Port Planning and Investment Toolkit

Introduction & User’s Guide

Port Planning & Investment Toolkit

Preface
The American Association of Port Authorities (AAPA) and the U.S. Department of
Transportation (USDOT), Maritime Administration (MARAD) signed a cooperative agreement
to develop an easy-to-read, easy-to-understand, and easy-to-execute Port Planning and
Investment Toolkit. The goal of the project is to provide U.S. ports with a common framework
and examples of best practices when planning, evaluating and funding/financing freight
transportation, facility and other port-related improvement projects.

The analytical tools and guidance contained in this comprehensive resource are designed to
aid ports in developing “investment-grade” project plans and obtain capital for their
projects in a variety of ways, including: (1) improve the chances of getting port
infrastructure projects into Metropolitan Planning Organization (MPO) and state
transportation programs to qualify for formula funding; (2) better position port projects for
federal aid; and (3) assist ports in obtaining private sector investment.

Since each port investment project is unique with its own set of strengths and obstacles, the
material in this Toolkit is not intended to address specific requirements of any single
project, user or port; it is a resource for a diverse group of users to become familiar with port
planning, feasibility and financing and to highlight opportunities for engagement and
coordination throughout the project definition process. This document is not a replacement
of existing policies or consultation handbooks and does not constitute a standard,
specification or regulation. The exhibits, processes, methods and techniques described
herein may or may not comply with specific national, state, regional and local regulatory
requirements.

All material included in the Toolkit is copyrighted, 2017 by AAPA. The materials may be
used for informational, educational or other non-commercial purposes. Any other use of the
materials in this document, including reproduction for purposes other than described
above, distribution, republication and display in any form or by any means, printed or
electronic, is prohibited without the prior written permission of the AAPA.

This Toolkit will be updated periodically as new regulations and policies are developed
affecting port planning, feasibility and investment requirements related to the applicable
laws discussed in the document. Additional information, updates, and resources of the
Toolkit are available on the AAPA website at http://www.aapa-
ports.org/empowering/content.aspx?ItemNumber=21263 and the MARAD website at -
https://www.marad.dot.gov/ports/strongports/port-planning-and-investment-toolkit/

For all other queries regarding the Port Planning and Investment Toolkit, please contact
Jean Godwin, Executive Vice President and General Counsel, AAPA at 703-684-5700.
 Port Planning & Investment Toolkit

INTRODUCTION/USER’S GUIDE

Introduction
The American Association of Port Authorities This requires costly investments in port
(AAPA) and the U.S. Department of infrastructure and equipment. Because these
Transportation (USDOT) through the Maritime rapidly growing capital needs cannot be fully met
Administration (MARAD) organized a team of port from traditional revenue sources, port owners
industry experts throughout the U.S. to develop have sought innovative methods to finance
this Port Planning and Investment Toolkit. The infrastructure investment by engaging with a
Toolkit provides port owners with information and new, larger cast of public and private partners.
practices to assist when planning and evaluating These partners must have access to in-depth
projects that require financing and/or funding from planning, environmental assessment, outreach,
public, private or combined sources. It also outlines feasibility and financial analysis outcomes before
the steps and processes used by planning determining whether to provide funds for a port
professionals and financiers, which may be new to project under consideration.
some port professional staff and commissioners.
Port owners have emphasized the need for a
resource to guide them as they prepare plans,
Purpose & Need
evaluate the feasibility and estimate the financial
U.S. ports move billions of tons of goods today performance of their projects to attract public and
and need significantly more capacity to handle private investment. Such a resource would assist
the peak cargo volumes projected in the future. them in reaching their goal of obtaining funding
and financing for the implementation of critical
Project Port & Private Capital Expenditures development, expansion, repair and upgrade
on Port Infrastructure projects.

This Toolkit is intended to be useful for owners of

ports of all sizes and within all markets by helping
to outline the steps for successful project
definition and implementation through
articulating assumptions, clarifying ambiguities,
quantifying details and identifying the important
considerations to achieve project funding and/or
financing. It is also intended to be useful for port
professional staff with technical responsibilities to
present their plans for a project and its associated
benefits to executives and governing boards.

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User’s Guide
This User’s Guide provides guidance and direction • Throughput Capacity provides detail related to
to Toolkit users when accessing the various the variables and modeling approach that
resources in the Toolkit. The Toolkit is comprised should be considered in assessing a port’s
of three modules that are aligned with the three practical capacity.
primary stages involved in project definition:
• Forecasting Trade Demand summarizes the
Planning, Feasibility and Financing. The Toolkit
challenges of developing a port-specific trade
also contains multiple Appendices, a Resource
forecast and provides an example of the
Catalog, and a Port Concession Evaluation Model.
economic variables that should be considered.
The Planning Module provides guidance to the The Resource Catalog is a searchable spreadsheet
Toolkit user when beginning to identify factors that contains references and links to applicable
that must be addressed when planning a potential studies and reports, academic papers, trade
port project. This module provides clearly defined publications and other pertinent material available on
steps of the planning efforts needed to support a the subject of port planning and feasibility.
financeable project.
The Port Concession Evaluation Model is a sample
The Feasibility Module addresses the process of financial model provided for illustrative purposes that
refining a project plan by considering all aspects can be used for considering high level concession
of cost, risk, and reward. This module includes evaluation elements. The objective of this sample
approaches for measuring and evaluating the model is to illustrate key elements of a financial
benefits and costs of project alternatives created feasibility and financing strategy analysis for a port
during the planning stage. terminal concession.
The Financing Module describes different This User’s Guide has been organized to help the
approaches for evaluating project financing Toolkit user quickly understand and gain access to
strategies and identifying ways to obtain grant the appropriate content of interest:
funding and public/private financing. It includes
I. Context: Key terms are defined to provide a
examples of financing strategy solutions designed
context for understanding the Toolkit’s
to address a variety of needs.
intended audience and purpose.
Appendices are included to provide usable
II. Outline: A general description of the structure
resources related to each module:
and content is provided to assist the user with
• The Glossary of Terms defines the understanding the top level organization of the
terminology that is used throughout the Toolkit modules.
Toolkit, providing a common basis of
III. Checklist: Rapid guidance to accessing specific
communication.
content in each Toolkit module is provided by
• Project Profiles includes descriptions of how using the checklist at the end of the user’s
different real-world projects were guide. A series of statements related to port
approached, providing Toolkit users with planning, feasibility and financing are provided
examples that demonstrate best practices in along with the corresponding hyperlink and
port planning, feasibility analysis and page number where each topic is addressed.
financing.

