Port Bond Feasibility Studies

Port Bond Feasibility Studies: Structure, Use, and Investor Analysis

Understanding Engineer's Reports, Rate Consultant Studies, and Revenue Projections for Port Revenue Bonds

Prepared by DWU AI

An AI Product of DWU Consulting LLC

February 2026

DWU Consulting LLC provides specialized municipal finance consulting for transportation agencies, airports, ports, toll roads, and water utilities. Our infrastructure finance expertise spans revenue forecasting, bond structuring, rate analysis, and capital program advisory. Please visit https://dwuconsulting.com

Important Disclaimer: This article is generated by artificial intelligence and provided for informational purposes only. It should not be construed as legal advice, investment advice, or financial guidance. Port authorities, investors, and policymakers should consult qualified legal, financial, and technical advisors before making decisions based on this content. DWU Consulting does not provide personalized investment, legal, or tax advice through this article.

Changelog
2026-02-23 — Initial publication. Comprehensive article on port bond feasibility studies, including study structure, revenue projections, DSCR analysis, limitations, and investor evaluation frameworks.

Introduction: What Is a Port Feasibility Study?

A port bond feasibility study — formally called an "engineer's report" or "rate consultant's report" — is a financial and operational analysis document prepared by an independent engineering or consulting firm as part of a municipal bond offering. The study projects the port's revenues, operating expenses, net revenues, and debt service coverage ratio (DSCR) over the bond's term, typically 20–30 years.

Feasibility studies serve two critical functions. First, they are a legal requirement mandated by the bond indenture for most port revenue bond issuances — the indenture typically requires that the port authority engage an independent consultant (independent from both the port authority and the bond underwriter) to certify that projected revenues will cover debt service with adequate margin. Second, they are a tool for investors and rating agencies to evaluate whether a port can sustainably service its debt over the long term.

Port feasibility studies are closest cousins to airport traffic and revenue (T&R) studies and toll road traffic and revenue studies — all three are forward-looking engineering-economic analyses of infrastructure revenue streams. However, port feasibility studies are less standardized across the industry than airport T&R studies, and the port consulting community is smaller and less formalized than the airport consulting world. This creates both opportunity (less efficient pricing of port credit risk) and risk (less structured methodologies can introduce inconsistencies).

This article explains what port feasibility studies contain, how they are structured, what assumptions drive the projections, and how investors should critically read and evaluate them.

Required vs. Independent Studies

Required Studies (Bond Indenture Requirement): Most port revenue bond indentures include a covenant requiring that before the port issues new parity or subordinate debt, it must obtain an independent feasibility study certifying that projected net revenues will cover debt service at a specified multiple (typically 1.10x to 1.50x, depending on the port). The study must be prepared by an engineer or consultant who is independent from the port authority, the bond underwriter, and the port's existing consultants. This independence requirement reflects the intent to provide an objective, third-party assessment of revenue feasibility.

However, the definition of "independence" varies by port and indenture. Some indentures define independence narrowly (the consultant cannot have performed prior work for the port or underwriter within a specified period, typically 2–3 years). Others define it more loosely. In practice, the pool of port engineering and rate consulting firms is small — perhaps 15–20 firms nationally with deep port expertise — and many have worked with the same ports multiple times over decades. True independence, in the sense of having zero prior relationship with the port, is often impractical; instead, indentures typically focus on procedural independence (the consultant is selected by the port, not the underwriter; the consultant reports to the port authority; the consultant is bound by professional standards and liability).

Independent Studies (Financial Analysis Tool): A port authority may also commission an independent feasibility study outside of a bond issuance context, to evaluate whether the port's current tariff structure is sufficient to fund a planned capital program, or to assess financial sustainability over a multi-year planning horizon. These studies are not legally required and are less common than required studies, but they serve an important planning function for port management.

Typical Consulting Firms: The major firms conducting port feasibility studies include:

• Engineering/Infrastructure Firms: CDM Smith, AECOM, Jacobs Engineering, Steer, Louis Berger, Mead & Hunt
• Specialized Port Consultants: LeighFisher (now part of HNTB), Landrum & Brown, IBI Group
• Rate/Finance Consultants: Jacobs, Resource Consulting Group, Stantec

Many of these same firms conduct airport T&R studies and toll road traffic and revenue studies, enabling cross-sector comparison of methodologies and assumptions. This is valuable for investors because it allows benchmarking of port studies against airport and toll road standards.

