ALAMEDA CORRIDOR

1. ALAMEDA CORRIDOR “A Project of National Significance”

2. Project Purpose The Alameda Corridor Project is needed to keep pace with the steady growth of cargo moving through the Ports of Los Angeles and Long Beach • U.S./Pacific Rim trade has doubled during the last decade • The Port’s share of West Coast container cargo increased from 42% in 1976 to 52% in 1999 with increasing market share projected in future years • Cargo volume in 2000 exceeds the forecast by the Independent Cargo Consultant for 2006 • Factors affecting future growth • 18 million population in six county area • Larger container ships • Vessel sharing arrangements • Increase in discretionary cargo • State of the art facilities at Ports • Ports are the “Load Center” of West Coast 2

3. DOWN- TOWN LOS ANGELES VERNON Vernon Ave. Stauson Ave. Gage Ave. HUNTINGTON PARK Florence Ave. Firestone Ave. Southern Ave. DOWNEY SOUTH GATE Tweedy Ave. Imperial Hwy. El Segundo Blvd. LYNWOOD COMPTON Rosencrans Ave. Compton Blvd. PARAMOUNT Alondra Blvd. BELLFLOWER CARSON LAKEWOOD Del Amo Blvd. TORRANCE Carson St. LONG BEACH LOMITA Sepulveda Blvd. Pacific Coast Hwy. Anaheim St. WILMINGTON RANCHO PALOS VERDES 101 105 405 710 110 10 5 60 91 Port of Long Beach SAN PEDRO Port of Los Angeles P A C I F I C O C E A N Project Schematic ALAMEDA CORRIDOR 3

4. Project Description The Alameda Corridor is a 20 mile, multi-track rail transportation corridor, paralleling Alameda Street, connecting the Ports of Los Angeles and Long Beach with the transcontinental rail network in downtown Los Angeles • Consolidates operations of the Union Pacific/Southern Pacific (UP) and Burlington Northern Santa Fe (BNSF) onto one improved corridor (San Pedro, Wilmington) • Eliminates traffic conflicts at 200 street level crossings with overpasses and 10 mile long trench • Estimated cost—$2.4 billion, including contingencies and financing costs • Estimated completion—Second Quarter 2002 • Projected to reduce train emissions (25%) and vehicular emissions (23%) • Projected to reduce locomotive hours (30% per day) and vehicle delays (15,000 hours per day) 4

5. Organizing the Solution • Identifying Participants and Stakeholders • Port of Los Angeles • Port of Long Beach • City of Los Angeles • City of Long Beach • Burlington Northern/Santa Fe Railroad • Southern Pacific Railroad • Leadership/Sponsorship roles—the Ports took the lead • Legal Construct—J.P.A.—two attempts • Legal Tests • Union Pacific Railroad • 6 Corridor Cities • LACMTA • Cal Trans • USDOT 5

6. Risk Sharing Construction Risk Ports USDOT Revenue Risk Design-BuildConsortium Seismic Risk Bondholders/Bond Issuers Environmental Risk Outside Insurers Interest Rate/Market Risk Railroads 6

7. ACTA—Financial Feasibility Analysis as a Central Planning Tool • First financial model designed in 1992 • 427 scenarios over 6 1/2 years • Focuses overall efforts • Centralizes decision-making around feasibility • Format of Executive Level reports allow policy makers to understand key aspects of projectand follow along with progress Debt Service Tables Construction Parameters Revenues Tax Analysis Coverage Tables Bonds • Senior • Subordinated Other Sourcesof Funds Federal Loan Flow of Funds Prepayments Reserves Revenue Accumulations Retirements & Reimbursements Structure 7

