The Virginia Commonwealth Transportation Board (CTB) recently approved a contract that will move Hampton Boulevard under the rail line that now crosses it.  The $20 million contract is small relative to some others in the state, but is one that the Port Authority has been pushing for for over 15 years.  

Once completed, the improved traffic pattern will allow the port to build longer trains carrying imported cargo containers without disrupting traffic on Hampton Blvd.  The port estimates that this could allow them to utilize rail for an additional 20% of the product that comes through the port.  Currently, that 20% leaves the port via truck and contributes to pollution, congestion and disgruntled neighbors.  The more product that can leave via rail, the better for Hampton Roads.

Now that Hampton Boulevard is being addressed, the State is considering an additional $17.8 million investment to double the on-dock rail capacity at Norfolk International Terminals.  These are all great projects for the port and will further enhance its competitive position over other East Coast ports.

The US Government’s Legacy Loans Program may soon be put on hold.  The program that is part of the $1 Trillion Public-Private Investment Program was designed to encourage banks to sell off loans and securities that were caustic to their balance sheets.  However, there has been both a lack of demand and supply in the marketplace.  Willing investors have turned un-willing over concerns that the government will later decide to change the terms of the agreement and impose salary caps or other onerous provisions.  On the supply side, many of the banks have already written down the assets and believe they can weather the economic storm without the program.  All talk, no action seems to be a recurring theme in the Geithner era.

In a further sign of the distress apparent in the bonds markets, the yield curve for US Treasuries moved to its steepest level in recorded history yesterday.  The spread between 2-year and 10-year notes breached 275 basis points.  The sharp increase in yields seems to be a result of concerns over the levels of debt the US government is incurring and how they will fund the spending.  According to a CNBC article,

With $2 trillion or more in issuance seen coming to market this year alone, some dealers were looking for a sharp readjustment in bond rates—which effectively reflect the cost to government of financing its borrowing.

The treasury did experience good demand for yesterday’s auction of $35 billion of 5-year notes.  However, strong demand for shorter term notes indicates a lack of demand for longer term issuance’s.  These are the ones that typically finance many of the municipal projects that provides the local services we, as taxpayers, demand.  In addition, the increase in longer term rates has a profound effect on mortgage rates, driving them up further.  This could serve to slow the improvements in the housing market, a sector which the US badly needs to improve in order to pull it from this recession.

While the debt markets may not be the most exciting thing to watch, they are extremely important to health and well being of our economy.

Citing a reduction in container volume, and increased competition from APM Terminals, Fitch recently downgraded their rating on the Virginia Port Authority’s $217.4 million of outstanding revenue bonds to “A”.  Fitch maintained a Stable outlook for VPA.  

The US Department of Education is changing its position on whether Stimulus Funds can, and should be used to fund new school construction.  In April, the DOE had indicated that new construction was an allowable use for the funds.  Last week, however, the DOE changed their position in an update to their previous guidance.  Now, the department is strongly discouraging the use of Stimulus Funds for new construction.  They have even gone as far as to indicate that anyone who does use the funds for new construction will be penalized in consideration for the “Race to the Top” money.  

Apparently, the funding of new school construction continues to be a hotly debated topic.  Keep in mind that $14-$16 billion of funds for new construction were stricken from the final Stimulus Bill.  There’s clearly a need, but no one is quite sure how to fund that need.

The Panama Canal Authority announced yesterday (LINK) that they intended to keep in place rate hikes which are scheduled to go into effect on May 1, 2009.  They also announced that they were implementing some temporary cost savings measures, effective June 1, 2009, to help shippers during these uncertain times.  The two primary components of their cost savings efforts are the redefinition of ballast for full container vessels transiting the canal and modifications to their reservations program to increase flexibility and reduce fees.  

While helpful, the early indications are that shippers are continuing to pursue other alternatives to both the Panama and Suez canals.  We’ll have to wait and see whether these cost savings offset the higher fees and whether shippers continue to structure routes to avoid any fees at all.