Typical Study Structure and Contents

A port feasibility study typically comprises 60–100 pages and is organized as follows:

1. Executive Summary (2–5 pages): High-level overview of port facilities, historical performance, growth assumptions, projected DSCR, and key findings. Designed for non-technical readers (municipal officials, city council members, credit rating committees).

2. Port Overview and Description (5–10 pages): Governance structure (independent authority, city department, county enterprise fund, port district); facilities description (container terminals, bulk cargo handling, cruise facilities); service area and hinterland analysis (defining the port's geographic market and competing ports); operational metrics (TEU capacity, berth configuration, crane inventory, labor agreements); and competitive position relative to peer ports (e.g., channel depth, proximity to major rail and highway networks, cargo mix).

3. Historical Financial Performance (5–10 pages): Actual audited operating revenues and expenses for the prior 3–5 fiscal years, organized by revenue category (container wharfage, dockage, terminal leases, cruise revenue, miscellaneous fees). Actual debt service paid, reserve balances maintained, and financial ratios (DSCR, days cash on hand). This section establishes a baseline for evaluating whether projected revenues represent a realistic extrapolation of historical performance or a departure from trend.

4. Revenue Forecast (15–25 pages): Projected revenues by category over the study period (typically 20–30 years). For each revenue category, the study specifies:

• Historical volume and revenue data
• Growth assumptions (cargo volume growth, tariff rate assumptions, new revenue sources)
• Underlying drivers (GDP growth, trade growth, shipping alliances, automation)
• Sensitivity to economic cycles and shocks

5. Operating Expense Forecast (5–10 pages): Projected operating and maintenance expenses, including labor (salaries, benefits), utilities, maintenance and repairs, insurance, professional services, and administrative overhead. Expense forecasts typically escalate historical baselines by inflation (often 2–3% annually) with adjustments for known future cost drivers (e.g., zero-emission compliance costs, automation investments).

6. Net Revenue and DSCR Projections (10–15 pages): Calculation of net revenues (gross revenues minus operating expenses) and debt service coverage ratio (net revenues divided by annual debt service) for each year of the projection period. Charts and graphs typically show DSCR trending over time, minimum DSCR in any year, and comparison to covenant requirements.

7. Rate Covenant Compliance Analysis (5–10 pages): Analysis showing that projected net revenues will meet or exceed the port's rate covenant requirement (e.g., if the covenant requires 1.25x DSCR, the study demonstrates that projected DSCR will exceed 1.25x throughout the study period). This is the core of the feasibility study — the yes/no answer to the question "can the port service this debt?"

8. Sensitivity Analysis (10–15 pages): Alternative scenarios testing how DSCR changes under different assumptions. Typical scenarios include:

• Revenue Downside (10%, 20%, 25% reduction in projected cargo volume)
• Rate Covenant Stress (revenue decline combined with expense inflation)
• Tariff Shock (sudden change in tariff rates, e.g., 15% tariff on containerized imports)
• Capital Program Delay (reduced depreciation-driven need for capital spending in early years)

Sensitivity analysis reveals how much "buffer" the port has above its covenant minimum and whether projected coverage could fall below the covenant if key assumptions prove wrong.

9. Capital Program and Funding (5–10 pages): Description of the capital program being financed by the proposed bond issuance, estimated costs, and timing of expenditures. The study may model the impact of capital spending on operating costs (e.g., debt service on existing debt, depreciation calculations for fleet replacement).

10. Appendices: Supporting data, detailed financial tables, consultant's qualifications, and citations to source data (port authority budget documents, historical financial statements, trade publications, economic forecasts).

Revenue Projections and Assumptions

The heart of any feasibility study is the revenue projection. Revenue projections are built from two components: (1) volume projections (e.g., number of TEUs expected to move through the port in year 5) and (2) tariff/rate assumptions (revenue per TEU, dockage rates, lease rates).