8. The Original Funding of the Project Original Budget ($millions) One Time Sources Federal Congress, TEA-21 and Demonstration Programs $700 USDOT–Other Programs 30 Air Quality—EPA 8 ISTEA 40 State and Regional 100 LACMTA–Regional STIP 0 Ports 400 Cities 40 Revenues—Recurring Sources—For bonds and/or Loan 600 Ports—Shippers 5% Gross Wharfage Surcharge Truck Tolls $3 toll Railroads—User Fees $30/box Total$1.838 BB 8

9. Railroad Sensitivities • RR’s do not like to share facilities • RR’s are sensitive to additional Per Unit Cost • May be amenable to Per Unit Cost where: • Leverage of State/Local/Federal sources is maximized • Accelerates asset modernization substantially • High-Density areas dramatically improve times • Strong demand areas • R.R. Capital costs are much higher • Uncertainty/Risk Avoidance 9

10. USDOT and ACTA—Precursor to TIFIA • ACTA approached Congress/USDOT for $700MM grant • USDOT countered with $400MM loan • Underwriters structured terms: • Consistent with feasibility • Favorable to ACTA • Competitive with tax-exempt rates • USDOT agreed to terms: • 10 year Treasury rate through 2001—30 year thereafter • No interest due through 2001 • Negative amortization through 2013—Builds to $880MM • 30 year term • No cross default • No rate covenant • Congress appropriates $59MM Loan Loss Reserve • Ratings • OMB scoring 10

11. ACTA and USDOT (cont.) • Congressional heavy lift • Chair of House Transportation Committee—House authorization • California delegation—Unified • Ca. Governor Speaker of the House Committee Chair • Administration efforts • Central L.A.—Jobs and economy • Signed loan—1/17/97 to great fanfare • Amended loan 10/98 • to include package of construction—friendly amendments • to allow 35 year termination of Use Fees • Draws scheduled and taken • $140—9/97 • $140–9/98 • $120—9/99 11

12. Project Contingencies $200 Ports $394 ROW, Demo Proj., Prelim. Eng. $468 Misc. $27 Interest $90 Senior Bond Proceeds $1,006 Corridor Construction Costs $1,431 Financing Costs $82 MTA $347 Capitalized Interest $247 Subordinate BondProceeds $164 DOT Loan $400 Sources and Uses of Actual Funding Total Project cost, including all expenditures to date, are estimated at $2.463 billion Sources Uses Amounts in $ millions. All construction cost dollars are inflated at 3.35% other than the design buildcontract price. Bond proceeds include original issue discount/premium and accrued interest. 12

13. Other Sources of Funds • The ports advanced $394 million in 1994 to purchase railroad rights-of-way • The U.S. Department of Transportation made a $400 million loan to the project • Congressional appropriation made • Total $400 million already drawn down • Paid ahead of the Senior Lien Bonds but after the Subordinate Lien Bonds • The Los Angeles County Metropolitan Transportation Authority has committed $347 million to the Project • Approximately $300 million already has been received • All but $76 million of Prop. C funds are from State of California/STIP Sources other than bonds comprise nearly 50% of project funding 13

14. Waterborne Containers are those that cross the docks at the Ports and leave Los Angeles area by rail (or vice versa) Use Fees and Container Charges subject to automatic annual escalation (CPI): Minimum of 1.5% per year Maximum of 3.0% per year No charges if complete blockage of Rail Corridor for more than five consecutive days—offset by business insurance Project Revenues per Operating Agreement with Railroads Use Fees or Container Charges are to be levied for 35 years commencing after Substantial Completion Railroads pay Use Fees for Using Rail Corridor Railroads pay Container Charges on waterborne containers not using Rail Corridor Waterborne containers $15/TEU (loaded)(i.e., entering or leaving ports) $4/TEU (empty) Non-waterborne containers $4/TEU (loaded or empty) Other railcars (autos, coal, white $8/railcar (loaded)bulk, iron & steel, liquid bulk, tec.) No charge (empty) Waterborne containers $15/TEU (loaded) No charge (empty) 14

