Port Terminal Railroads Public Private Partnerships September 18, 2018
John Elliott, Senior Vice President Established in 1995 in Philadelphia to advise short jelliott@strategicrail.com line railroads and companies in the rail industry, SRF has advised on projects in 42 US states and Canadian provinces Strategic Rail Finance • Public and private finance 1700 Sansom Street, Suite 500 • Business sales and acquisitions Philadelphia, PA 19103 • Transportation planning and policy (215) 564-3122 • Business development and site selection Created OnTrackNorthAmerica in 2007, a 501c3 strategicrail.com non-profit advancing sound transportation policy ontracknorthamerica.org and collaborative, holistic growth of the rail industry AAPA Real Estate Conference Strategic Rail Finance Sept 18, 2018 – Page 2
Presentation Outline Railroad industry as context Menu for hybrid investment-public-private partnerships with railroads Financial and “Programmatic” return on investment Case Study: closing a funding gap for on-dock, rail-served development AAPA Real Estate Conference Strategic Rail Finance Sept 18, 2018 – Page 3
7 Structure of the North Class I Railroads American Rail Industry 600+ Class II and III Railroads Industrial Rail Shippers 3000+ AAPA Real Estate Conference Strategic Rail Finance Sept 18, 2018 – Page 4
Comparison of Railroad Types Class I and Regional Railroads Terminal Railroads • Long-haul carriers • Last-mile carriers • The railroads are “public” like a • Typically operate a few miles of utility but without price controls track and switching yards • Railroads privately fund the • Many public, private and hybrid infrastructure and locomotives ownership / operation models • Railroads maintain exclusive • Perform the blocking and operational control over tens of interchange for Class Is and thousands of route miles switching for customers AAPA Real Estate Conference Strategic Rail Finance Sept 18, 2018 – Page 5
Hybrid Investment-Ownership-Operation Ownership Operations Pricing • Land • Train • Tariff rate operations setting • Repair facilities • Signals and • Interchange dispatching agreements • Locomotives • Track • Utility • Mainline and maintenance easements yard tracks • Overhead • Land leases • Structures rights • Industrial • Industrial • Trackage switch tracks rights agreements • Rolling stock • Level of • Storage rates • Leasing service options AAPA Real Estate Conference Strategic Rail Finance Sept 18, 2018 – Page 6
Hybrid Investment-Ownership-Operation Ownership Operations Pricing • Land • Train • Tariff rate operations setting • Repair facilities • Signals and • Interchange dispatching agreements • Locomotives • Track • Utility • Mainline and maintenance easements yard tracks • Overhead • Land leases • Structures rights • Industrial • Industrial Business • Trackage switch tracks rights agreements • Rolling stock Development • Level of • Storage rates • Leasing service options AAPA Real Estate Conference Strategic Rail Finance Sept 18, 2018 – Page 7
Return on Investment Financial Returns Market forces define Equity 12-15% Hybrid Debt No-go zone T-Bills Risk Zero Investment risk grade Programmatic Returns AAPA Real Estate Conference Strategic Rail Finance Sept 18, 2018 – Page 8
Return on Investment — the Third Dimension Financial Returns Equity Public interest Hybrid define Debt Risk Subsidized Debt Limits of Politics and Prudence Programmatic Grants and Tax Credit Equity Returns AAPA Real Estate Conference Strategic Rail Finance Sept 18, 2018 – Page 9
AAPA Real Estate Conference Strategic Rail Finance 10
Group Exercise – “Mind the Gap” On-Dock, Rail Served Prospect How to Close a Funding Gap • $400mm chemical plant, • Another state offered a lot of including $30mm for port and incentives rail improvements • The Company needs the Port • Feedstock via pipeline and rail and RR to close a $20mm funding gap to pick your site • Finished product of 2.2 million • With no land lease revenue or tons by barge and rail available port bond capacity, • Landlord Port owns the land, how do we close the gap? wharf, and railroad track AAPA Real Estate Conference Strategic Rail Finance Sept 18, 2018 – Page 11
Thank You! John Elliott, Senior Vice President jelliott@strategicrail.com Strategic Rail Finance 1700 Sansom Street, Suite 500 Philadelphia, PA 19103 (215) 564-3122 strategicrail.com AAPA Real Estate Conference Strategic Rail Finance Sept 18, 2018 – Page 12
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