Priority Gateway Infrastructure Projects Cost-Recovery Mechanism - - PowerPoint PPT Presentation

November 27 – December 22, 2017

Priority Gateway Infrastructure Projects

Cost-Recovery Mechanism Options Consultation

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• Provide an overview of Vancouver Fraser Port Authority work

in identifying and seeking federal funding for projects that will benefit the gateway

• Outline current understanding of potential port authority pre-

funding on behalf of industry over the next decade and need for cost-recovery

• Seek input from industry regarding potential cost-

recovery mechanism options

Purpose

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1. About the Port of Vancouver and the Vancouver Fraser Port Authority 2. Background: Gateway Infrastructure Program and Gateway Infrastructure Fee 3. The next round of generational infrastructure investments

• Gateway T

ransportation Collaboration Forum’s Greater Vancouver Gateway 2030 strategy

• Other Vancouver Fraser Port Authority projects

4. Cost-recovery mechanism options

• Discussion regarding options

5. Feedback from industry

Outline

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Background: About the Port of Vancouver and the Vancouver Fraser Port Authority

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About the Port of Vancouver

• Canada’s largest and most

diversified port

• $200 billion in goods annually
• $550 million of cargo/day
• 28% of Canada’s trade beyond

North America

• 115,300 jobs across Canada

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Vancouver Fraser Port Authority mandate and role

• Facilitate Canada’s trade
• Protect the environment
• Consider local communities
• Operate safely
• Be commercially viable

Work for the benefit of all Canadians

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Federal port lands and waters

2.3

million people

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municipalities

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Our five business sectors

Bulk Breakbulk Auto Container Cruise

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Background: Gateway Infrastructure Program and Gateway Infrastructure Fee

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Roberts Bank Rail Corridor $310 million North Shore Trade Area $283 million South Shore Trade Area $127 million

Gateway Infrastructure Program (2009 – 2015)

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• 17 projects completed in North Shore, South Shore and

Roberts Bank T rade Areas

• Projects largely removed road and rail conflicts and congestion

at key bottlenecks, and increased capacity to accommodate anticipated growth in road and rail traffic associated with goods movement

• VFPA pre-funded $167 million on behalf of industry
• Leveraged more than $3 million of funding from federal, provincial

and local governments, T ransLink and railways for every $1 million contributed by industry

• These investments in turn led to rail improvements

undertaken by the railways and private sector investment

Gateway Infrastructure Program (2009 – 2015)

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Richardson $140 million Deltaport $400 million G3 Terminal $550 million

Private sector investments

Westshore $385 million Neptune $330 million PCT $170 million

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• As part of its requirement to be financially self-sufficient, port

authority needed to recover the $167 million investment from industry

• Four models were taken out to consultation in 2010:
• Value-based
• T
• nnage-based
• Mode and tonnage-based
• Rail footage and truck unit-based
• Industry feedback was considered in establishment of the

Gateway Infrastructure Fee

Gateway Infrastructure Fee

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• The Gateway Infrastructure Fee was established in 2011 and will be in place for

30 years

• T
• nnage-based fee allocated by benefiting trade areas (North Shore, South

Shore and Roberts Bank)

• As of 2017, Gateway Infrastructure Fee is set at:
• Roberts Bank T

rade Area: $0.05/tonne

• South Shore T

rade Area: $0.17/tonne

• North Shore T

rade Area: $0.08/tonne

• There were no projects in the Fraser River T

rade Area in the Gateway Infrastructure Program

• Annual report is provided to industry on portvancouver

.com

• Recalculation of Gateway Infrastructure Fee is done on an annual basis based on

cargo volumes and project costs to ensure that there is not an excess or insufficient amount of cost-recovery

Gateway Infrastructure Fee Cont.

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The next round of generational investment

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Trade is growing and further investment is needed

50 100 150 200 250 Millions of Metric Tonnes

Others Other Fertilizers Autos Sulphur Bulk Liquids Potash Metals & Minerals Agricultural Products Forest Products Containers Coal

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• Gateway T

ransportation Collaboration Forum (GTCF)

• Established in 2014 to identify priority projects related to trade and transportation

in the Greater Vancouver area

• Membership and steering committee consists of Vancouver Fraser Port Authority

, T ransport Canada, Ministry of T ransportation and Infrastructure, T ransLink and Greater Vancouver Gateway Council

• Greater Vancouver Gateway 2030 strategy: nearly 40 projects identified by

GTCF for federal funding asks through the National T rade Corridors Fund and

• thers – not all projects will have a funding commitment from VFPA
• Other identified investments
• In addition to GTCF projects, VFPA has announced funding commitment with the