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I. Context
This Toolkit has been created to guide the Port developments may have multiple components
definition of a project for which a port owner is that are linked together by a common objective;
seeking financing and/or funding. The term project however, port owners seeking financing and/or
financing as used in this Toolkit refers to the funding should separate each independent
means by which debt and/or equity is acquired to component into individual projects to minimize the
pay for a project or portion thereof, requiring the compounding of financial and permitting risks. Each
project's cash flow or assets for repayment. project should have independent utility, i.e., it is
Project funding, in this Toolkit, refers to the functional without the development or improvement
means by which internal reserves, direct user of other separate assets. While the project may
charges/fees, or government investment are raised include sub-projects related to the phasing of project
or obtained and used to pay for a project or portion construction, these phases of the project would
thereof. typically not have independent utility.

Because the range of potential users of this Toolkit A project with independent utility will have an
is diverse, the term port owner throughout this independent development timeline such that its
Toolkit encompasses port authorities, terminal unique benefits, costs and impacts can be clearly
operators, private companies, and project ascertained. Although additional benefits or costs
sponsors that own and/or operate a port. A port is of a project may result in the future due to
considered to be a single- or multiple-facility entity synergies with other planned improvements at a
that facilitates the transfer of cargo and/or port, the project should stand on its own merits in
passengers between logistically-linked transport the event that the other projects never come to
modes (e.g., truck to barge to ocean-going vessel). fruition. The cumulative impacts of other projects
A port may provide services at inland multimodal that have occurred or may occur in a project area
facilities as well as along navigable waterways. should still be considered, particularly for
environmental review.

Accordingly, the use of the term project

throughout this Toolkit comprises the acquisition,
development, expansion or renovation of a single
site, facility, infrastructure element, or operational
resource to meet an identified or emergent need.
For example, the project could be a new
distribution center as an outcome of a planning
effort or procurement of gantry cranes as a result
of an abrupt increase in vessel sizes calling at the
port. A project endorsed by a port owner should
enable the movement of freight through a port’s
coastal and/or inland assets.

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In a given year, a port owner may undertake any For example, a strategy to increase refrigerated
one or several planning efforts (Exhibit I-1 ) that cargo business as an outcome of a port’s Strategic
lead to potential port projects. Comprehensive Plan may cause higher local truck traffic and create
planning outcomes typically include the a need for additional warehouse space and reefer
identification of future port developments and plugs, impacting the Regional Goods Movement
potential projects. Project-specific planning Plan and the port’s Operations & Maintenance
efforts involve the definition of a project and Plan and Capital Improvement Plan, among
culminate in a project plan in support of pursuing others. Similarly a Transportation Access Plan that
project financing and/or funding. identifies a need for an overpass at the Port
impacts the port’s Land Use Plan, Stormwater
Although port planning efforts occur at different
Plan, and Inter-Terminal Plan.
stages and at varying degrees of specificity
ranging from strategic to tactical, they are often Comprehensive Planning: Identification of
interconnected such that the decision cycles Potential Projects
resulting from one planning effort can influence Comprehensive planning efforts have been
the outcomes of other efforts. In addition, any of organized into three groups with associated
the comprehensive planning efforts can provide ranges of focus:
input into the development of project plans, and
project plans in turn can influence the
• Direction (long to short term);
identification of other potential projects. • Operation (external to internal focus); and
• Resource (regional to port focus) planning.
Exhibit I-1 Examples of Port Planning Efforts

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Direction planning documents

such as master plans and land Fulfilling Federal Environmental Requirements
use plans typically clarify and If there is a possibility that the potential project will be subject to
communicate a port’s vision, Federal action, due to partial or full federal funding, impacts on
goals and objectives. This type federal lands or waterways, or a need for federal permits, then
of comprehensive planning is compliance with federal environmental regulations will be
critical for guiding a port necessary. Federal regulations with particular relevance to ports
owner’s development and include the Clean Air Act (CAA), Clean Water Act (CWA) and the
management of land, National Environmental Policy Act (NEPA). For more information,
infrastructure and facilities refer to the Environmental Protection Agency’s “A Ports Primer for
over a period of 10 to 20+years. Communities - Office of Transportation and Air Quality”.
Similarly strategic plans Environmental review requirements can be applicable to both
typically outline a port’s comprehensive planning efforts and specific project planning
market position and direction, efforts. For example, NEPA requires the identification and analysis
ensuring that resources are of potential environmental effects of major proposed Federal
allocated to achieve the port actions and alternatives before those actions take place.
owner’s defined goals and
The principles or essential elements of NEPA decision making
objectives. Business and
include:
marketing plans present
shorter-term actions to • Assessment of environmental and socioeconomic impacts of a
support a port’s long-term proposed action or project
plans. Port owners should • Analysis of a range of reasonable alternatives to the proposed
undertake a Direction planning project, based on the defined purpose and need for the project
effort before beginning to • Interagency participation, coordination and consultation
define specific projects, with
• Public involvement including opportunities to participate and
the exception of projects that
comment
emerge suddenly.
• Consideration of appropriate impact reduction methods
Port owners may also including avoidance, minimization and
complete more detailed mitigation/compensation
Operation planning efforts to
• Documentation and disclosure
sustain or improve the port’s
service and address impacts In advance of project-specific planning, port owners should
resulting from the port’s determine what environmental studies or other information may
operation. be required, and what mitigation requirements are likely, in
connection with federal environmental regulations. While the
Resource planning efforts
environmental review process can have implications for permitting
focusing on enhancing
and other Federal engagement, it is also an opportunity for a port
regional and port-specific
owner to identify and communicate the ways in which a potential
assets are most likely to
project will benefit the local and regional community. Project-level
generate potential projects,
NEPA review and other environmental compliance requirements
requiring capital investment
are discussed in more detail in the Environmental Impacts section
and a project plan.
2.1.3.4 of the Feasibility Module.

