CHICAGO — The Illinois Finance Authority gave preliminary approval this week to the Seneca I-80 Railport Development LLC’s proposed $576 million issue. The move advances development efforts for the proposed freight-transfer facility that is seeking an allocation of tax-exempt, private activity bonding under the federal government’s $15 billion pilot program.
The U.S. Department of Transportation manages the program, which was established in 2005. After a slow start, the DOT has now allocated $7.87 billion for eight projects nationally, including two other freight transfer facilities in Illinois, based on a department report in December.
The program seeks to promote projects of regional or national importance through private investment by allowing state departments of transportation and other government agencies to finance highway, bridge and intermodal freight transfer facilities with tax-exempt private-activity debt, subject to approval from DOT.
The IFA, which would act a conduit issuer, since 2006 has given preliminary approval to three other projects related to the program: CenterPoint Properties Trust has received a $1.34 billion PAB allocation for its Joliet Terminal Railroad LLC project; CenterPoint’s $505 million financing for a proposed Crete Terminal Railroad LLC project; and Ridge Property Services LLC in Will County, which wants to build an rail transfer facility in Wilmington and has received a $554 million allocation from the DOT.
Intermodal facilities are designed to provide for the efficient and direct transfer of goods between ship, rail or truck, in effect serving as an inland port. Chicago currently serves as the largest inland port-freight transfer center nationally.
“Although the Seneca project is in the early planning stages, the IFA’s passage of an inducement resolution paves the way for the developer’s application for a bonding allocation with the DOT and federal highway grants,” said the IFA’s Rich Frampton, vice president for business, industry and not-for-profit markets. The project will seek Title 23 highway grant funds, a prerequisite for qualifying for the pilot program.
The Seneca facility — located in Grundy County — is designed to improve transportation via truck, the CSX Transportation railroad, and barges using the Illinois River, which connects to the Gulf of Mexico via the Seneca Regional Port District. The project is unique among the four in Illinois in that it is the only one that will serve an East Coast rail line.
The developers are contemplating financing structures, including the use of a direct bank placement or a variable-rate sale enhanced by a bank letter of credit. Proceeds would finance costs related to land acquisition, site improvements, infrastructure, and the construction of an intermodal terminal and warehousing-logistics park on a 465-acre site and related rail and rail-to-truck and truck-to-rail freight transfer facilities located in an adjacent 555-acre park. The total cost of the project is $608 million.
Ice Miller LLP is bond counsel and the prospective banks the developers are working with include Private Bank, Cole-Taylor Bank, Harris Bank, MB Financial Bank, First Midwest Bank, and First American Bank.
The initial developers on the project include Gerald Keating, president of the real estate development company Keating Resources; various principals at Clark Street Development LLC; and an affiliate of NAI Hiffman Asset Management. The group expects additional equity members in the future. The initial group was involved in the acquisition and pre-development efforts on a 1,700-acre site in Joliet that was later purchased by the CenterPoint group.
Developers broke ground in September at a ceremony attended by Gov. Pat Quinn on the CenterPoint Joliet facility. Zoning issues are still pending on the Ridge project and the CenterPoint Crete facility is still in the pre-development stage. None of the three have issued bonds.
“The tight credit markets and the state of the economy have not helped” the pending financings, Frampton said. All of the deals would be unrated.
Of the eight projects approved by the DOT, only the Capital Beltway Hot Lanes in Virginia has sold bonds. That $589 issue million sold in June 2008.
Over the summer, Quinn signed the Intermodal Facilities Promotion Act, which is designed to encourage business development along the freight rail systems of Illinois.
Under the act, state income taxes attributed to the jobs created at the facilities would be placed in an Intermodal Facilities Promotion Fund. The Department of Commerce and Economic Development in turn would distribute the funds to provide grants for infrastructure. CenterPoint Joliet is expected to receive up to $3 million annually between 2010 and 2016.