribute to over 25% more throughput capacity.  Other members with smaller projects report good, although lower throughput gains.

Nossaman:
Well, we want to thank John again for participating in this Q/A.

Construction Begins on Port of Savannah $125M Rail-Served Logistics Campus

A joint venture lead by Capital Development Partners, an industrial real estate and infrastructure development company, has begun construction on a $125 million logistics campus at the Port of Savannah in Georgia, known as the Savannah Port Logistics Center.

The 197-acre industrial campus will offer dual rail service by Norfolk Southern Railway and CSX Transportation. The site also will offer transload capability and more than 2,000 container storage positions, according to a Capital Development Parners press release.

The first building to be constructed as part of the campus is a 1,075,000-square-foot industrial facility with transload, cross-dock capability and high cube container and trailer storage capacity.  It is slated to open in April 2019.

Construction on the second building, a similar 1,310,400-square-foot facility, is expected to begin late this year.

Demand for modern industrial and logistics facilities at the Port of Savannah and elsewhere on is driven fueled by the widening of the Panama Canal and the emergence of the “New Panamax” vessels, with a cargo capacity of up to 13,000 TEU.

The Savannah Port Logistics Center is financed with institutional financial partners including Greenfield Partners and GH Anderson & Co.

The Port of Savannah, home to the largest single-terminal container facility of its kind in North America, is comprised of two modern, deepwater terminals: the Garden City Terminal and the Ocean Terminal. The Garden City Terminal is the fourth busiest container handling facilities in the United States, encompassing more than 1,200 acres and moving millions of tons of containerized cargo annually.

Rail Projects in Chicago and Ohio Receive U.S. Department of Transportation INFRA Grant Funding

Last week the U.S. Secretary of Transportation Elaine Chao notified Congress of DOT’s INFRA grant winners.  The Chicago CREATE program will receive over $132 million to reduce congestion where multiple railroads intersect and to eliminate automobile traffic delays by separating rail and automobile traffic.  In Ohio, the Ohio Rail Development Commission will receive over $16.2 million to improve 30 miles of rail line.

The INFRA program formerly known as the FASTLANE program focuses on highway projects, but projects that shift freight to other modes of transportation are eligible.

Under the INFRA program, DOT prioritizes projects that have considerable local investment.    The CREATE program is an example of local commitment to a transportation infrastructure project.  In addition to the $132 million in federal funds, the Illinois DOT ($111M), Cook County ($78M), and Chicago ($9M) are contributing to the project as well as Metra ($23M) and Amtrak ($5M).  The Association of American Railroads is also contributing $116 million.

The INFRA grant funding will allow the CREATE Program to fund three of these proposals:

  • The Forest Hill flyover consists of a new north-south flyover structure eliminating conflicts between north-south and east-west train movements at the Foresthill Junction;
  • The 71st Street Grade Separation will separate the Western Avenue rail corridor from 71st street;
  • The Argo Connections component will improve connections at the Argo and Cana junction, address the 87th Street chokepoint, and increase capacity at Argo yard.

These projects are part of the larger CREATE program, which has identified over 70 projects needed throughout Chicago to relieve rail related congestion.

The INFRA grant to the Ohio Rail Development Commission is another example where the sponsor, a division of the Ohio Department of Transportation, is partnering with a railroad. The Norfolk Southern is contributing 40% of the funding to improve 30 miles of rail line along the Ohio River in Jefferson and Belmont County which includes capacity improvement at two rail yards.  Local officials in this rural area hope that the track improvements will attract an ethane cracker plant.

 

 

Financial Close for Automated People Mover (APM) Project at LAX

On June 8, 2018, the City of Los Angeles, acting through the Los Angeles World Airports (LAWA) Board of Airport Commissioners, and LAX Integrated Express Solutions, LLC (LINXS) successfully reached financial close on the $4.9 billion agreement for the APM project.

After reaching commercial close with LAWA on April 11, 2018, LINXS proceeded to secure equity contributions and to arrange and close both bond and bank financings for the project.  Private financing for the project is comprised of approximately (a) $1.2 billion in private activity bonds issued by the California Municipal Finance Authority on behalf of LINXS; (b) a $270 million construction period credit facility with loan commitments from Canadian Imperial Bank of Commerce New York Branch, Mizuho Bank Ltd., Sumitomo Mitsui Banking Corporation, Korea Development Bank and Toronto-Dominion Bank; and (c) an aggregate equity contribution of $103 million secured by letters of credit provided by Fluor Enterprises, Inc. (27%), Balfour Beatty Investments, Inc. (27%), HOCHTIEF LINXS Holding, LLC (18%), ACS LINXS Holdings, LLC (18%) and  Bombardier Transportation (Holdings) USA Inc. (10%).