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These three groups of comprehensive planning

efforts usually involve:
• Developing or refining a port’s vision, goals
and objectives
• Quantifying a port’s needs, capabilities and
the gap between
• Conducting outreach with the stakeholders,
including the public and nearby community,
as well as resource agencies (local, regional,
state and federal)
• Identifying actions, developments or
improvements that can fill the gap between
needs and capabilities
• Considering possible social, economic and
Efforts for defining a project include:
environmental impacts and requirements
• Establishing project needs, capabilities,
All planning efforts should proactively consider
opportunities and constraints
compatibility with laws and regulations that may
be applicable to a potential project. Early
• Conducting outreach with the stakeholders
and resource agencies (community, local,
consultation with community organizations, the
regional, state and federal)
public, and local, regional, state and federal
agencies will help inform the planning process • Demonstrating project fitness, feasibility and
going forward, expedite project developments cost
when they come to fruition and help to secure • Justifying project value, benefits and impacts
stakeholder support. • Establishing the project’s timeline
Project-Specific Planning: Project Definition • Identifying needed funding and financing
Once a potential project is identified as a result of sources
a comprehensive planning effort or to address an Activities within the structure of the project-
unexpected or emergent need, the planning focus specific planning process are often similar to
shifts to defining the project. Project-specific comprehensive planning efforts, such as
planning should be completed to define the exact quantifying needs and capabilities, stakeholder
scope and impacts of a potential project before a outreach and assessing impacts, differing
port owner can convince local, state, federal primarily in scale and level of detail. Thus, port
and/or private partners to make monetary owners embarking upon comprehensive planning
investments. efforts will find value in the guidance provided in
the Planning and Feasibility Modules of this
This Toolkit focuses on the efforts involved Toolkit.
in defining a project and the development of
a project plan in support of pursuing project
financing and/or funding.

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II. Outline
The project definition process and formulation of When conducting project feasibility activities,
a project plan are simultaneous processes that the reasonable project alternatives are subjected
consist of a series of stages to establish that a to systematic and comprehensive evaluation and
“potential project” is feasible and to advance it to a the highest performing project alternative is
“financeable project”. The Toolkit is structured to selected and refined. From the resulting
follow this natural progression of a project recommended project, project costs and a
through the Planning, Feasibility and Financing strategy for financing those costs can be
Modules, as shown in Exhibit I-2. identified. The financeable project can then be
submitted for approval and financing to the
Project definition takes place at the culmination
appropriate entities. Once the necessary
of the “Identification” process whereby a port
approvals and financing are in place, the project
owner has already established the overall port
plan can be implemented. Plans are rarely
vision and needs, quantified port gaps, and
implemented to perfection so regular
identified potential projects that fill those gaps.
monitoring and periodic evaluation should be
During project-specific planning efforts, details of carried out to identify shortcomings and to make
a potential project are quantified and project enhancements.
alternatives are formed. While certain project
Within and between each module or stage,
alternatives will be briefly considered and
project definition activities may loop back to
eliminated, the reasonable project alternatives will
previous efforts to continually improve the
address the project goals and objectives, while
project planning, feasibility and financing
giving consideration to social, economic,
strategy. The activities occurring at each stage
environmental and other impacts. Port owners
can also be iterative and overlapping and might
should engage with external stakeholders, such as
require reconsideration of previous conclusions if
port users, nearby communities and regulatory
conditions change. For example, during the
agencies, to determine possible impacts of the
evaluation of a project’s feasibility, the cost of
project alternatives.
one component of the project may not return a
high enough benefit and the project alternatives
may need to be revisited and amended.
Likewise, during the analysis of financing and
funding strategies, the sequencing and timing of
improvements may prohibit the highest financial
performance. At that point the project
alternatives should be revised, the feasibility
reevaluated and ultimately the financing
strategy reexamined.

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Exhibit I-2 PPIT Focus: Project Definition Process

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III. Check List Check Page

Project Definition Process Topic
Box #
This checklist provides Toolkit
Planning
users with a rapid resource for
navigating to specific topics in Initiate - Defining project goals and objectives 1-2
each module and appendix Initiate – Data collection relevant to the potential project 1-3
that relate to specific planning Initiate – Stakeholder engagement to identify community and environmental needs
1-3
efforts relevant to the or issues relevant to the potential project
development of a project plan. Quantify - Existing conditions of the port relevant to the potential project including:
The structure of the check list • Assets 1-6
is aligned with the titles of key • Operations 1-7
sections in each Toolkit • External Influences 1-7
module including section • Volumes/Trade Flows 1-7
• Capacity 1-7
descriptions to help the
Toolkit user determine the Quantify - Project drivers including:
1-9
• Regulatory Environment
topics that relate to their 1-10
• Market Dynamics
project and financing needs. 1-12
• Competitive Position
1-13
While the content in each • Demand Forecast
module is intended to guide Quantify - Project needs by performing a gap analysis 1-15
users in the development of Form - Project context, opportunities and constraints 1-16
a project plan, certain Form - Initial project alternatives 1-17
projects may not require in-
Form - Refined project alternatives by defining phasing, timing, details and costs 1-19
depth analyses or an
Feasibility
extensive effort at all
project stages. Some port Measure – Physical and operational performance of each project alternative’s:
• Capital Resources 2-2
owners may find value in
• Operating Resources 2-3
limited sections of a
• Capacity and Productivity 2-3
particular module,
Measure – Market and financial performance of each project alternative’s:
depending on port owner
• Revenue Forecast 2-4
and project requirements. • Cash Flow Modeling 2-5
This checklist can be used as • Capital Expenditures (CapEx) 2-5
guidance by reviewing it in • Operating Expenses (OpEx) 2-7
its entirety and selecting Measure - Impacts of each project alternative including:
specific topics by checking • Institutional and Stakeholder 2-8
the blank space on the left • Social 2-9
side. After all appropriate • Economic 2-9
topics are selected, the user • Environmental 2-10
will have a handy guide to Measure - Project alternatives’ risks and mitigation/sharing strategies 2-11
direct them to specific Evaluate - Project evaluation approach:
2-12
module sections by • Cash Flow Evaluation
2-14
hyperlinks and starting page • Benefit Cost Analysis
2-15
number. • Multi-Criteria Evaluation
Evaluate - Reasonable alternatives comparison 2-18
Evaluate - Recommended project identification and refinement 2-18

