Tag Archives: bonds

Explaining the other half of America Fast Forward: transportation bonds

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America Fast Forward Bonds

Click above to view larger.

Metro last year scored a win when Congress adopted part of the America Fast Forward initiative, expanding a federal loan program called TIFIA that offers low-interest, government backed loans.

Metro is now pushing Congress to adopt the other half of AFF, a bond program designed to raise money to accelerate transportation projects and create jobs.

Which might sound familiar. Everyone in Congress is always talking about job creation, including President Barack Obama in his State of the Union address on Tuesday. Metro believes AFF is a good way of tackling that issue while also dealing with a few others — expanding transit, reducing greenhouse gas emissions and ensuring that our infrastructure remains in good working order.

The bond program is a bit complex: it’s taken me a while to get my brain wrapped around it. The above graphic explains it well. In one sentence: those who invest in transportation bonds receive federal tax credits instead of interest, a good way for investors to lower their tax burden and a good way for transportation agencies to save on interest costs.

Another way of thinking about it: the program doesn’t ask the federal government to spend directly on transportation projects. It does, however, ask the feds to forgo some tax revenues.

Metro is hoping to get the bond and loan program enshrined in the next multi-year federal transportation spending bill. The current bill expires in 2014, meaning a new bill will hopefully be approved by Congress within the next year.

Measure R bonds sold

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The first set of bonds to be repaid by Measure R sales tax receipts were sold last week, according to Metro CEO Art Leahy’s daily email to staff:

Last Thursday, we sold $732 million of Measure R bonds, made up of $574 million of taxable Build America Bonds and $158 million of tax exempt bonds. Proceeds of the bonds will provide $750 million, including bond premiums, for Measure R projects. Following extensive marketing, the AAA/Aa2 rated bonds were favorably received by investors as evidenced by the nearly 2x over subscription. Because of the 35% federal subsidy, the net interest cost for the entire bond issue is approximately 3.52% as compared to an estimated 4.24% had we sold the entire amount on a tax exempt basis.

Bonds are sold in order to obtain the money to build projects now and to offset the increased cost of building them later. The alternative is to wait until Measure R receipts flow into county coffers over time — but the key word there is ‘time.’ It can take many years for enough money to accumulate to build all of the projects Metro wants to build. Here’s the list.

Pressing forward on the 30/10 Initiative

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L.A. Mayor Antonio Villaraigosa and Sen. Barbara Boxer at their discussion on the 30/10 Initiative earlier today at City Hall. To the left of the mayor are Metro CEO Art Leahy and L.A. County Federation of Labor Secretary-Treasurer Maria Elena Durazo. Photo by David Starkopf, Office of Los Angeles Mayor Antonio Villaraigosa.

Los Angeles Mayor Antonio Villaraigosa and U.S. Senator Barbara Boxer co-hosted a ’roundtable’ discussion on the 30/10 Initiative this afternoon at City Hall in downtown L.A.

The map shows the Measure R-funded transit projects that would be accelerated under the 30/10 Initiative. Click above for a larger image.

The point: talk about progress on the effort to secure federal loans and financing to build 12 Measure R transit projects in the next 10 years instead of the next 30. The projects are sprinkled throughout the county; among them are the Westside Subway Extension, Regional Connector, Crenshaw Line and an extension of the Eastside Gold Line.

A lot of the discussion was either technical in nature or reiterated points that attentive Source readers already know: 30/10 could indirectly create a half-million jobs in L.A. County and will likely require Congressional approval as part of the next massive transportation bill, which is likely to be taken up after the November elections.

Here are a few highlights of the discussion:

•”We expect to have good news about one of the projects or more getting accelerated within 60 days,” Boxer said, without specifying which project or projects is the candidate. All I can say for sure is that the projects farthest along in the planning stages are likely the most serious candidates and those projects, in alphabetical order, are the Crenshaw Line, the Foothill Extension of the Gold Line to Azusa, the Orange Line extension to Chatsworth, the Regional Connector and the Westside Subway Extension.

•The best quote came from Villaraigosa, explaining his intent to continue pressing hard on 30/10 during his last three years as mayor. “I’ve got three years left, I’m not going out on a cot here. I want to go out on a train.” Continue reading →