Transportation Tuesdays Online Third in webinar series for transit CEOs & board members on economic sustainability January 17, 2012

Transcription

1 Transportation Tuesdays Online Third in webinar series for transit CEOs & board members on economic sustainability January 17, 2012 CREATIVE FINANCING AND PUBLIC TRANSPORTATION Greg Evans Art Leahy Tom Yedinak Pam O Connor Robena Reid David Yale Art Guzzetti

2 Creative Financing and Public Transportation Greg Evans Member, Executive Committee, and Representative Region VI-Transit Board Members Committee, APTA; and Board Vice President, Lane Transit District, Eugene, OR

3 Creative Financing and Public Transportation Art Guzzetti APTA Vice President-Policy, Washington, DC

4 Federal Financing Programs Tom Yedinak Private Sector Liaison Innovative Programs, Office of Budget and Policy, Federal Transit Administration Robena Reid Financial Economist, Office of Policy Review and Development, Federal Transit Administration

5 Transportation Infrastructure Finance and Innovation Act (TIFIA) Tom Yedinak Private Sector Liaison Innovative Programs, Office of Budget and Policy, Federal Transit Administration, Washington, DC

6 TIFIA Credit Program Overview Tom Yedinak Federal Transit Administration January 17, 2012 Transportation Infrastructure Finance and Innovation Act (TIFIA)

7 Background on TIFIA Strategic goal to leverage limited Federal resources and stimulate private capital investment in transportation infrastructure by providing credit assistance in the form of direct loans, loan guarantees, and standby lines of credit (rather than grants) to projects of national or regional significance. Key objectives Facilitate projects with significant public benefits Encourage new revenue streams and private participation Fill capital market gaps for secondary/subordinate capital Be a flexible, patient investor willing to take on investor concerns about investment horizon, liquidity, predictability and risk Limit Federal exposure by relying on market discipline 7

8 Background on TIFIA (continued) Major requirements Large surface transportation projects ($50M generally, $15M for intelligent transportation systems ITS) TIFIA contribution limited to 33 percent Senior debt must be rated investment grade Dedicated revenues for repayment Applicable Federal requirements, including but not limited to Civil Rights, NEPA, Uniform Relocation, Titles 23/49 Public or private highway, transit, rail and port projects are eligible to apply for TIFIA assistance Application process applicants must submit letters of interest and, after invitation from the TIFIA Joint Program Office (JPO), a formal application including financial plans and ratings, to DOT for consideration. 8

9 Eligible TIFIA Applicants and Projects Highways and Bridges State Governments Intelligent Transportation Systems Intermodal Connectors Private Firms Special Authorities Transit Vehicles and Facilities Intercity Buses and Facilities Local Governments Transportation Improvement Districts Freight Transfer Facilities Passenger Rail Vehicles and Facilities 9

10 Statutory Selection Criteria Weighting (percentage amounts) 10

11 Program Implementation: Selection & Funding of a TIFIA Project 1 Applicant Submits Letter of Interest to the DOT by the Notice of Funding Availability Deadline 2 Applicant Prepares and Submits Application to the DOT after Invitation from the TIFIA JPO 3 DOT Staff Prepare Preliminary Evaluation and Arrange Presentation 5 DOT Credit Council Provides Recommendations to the Secretary, who Selects Projects to Receive TIFIA Credit Assistance 4 DOT Staff Prepare Final Evaluation and Make Recommendation to DOT Credit Council 6 The DOT Issues Term Sheet and Obligates Funds 7 The DOT Executes Credit Agreement and Disburses Funds 11

12 TIFIA Documentation Requirements 12

13 TIFIA Program Fees The TIFIA JPO will require each applicant to pay a non-refundable Application Fee of $50,000. Each borrower will be required to pay a Transaction Fee equal to the costs incurred by the TIFIA JPO in negotiating the credit agreement. This credit processing fee will typically range from $300,000- $500,000. Borrowers will be required to pay an $11,500 Loan Servicing Fee annually, due by November 15. Borrowers also will be required to pay a Monitoring Fee as defined in the credit agreement. 13

14 TIFIA Approved Projects (TIFIA Instruments in Millions ) Staten Island Ferries Retired paid in full $159 Warwick Intermodal Station $42 Reno Rail Corridor Retired paid in full $51 Transbay Transit Center $171 U.S. 36 Managed Lanes $54 Denver Union Station $146 Eagle Project $280 South Bay Expressway $140 Intercounty Connector $516 Washington Metro CIP $600 Capital Beltway HOT Lanes $589 Pocahontas Parkway/ Richmond Airport Connector $150 Triangle Expressway $387 IH 635 Managed Lanes $850 North Tarrant Express $650 President George Bush Turnpike Western Extension (SH 161) $418 LA -1 $66 Cooper River Bridge Retired refinanced $215 I-595 Corridor Roadway Improvements $603 US 183-A Turnpike $66 SH 130 Corridor $430 Central Texas Turnpike $900 Tren Urbano Puerto Rico Retired paid in full $300 Miami Intermodal Center Rental Car Facility FDOT Program Elements $270 Retired paid in full $269 Port of Miami Tunnel $341 Total TIFIA Assistance: $8.7 Billion Total Project Investment: $33.1 Billion 14