Courtesy of LAWA

The bonds were underwritten by Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc. and Ramirez & Co., Inc. Certain maturities of the bonds have the benefit of bond insurance provided by Assured Guaranty Municipal Corp.

Fitch Ratings assigned a rating of “BBB+” to the bonds (other than the insured bonds) and S&P Global Ratings assigned a rating of “AA” to the insured bonds.

LINXS’ debt obligations under the bonds and to the banks, and distributions to equity providers, will be paid through revenues generated by the APM project.  The revenues generated by the project are the payments from LAWA to Developer under the terms of the project agreement, comprised of (a) five Milestone Payments, together with certain additional D&C payments, paid by LAWA during the construction period and a sixth Milestone Payment paid after final completion; and (b) “availability payments” that commence when the APM system is available for passenger service and continue through the operations and maintenance period.

Under the terms of the project agreement LAWA may make downward adjustments to availability payments if the APM system does not meet specified availability and performance requirements.  As such, Developer’s private financing is at risk to performance, creating a strong incentive for Developer to provide high quality infrastructure and service throughout the operating period.  LAWA’s APM is the first APM system to be procured through an availability payment P3 delivery model.

The APM will directly benefit airport users and the community by vastly improving mobility and access at the airport. The APM system will include six stations and up to nine electric powered trains, each with four cars, in simultaneous operation.  The APM trains will travel on an elevated 2.25-mile long guideway, easing access into and out of the second busiest airport in the United States (LAX) and connecting travelers to LA Metro’s Crenshaw Light Rail Line, intermodal transportation facilities and a consolidated rental car center.

 

 

PhilaPort Wins $25.5M INFRA Grant for Packer Avenue Marine Terminal Modernization

Today, US DOT is formally announcing 26 INFRA grant award winners.  The INFRA program is the Administration’s rebranding of the former FASTLANE grant program, authorized by the 2015 FAST Act.  Both programs were intended to prioritize highway projects, although congestion-reducing rail and port infrastructure projects are eligible.

Among the 26 winners is the Philadelphia Regional Port Authority (“PhilaPort”), which received a $25.5M grant for a $110.5M project to improve the Packer Avenue Marine Terminal. The project will add capacity to modernize the Terminal, including deeper berths (45-feet) to match the new 45-foot depth of the Delaware River’s main channel; four new electric engine cranes; two crane conversions (diesel to electric); demolition of antiquated warehouse facilities and construction of a new temperature controlled warehouse, with related offsite warehouse improvements; and added crane rail tracks.

Courtesy of The Port of Philadelphia

The Packer Avenue Marine Terminal improvements will increase PhilaPort’s ability and efficiency service marine vessels visiting the port, including the large Post-Panamax vessels.

PhilaPort is leveraging the INFRA grant with State and private sector investment and incorporating the life-cycle costs of the Packer Avenue Marine Terminal improvements. Astro Holdings, Inc., the tenant of the Packer Avenue Marine Terminal, will purchase one of the new cranes for the terminal and dedicate significant privately-owned port acreage as part of the project.

USDOT is required to notify the congressional authorizing committees of jurisdiction of the proposed projects selected under the INFRA program. The list must remain with the committees for a 60-day review period before the agency can award the grants.

GAO Report Critiques FTA’s Failure to Implement MAP-21 and FAST Act Mandates

A new Government Accounting Office report says the Federal Transit Administration has failed to meet three statutory requirements (two from MAP-21 and one from the FAST Act) related to the Capital Investments Grant program, the primary source of federal funding for commuter, light rail, subway, ferry and bus rapid transit projects.  FTA says it has no plans to do so.

GAO says FTA has not issued regulations for rating Core Capacity Improvement projects; established a grant program for simultaneous development of multiple transit projects; or implemented a pilot program for fast-track transit project approval.

These are not trivial matters.  Core Capacity Improvement projects are investments in existing commuter, light rail, subway, ferry and BRT systems designed to increase corridor capacity, so a rating system could ensure that the best projects get funding.  A grant program for simultaneous development of multiple transit projects (aka, a “program of interrelated projects”) could help transit systems in fast-growing cities deliver multiple, complementary projects more efficiently.  Implementation of a pilot program for fast-track transit project approval, a FAST Act mandate, would facilitate faster clearance and funding of capital grants.

FTA told GAO they had no immediate plans to advance any of these requirements, in part because the Trump Administration has proposed to phase out the Capital Investments grant program. GAO notes that the FY2018 omnibus spending bill appropriated $2.6 billion and “required FTA to continue to administer the program in accordance with the procedural and substantive requirements specified in statute.” This, by the way, is as pointed as GAO gets.

