As part of an unusual financing plan, the Los Angeles City Council has approved a one-year, $16.4-million loan to the Harbor Department to help pay for the construction of the West Channel/Cabrillo Beach Recreational Complex and four other major port projects scheduled for completion in the next five years.
The loan, approved by a unanimous council vote Wednesday, will give harbor officials temporary use of funds that have been set aside for community development projects but so far have not been spent.
The funds will be used in conjunction with construction bonds and surplus harbor operating revenues to carry out a $500-million renovation of the harbor's recreational and cargo-handling facilities, said Michael Ferrall, legislative representative for the harbor.
The loan will be used to help complete an 1,150-slip recreational marina at Cabrillo Beach; a World Cruise Center, to be operated by a consortium of private cruise lines; a 91-acre cargo and automobile shipping terminal, and a 150-acre transfer yard for placing shipping containers onto railroad cars that will be a joint project with the Port of Long Beach, Ferrall said. New wharves also will be constructed at several commercial cargo berths, he said.
20 Projects Planned
The five projects are among 20 the harbor is now planning, Ferrall said. The additional projects, designed to improve old wharves and cargo terminals, will not be financed under the city loan.
"We've seen a tremendous growth in international trade," Ferrall said. "We're trying to keep up with that demand."
Funds for the renovation have been developed from a number of sources, said Rami Furman, the harbor's chief financial officer. Last summer the Harbor Department won City Council approval to sell $200 million in construction bonds and variable-interest-rate certificates, from which the harbor has already secured about $140 million, Furman said.
Additional financing is expected to come from the harbor's $41-million annual operating surplus, as well as from the private tenants that would lease some of the new facilities.
Officials described the loan as an innovative financing tool that will bring important benefits to both the city and the independently operated Harbor Department. The loan is the first of its kind under a recently approved program to make short-term loans of federal block grant money, said Parker Anderson, director of industrial and commercial development for the city's Community Development Department.
Until now, federal money for community development projects--such as libraries, community centers and social programs--was held until it could be spent for designated projects, earning no interest for the city, Anderson said. Loans through the new program will provide the city with interest income while putting the money to temporary use in places where it might benefit the community, he said.
The 6% loan will provide low-interest cash for the harbor and generate about $600,000 in new interest income for the city, said Emma McFarlin, the city's assistant chief legislative analyst. The five construction projects are expected to create 884 permanent jobs in the harbor, more than half of them available to low- and moderate-income workers who do not have extensive education or training.
Ferrall said harbor officials began negotiating for the loan after learning that the large pool of funds might be available on a short-term basis. Under terms of the agreement, the Harbor Department may be required to return all or any portion of the funds upon 30-day notice from the city.
"We don't receive any tax income from the city," Ferrall said. "We don't get anything from the city; we don't get anything from the state, and we're not going to get anything from the federal government. We're in a position where we have to look wherever we can to find sources of funding for these projects . . . (and) $17 million is not a small sum of money."
Officials said more than $9.6 million of the loan will be applied toward construction of the $40-million West Channel/Cabrillo Beach Recreational Complex, where there has been intense competition for boating slips.
World Cruise Center
More than $2.8 million will go toward the World Cruise Center--a $13.5-million project that is expected to bring the port more than $6 million in annual passenger fees--and more than $2 million of the loan will help build the $54-million railroad transfer yard.
Remaining funds from the loan will be divided between new cargo terminals and wharf construction, a city report said.
Ferrall said the transfer yard, the largest of the five projects, will be built about three miles from the port's cargo terminals, with 10 or 12 railroad lines that will help distribute cargo containers across the country. He said the facility will reduce truck traffic on the Harbor Freeway, where trucks now transport most cargo containers to train yards in downtown Los Angeles.