Province of BC for the Highway 91 to Highway 17 and Deltaport Way Corridor Improvement Project

The next round of generational investment

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Priority Gateway Infrastructure Projects Greater Vancouver Gateway 2030 Projects

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Priority Gateway Infrastructure Projects Identified projects for VFPA pre-funding

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• As part of its requirement to be financially-self sufficient, VFPA

intends to recover its pre-funding contributions from industry

• This cost-recovery mechanism will apply to all commodities
• The cost information in this presentation is a conservative

estimate based on the current understanding of projects that may be funded by the port authority over the next 10 years

• VFPA’s pre-funding contributions will not be recovered through its
• ther fees (harbour dues, wharfage or berthage)

Cost-recovery for investments

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Cost-recovery mechanism options

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Cost-recovery criteria

• Fairness: Cost recovery is based on the principle that gateway

infrastructure improvements will benefit gateway users, therefore gateway users should be subject to the fee. The cost recovery should be transparent and should not compromise port or port operator competitiveness.

• Effectiveness: The cost-recovery mechanism should raise the

required port authority pre-funded infrastructure investment plus the cost of borrowing.

• Efficiency: The cost-recovery mechanism should be as simple and

efficient to collect as possible.

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• The cost-recovery mechanism will apply to all trade areas and

commodities

• The cost-recovery mechanism will be based on tonnage
• Options based on value and modal split were considered in the

development of the Gateway Infrastructure Fee but were deemed by industry stakeholders to be too complicated

• The term of the cost recovery would be 30 years
• Recalculation of the per tonne cost recovery amount would be

done on an annual basis based on cargo volumes and project costs

• An annual report would be provided on portvancouver

.com

Cost-recovery assumptions

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• T
• tal cargo volume estimates presented are for 2019, when

the new fee is anticipated to take effect

• Fee model assumes:
• 3% cargo growth per year from 2019 to 2048
• 4.63% annual cost of borrowing, the current VFPA bond rate
• $450 million capital costs do not include major

repair/maintenance, property insurance or land cost, which are cost recovered through GIF and would be cost recovered through the new fee

Model assumptions

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• The following table provides the assumptions regarding project costs

and eligible cargo throughput by trade area and across the gateway , which result in the calculations of cost per tonne in the options.

Capital spend by trade areas and across the gateway

Roberts Bank Trade Area Fraser River Trade Area South Shore Trade Area North Shore Trade Area Total Estimated Project Cost $104 M $161 M $90 M $95 M $450 M Forecast Tonnage Subject to Cost Recovery 40 MT 5 MT 30 MT 35 MT 110 MT * project costs have been allocated to trade areas based on benefit to those trade areas. For example, a project located within the Fraser River T rade Area that also benefits the Roberts Bank T rade Area has had costs allocated, in part, to Roberts Bank.

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Capital spend by trade areas – 2009-2030

RBTA FRTA SSTA NSTA Total GIP/GIF (2009-2015) $50 M

• $58 M

$59 M $167 M Current Projects (2017+) $104 M $161 M $90 M $95 M $450 M Total $154 M $161 M $148 M $154 M $617 M Total 2019 Tonnage (forecast) 40 MT 5 MT 30 MT 35 MT 110 MT * project costs have been allocated to trade areas based on benefit to those trade areas. For example, a project located within the Fraser River T rade Area that also benefits the Roberts Bank T rade Area has had costs allocated, in part, to Roberts Bank.

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Cost-recovery mechanism options

• Four options have been developed for consultation:
• Option 1: T
• nnage-based cost recovery allocated by trade areas (no change to

amount or collection of existing Gateway Infrastructure Fee)

• Option 2: T
• nnage-based cost recovery allocated by trade areas combined with

existing Gateway Infrastructure Fee

• Option 3: T
• nnage-based gateway-wide cost recovery (no change to amount or

collection of existing Gateway Infrastructure Fee)

• Option 4: T
• nnage-based gateway-wide cost recovery combined with existing

Gateway Infrastructure Fee

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• Option 1 would be a new fee with the same structure as the

existing Gateway Infrastructure Fee (GIF):

• T
• nnage-based fee
• Allocated by trade areas based on spending and benefit per area
• Based on assumptions, the new fee would be calculated as follows:

Option 1: T

• nnage-based cost-recovery allocated by

trade areas

Trade Area Option 1

(per metric tonne)

Roberts Bank $0.12 Fraser River $1.30 South Shore $0.13 North Shore $0.12

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• Each trade area would pay for infrastructure benefiting that

trade area

• Liquid bulk terminals in Burrard Inlet previously exempt GIF

would be subject to the fee

• FRTA would have the largest fee per tonne, as a result of the

number and cost of proposed improvements in the trade area, and the lower amount of cargo through this trade area as compared to other trade areas