15 TIFIA Portfolio 15

16 TIFIA JPO Organizational Framework Secretary of Transportation Deputy Secretary of Transportation (Chair) Under Secy. of Transportation For Policy General Counsel Asst Secy. for Transportation Policy Director of OSDBU At-large Member DOT Credit Council At-large Member Asst. Secy. for Budget and Programs/CFO (Vice Chair) Federal Transit Administrator Federal Highway Administrator Federal Railroad Administrator Maritime Administrator At-large Member Director of the Office of Innovative Program Delivery TIFIA Joint Program Office 16

17 TIFIA Oversight: Credit Instrument Life Cycle Construction Oversight and Performance Monitoring Design / Construction On-site inspections Periodic meetings Disbursement approvals Project acceptance Substantial Completion Operations/Post Construction Performance reporting Revenue realization Change reporting Compliance with credit agreement Financial Closing Construction Risk Performance Risk Exposure (Decreases over Time) Final Maturity 17

18 State Infrastructure Banks & Debt Service Reserve Fund Program Robena Reid Financial Economist, Federal Transit Administration, Washington, DC

19 APTA Webinar Topics State Infrastructure Banks Debt Service Reserve Fund Program Page 19

20 State Infrastructure Bank (SIB) Program History National Highway System Designation Act (1995) Capitalization: 10% of ISTEA apportionments (FY 96-97) Federal requirements: Apply to first round of assistance 39 SIBs approved TEA-21 (1998) Capitalization: Unlimited % of apportionments Federal requirements: Apply to all Federal money Eligible States: CA, RI, MO, FL, TX SAFETEA-LU (2005) Capitalization: Up to 10% of eligible apportionments (except FRA) Federal requirements: Apply to all Federal money Maximum 30 year repayment period Program open to all 50 States and territories Regional banks may be formed Page 20

21 State Infrastructure Banks State controlled revolving loan fund Capital : Federal and State matching funds Governed by cooperative agreement SIB Products: All or partial project financing Transportation project financial assistance Direct loans (most common) Credit enhancement products Loan Guarantees Bond insurance Letters of Credit Page 21

22 State Infrastructure Banks: Program Participation AK WA MT ND ME OR MN VT NH ID WY SD WI MI NY MA RI NE IA PA NJ CA UT CO KS MO IL IN KY OH WV MD VA DE AZ NM OK AR TN SC NC AL GA TX LA 1998 TEA-21 Approved SIBs 1998 TEA-21 Authorized SIBs 1995 NHS SIBs FL PR Page 22

23 SIB Operations Similar to a commercial bank: Marketing and outreach activities Application eligibility Lending priorities and procedures Accounting and loan monitoring activities Other issues Fund management Interest rate policy Management organization Page 23

24 SIB Flow of Funds 2 Repayments Federal Aid State Funds Capitalization Grants SIB 1 3 Initial Loans Second Round Loans Initial Projects Second Round Projects Typical Direct Loan Product 4 Repayments Page 24

25 Federal Credit Requirements Below market interest rates 30 year maximum repayment period Investment grade rating on SIB debt, OR sufficient bond insurance Investment income is credited to the bank Loan repayment must commence not later than 5 years after project completion Page 25

26 SIB Accomplishments Lending activity: Transit: $94.5 million; 8 SIBs Total as of December 30, 2008: 609 loan agreements More than 6 billion dollars in loan agreements 33 SIBs; including one territory Reduced project financing costs: Provided below market interest rates for projects Accelerated project delivery: Funded project match requirements for transit projects Partnered with other DOT programs: TIFIA: Cooper River Bridge Page 26

27 Establishing a SIB Program Commencement: Obtain State enabling legislation Determine scope of activities Execute cooperative agreements Capitalize the bank Page 27

28 Debt Service Reserve Fund Program 49 U.S.C (a)(1)(k) and 49 U.S.C (e)(3)-(4) Agencies may be reimbursed for up to 80 percent of deposits in a debt service reserve Financing for transit capital projects from FTA formula and capital funds (5307, 5309) Reserves support timely payments to bond holders Will reduce grantees out-of-pocket DSR issuance costs (bond insurance premium) Creation of DSR and reimbursement process Agency first issues bonds pledging local revenue Agency funds DSR with proceeds from the bond Agency applies for Federal reimbursement No issuer has applied to the DSR pilot program Page 28

