APP 2013 Honors: Joint Financing Strategies for the Metro to LAX Airport Connector Project
By: Jonathan Overman, Gregory Maul, Masashi Sato
For full report, click here
The Los Angeles County Metropolitan Transportation Authority (Metro) is planning to
connect existing and planned rail transit to the Los Angeles International Airport (LAX).
Additionally, Los Angeles World Airports (LAWA) is preparing to implement a number
of major capital projects at LAX, including ground access to offsite projects adjacent to
the planned light rail, specified in its master plan. Furthermore, the project has a high
profile at the local level, as both the Mayor and the Metro Board are interested in seeing
the project initiated. These conditions make the timing for a fixed public transit
connection to LAX attractive; however, the actual project alignment and the funding
strategy for the airport transit connection, the “Airport Connector”, have not been
determined. LAWA asked us to research the funding opportunities on their behalf.
This report outlines the basic alternatives for a fixed public transit connection to LAX
and presents an evaluation of the multi-agency funding strategies for each alternative
from the perspective of LAWA. In order to identify possible sources of funding, the
project team reviewed the literature on transportation finance and studied other cases of
ground access projects at airports in the US. We established criteria by which to evaluate
each funding source and identified the funding sources that would maximize the benefits
and minimize the burden to Metro and LAWA.
The preferred funding strategy for the project depends on the chosen alignment and
associated total project costs. We present five alternative projects with differing costs
and possible user groups. Potential users of the Airport Connector include those who
circulate within the terminal, those connecting between the terminal and an offsite facility,
and those who travel between offsite facilities without visiting the terminal. Each
alternative contains project components that may be utilized by the different user groups.
We believe that the user groups should help determine relative cost share for each agency.
There is $200 million earmarked for the Airport Connector through the voter-approved
Measure R, a local sales tax passed in 2008. Those funds are available for any of the
project alternatives. Additionally, Metro suggests that an additional $130 million will be
available for the project through federal and local sources. The remaining project costs
must be covered by LAWA or Metro, or a combination of sources from each agency.
From LAWA’s perspective, any additional funding that Metro can contribute will allow
LAWA to prioritize other airport development projects. Metro is responsible for
disbursing a variety of federal, state, and local funding sources, and would therefore need
to shift funds away from other projects to program more than $330 million to the Airport
For its share of the costs, we recommend LAWA seek sources from which few other
projects at LAX could be funded, sources with flexible funding amounts, and sources
with a low cost of capital. With low interest rates on external financing sources and the
ability of LAWA to bond against future revenue, we recommend borrowing as a way to
accelerate the project timeline and smooth the future cash flows. We recommend that
LAWA apply for a federally supported Transportation Infrastructure Finance and
Innovation Act (TIFIA) loan. To the extent possible, we recommend raising the
Customer Facility Charges for rental car customers and bonding most of this future