Container Volume Projections: For container ports, volume projections typically start with published forecasts of U.S. container import/export volumes (available from the Maritime Administration, port associations, and industry publications like JOC.com). The consultant then applies a market share assumption (e.g., "the Port of Savannah will capture 6.5% of total U.S. container imports by 2035") to arrive at port-specific TEU forecasts.

Volume assumptions are driven by macro factors including:

• GDP Growth Assumptions: Most feasibility studies assume real GDP growth of 2.0–2.5% annually, with containerized import growth tracking GDP or slightly above it (typically 2.2–2.7% annually). During periods of trade uncertainty or tariff shock (as experienced in 2025), baseline GDP growth assumptions may not hold, and volume declines are possible.
• Trade Growth Drivers: Population growth (especially in the port's hinterland), e-commerce penetration (which tends to increase import volumes), and supply chain length (nearshoring reduces some trade, but diversification increases complexity and requires more cross-border movement).
• Shipping Alliance Decisions: The major global container shipping alliances make strategic decisions about which ports to call at and with what frequency. A decision by the Ocean Alliance to increase calls at Savannah and reduce calls at Charleston directly affects those ports' cargo volumes. Feasibility studies may not explicitly model alliance routing dynamics, but they implicitly assume that historic market share will be maintained — a risky assumption given shipping consolidation trends.
• Infrastructure Capacity Constraints: A port that is currently operating at 90%+ of nameplate capacity may need to project volume growth more conservatively unless major capacity expansions (new berths, deeper channels, additional cranes) are planned and funded. Feasibility studies typically assume that capital investments are completed on schedule and deliver expected capacity increases.

Bulk and Breakbulk Volume Assumptions: Ports with significant bulk cargo (petroleum products, dry bulk commodities like grain or coal) typically project bulk volumes separately from container volumes. Bulk volume assumptions are often driven by commodity-specific factors: grain exports are correlated with U.S. agricultural production and global demand; petroleum throughput is correlated with refinery utilization and crude oil imports. Consultants typically use commodity price forecasts and historical production/import ratios to project future volumes.

Cruise Passenger Projections: For ports with cruise operations (Miami, Everglades, Canaveral, Tampa, Seattle), cruise passenger volumes are projected based on historical trends, cruise line capacity additions, and assumed per-passenger fee growth. Cruise demand is correlated with consumer confidence and discretionary spending but has proven to be resilient through economic cycles. Feasibility studies may model cruise volume risk separately, as the COVID pandemic demonstrated that cruise revenue can collapse suddenly due to external shocks.

Tariff and Rate Assumptions: Once volumes are projected, revenues are calculated by applying tariff rates (e.g., cost per TEU wharfage, per-vessel dockage charge, per-acre ground lease rate). Feasibility studies typically assume modest tariff increases — often tracking inflation (2–3% annually) — with the assumption that the port authority will exercise its rate-setting authority to maintain real revenue levels. However, some studies may build in more aggressive tariff increase assumptions if the port has pricing power (e.g., a port with a unique competitive advantage may be able to increase tariffs faster than inflation).

Terminal Lease Revenue: For ports that lease terminal facilities to private operators (e.g., the Port of Long Beach, which generates ~90% of revenue from terminal operator leases), lease revenue projections are critical. These projections typically assume that lease rates will escalate based on historical lease agreement escalation clauses (often tied to inflation or, for newer leases, to cargo volume performance). Lease revenue is relatively stable compared to cargo-volume-dependent revenue, but it does expose the port to terminal operator credit risk.

DSCR Projections and Coverage Tests

The core of a feasibility study is the projection of debt service coverage ratio (DSCR) — the ratio of net revenues available for debt service to annual debt service payments (principal plus interest).

DSCR Calculation: DSCR is calculated as follows:

DSCR = Net Operating Revenue / Annual Debt Service

Net Operating Revenue = Gross Port Revenues – Operating & Maintenance Expenses
Annual Debt Service = Sum of all principal and interest payments due in the fiscal year on outstanding bonds

A DSCR of 1.5x means the port generates $1.50 in net revenue for every $1.00 of annual debt service. A DSCR of 1.0x means the port exactly breaks even on debt service (all net revenue is consumed by debt payments, with nothing left for reserves, capital renewal, or distributions to the parent entity).