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Check Page
Project Definition Process Topic
Box #
Financing
Strategize - Approach for project investment 3-1
Strategize - Performing project due diligence through:
• Financial Feasibility Screening 3-3
• Financial Risk Analysis 3-4
• Debt Considerations 3-5
Strategize - Identifying the port owner’s credit/debt profile of:
• Project Credit Elements 3-6
• Port Credit Attributes 3-7
• Rating Agency Considerations 3-9
• Debt Profile 3-11
Structure - Business model influences on finance 3-13
Structure - Considering finance alternatives through:
• Private Activity Bonds 3-15
• Commercial Bank Financing 3-15
• Project Finance Bonds 3-16
• Revenue Bonds 3-19
Structure - Financial modeling approach and process 3-19
Structure - Managing and implementing debt including:
• Debt Capacity and Issuance for Projects 3-24
• Debt Refunding for Saving 3-26
• Debt Transactions 3-27
• Post-Issuance Compliance 3-29
Structure - Public-Private Partnership (P3)/Concession elements:
• Background and Rationale 3-30
• Analysis and Valuation 3-33
• Development of Transactions 3-34
• Business/Financial Terms 3-36
• Solicitation 3-38
Structure - Grant Funding 3-41
Structure - Government Loans 3-46
Appendices
A: Glossary of Terms A-1
B: Project Profiles B-1
C: Estimating Throughput Capacity Example C-1
D: Forecasting Trade Demand Example D-1
Resource Catalog URL
Port Concession Evaluation Model URL

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APPENDICES

Glossary of Terms
Additional Bonds Test - The financial test, Asset - Any item of economic value, either
sometimes referred to as a “parity test,” that must physical in nature (such as land) or a right to
be satisfied under the bond contract securing ownership, expressed in cost or some other value,
outstanding revenue bonds or other types of which an individual or entity owns. 2
bonds as a condition to issuing additional bonds.
Asset-Backed Debt - Debt having hard asset
Typically, the test would require that historical
security such as a crane lease or property
revenues (plus, in some cases, future estimated
mortgage, in addition to the security of pledged
revenues) exceed projected debt service
revenues.
requirements for both the outstanding issue and
the proposed issue by a certain ratio.1 Availability Payment - A means of compensating
a private concessionaire for its responsibility to
Advance Refunding - For purposes of certain tax
design, construct, operate, and/or maintain an
and securities laws and regulations, a refunding in
infrastructure facility for a set period of time.
which the refunded issue remains outstanding for
These payments are made by a public project
a period of more than 90 days after the issuance of
sponsor (a port authority, for example) based on
the refunding issue.1
particular project milestones or facility
Alternative Minimum Tax (AMT) - Taxation based performance standards.2
on an alternative method of calculating federal
Best and Final Offers (BAFO) - In government
income tax under the Internal Revenue Code.
contracting, a vendor’s response to a contracting
Interest on certain private activity bonds is subject
officer’s request that vendors submit their last and
to the AMT.1
most attractive bids to secure a contract for a
Amortization - The process of paying the principal particular project. Best and final offers are
amount of an issue of securities by periodic submitted during the final round of negotiations.3
payments either directly to bondholders or to a
Bond Indenture - A contract between the issuer of
sinking fund for the benefit of bondholders.1
municipal securities and a trustee for the benefit of
Arbitrage Rebate - A payment made by an issuer the bondholders. The trustee administers the
to the federal government in connection with an funds or property specified in the indenture in a
issue of tax-exempt or other federally tax- fiduciary capacity on behalf of the bondholders.
advantaged bonds. The payment represents the The indenture, which is generally part of the bond
amount, if any, of arbitrage earnings on bond contract, establishes the rights, duties,
proceeds and certain other related funds, except responsibilities and remedies of the issuer and
for earnings that are not required to be rebated trustee and determines the exact nature of the
under limited exemptions provided under the security for the bonds. The trustee is generally
Internal Revenue Code. An issuer generally is empowered to enforce the terms of the indenture
required to calculate, once every five years during on behalf of the bondholders.1
the life of its bonds, whether or not an arbitrage
Call Date - The date on which bonds may be called
rebate payment must be made.1
for redemption as specified by the bond contract. 1

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Capacity (Maximum Practical) - Throughput concession is a contractual agreement in which a

volume which, if exceeded, would cause a port owner conveys specific operating rights of its
disproportionate increase in unit operating cost or facility to a private entity for a specified period of
business delay, within the context of a facility’s time.
land use, layout, and uncontrollable commercial
Convertible Capital Appreciation Bonds (CCABs)
drivers.
- CABs with a convertibility feature at a future
Capital Expenditure (CapEx) - Expenditure on date to CIBs. CCABs can be used to defer interest
capital items either at the commencement of the and principal payments, with conversion to
project or the cost of their renewal and Current Interest Bonds so that debt service
replacement (”R&R”) over the life of the project. requirements begin, thus reducing the cost of
funds relative to traditional, non-convertible
Capital Appreciation Bonds (CABs) - A municipal
CABs.
security on which the investment return on an
initial principal amount is reinvested at a stated Coupon - The periodic rate of interest, usually
compounded rate until maturity. At maturity the calculated as an annual rate payable on a security
investor receives a single payment (the “maturity expressed as a percentage of the principal
value”) representing both the initial principal amount. The coupon rate, sometimes referred to
amount and the total investment return. CABs as the “nominal interest rate,” does not take into
typically are sold at a deeply discounted price with account any discount or premium in the purchase
maturity values in multiples of $5,000.1 price of the security.1