15. Ports’ Shortfall Advances • Payable in any year in which use fees and container charges are insufficient to pay 100% of debt service on the bonds and the DOT loan • The maximum Shortfall Advance payable by the ports in any year (i.e. “Contingent Port Obligation”) = 40% of debt service on bonds and DOT loan • Actual Shortfall Advance = debt service on bonds and DOT loan less Use Fees and Container Charges collected The Ports are obligated to provide limited “Shortfall Advances” 15

16. Senior Lien Bonds Subordinate Lien Bonds Total $494MM Series A (2006–2037) $21MM Series B (2003–2006) Tax-Exempt $515MM $505MM Series C (2015–2037) $145MM Series D (2003–2015) Taxable $650MM Total $999MM $166MM $1,165MM Detail of Revenue Bonds ACTA has issued/will issue approximately $1.165 billion of 1999 Revenue Bonds in four series Amounts shown reflect the estimated par amount (not proceeds) of the 1999 Bonds 16

17. Corridor Revenues ACTA’s repayment obligations will be paid primarily from Use Fees and Container Charges as projected by BST (based on the Mercer/DRI Cargo Forecast) Use Fees and Container Charges FY Revenues ($ millions) Federal Fiscal Year Source: BST based on Mercer/DRI 1998 Cargo Forecast through 2020 (“Asian Crisis” scenario); 0% cargo growth assumption and 1.5% CPI assumption on revenue from 2021-2037. Assumes termination of revenues occurs July 2037. *Containers account for 99% of total revenues 17

18. Available Revenues Additional Dedicated Revenues are provided by the Contingent Port Obligation Contingent Port Obligation Use Fees and Container Charges FY Revenues ($ millions) Federal Fiscal Year Source: BST based on Mercer/DRI 1998 Cargo Forecast through 2020 (“Asian Crisis” scenario); 0% cargo growth assumption and 1.5% CPI assumption on revenue from 2021-2037. Assumes termination of revenues occurs July 2037. Contingent Port Obligation = 40% of the Annual Amount and DOT Loan payments each year. 18

19. Senior Lien Debt Service DOT Loan Subordinated Debt Service Use Fees and Container Charges “Dedicated Revenues” Required Shortfall Advances ACTA Obligations Dedicated Revenues are expected to provide ample coverage of the 1999 Revenue Bonds and DOT Loan Debt Service ($ millions) Federal Fiscal Year All debt service is assumed to be capitalized through January 1, 2003. Dedicated Revenues = Use Fees and Container Charges, Contingent Port Obligations and certain interest earnings 19

20. Mercer Scenarios ACTA’s “base case” projections assume Mercer’s mostconservative estimate (“Asian Crisis”) cargo growth scenario Total TEUs ($millions) Containers (TEUs)1996–2020CAGR Forecast Scenarios Characteristics 1996 2010 2020 Asian rebound apparent by late 1998 Steady gains in trade liberalization Long-term global GDP growth rate of 3.2% High Growth 2.9 7.8 16.7 7.6% Asian rebound begins in mid-1999 Trade liberalization proceeds at a moderate pace Long-term global GDP growth rate of 2.8% Base Case (12/97) 2.9 7.0 14.4 6.9% Asian recovery delayed until early 2000 Trade liberalization slows Long-term global GDP growth rate of 2.4% “Asian Crisis” 2.9 6.3 12.4 6.2% Note: TEU = Twenty-Foot Equivalent Unit CAGR = Compound Annual Growth Rate 20

21. Conclusion • Successfully secured the cooperation of major stakeholders including intense competitors. • Local, state, and national elected officials fully supportive of project with Federal government designating the Alameda Corridor as a “project of national significance. • Policy maker decision making process facilitated with well developed model and feasibility analysis. • Risk spread among various parties including construction contractor. • ACTA among first to use TIFIA program under TEA-21 resulting in $400 million federal loan with highly flexible provisions. • Funding shared equally between private and public partners. • ACTA, on time and on budget, has been a public/private partnership success. 21