Opportunity Knocks

OpportunityKnocksOpportunityKnocks

Creative Funding

Approaches From

The San Francisco

Bay Area

Therese W. McMillanDeputy Director, PolicyMetropolitan Transportation Commission

University of California, Irvine

ITS: Center for Urban InfrastructureMarch 7, 2003

Pursue creative innovation through grants management

Maximize region-specific funds sources (in MTC’s case — bridge tolls)

Develop long-range financial strategies and companion legislative proposals to deliver them.

Three Ways to Create Funding Opportunities

San Francisco Bay Area Counties

Million People; almost 4 million jobs

Municipalities

Miles of highway

Miles of local streets and roads

Public transit operators

What is the MTC region?

9

7

101

1,40019,600

23

The Current Crisis

The state’s fuel tax has lost one-third of its value since 1964, adjusted for inflation.

The Current Crisis State Transportation Improvement Program Also at Risk State Highway Account: Going, Going, Gone?

The State Highway Account is projected to be in the red by as early as June 2003. This likely will affect dozens of Bay Area transit, highway and local road projects in the STIP, many of which are now under construction.

The Current CrisisTraffic Congestion Relief Program: A Promise Deferred

2000-01

2001-02

March 2002

January 2003

Governor Davis proposes TCRP/AB 2928 signed into law:$6.8 billion total statewide / $4.9 billion in projects$1.7 billion in San Francisco Bay Area

Majority of funding for TCRP immediately deferred for two years:From FY 2001-02 until FY 2003-04

Proposition 42 passed by voters; to protect and extend funding for TCRP projects, local streets and roads and transit elements

Governor’s proposed budget proposes significant TCRP program reductions:2002-03: $100 million2003-04: $1.5 billionTOTAL: $1.6 Billion Statewide

Bay Area at Risk$510 million in approved TCRP allocations$29 million local streets and roads$14.4 million transit assistance (FY 2003-04)

Key Factors

High level of local dollars compared to state/federal dollars

Statutory provisions provide additional funding flexibility

via delegation to regions

High propensity (in Bay Area) to vote for increased

transportation including local sales taxes revenue measures

Creative Financing through Grants Management

The Regional Transportation Plan Funding Distribution: $87.4 billion

Maintenance vs. Expansion Commitment

State/Federal vs. Local Funding

Sales taxes outstrip the STIP

In each of the five Bay Area

counties with a special

transportation sales tax in

place, the proceeds from

this levy exceed the county’s

share of funds from the

State Transportation

Improvement Program

(STIP).

1992 — Suballocation of Federal Dollars (SB 1435)

State legislature passes ISTEA implementing bill that not only

codifies the federal suballocation of STP funds, but takes extra

step of suballocating CMAQ funds to regional agencies in air

quality non-attainment and maintenance areas.

1997 — Delegation of State Programming Choices

State legislature passes Senate Bill 45 which guarantees that

RTPA’s have project selection authority over 75% of a portion

of state highway account spending; the remaining 25% of

funds are programmed by California Transportation

Commission.

Statutory Flexibility

MTC assisted Santa Clara Sales Tax Authority in

delivering State Route 17/85 interchange project by

advancing $19.3 million in federal funding capacity.

Santa Clara paid MTC back with local sales tax

dollars — cash.

MTC used new cash account to facilitate future

swaps of local monies to projects having difficulty

obligating federal dollars (“red tape end-run”).

Applying Local Leverage and State Flexibility:

Santa Clara/MTC Swap

Bonds for Bridge Improvements

In its role as the Bay Area Toll Authority (BATA),

MTC will issue a total of $900 million in revenue

bonds to finance improvements to Bay Area toll

bridges.

Bond funds will be used for:

widening the San Mateo-Hayward Bridge

reconfiguring the approaches to Dumbarton Bridge

constructing a new Benicia-Martiez Bridge

replacing the westbound Carquinez Bridge span

upgrading the Richmond-San Rafael Bridge

Maximizing Regional Specific Sources

4.18%

5.50%

BATA developed a Plan of Finance with a prudent mix of fixed and variable rate debt.