Capital Improvement Program (CIP) - A schedule, Covenants - Contractual obligations set forth in a
typically covering a period of less than ten years, bond contract. Covenants commonly made in
which outlines expenditures for capital projects on connection with a bond issue may include
an annual basis and corresponding funding covenants to charge fees sufficient to provide
sources. required pledged revenues (called a “rate
covenant”); to maintain casualty insurance on the
Capital Structure - The mix of an issuer’s or a
project; to complete, maintain and operate the
project’s short and long-term debt and equity,
project; not to sell or
including the terms of such financing and
encumber the project;
repayment requirements.
not to issue parity
Capitalized Interest - A portion of the proceeds of bonds or other
an issue that is set aside to pay interest on the indebtedness unless
securities for a specified period of time. Interest is certain tests are met
commonly capitalized for the construction period (“additional bonds” or
of a revenue-producing project, and sometimes for “additional
a period thereafter, so that debt service expense indebtedness”
does not begin until the project is expected to be covenant); and not to
operational and producing revenues.1 take actions that would
Concession - An alternative method for a public cause tax-exempt
sector entity to deliver a public- purpose project interest on the bonds to
through long-term contracting with a private become taxable or
sector entity. A concession agreement typically otherwise become
covers the objectives of the asset concession, arbitrage bonds (“tax
compensation, and duration of concession. A port covenants”).1

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Credit Rating - An to comply with a covenant in the bond contract) (a

opinion by a rating “springing reserve”). Issuers may sometimes
agency of the credit- authorize the provision of a surety bond or letter of
worthiness of a credit to satisfy the debt service reserve fund
bond.1 requirement in lieu of cash. If the debt service
reserve fund is used in whole or part to pay debt
Current Interest
service, the issuer usually is required to replenish
Bonds (CIBs) - A
the fund from the first available revenues, or in
bond on which
periodic repayments over a specified period of
interest payments
time.
are made to the
bondholders on a Defeasance - Termination of certain of the rights
periodic basis. This and interests of the bondholders and of their lien
term is most often on the pledged revenues or other security in
used in the context of an issue of bonds that accordance with the terms of the bond contract for
includes both CABs and CIBs.1 an issue of securities. This is sometimes referred to
as a “legal defeasance.” Defeasance usually occurs
Current Refunding - A refunding transaction
in connection with the refunding of an outstanding
where the municipal securities being refunded will
issue after provision has been made for future
all mature or be redeemed within 90 days or less
payment of all obligations related to the
from the date of issuance of the refunding issue.1
outstanding bonds, sometimes from funds
Debt Profile - A detailed description of an issuer’s provided by the issuance of a new series of bonds.
overall debt portfolio and credit profile that is In some cases, particularly where the bond
updated as changes in capital structure occur. A contract does not provide a procedure for
debt profile typically includes all of the relevant termination of these rights, interests and lien other
information about an issuer’s debt including but than through payment of all outstanding debt in
not limited to current ratings, debt service full, funds deposited for future payment of the
requirements, debt service coverage ratios and debt may make the pledged revenues available for
eligibility for refunding. other purposes without effecting a legal
Debt Service Coverage Ratio - The ratio of defeasance. This is sometimes referred to as an
available revenues available annually to pay debt “economic defeasance” or “financial defeasance.”
service over the annual debt service requirement. If for some reason the funds deposited in an
This ratio is one indication of the availability of economic or financial defeasance prove
revenues for payment of debt service.1 insufficient to make future payment of the
outstanding debt, the issuer would continue to be
Debt Service Reserve - A fund in which funds are legally obligated to make payment on such debt
placed to be applied to pay debt service if pledged from the pledged revenues.1
revenues are insufficient to satisfy the debt service
requirements. The debt service reserve fund may Demand & Revenue Study - A professionally
be entirely funded with bond proceeds at the time prepared forecast and report of the market
of issuance, may be funded over time through the demand for a port’s cargo, and the ensuing
accumulation of pledged revenues, may be funded revenue as a result of charging rates/fees for such
with a surety or other type of guaranty policy cargo moving through a port. Demand & revenue
(described below), or may be funded only upon the data is used as input in developing plans of finance
occurrence of a specified event (e.g. upon failure and evaluating investment opportunities.

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Design-Build (DB) - A project delivery method collection account or revenue fund established
that combines two, usually separate services into a under the bond contract for disbursement into the
single contract. With design-build procurements, other accounts established under the bond
owners execute a single, fixed- fee contract for contract. Such other accounts generally provide
both architectural/engineering services and for payment of the costs of debt service, debt
construction. The design-build entity may be a service reserve deposits, operation and
single firm, a consortium, joint venture or other maintenance costs, renewal and replacement and
organization assembled for a particular project.4 other required amounts.1
Design-Build-Finance-Operate-Maintain Forward Refunding - An agreement, usually
(DBFOM) - A method of project delivery in which between an issuer and the underwriter, whereby
the responsibilities for designing, building, the issuer agrees to issue bonds on a specified
financing and operating are bundled together and future date and an underwriter agrees to purchase
transferred to private sector partners.4 such bonds on such date. The proceeds of such
bonds, when issued, will be used to refund the
Design-Build-Operate-Maintain (DBOM) - An
issuer’s outstanding bonds. Typically, a forward
integrated partnership that combines the design
refunding is used where the bonds to be refunded
and construction responsibilities of design-build
are not permitted to be advance refunded on a tax-
procurements with operations and maintenance.
exempt basis under the Internal Revenue Code. In
These project components are procured from the
such a case, the issuer agrees to issue, and the
private sector in a single contract with financing
underwriter agrees to purchase, the new issue of
secured by the public sector.4
bonds on a future date that would effect a current
Enabling Act – Legislation by which port refunding.1
authorities and other governmental agencies are
Independent Utility - A project is considered to
created and granted powers to carry out certain
have independent utility if it would be constructed
actions. While enabling acts for port authorities
absent the construction of other projects in the
vary widely; key aspects generally include
project area. Portions of a multi-phase project that
establishment of the port entity; governance and
depend upon other phases of the project do not
procedures; powers such as ability to enter into
have independent utility. Phases of a project that
contracts, construct projects, transact business,
would be constructed even if the other phases
and enter into financing agreements; and
were not built can be considered as separate single
reporting requirements.
and complete projects with independent utility. (72
Equity - A funding contribution to a project having FR 47, p. 11196).
an order of repayment occurring after debt holders
Intelligent
in a flow of funds per the bond indenture securing
Transportation
such funding contribution.
Systems (ITS) - An
Escrow - A fund established to hold funds pledged operational system
and to be used solely for a designated purpose, of various
typically to pay debt service on an outstanding technologies that,
issue in an advance refunding.1 when combined and
Flow of Funds - The order and priority of handling, managed, improve
depositing and disbursing pledged revenues, as set the operating
forth in the bond contract. Generally, pledged capabilities of the
revenues are deposited, as received, into a general overall system.

