LOS ANGELES — The long process leading to the construction of the new $1.26 billion Gerald Desmond Bridge to serve the Port of Long Beach, Calif. is gathering steam.
Long Beach port authorities finalized a $325 million Transportation Infrastructure Finance and Innovation Act loan agreement with the U.S. Department of Transportation last week to help fund construction of the bridge at the second busiest container seaport in North America.
Though bonds have been proposed for the bridge and other capital improvement projects at the port, environmental clearance delays have enabled port authorities to hold off on plans to issue long-term debt, said Art Wong, a port spokesman. The port will not be issuing long-term debt for the bridge. The $325 million in short-term notes it priced last week, to be repaid by the TIFIA loan, will be the only debt needed for the bridge project.
The delays from environmental clearance resulted in the port having $1 billion in cash on hand to fund capital projects at one point, Wong said. While other projects were slowed by this process, it hasn't hampered the bridge project. The port brings in roughly $366 million in revenues annually from leases.
"We will need revenue bonds at some point," Wong said. "When we do go out for bonds it will mean the projects are back on schedule."
Port authorities are funding $800 million of the bridge's cost using state and federal grants, which leaves $460 million to be funded by the port. The majority of the port's costs are being funded through the TIFIA loan.
The Desmond bridge replacement is a joint effort of the California Department of Transportation, the Port of Long Beach, the U.S. Department of Transportation and the Los Angeles County Metropolitan Transportation Authority.
The new bridge, being constructed north of the 1968-era bridge it replaces, will rise 205 feet above the water, allowing taller cargo ships access to berths north of the bridge. The new bridge to connect Interstate 710 with port facilities on Terminal Island is slated for completion in mid-2016. It will have three traffic lanes and an emergency lane in each direction, plus a pedestrian/bicycle path
It will be a significant upgrade over today's Desmond bridge, which has two lanes in each direction and no breakdown lane.
Simultaneously, the port is working on a $1.3 billion project in its Middle Harbor to relocate oil wells, remove dredged material, and reconfigure smaller berths to fit modern oversized ships. It will quintuple on-dock rail capacity, add shore power hook-ups and advanced technology that will allow the new terminal to move twice the cargo with half the air pollution. Construction began in 2011 and is expected to end in 2019.
The Harbor Department also is nearing the finish line on a multiyear $470 million renovation of the ITS container terminal.
Terminal Island, shared by the ports of Long Beach and Los Angeles, has three bridges to the mainland, but the Gerald Desmond is favored by trucks serving the Port of Long Beach because it does not have as steep of a grade to ascend, Wong said.
When talk first turned to upgrading the Desmond bridge 10 years ago, repair was contemplated. But that would not have solved the problem of access for newer, taller ships, Wong said.
"It also needed to be upgraded for earthquake safety," he said.
The bridge, built over a waterway that runs down the middle of the port, also sits on top of a major oil field.
"Much of the last two years has been clearing a path, re-drilling wells or abandoning wells," Wong said. "At this point, we are done with all of that. We are now beginning to do the foundation work."
Construction began a year ago on piles at either end that support the bridge. The actual bridge construction is anticipated to begin in a few weeks, Wong said.
The project involved shoring up the soil beneath the new bridge's footprint before actual bridge construction could begin. The modern 1.5-mile-long structure will traverse the center of the nation's third-largest oil field, where more than 6,000 wells have been drilled since oil was discovered in 1932, according to the port's web site. Roughly 13 miles long and 3 miles wide, the Wilmington Oil Field encompasses nearly all of the port and stretches into portions of the city of Long Beach and the ocean. About 600 wells remain active today.
Twenty-three active and idle wells sit in the path of the new bridge. To secure the site, 23 active and idle wells had to be relocated or abandoned. The excavation project went down 200 feet in order to extract huge metal pipes known as casings and to fill the cavities with a precise mix of materials to re-establish the natural consistency, density and strength of the soil.
Over the past week, ramps to the I-710 and existing bridge have been removed. Within days, work will begin on construction of the actual bridge, Wong said.
While construction on the new bridge is underway, traffic will continue to flow over the old one.
The port has across-the-board double A ratings from Standard & Poor's, Moody's Investors Service and Fitch Ratings. All assign a stable outlook.
"The port has a healthy balance sheet with a very strong liquidity position, of $550 million, representing 2,643 days cash on hand," according to Fitch analysts' most recent report issued in May 2012. The port's board has passed an ordinance requiring management to a minimum of two times debt-service coverage ratio and 600 days cash on hand, Fitch noted.
The port's revenues are insulated from trade-related volatility due to long-term guaranteed contracts with most tenants comprising 95% of revenues, according to a December 2012 Moody's report.
It has a "strong market position as the second largest port in the U.S., by twenty-foot equivalent count," according to Moody's analysts. "The port also benefits from a 50-foot channel depth, state-of-the-art facilities, and good road access and intermodal connectivity through the Alameda Corridor and Intermodal Transport Facility."
While the total impact on Long Beach of the forthcoming Panama Canal widening is unknown, port officials said Long Beach has existing ability to handle ships larger than the capacity anticipated from the Panama expansion.
In July 2013, the Board of Harbor Commissioners authorized the issuance of $200 million in subordinate harbor revenue revolving obligations Series A and Series B tax exempt and Series C taxable bonds, according to its comprehensive annual financial report for the year ended Sept. 30, 2013.
The outstanding lines of credit as of Sept. 30, 2013 were $80 million, half through Bank of America and half through Union Bank. It also had $640 million in long-term bond debt as of year-end fiscal 2013.
The port's revenue derived from cargo facilities increased by 38.7% between 2003 and 2013 from $249.5 million to $346.2 million; cargo volumes measured in metric revenue tons grew by 37.3% during the same period of time from 118.2 million tons to 162.3 million tons.
Cargo traffic has been so strong that within two more years, the Port of Long Beach could be back to the peak, pre-recession trade levels of 2007, according to the CAFR.
Even as it pushes forward on its sizeable capital improvements plan, the port has experienced heavy turnover in key executive positions over the past year.
Sam Jomblat, who had served as the port's chief financial officer since 2006, left in March to work for Metrolink, the regional commuter train system.
Gary J. Cardamone, director of construction management, who was overseeing construction of the Middle Harbor and bridge construction project, retired in February. The executive director position vacated by Chris Lytle, who left to work for the Port of Oakland last June, also remains open.
