Manhattan Light‐rail Project
Manhattan Light‐rail (MR) is an economic project in the long run, which aims for both an enduring growth in investing and a proper balance between Manhattan commuters and the whole realm. In order to realize these goals, it is of great importance to make an appropriate plan of finance, which contributes to the greater beanfit for a range of beneficiaries and sustainability in the finance of this project. Light rail consortium (LRC) is committed to outline an economical structure of finance sustainably with feasible value capture mechanisms and credible fund arrangement and control for the MR programme.
The financial planning of Light rail consortium targeted at optimal finance to provide the maximized money value for beneficiaries such as the stakeholders and the government of Manhattan. In this plan, performance of revenue and loss in the past will be provided to illustrate the health of finance in operation. Budget of financial viability will be given as well. In addition, specified partners and financing outline will be stated. LRC will also use a series of funding mechanism to explain a feasible structure of money by estimating the cost and considering the key financial risks.
4.1. LRC Financial Performance
4.1.1. Financial experience
Urbanomics has used an established analytic method for the Federal Transit to improve the values of the property and the social welfare. It is raported that there are enduring economic beanfits generated through this one-time investment in the auto-free light rail. Large amounts of revenue inflow because of the expected new access in the transportation terminals and the railway, which represent the top valuable real facilities of a country. An improvement of $13.7 million is estimated in these estates. What’s more, fiscal beanfits per year such as the taxation will be improved by $175.4 million causing by obtain of the property value (Institute for Rational Urban Mobility 2008).
4.2. Financial viability
4.3. MRC Key Financing Partners
4.3.1 Equity Contributors
The Institute for Rational Urban Mobility, Inc. is a non-profit company in New York from 1997 to research and improve the livability and the economic advantages of the city. IRUM is one of the hosts of this project. There are 6 major members in IRUM, George Haikalis, President, Jeffrey Gold, Vice President, William K. Guild, III, Esq., Secretary/Treasurer, Anthony Callender, Jill Greenberg, and John West, III.
4.3.2 Financial Advisors
Metropolitan Waterfront Planner, led by urban planner and activist Carter Craft, is a non-profit organization which is committed to the development and usage of the waterfront, shoreline and linked upland regions in New York City and other metropolitan realms, such as the City of Water Day announced by City Council Speaker Christine Quinn at MWA's 2008 (Craft 2007), The Environmental Defense Fund. Besides, it also provides funding for the construction of infrastructure services. It has participated as sponsor and equity contributor in many events related for financing.
ANZ, serving as a bank, is mainly committed to initiate capital management, risk control and providing advice in financing. It also provides lending in the pattern of infrastructure, public projects and other social issues. And Commonwealth bank is another influential bank which contributes much in the infrastructure area.
4.4. Auto-‐free Light Rail Boulevard Financing Outline
Estimated cost of the light rail project
4.5. Proposed Funding Mechanism
The plan seeks to gain as much as from the development of the project and to improve the value of the investment since they are the end-users in terms of the Manhattan Light Rail. From this point of view, LRC develops several criterions in order that the plan beanfits their community, economic condition as well as the environment. These criterions have taken the past of communities near the Manhattan realm into consideration. Maximize the usage of land, create an initiate and interest place for better communication among the residents. Being environment friendly for farmland, scenery of nature and important region. What’s more, various options for transportation should be provided with more reasonable and fair prices. Last but not least, the project should contribute to the cooperation between the communities and the stakeholders.
4.5.1 Direct fees
The Manhattan realm includes some public spaces such as over one hundred retail shops, theaters with more than six thousand seats, restaurants, and etc. The development of the light rail will increase the need for these aspects. It will bring more consumption through more new iohabitants, renters, visitors at home and abroad. Direct fees like transportation, tickets and other expenditures like shopping, housing and new development in squares, fountains as well as terraces can roll out the financial costs from the operation of Manhattan Light Rail.
As the table shows, the growth in the retail market contributes to the economic performance, and the new public places are planned to improve the area of transit beanfit. The properties of Manhattan are arousing the added commodities and services, which can increase the needs not only within the market of region, but also the nation, even the whole world.