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Interest Rate Swap - A specific derivative contract letter of credit committing to pay principal of and
entered into by an issuer or obligor with a swap interest on the securities in the event that the
provider to exchange periodic interest payments. issuer is unable to do so.1
Typically, one party agrees to make payments to the
Liquidated Damages - Present in certain legal
other based upon a fixed rate of interest in exchange
contracts, this provision allows for the payment of
for payments based upon a variable rate. The swap
a specified sum should one of the parties be in
contract may provide that the issuer will pay to the
breach of contract.3
swap counter-party a fixed rate of interest in
exchange for the counter-party making variable Liquidity - In the context project finance, the
payments equal to the amount payable on the build-up of cash reserve balances which are viewed
variable rate debt.1 favorably given the ability to use such reserves to
cover debt service and other obligations under a
Internal Rate of Return (IRR) - The discount rate
bond indenture should expected project cash flows
often used in capital budgeting that makes the net
not materialize for any given period.
present value of all cash flows from a particular
project equal to zero. Generally speaking, the higher a Long Range Transportation Plan (LRTP) - A
project’s internal rate of return, the more desirable it document resulting from regional or statewide
is to undertake the project.3 collaboration and consensus on a region or state's
transportation system, and serving as the defining
Investment-Grade - A security that, in the opinion of
vision for the region's or state's transportation
the rating agency, has a relatively low risk of default.1
systems and services. In metropolitan areas, the
Alternatively, the level of comprehensiveness and
plan indicates all of the transportation
market readiness for investment-grade security
improvements scheduled for funding over the next
issuance in referring to a demand & revenue report or
20 years. The plan must conform to regional air
engineering report supporting such security issuance.
quality implementation plans and be financially
Letter of Credit - An irrevocable commitment, usually constrained.2, 4
made by a commercial bank, to honor demands for
Major Project Financial Plan - Under U.S.
payment of a debt upon
Department of Transportation (USDOT) guidance,
compliance with conditions
transportation projects are required to submit a
and/or the occurrence of
Major Project Financial Plan if any of the following
certain events specified
apply: 1) recipient of Federal financial assistance
under the terms of the letter
for a Title 23 project with a minimum cost of $500
of credit and any associated
million, 2) identified by the USDOT Secretary as a
reimbursement agreement. A
major project and 3) applying for TIFIA assistance.
letter of credit is frequently
used to provide credit and Master/Land-Use Plan - Port documents that
liquidity support for variable guides a port’s planning, development and
rate demand obligations and management of land, infrastructure and facilities,
other types of securities. with the goal of accommodating future growth
Bank letters of credit are and supporting the regional economy. These plans
sometimes used as additional often include information on port owners’ goals
sources of security for issues and policies; survey of existing conditions/facilities;
of municipal notes, stakeholder outreach activities; land use data;
commercial paper or bonds, environmental considerations; analysis of future
with the bank issuing the

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demand, capacity, and capacity requirements; CIP; operating lease is not

and operating and financial performance of the capitalized; it is accounted for
port. as a rental expense in what is
known as “off balance sheet
Maximum Annual Debt Service - Maximum
financing.” For the lessor, the
annual debt service refers to the amount of debt
asset being leased is accounted
service for the year in which the greatest amount
for as an asset and is
of debt service payments are required and is often
depreciated as such. Operating
used in calculating required reserves and in
leases have tax incentives and
additional debt tests.1
do not result in assets or
Negative Arbitrage - Investment of bond liabilities being recorded on the
proceeds and other related funds at a rate below lessee’s balance sheet, which
the bond yield.1 can improve the lessee’s
Net Present Value (NPV) - The difference financial ratios.3
between the present value of cash inflows and the Operating Expenditure
present value of cash outflows. NPV is used in (OpEx) - Expenditure on
capital budgeting to analyze the profitability of an operating and routine
investment or project.3 maintenance costs.
Net Revenue - The amount of money available Operations & Maintenance (O&M) - Refers to
after subtracting from gross revenues such costs expenses incurred for operating and maintaining a
and expenses as may be provided for in the bond project asset. O&M is a key input in determining
contract. The costs and expenses most often project cash flows, often placed after gross
deducted are O&M expenses.1 revenues in the flow of funds of a bond indenture.
Off-Balance Sheet - Assets or liabilities that do Payment Bond - Deposit or guaranty (usually 20
not appear on a company's balance sheet but that percent of the bid amount) submitted by a
are nonetheless effectively assets or liabilities of successful bidder as a surety that (upon contract
the company. Assets or liabilities designated off completion) all sums owed by it to its employees,
balance sheet are typically ones that a company is suppliers, subcontractors, and others creditors, will
not the recognized legal owner of, or in the case of be paid on time and in full.5
a liability, does not have direct legal responsibility
Performance Bond - A written guaranty from a
for. Off-balance-sheet financing may be used
third party guarantor (usually a bank or an
when a business is close to its borrowing limit and
insurance company) submitted to a principal
wants to purchase something, as a method of
(client or customer) by a contractor on winning the
lowering borrowing rates, or as a way of managing
bid. A performance bond ensures payment of a
risk. This type of financing may also be used for
sum (not exceeding a stated maximum) of money
funding projects, subsidiaries or other assets in
in case the contractor fails in the full performance
which the business has a minority claim. An
of the contract. Performance bonds usually cover
operating lease, used in off balance sheet
100 percent of the contract price and replace the
financing, is a good example of a common off
bid bonds on award of the contract. Unlike a
balance sheet item.3
fidelity bond, a performance bond is not an
Operating & Use Lease Agreement - A contract insurance policy and (if cashed by the principal) the
that allows for the use of an asset, but does not payment amount is recovered by the guarantor
convey rights of ownership of the asset. An from the contractor.5