Covenant Requirements: Port bond indentures typically require a minimum DSCR of 1.10x to 1.50x, depending on the port and the specific bond series. For example:

• Port of Los Angeles: 2.0x DSCR covenant
• Port of Long Beach: 1.25x DSCR covenant (senior lien)
• Port Everglades: 1.25x (senior); 1.10x (all-in)
• Virginia Port Authority: 1.25x covenant

The feasibility study must demonstrate that projected DSCR will meet or exceed the covenant throughout the study period (typically 20–30 years). This is the feasibility test: if projected net revenues fall short of the covenant minimum in any year, the port would be in technical default of its bonds, triggering potential covenant violations and rating downgrades.

Minimum Year Coverage: Feasibility studies highlight the "minimum year DSCR" — the lowest projected DSCR in any year of the study period. For example, a study might project Year 1 DSCR of 2.5x, Year 5 DSCR of 2.8x, and Year 15 DSCR of 1.8x, with a minimum year DSCR of 1.8x. This minimum year coverage is the most conservative measure of feasibility: if the minimum year DSCR exceeds the covenant, the port is compliant with its financial test in all years.

Buffer Above Covenant: The "buffer" between projected minimum year DSCR and the covenant requirement indicates the margin of safety. If a port with a 1.25x covenant projects minimum year DSCR of 2.0x, the buffer is 0.75x (2.0x – 1.25x). A larger buffer indicates greater resilience to adverse conditions; a smaller buffer indicates tighter financial margins. Rating agencies and investors typically prefer to see buffers of at least 0.50x–0.75x above the legal covenant.

Cargo Volume and Traffic Revenue Forecasts

Port feasibility studies often incorporate or reference traffic and revenue (T&R) studies prepared by specialized transportation consultants. A T&R study is a detailed forecasting analysis that projects future cargo volumes based on detailed economic analysis, competitive positioning, infrastructure constraints, and historical trends.

T&R Study Methodology: A comprehensive T&R study typically includes:

• Market Definition: Defining the geographic market served by the port (e.g., "the Port of Savannah serves the Southeast U.S., with primary hinterland coverage extending 500 miles inland via rail and truck").
• Competitive Analysis: Identifying competing ports (e.g., Port of Charleston, Port of Jacksonville) and the factors influencing shipper choice among ports (tariffs, channel depth, rail connectivity, distance to consumption centers).
• Historical Trend Analysis: Analyzing 10–20 years of historical port cargo data and identifying trend breaks corresponding to major events (channel deepening, terminal expansion, supply chain disruptions).
• Elasticity Assumptions: Modeling how cargo volume responds to changes in tariffs, transportation costs, and competitor actions. Price elasticity of demand for port services is typically modeled at -0.5 to -1.0, meaning a 1% increase in port tariffs leads to a 0.5–1.0% decrease in port cargo volumes.
• Scenario Analysis: Projecting volumes under baseline, upside, and downside economic scenarios.

Common T&R Consultants (Port Sector): The major firms conducting port T&R studies include LeighFisher, Steer, Louis Berger, AECOM, Jacobs, and CDM Smith — the same firms that conduct airport T&R studies and toll road T&R studies.

Optimism Bias in Port T&R Studies: Academic research (particularly the work of Bent Flyvbjerg at Oxford University on infrastructure forecasting accuracy) has documented systematic optimism bias in transportation forecasting across all modes: airport T&R studies, toll road T&R studies, and port T&R studies. Port T&R studies, on average, overestimate cargo volume growth by 10–20% relative to actual outcomes. The causes of this bias include:

• Incentive Structure: The port authority commissioning the study has an incentive for the study to show strong feasibility (supporting debt issuance). The T&R consultant knows this and may consciously or unconsciously bias assumptions upward to demonstrate feasibility and secure repeat business from the port.
• Anchoring on Optimistic Scenarios: T&R consultants often anchor their baseline scenario on recent peak traffic years (e.g., 2022 pre-tariff peak) rather than longer-term trend lines, which can overestimate sustainable growth.
• Underestimation of Structural Headwinds: T&R studies often assume that structural changes affecting cargo flows (nearshoring, automation, shipping alliance consolidation) will not materially reduce volumes — a conservative assumption in hindsight.
• Black Swan Exclusion: Feasibility studies by definition assume that major disruptions (pandemics, wars, financial crises, trade policy shocks) will not occur during the study period. This is a reasonable baseline assumption for modeling, but it creates a systematic upward bias when the study is used to make long-term financial commitments.

Investors evaluating feasibility studies should be aware of this documented bias and apply a conservative haircut (10–15%) to port volume projections when stress-testing the port's debt service capacity.

Limitations and Optimism Bias in Feasibility Studies

Port feasibility studies are valuable planning and financing tools, but they have important limitations that investors and port officials should understand.

1. Optimism Bias — Cargo Volume Forecasts: As noted above, port T&R studies systematically overestimate cargo growth. Academic studies suggest applying a 10–15% downward haircut to consultant volume projections when evaluating debt service capacity. For example, if a study projects 6.0 million TEUs in year 10, a more conservative estimate might be 5.1–5.4 million TEUs.

2. Trade Policy and Tariff Shocks: Feasibility studies are typically prepared in a baseline trade policy environment and do not explicitly model tariff scenarios. The 2025 tariff episode demonstrated that trade policy changes can reduce cargo volumes by 15–25% within months. Port authorities and investors should evaluate how much DSCR buffer would remain if a tariff shock reduced volumes by 20–25% below baseline.

3. Shipping Alliance Routing Risk: Feasibility studies assume that the port will maintain its historical market share and call patterns. However, the consolidation of the global container shipping industry into four major alliances means that routing decisions by alliance members can shift cargo volumes between competing ports. A study prepared for the Port of Charleston, for example, might project stable market share without explicitly modeling the risk that the Ocean Alliance (which includes CMA CGM and COSCO, major carriers calling at Charleston) could reduce calls at Charleston in favor of Savannah or another port.

4. Long-Term Uncertainty: Feasibility studies project revenues and expenses 20–30 years into the future. Uncertainty about GDP growth, trade patterns, consumer preferences, technological change, and regulatory requirements increases exponentially over this time horizon. A 30-year projection is inherently more uncertain than a 10-year projection, yet feasibility studies often present long-term projections with the same level of confidence as short-term ones.

5. Environmental Compliance Costs Not Fully Captured: Many feasibility studies prepared before 2024 do not fully account for the cost of California CARB zero-emission compliance, federal EPA Phase 3 requirements, or port-side shore power and electrification infrastructure. For ports subject to or voluntarily adopting these standards, operating cost projections may be understated, reducing net revenues and DSCR relative to projections.

6. Vessel Size Assumptions: Feasibility studies typically assume that larger vessel sizes (New Panamax and Post-Panamax) will continue to call at the port if channel and berth infrastructure supports them. However, if a competing port deepens its channel or expands berth capacity, it may attract larger vessels, diverting high-value cargo from competing ports. This risk is difficult to quantify in a feasibility study but can have material revenue consequences.

7. Terminal Operator Credit Risk (Lease Revenue): For ports heavily dependent on terminal operator leases (like Port of Long Beach), feasibility studies assume that lease operators will remain solvent and continue making lease payments. Terminal operator defaults are rare but possible, and a major operator insolvency could significantly impact port revenues. The COVID pandemic tested this risk, with some terminal operators seeking lease deferrals or restructurings.

8. Capital Program Completion Risk: Feasibility studies typically assume that planned capital projects (channel deepening, berth expansion, rail facilities) will be completed on schedule and on budget, and will deliver expected capacity increases. Construction delays, cost overruns, and technical performance shortfalls are common in large infrastructure projects and can reduce revenue-generation capacity relative to projections.