Even recognizing the other important work of the agency, I am surprised FTA is not moving to implement these statutory requirements.  FTA might be missing an opportunity to make the Capital Investments Grant program better, stronger and faster, which would do a lot to ensure the program’s survival.

New Federal Transit Administration Rule Seeks to Remove Barriers to P3s

In an effort to promote project flexibility, funding innovation, efficiencies and timely implementation, this week the Federal Transit Administration (FTA) released its final rule regarding P3s (and other private involvement) in public transportation projects.

The “primary goal” of FTA’s “Private Investment Project Procedures” (or “PIPP”), new 49 C.F.R. Part 650, is to “identify and address” FTA requirements that are “impediments to the greater use of public-private partnerships and private investment in public transportation capital projects, while protecting the public interest and any public investment in such projects.”  This new FTA rule was promulgated under authority granted under 2012’s MAP-21 Act.[1]

MAP-21 directed the U.S. Secretary of Transportation to develop policies that promote public understanding of the role of private investment in public transportation and to coordinate private sector participation in delivery of public transportation services.  The mandate was then, among other things, to identify and address impediments to “greater use” of P3 delivery and “private investment in public transportation projects.”[2]

FTA elected a strategy to set out special procedures outlined in the PIPP by which project sponsors may petition for modification to some federal, non-statutory requirements that pose the impediments described just above, not unlike the Federal Highway Administration’s strategy via SEP-15 authority.  Put another way, FTA wants to encourage modifications to these federal requirements that will “accelerate the project development process, attract private investment and lead to increased project management flexibility, more innovation, improved efficiency, and/or new revenue streams.”[3]  FTA is not trying to change the rules themselves.  Rather, it is using a flexibility strategy that lends itself to project-specific sensitivity.

Sponsors may not, however, seek to modify or waive NEPA requirements or statutory requirements, as this is outside FTA’s statutory authority under MAP-21.[4]

PIPP pertains only to public transportation projects that intend to involve private sector investment or developers – essentially P3 public transportation in specific forms.  PIPP defines P3 broadly as “a contractual agreement formed between a public agency and a private sector entity that is characterized by private sector investment and risk-sharing in the delivery, financing and operation of a project.”[5]  PIPP outlines an application process and the factors with respect to any eligible project[6] that the sponsor must demonstrate to FTA in order for FTA to consider waiving or modifying its non-statutory, non-NEPA requirement.[7]  The factors[8] are essentially whether the waiver or modification:

  • Would remove an impediment or “discouragement” to use of P3 (joint development or private sector investment);
  • Would encourage use of P3 (joint development or private sector investment);
  • Likely private sector investment or risk transfer “warrants” modification/waiver; and
  • Still protects the public interest and public investment in the project.

Project sponsors retain post-waiver/modification reporting responsibilities.  Central to the application is “evidence of committed financing,” including private sector investment, but FTA seeks further comment as to whether this is feasible at the time of the application – a chicken-and-egg issue.  Public comment to the final rule is invited, so further changes to PIPP may be forthcoming.

PIPP is largely unchanged from the July 31, 2017 proposed rulemaking.  PIPP outlines substantive changes, largely relating to project identification in long-term planning and other administrative matters regarding applications.

FTA’s move here fulfills the MAP-21 requirements but also is consistent with the Executive Branch’s “roadmap” for infrastructure, released in February, itself a principled extension and proposed implementation of MAP-21’s subsequent transportation bill, 2015’s “Fixing America’s Surface Transportation (FAST) Act.”[9]  Specifically, the PIPP supports the proposal’s key principle that project sponsors are to prioritize projects and make investment decisions. The natural extension through PIPP is to identify, and propose to remove, impediments to private investment via P3.

[1] Nossaman’s 2012 blog and more information on the then-remaining challenges to P3s that MAP-21 retained can be found here.

[2] P.L. 112-141 § 20013(b); see 49 U.S.C. § 5315.

[3] FTA-drafted Executive Summary of PIPP.

[4] 49 C.F.R. § 650.13

[5] 49 C.F.R. § 650.5

[6] Defined at 49 C.F.R. § 650.5 as “any surface transportation capital project that is subject to 49 U.S.C. ch. 53 [public transportation projects] and that will be implemented as a public-private partnership, a joint development, or with other private sector investment.”  See 49 C.F.R. § 650.5 for other relevant definitions.

[7] See 49 C.F.R. § 650, Subparts B and D.

[8] 49 C.F.R. § 650.11(b)(1) to (4).

[9] https://www.infrainsightblog.com/2018/02/articles/news/white-house-releases-roadmap-for-nations-infrastructure-congress-takes-the-wheel/

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