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Port - A single- or Private Placement - A primary offering in which a

multiple-facility entity placement agent sells a new issue of municipal
that facilitates the securities on behalf of the issuer directly to
transfer of cargo and/or investors on an agency basis rather than by
passengers between purchasing the securities from the issuer and
logistically-linked reselling them to investors. Investors purchasing
transport modes. privately placed securities often are required to
agree to restrictions as to resale and are
Port Authority - State or
sometimes requested or required to provide a
local government that
private placement letter to that effect. The term
owns, operates, or
Private Placement is often used synonymously
otherwise provides wharf, dock, and other
with the term “direct loan,” which more
investments at ports.
specifically is a loan to a municipal issuer from a
Port Owner - Port authorities, terminal operators, banking institution or another lender. Such
private companies, and project sponsors that own obligations may constitute municipal securities.1
and/or operate a port.
Project - A port owner’s acquisition, development,
Price - The amount to be paid for a bond, usually expansion or renovation of a single site, facility,
expressed as a percentage of par value but also infrastructure element, or operational resource to
sometimes expressed as the yield that the purchaser meet an identified or emergent need.
will realize based on the dollar amount paid for the
Project Financing - A non-recourse or limited
bond. The price of a municipal security moves
recourse financial structure where project debt and
inversely to the yield.1
equity used to finance the project are paid back
Private Activity Bonds (PABs) - A municipal security from the cash flow generated by the project. While
of which the proceeds are used by one or more private the loan structure relies primarily on the project's
entities. A municipal security is considered a PAB if it cash flow for repayment; the project's assets,
meets two sets of conditions set out in Section 141 of rights and interests are held as secondary security
the Internal Revenue Code. A municipal security is a or collateral.3
PAB if, with certain exceptions, more than 10 percent
Project Funding - A financial structure where
of the proceeds of the issue are used for any private
internal reserves, user charges and/or government
business use (the “private business use test”) and the
investments are used to finance the project
payment of the principal of or interest on more than
without a direct requirement for repayment.
10 percent of the proceeds of such issue is secured by
or payable from property used for a private business Project Sponsor - The entity that provides
use (the “private security or payment test”). A financial resources to support the project.
municipal security also is a PAB if, with certain
Public-Private Partnership (P3) - A generic term
exceptions, the amount of proceeds of the issue used
for a wide variety of financial arrangements
to make loans to non-governmental borrowers
whereby governmental entities agree to transfer
exceeds the lesser of 5 percent of the proceeds or $5
any risk of, or substantial management control
million (the “private loan financing test”). Interest on
over, a governmental asset to the private entity in
private activity bonds is not excluded from gross
the port sector this is typically in exchange for
income for federal income tax purposes unless the
upfront or ongoing payments though those may
bonds fall within certain defined categories (“qualified
only be sufficient to pay for the capital
bonds” or “qualified PABs”). Most categories of
improvement.1
qualified PABs are subject to the AMT.1

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Publicly Issued - The sale of bonds or other investment or to compare the efficiency of a
financial instruments by an organization to the number of different investments. ROI measures
public in order to raise funds for infrastructure the amount of return on an investment relative to
expansion and investment (contrast with privately the investment’s cost. To calculate ROI, the
placed financial instruments including directly benefit (or return) of an investment is divided by
placed loans with a financial institution/lender). the cost of the investment, and the result is
expressed as a percentage or a ratio.3
Put Bond - A bond that allows the holder to force
the issuer to repurchase the security at specified Request for Letters of Intent (RLOI) - Document
dates before maturity. The repurchase price is set used to solicit Letters of Intent, an interim
at the time of issue, and is usually par value.3 agreement that summarizes the main points of a
proposed deal, or confirms that a certain course of
Railroad Rehabilitation & Improvement
action is going to be taken. Normally, it does not
Financing (RRIF) - Under this program the Federal
constitute a definitive contract but signifies a
Railroad Administration Administrator is
genuine interest in reaching the final agreement
authorized to provide direct loans and loan
subject to due diligence, additional information, or
guarantees up to $35.0 billion to finance
fulfillment of certain conditions. The language
development of railroad infrastructure. Up to $7.0
used in writing a letter of intent is of vital
billion is reserved for projects benefiting freight
importance, and determines whether it is only an
railroads other than Class I carriers. The funding
expression of intent or an enforceable
may be used to (a) acquire, improve, or rehabilitate
undertaking.5
intermodal or rail equipment or facilities, including
track, components of track, bridges, yards, Request for Proposals (RFP) - Document used in
buildings and shops; (b) refinance outstanding sealed-bid procurement procedures through which
debt incurred for the purposes listed above; and (c) a purchaser advises the potential suppliers of (1)
develop or establish new intermodal or railroad statement and scope of work, (2) specifications, (3)
facilities. Direct loans can fund up to 100% of a schedules or timelines, (4) contract type, (5) data
railroad project with repayment periods of up to 35 requirements, (6) terms and conditions, (7)
years and interest rates equal to the cost of description of goods and/or services to be
borrowing to the government. Eligible borrowers procured, (8) general criteria used in evaluation
include railroads, state and local governments, procedure, (9) special contractual requirements,
government-sponsored authorities and (10) technical goals, (11) instructions for
corporations, joint ventures that include at least preparation of technical, management, and/or cost
one railroad, and limited option freight shippers proposals or in the case of P3s, a full P3 contract.
who intend to construct a new rail connection.6 RFPs are publicly
advertised and suppliers
Rate Covenant - A covenant to charge fees
respond with a detailed
sufficient to provide required pledged revenues.1
proposal, not with only a
Renewal & Replacement (R&R) - Funds to cover price quotation. They
anticipated expenses for major repairs of the provide for negotiations
issuer’s facilities or a project whose revenues are after sealed proposals are
pledged to the bonds or for R&R of related opened, and the award of
equipment.1 contract may not
Return on Investment (ROI) – A performance necessarily go to the
measure used to evaluate the efficiency of an lowest bidder.5