Investor's Guide to Reading a Feasibility Study

For investors evaluating port revenue bonds, here is a structured approach to reading and critically evaluating a feasibility study:

Step 1: Assess the Baseline — Historical Performance

Start with the historical financial section. Plot the port's actual revenues, expenses, and DSCR for the prior 5 years. Ask:

• Is revenue trending up, down, or flat?
• Is the port's expense growth tracking inflation, or accelerating?
• How volatile are revenues? (High volatility suggests sensitivity to economic cycles or trade policy)
• What is the historical range of DSCR? (This gives you a sense of the port's financial flexibility)

Example: If the Port of Savannah posted historical DSCR of 2.1x (FY2023), 2.3x (FY2024), and 2.5x (FY2025), and the feasibility study projects minimum year DSCR of 1.8x by year 10, this represents a decline from historical levels — be cautious about why the study projects DSCR compression.

Step 2: Evaluate Growth Assumptions

Review the revenue forecast section and extract the key assumptions:

• Volume Growth Rate: What is the projected average annual growth rate in cargo TEUs? (Typical range is 2.0–4.0% annually). Compare this to long-term historical growth rates. If the port grew at 2.5% historically but the study projects 4.0%, ask what has changed.
• Tariff Growth Rate: What are the tariff increase assumptions? (Typical: 2–3% annually, tracking inflation). If the study assumes tariffs can grow faster than inflation (e.g., 3.5–4.0%), that implies pricing power — make sure this is justified.
• Terminal Lease Escalation: For lease-dependent ports, what escalation rates are assumed in lease agreements? (3–5% annually is typical). Are leases locked in at fixed escalation rates, or do they have performance adjustment clauses?

Step 3: Check the Sensitivity Analysis — How Much Buffer Is There?

The sensitivity analysis section is critical. Look for:

• Revenue Downside Scenario: What happens to DSCR if cargo volumes decline 10%, 20%, or 25%? If the base case projects 1.8x minimum year DSCR and a 25% volume decline would reduce DSCR to 1.10x (barely meeting covenant), the margin of safety is very thin.
• Stress Scenario (Volume + Rate Increase): Many studies include a scenario combining volume decline with expense inflation. This is more realistic than pure volume shocks, since a recession typically affects both revenues and expenses. A port that can maintain covenant compliance under 20% volume decline + 3% expense inflation has more resilience.
• Tariff Shock Scenario: Given the 2025 tariff experience, ask whether the study includes a scenario modeling 15% tariff (or higher) with resulting cargo diversion. If not, apply this scenario yourself: reduce cargo volumes by 15–20% and recalculate DSCR.

Step 4: Identify the Consultant and Assess Track Record

Who prepared the feasibility study?

• Is it one of the major national consulting firms (CDM Smith, AECOM, Jacobs, LeighFisher/HNTB, Steer)?
• How much prior work has the consultant done for this port or other ports? (Multiple prior engagements suggest deep knowledge but also potential conflicts of interest)
• Are there published critiques or academic studies evaluating this consultant's forecast accuracy?

If the study was prepared by a boutique or local consultant with limited national port experience, be more skeptical of volume projections and methodology.

Step 5: Apply a Haircut to Volume Projections

Based on documented optimism bias in transportation forecasting, apply a 10–15% haircut to consultant volume projections. Example:

• Consultant projects: 5.0 million TEUs in year 10
• Conservative estimate (10% haircut): 4.5 million TEUs in year 10
• Recalculate DSCR using conservative volume estimates

If the port's DSCR drops below covenant when you apply a 10–15% volume haircut, the bond is riskier than the study suggests.

Step 6: Evaluate Capital Program Assumptions

Review the capital program section and the study's assumptions about cost and timing:

• Are major capital projects (channel deepening, berth expansion) assumed to be completed on schedule and on budget?
• What happens to revenue and DSCR if a major project is delayed by 2–3 years or costs 20% more than estimated?
• Are operating cost increases for maintaining new assets (additional depreciation, higher maintenance on newer facilities) adequately reflected in the expense forecast?

