LA County wins $546m for LAX rail

An 8.5 mile transit line to Los Angeles International Airport now has the hefty backing of the Federal government, which used its power under a discretionary grant program to make an increasingly scarce TIFIA loan for the project. This year alone, 39 projects expressed interest in TIFIA loans but only four were cleared to apply for them.

The Los Angeles County Metropolitan Transportation Authority will receive a $546 million loan from the US Department of Transportation for a transit line that could potentially proceed as a public-private partnership.

The project, an 8.5 mile transit rail line connecting Los Angeles International Airport with the southwestern Crenshaw district of Los Angeles. It is a key piece of Los Angeles Mayor Antonio Villaraigosa’s 30/10 initiative, which aims to construct 12 major transit projects in 10 years rather than 30.

As part of speeding up the process, Los Angeles is examining whether to deliver the Crenshaw line as a public-private partnership (PPP). The project is now being assessed for its PPP viability, according to a recent presentation by InfraConsult, the county’s advisor on the metro PPP programme.

Rick Jager, a spokesperson for the Los Angels County Metropolitan Transportation Authority, said the $546 million loan will help the project break ground by the end of next year and enter full construction in 2012. He said the full cost of the Crenshaw line is about $1.7 billion.

The remaining funds will come from a combination of state and local tax sources, Jager said. In 2008, Los Angeles County voters approved a half-cent sales tax to support Mayor Villaraigosa’s 30/10 initiative.

The Department of Transportation cited the 30/10 initiative as a “bold” transportation plan deserving of one of its limited transportation infrastructure grants known as TIGER, Transportation Investment Generating Economic Recovery.

The department had $600 million of such grants available in this round of funding and was allowed to use up to a quarter of it to seed money for loans under a lending programme known as TIFIA. The Departmnet used $20 million of the $150 million allocation for Crenshaw, which will support the loan of $546 million, according to a statement.

The department didn’t make any other loans available from the TIGER grants. All together, 42 construction projects and 33 planning projects across 40 states will share the $600 million given out by the department.

Los Angeles’ loan award comes at a highly competitive time for the TIFIA lending programme. Created in 1998 by its namesake Transportation Infrastructure Finance and Innovation Act, the programme has its demand skyrocket among potential project sponsors.

For example, in March the Department of Transportation received 39 letters of interest for $12.5 billion of TIFIA loans, according to the department’s website. But it only allowed four projects to move forward with applications for about $1.3 billion in loans.

During the previous 11 years of its existence, the TIFIA programme received 83 letters of interest for loans, according to its website.

The winners this year included several prominent public-private partnerships – such as the Presidio Parkway in San Francisco ($309 million), the Eagle Commuter Rail Project in Denver ($400 million) and the Goethals bridge replacement in New York and New Jersey ($500 million). San Francisco’s waterfront transportation improvement project also got a go-ahead to apply for $121 million in loans.

Several noteworthy public-private partnerships were left out, including Pennsylvania and New Jersey’s Scudder Falls bridge replacement (which requested $102 million in TIFIA loans), Georgia Department of Transportation’s Northwest Corridor improvement ($375 million), and Macquarie- and Skanska-backed Elizabeth River Crossings’ underwater tunnel in Portsmouth and Norfolk, Virginia ($525 million). 

Each of these projects will have a chance to apply again next year when their procurement is further along. However, unless Congress acts to expand the TIFIA programme’s lending capacity, competition is likely to remain tough for the low-cost loans.

A 35-year TIFIA loan cost 3.95 percent as of today, according to the programme’s website.

Congress is due to take up the question of TIFIA funding in its next multi-year transportation spending bill. However, action on the bill, originally due to be enacted a year ago, has been postponed at least until next year, when the current re-authorisation of the current transportation bill expires.