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three years. Projects included in the STIP must be

consistent with the long-term transportation plan,
must conform to regional air quality
implementation plans, and must be financially
constrained (achievable within existing or
reasonably anticipated funding sources). 2

Strategic Plan - Port document outlining a port’s

market positioning and strategic direction.
Strategic plans may include, among other topics,
a competitive assessment relative to other ports;
trends in regional, national and global economies;
Request for Qualifications (RFQ) - Document used
cargo/passenger analysis; growth strategies; and
in a procurement process to solicit qualifications of
capital investment recommendations.
professional providers of goods or services for a
given project. The objective of the RFQ is to pre- Subordinate Lien Debt - Bonds that have a claim
qualify bidding teams based on well- defined criteria. against pledged revenues or other security
subordinate to the claim against such pledged
Security for Debt - The specific revenue sources or
revenues or security of other obligations.1
assets of an issuer or borrower that are pledged or
available for payment of debt service on a series of Terminal Operator - A port authority or private
bonds, as well as the covenants or other legal company that operates a port facility and manages
provisions protecting the bondholders.1 the movement of cargo and/or passengers.

Senior Lien Debt - Bonds having the priority claim Transport Modes - For each mode, there are
against pledged revenues superior to the claim several means of transport. They are: a. inland
against such pledged revenues or security of other surface transportation (rail, road, and inland
obligations.1 waterway); b. sea transport (coastal and ocean); c.
air transportation; and d. pipelines.
Special Purpose Facility Bonds - Bonds issued by a
governmental entity to finance facilities supporting Transportation Improvement Program (TIP) - A
private sector activity, and secured by payments of short-term transportation planning document,
special purpose rent received by the port or the approved at the local level, covering at least a
trustee pursuant to an agreement with lessee/ four-year period for projects within the
concessionaire. Such bonds are issued by the boundaries of a Metropolitan Planning
governmental entity as the conduit issuer to achieve Organization (MPO). The TIP must be developed
tax-exempt (or AMT) status on the bonds. in cooperation with state and public transit
providers and must be financially constrained. The
State Infrastructure Bank (SIB) - A state or multi-
TIP includes a list of capital and non-capital
state revolving fund that provides loans, credit
surface transportation projects, bicycle and
enhancement, and other forms of financial
pedestrian facilities and other transportation
assistance to transportation infrastructure projects.2
enhancements. The TIP should include all
State Transportation Improvement Program regionally significant projects receiving FHWA or
(STIP) - A short-term transportation planning FTA funds, or for which FHWA or FTA approval is
document covering at least a three-year period and required, in addition to non-federally funded
updated at least every two years. The STIP includes a projects that are consistent with the MPO’s LRTP.
priority list of projects to be carried out in each of the

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Transportation Infrastructure Finance and Value for Money (VfM) - A technique used to
Innovation Act (TIFIA) - The Transportation evaluate and quantify project risks. VfM “prices”
Infrastructure Finance and Innovation Act of 1998 risk by producing a discounted net present value
(TIFIA) authorized the USDOT to provide three amount that represents the aggregate impact of
forms of credit assistance - secured (direct) loans, various sensitivities applied to the variable inputs
loan guarantees and standby lines of credit - to of a project. An assessment of VfM for P3
surface transportation projects of national or procurements is a comparative concept, and as
regional significance. A specific goal of TIFIA is to such most delivery agencies seek to use a “public
leverage private co-investment. Because the sector comparator” approach to evaluating VfM.
program offers credit assistance, rather than grant
Yield - The annual rate of return on an investment,
funding, potential projects must be capable of
based on the purchase price of the investment, its
generating revenue streams via user charges or
coupon rate and the length of time the investment
have access to other dedicated funding sources. In
is held. The yield of a municipal security moves
general, a project’s eligible costs must be
inversely to the price.1
reasonably anticipated to total at least $50 million.
Credit assistance is available to: projects eligible Yield Restriction - A general requirement under
for assistance under title 23 or chapter 53 of title the Internal Revenue Code that proceeds of tax-
49; international bridges and tunnels; intercity exempt bonds not be used to make investments at
passenger bus or rail facilities and vehicles, a higher yield than the yield on the bonds. The
including those owned by Amtrak; public freight Internal Revenue Code provides certain
rail projects; private freight rail projects that exceptions, such as for investment of bond
provide public benefit for highway users by way of proceeds for reasonable temporary periods
direct highway-rail freight interchange (a pending expenditure and investments held in
refinement of the SAFETEA-LU eligibility “reasonably required” debt service reserve funds.1
criterion); intermodal freight transfer facilities; Note: Sources for the glossary include (1)
projects providing access to, or improving the www.msrb.org, (2) www.transportation-
service of, the freight rail projects and transfer finance.org, (3) www.investopedia.com, (4)
facilities described above; and surface www.fhwa.dot.gov, (5)
transportation infrastructure modifications www.businessdictionary.com, and (6)
necessary to facilitate direct intermodal www.fra.dot.gov.
interchange, transfer and access into and out of
a port. The TIFIA credit assistance is limited to
49 percent of eligible project costs.4
Transportation Investment Generating
Economic Recovery (TIGER) - USDOT TIGER
discretionary grants are awarded on a
competitive basis for capital investments in
surface transportation projects that will have a
significant impact on the nation, a metropolitan
area or a region.

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 U.S. Department of Transportation
Maritime Administration
West Building
1200 New Jersey Avenue, SE
Washington, DC 20590

American Association of Port Authorities

1010 Duke St.
Alexandria, VA 22314