Step 7: Compare to Peer Port Benchmarks

If you're evaluating a port revenue bond, compare the study's assumptions and projections to those of peer ports:

• DSCR Comparison: Do similar-sized ports project similar DSCR multiples? If your port's study projects minimum year DSCR of 1.5x while comparable ports project 2.0x+, ask why.
• Growth Assumptions: Are volume growth rates consistent across peer ports, or is your port projecting faster growth? If faster growth, what's the justification?
• Tariff Assumptions: Can you find published tariff schedules for peer ports and compare assumed escalation rates?

The DWU port finance skill file contains historical DSCR data for 12 major U.S. port authorities, enabling cross-port benchmarking.

Step 8: Assess Trade Policy Risk Exposure

What is the port's exposure to trade policy shocks?

• Cargo Mix by Origin: If the port handles high volumes of imports from China (e.g., through alliances), how sensitive is revenue to U.S. tariff policy? West Coast ports are particularly exposed to U.S.-China trade dynamics.
• Diversification: Does the port have diversified trade partners (multiple countries, multiple commodities)? Diversified ports are more resilient to country-specific or commodity-specific tariff shocks.
• Tariff Scenario Analysis: Does the feasibility study include a scenario testing revenue impact of elevated tariffs (15%+)? If not, run your own scenario.

Step 9: Look for Red Flags

Warning signs that warrant caution or deeper investigation:

• Very High Growth Assumptions: Projected volume growth >4% annually, especially if historical growth was <2%.
• Very Low Sensitivity to Downside Scenarios: A study where even a 25% volume decline still results in DSCR well above covenant (e.g., 2.5x DSCR under 25% downside) is unrealistic and suggests conservative (good), but may also indicate the consultant is under-stressed the port's true risks.
• Inadequate Environmental Compliance Cost Modeling: Studies prepared before 2023 may not account for CARB/EPA zero-emission compliance costs. If the port is subject to these mandates, operating costs are likely understated.
• Thin Buffer Above Covenant: If minimum year projected DSCR is <0.5x above covenant, the margin of safety is minimal.
• Terminal Operator Concentration Risk Not Addressed: For lease-dependent ports, feasibility studies should acknowledge concentration risk. If one terminal operator pays 40%+ of port revenue and there's no discussion of operator credit risk or lease renewal risk, that's a red flag.
• Heavy Reliance on Port Authority Tariff Increases: If the study's feasibility depends on tariff increases beyond inflation, assess whether the port has political authority to implement such increases without pushback from users or the parent municipality.

Step 10: Synthesize and Compare to Credit Rating

After working through the feasibility study critically, compare your assessment to the port's published credit ratings from Moody's, S&P, and Fitch:

• Does your conservative analysis support the published rating, or does it suggest the rating may be optimistic?
• What is the rating outlook (stable, positive, negative)? If your analysis suggests downside risk that the rating agencies have not yet reflected, the bond may be priced to underestimate risk.
• Has there been rating agency commentary about feasibility study assumptions or methodology? Ratings agencies often flag studies they view as optimistic.

Example: A port with an A rating (S&P) projects minimum year DSCR of 1.6x with a 1.25x covenant, yielding a 0.35x buffer. Your conservative analysis suggests DSCR could be 1.45x under tariff shock (a 20% volume decline), barely above covenant. This suggests execution risk and potential for rating downgrade if adverse conditions materialize. The bond may offer a yield premium that appropriately compensates for this risk, or it may be mispriced.

Related Articles

• Port Revenue Bonds and Finance
• Port and Harbor Credit Analysis
• Port Capital Programs and Infrastructure Investment
• Port Financial Benchmarking and KPIs
• Container Port Economics
• Toll Road Traffic and Revenue Studies
• Airport Bond Documents and Official Statements

Disclaimer

Important: This article is generated by artificial intelligence and provided for informational and educational purposes only. It does not constitute legal advice, investment advice, tax advice, or financial guidance. All information, methodologies, and examples are based on publicly available data and industry practices as of February 2026. Material facts, bond ratings, port financial metrics, and consultant practices may change. Investors, port authorities, and financial professionals should conduct independent research, consult with qualified legal and financial advisors, and review original source documents (official statements, bond indentures, feasibility studies, audited financial statements) before making decisions. DWU Consulting LLC does not provide personalized legal, financial, or investment advice through this article.