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It is nearly Thanksgiving 2019. There are reports that the heavily used railroad intermodal corridor serving the adjacent Port of Los Angeles and Port of Long Beach is seeing maritime container volume drops year-over-year. The suggestion is that the drop will lower railroad freight train movements along the 20-mile long special project route of port traffic container trains.
Technically, the railroad project is called the Alameda Corridor Transportation Authority (ACTA).
One outlook is that perhaps “if current trends continue, ACTA will experience significant cash flow deficits beginning in 2024… growing in size out towards 2038.”
ACTA is not a railroad company-owned asset. Instead, think of it as special tollway authority with the capacity for numerous trains per day. That authority is financed by a series of privately financed public debt measures.
Physical facts about the Alameda Corridor:
Again, ACTA is administered as a state-chartered authority. Has that rail project worked? Absolutely.
Consider in Figure 1 the dense freight train operations that used the corridor in the 13-year period 2002 to 2014.
Total annual Alameda Corridor trains per year
(plus calculated daily average)
Data from ACTA published reports
That is a lot of trains – more than 17,000 in 2014.
No other special service intermodal route in the world sees this kind of volume.
In 2006, the corridor marked its highest number of trains per year, followed by three years of decline during the Great Recession.
Yes, traffic has slumped before.
How much of the port complex traffic moves inland by rail? Not as much as you might think. Trucking is still the primary freight mode. Rail’s intermodal market share was calculated back in 2007 at about 20%.
It varies by year. Figure 2 shows 2013 rail intermodal share at about 33%.
Graph courtesy of ACTA. Transloading in 2019 seems to be between 30% and almost 60% conversion of TEU and FEU size maritime containers to 53-foot domestic North American containers like those used by J.B. Hunt and others.
Many proponents of the corridor project expected a much larger rail share. Perhaps up to 25% to 50% of the total. That didn’t happen.
Trucks continue to dominate because of the basic high load on/load off lift costs for rail when the movement is a short haul between the port and the southern or central California distribution processing and holding centers. “Trucks rule on short distances” until those terminal rail costs are somehow lowered.
Debt coverage fundamentals
Few predicted this outlook uncertainty three decades ago when the special rail line project was conceived, designed, engineered and then built.
Intermodal rail 25 to 30 years ago was growing strongly.
Linked to global trade, the port complex’s container trade was often growing at nearly 7% annually.
Rail-related port and container traffic growth was stimulated by the 1983-84 APL Lines introduction of the double-stacked container train.
The issue in the 1990s was how could public policy support that environmental mode shift?
The new all-grade separated railway line was the public solution. Local special purpose financing was adopted. No big share of federal funds or federal grants were required.
What could go wrong? More and more ships with containers were coming.
Realistically, all projects face risks. A deeper examination does reveal increasing risks not in the original strategic assumptions. History teaches us that at least three competitive forces can change project outlooks. They are:
Many global projects miss these signals during the buildup excitement and construction. The board and management of ACTA have paid attention to the occasional traffic volume shifts. This 2019 report is not their first debt service review.
Now there is a challenge predicted