• Fraser River T

rade Area is not subject to the current Gateway Infrastructure Fee

• GIPAC raised concerns that the high fee in the Fraser River

T rade Area could impact competitiveness of the trade area, and may reduce future investment within the trade area

Option 1 considerations

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• Option 2 would combine a new tonnage-based cost-recovery fee

with the existing GIF

• For the 22 years that GIF and the new fee would overlap, the fee

would be combined for ease of administration

• The new fee portion would continue for the remaining eight years

Option 2: T

• nnage-based cost-recovery allocated by

trade areas combined with existing Gateway Infrastructure Fee

Trade Area GIF portion

(per metric tonne)

New fee portion

(per metric tonne)

Option 2

(per metric tonne)

Roberts Bank $0.05 $0.12 $0.17 Fraser River

• $1.30

$1.30 South Shore $0.17 $0.13 $0.30 North Shore $0.08 $0.12 $0.20

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• Simpler to administer and collect
• The liquid bulk terminals in Burrard Inlet that were previously exempt

from the existing Gateway Infrastructure Fee would be subject to the new fee portion only

• As with Option 1, each trade area would pay for infrastructure

benefiting that trade area

• Again, like Option 1, the FRTA would have the largest fee per tonne
• GIPAC raised concerns that the high fee in the Fraser River T

rade Area could impact competitiveness of the trade area, and may reduce future investment within the trade area

Option 2 considerations

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• Option 3 would be a new fee charged on cargo throughout the

gateway:

• T
• nnage-based fee
• Allocated gateway-wide
• The gateway-wide fee would be set at $0.18/tonne

Option 3: T

• nnage-based gateway-wide cost-recovery

Trade Area Option 3 (per metric tonne) Roberts Bank $0.18 Fraser River $0.18 South Shore $0.18 North Shore $0.18

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• Unlike with Options 1 and 2, the new fee in each trade area

would be equal

• Liquid bulk terminals in Burrard Inlet that were previously

exempt from GIF would be subject to the fee

• Existing GIF would remain unchanged, and would be collected

from cargo through Roberts Bank, South Shore and North Shore trade areas

• The GIPAC noted that a gateway-wide fee would reduce the risk
• f affecting the competitiveness of any one trade area

Option 3 considerations

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• Option 4 would combine a new gateway-wide cost-recovery fee and

the existing GIF

• It would be calculated by taking the average of remaining GIP costs

($0.09/tonne) and combining with the new costs ($0.18/tonne) for a total fee of $0.27/tonne for a 22-year period

• As with Option 2, the rate would be reduced for the remaining eight

years of the new fee, down to $0.18/tonne

Option 4: T

• nnage-based gateway-wide cost-recovery

combined with existing Gateway Infrastructure Fee

Trade Area GIF portion

(per metric tonne)

New fee portion

(per metric tonne)

Option 4

(per metric tonne)

Gateway-wide $0.09 $0.18 $0.27

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• The Fraser River T

rade Area and liquid bulk terminals in Burrard Inlet, which were previously exempt from GIF , would be subject to the remaining GIF portion

• As with Option 2, simpler to administer and collect
• As with Option 3, the new fee in each trade area would be

equal

• The GIPAC noted that a gateway-wide fee would reduce the risk
• f affecting the competitiveness of any one trade area

Option 4 considerations

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Quantitative comparison of options

*In Options 2 and 4, the GIF portion would be collected for 22 years. For the remaining eight years, the fees would be reduced to the new fee portion only (i.e., in Option 2, it would be $0.12 for Roberts Bank; $1.30 for Fraser River; $0.13 for South Shore; and $0.12 for North Shore; and in Option 4, it would be $0.18/tonne). Option 1 Option 2* Option 3 Option 4* Trade Area GIF New fee Total New fee (includes GIF) GIF New fee Total New fee (includes GIF) Roberts Bank $0.05 $0.12 $0.17 $0.17 $0.05 $0.18 $0.23 $0.27 Fraser River

• $1.30

$1.30 $1.30

• $0.18

$0.18 $0.27 South Shore $0.17 $0.13 $0.30 $0.30 $0.17 $0.18 $0.35 $0.27 North Shore $0.08 $0.12 $0.20 $0.20 $0.08 $0.18 $0.26 $0.27

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Feedback from industry

• In addition to attending a small group meeting, you

are invited to provide input by:

• Reading the discussion guide and completing the feedback

form in hard copy or online at the link in the discussion guide

• Sending an email to

Commercial_Enquiries@portvancouver .com

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Discussion