Table .Employment and Retail Sales Forecasts for Other Commercial Activities in New York City, 2010-2015
4.5.2 Credit assistance
Establishing a new light-rail is always a complex issue, requiring financial support from a variety of money sources from Federal, State as well as the local. In the Federal fiscal year of 2002, New York got $550.9 million, in which the vision 42 ranked the top in funding because of the pedestrianization resulting from the connection between the development of the light-rail and the 42nd street (Securities and Exchange Commission 2002). Public Works Grants may also fund the project since it influence the creation of jobs and the potentials which can help to develop initiate industries and technology. In addition, large amounts of funding from the New York City, the Mass Transportation Trust Fund following the law all contribute to the assistance of credit through decreasing borrowing from other investors, which generates high trustworthiness and financial safety in case that something unexpected occurs and impact the repaying abilities.
4.6 Value Capture Mechanisms
A) Developer Fees and Exactions
These fees are responsible to developers for the new project, which can cover its costs in occupying the land for all kinds of facilities and public infrastructure. Expenses include payments in pedestrian zone, parking areas, and cyclists like access paths for commuters, sewer extensions and transportation management.
In addition, consider that the cost of the facilities are paid with Non-recurring engineering costs. While the usage of these issues can last for several decades, which can be regarded as developer fees. The costs should be revalued as the new facilities which are put into operation generate more cash inflows and outflows. And it is obvious that the revenues are much more than the expenses in the long term. The increment of taxation is another fees should be considered although the increment of taxation against the discrimination challenges the law, it should not be ignored that those law cases are supporting the fees gathering (Russ Building Partnership, 1987).
b) Transit Improvement District Assessment
In this assessment, the major revenue to consider the improvement of transit includes cost or valuation which requires real property ownership. But another assessment focuses on the ground, landscapes and other amelioration which can bring along subsequent beanfits coming from new public infrastructure. Special assessments are regarded as a kind of method to reconsider the costs and cash flows by adding some unimplemented profits or incomes. A specified taxes percentage of property and the business development are two approaches for assessment.
c) Tax Increments Financing
As the running of project improves and the evenlasting impacts from that development, collection and valorization of revenues can be improved by increasing the taxes. Since the beanfits generated are not visible until the light rail come into service for longer time. The income from this part can offset the costs to some great extent, and therefore TIF is usually used by covering its expenses with adequate revenue in the long run. Once the Manhattan light rail comes into operation, continuous booming of revenue will appear which have been approved by the example of the recent High Line Park.
d) Other Commercial Revenue
The various advertisement on trains, stations and platforms, development of the state of the art services for way-finding, sponsorship of public or corporate activities and naming rights are also contribute to the value capture. Take the sporting sponsorship, which led to the top income as an illustration. Insurance in the whole country spent $84 million for 26 years in order to buy the naming rights of NASCAR, which is raported that seeking thirty million dollars every year. At the same time, the beginning Series is assessed for seventy million dollars annually (Lewis 2008).
4.6. Key Financial Risks
The risk coming from liquidity and funding should be highlighted since the cash outflows of the project dominated large shares of the expenditure. Though it is based much on the credit of the state and the government, the enduring beanfit and the later performance of the light rail will be impacted directly if there are problems occurred with the fund flow and budget.
The criterion and the regulations are not suitable for the assets involved in an SPV since it is reflected outside the balance sheet. It can explain that why many organizations and businesses always seeking for those tools firstly. Nevertheless, this criterion can result in the implicit venture especially for the enterprises.
Additionally, the reputational risk of the nation and the government also exists. The vision 42 proposal is managed by the city for non-profit operation concerning with lower cost of transport to improve the livable condition of the urbanites.
Lewis, R 2008, ‘Answer about New York City’s waterfront’, New York Times, viewed 8 October 2014, <http://cityroom.blogs.nytimes.com/2008/07/30/answers-about-new-york-citys-waterfront/>.
Craft, C 2007, ‘Ask the waterfront expert’, New York Times, viewed 8 October 2014, < http://cityroom.blogs.nytimes.com/2007/07/30/waterfront-expert-takes-questions/?_php=true&_type=blogs&_r=0 >.
Institute for Rational Urban Mobility 2008, Vision 42, viewed 8 October 2014, < http://www.vision42.org/v42_web.pdf>.
Securities and Exchange Commission 2002, Annual raport pursuant to section 13 or 15(d) of the securities exchange Act of 1934, viewed 8 October 2014, < http://www.sec.gov/Archives/edgar/data/1088033/000101706203000693/d10k.htm >.
Russ Building Partnership v. City and Country of San Francisco 1987, viewed 8 October 2014, < http://law.justia.com/cases/california/court-of-appeal/3d/199/1496.html >.