While existing assets act as a natural hedge against variable rate debt, BATA has a limited amount of variable

rate capacity given its limited ability to increase revenues.

Debt mix:

67% Fixed Rate

33% Variable Rate

The Original Plan of Finance

$300 MillionVariable Rate

$200 MillionSynthetic Fixed

Rate

$100 MillionFixed Rate

$300 Million Synthetic Fixed

Rate

4.41%

4.44%

4.86%3.60%($200 million

to be financed)

The Current Plan of Finance BATA approved modifications to financing plan that include two synthetic fixed-rate swaps on a total

of $500 million of the issued debt that reduces interest rate cost and risk on the variable rate bonds issued.

Debt mix:

67% Fixed Rate

33% Variable Rate

2002

2003

BATA has limited variable rate capacity, and the 2002 and 2003 swaps were designed to lock in interest rates at levels below the current market as well as the assumptions for the fixed rate component of the Plan of Finance.

$300 Million Variable Rate

$600 MillionFixed Rate

4.18%

5.50%

$600 MillionFixed Rate

$300 Million Variable Rate

3.60%

Average Borrowing Cost: 5.07% Average Borrowing Cost: 4.19%

Original Plan of Finance Current Plan of Finance

Adds $200 million in additional project capacity

Sum|mary Financing Recommendation

5.50%

Establishes updated financing strategy to address over $2.0 billion

in cost overruns on the Bay Bridge seismic retrofit project.

Extends the “second dollar” seismic surcharge on the Bay Bridges

permanently.

MTC/BATA negotiated a provision to:

recoup any “excess” toll funds generated by the surcharge

extension to fund other transportation projects; extend the financing of the second dollar for a maximum

30 year period.

These provisions together serve to generate a new revenue source

estimated at roughly $500 million: key element in MTC’s Regional

Transit Expansion Program.

Assembly Bill (AB) 1171: Creating New Funding Potential

The cornerstone of the 2001 Regional Transportation Plan

(RTP) is MTC Resolution 3434, the Regional Transit

Expansion Program.

The $10.5 billion program will enable the Bay Area to speak

with one voice in Washington to solicit funding for both rail

and express/rapid bus transit projects.

Includes 9 new rail extensions, significant service expansions

and a comprehensive regional bus program.

Developing Long-Range Strategies: Resolution 3434Regional Transit Expansion Program

Resolution No. 3434

Resolution No. 3434 Regional Transit Expansion Program:

Map of Projects

Resolution No. 3434

19 projects including bus, rail, and

terminal investments

> 11 fund sources working in concert

to deliver projects

State and federal funds total $3.4 billion

Leveraging over

$6.3 billion in local

revenue sources

Funding a Game Plan for Regional Transit Expansion — MTC Resolution 3434

Resolution No. 3434

SF Muni Received $140 Million in Traffic

Congestion Relief Funds from State

Used Funds Immediately to Complete Phase 1 of

New Central Subway

Swap with Local Sales Tax Measure Funds that Will

Kick-In to Deliver Phase 2 New Central Subway

Inter-regional discussions about Similar Swaps of

Local Sales Tax Measures and State Funds for

Projects Ready Now versus Later

Managing Cash Flow through Swaps Critical to Timely Project Delivery

Resolution No. 3434

Commits $360 million of $500 million in new toll

revenues to transit expansion projects

Funds to Deliver: Extension of Caltrain to Downtown San Francisco Rebuilt Transbay Terminal with ability to accommodate

regional transit and future high speed rail Two BART extensions in Contra Costa and Alameda Counties

Bond Financing Will Make 30-Year Revenue Stream

Available as Early as 2011

AB 1171: Using New Regional Revenues to Deliver Transit Expansion Projects

Resolution No. 3434

60% of the region’s transit expansion program

funded locally

New Starts requests meet an even higher benchmark,

with federal funds proposed to leverage 77% in local

revenues

Argument that “supermatched” projects be prioritized

Case for Feds providing a backstop loan guarantee if

appropriations are not keeping pace with full funding

grant agreement payment schedule

Advocating the Region’s Strengths – the Argument for a “Supermatch”