29 Innovative Finance Resources FTA web site: TIFIA web site: FHWA web site: AASHTO Clearinghouse: Page 29

30 TIFIA Contact Information TIFIA Joint Program Office (HCFT-1) U.S. Department of Transportation Room E New Jersey Avenue, SE Washington, DC fax: (202) Duane Callender, Director (202) Jorianne Jernberg (202) Page 30

31 Contact Information: Robena Reid Federal Transit Administration (202)

32 Federal Financing Programs Tom Yedinak Private Sector Liaison Innovative Programs, Office of Budget and Policy, Federal Transit Administration Robena Reid Financial Economist, Office of Policy Review and Development, Federal Transit Administration Paula Schwach Regional and TIFIA Counsel, Federal Transit Administration, Region VII, Kansas City, MO

33 America Fast Forward: Creating Jobs the Right Way Arthur T. Leahy Chief Executive Officer, Los Angeles County Metropolitan Transportation Authority Pam O Connor Board Member, Santa Monica s Big Blue Bus and Los Angeles County Metropolitan Transportation Authority David Yale Deputy Executive Officer, Regional Programming, Los Angeles County Metropolitan Transportation Authority

34 APTA Webinar on Creative Financing and Public Transportation Honorable Pam O Connor Metro Board of Directors Arthur T. Leahy Chief Executive Officer David Yale DEO, Regional Programming January 17, 2012

35 The Goal for L.A. County: Deliver 30 Year Measure R Program in 10 Years Twelve transit projects completed in ten years would provide: 77 million more transit boardings 191 million fewer vehicle miles traveled 160,000 jobs created Accelerating 15 highway projects is also sought 35

36 Public Transportation Plan 36

37 Highways Recommended Plan 37

38 Measure R Project Names 38

39 America Current Fast Debt Forward: Financing Challenges Policy Facing Rationale Transportation Agencies Accelerate critical infrastructure initiatives that create jobs and generate major public benefits Programmatic Design Objectives: Minimize federal budget impact Rely on existing programs / proven techniques Apply broadly to various modes and geographical areas Promote generation of new non-federal revenue streams ( selfhelp approaches) 39

40 America Fast Forward: Specific Federal Financing Tools Transportation Infrastructure Finance and Innovation Act (TIFIA) Loans direct from USDOT at Treasury rates Flexible payment terms Proposed Legislation in MAP-21 Qualified Transportation Improvement Bonds (QTIBs) New class of qualified bonds for surface transportation Federal tax credits in lieu of cash interest payments Issuance volume legislatively capped Permitted purposes carefully defined Proposed Legislation in S.1436 and H.R

41 TIFIA Program: Advantages of TIFIA Credit Assistance Ascending debt service payments Enables borrowing against future sales tax growth Contains other flexible payment terms Lower coverage ratios (Principal and Interest as percent of revenues) ~1.10x vs. 1.30x or higher Low rates (Treasury yields) ~3.0% for 30+ years, currently These factors can significantly enhance an Agency s Debt Capacity 41

42 America Fast Forward: Proposed TIFIA Program Enhancements Expand program support Provide funding that could support ~$10 billion of loans annually Broaden eligibility to include programs of related projects Increase the maximum TIFIA share to 49% Authorize USDOT Master Credit Agreements for major projects/programs Upfront conditional commitment of future TIFIA project loans Facilitates the financing of multi-year projects/programs Mitigates project selection risk & financing uncertainty TIFIA loans still require all environmental approvals and other conditions to be met 42

43 America Fast Forward: Proposed QTIB Program Structure $45 billion 10-year National Volume Cap ($4.5 billion per year) Discretionary Program [50-65%] for Mega Projects Formula Program [35-50%] to the States for Other Projects Maximum bond maturity of 35 years Maximum 80% federal subsidy 43

44 National QTIB Program: Investment Benefits Federal subsidy of interest costs means that any given revenue stream should be able to support over double the capital investment level that is possible with traditional tax-exempt bonds Significantly broadens the investor base taps into the pool of taxable bond investors who cannot buy traditional tax-exempt bonds 44

45 National QTIB Program: Federal Fiscal Impacts Tax credits allow federal cost to be amortized over the term of the bonds rather than scored upfront as construction period grant disbursements $45 billion national program: Scored cost of ~$9 billion (net tax expenditures over 10-year window) Economic cost of ~$17 billion (PV of lifetime net tax expenditures) 45

46 Applying the AFF Finance Strategy: The Los Angeles County Transit Example Total Escalated Cost of Transit (accelerated) $14.8 Billion Total Funded thru Measure R $ 9.1 Billion Build America Bonds (Issued Nov. 10) $.6 Billion Other (future tax exempt bonds & direct receipts) $ 1.1 Billion America Fast Forward QTIB Bonds $ 5.7 Billion America Fast Forward TIFIA loans $ 1.7 Billion Other Funding Sources Federal New Starts Federal Flexible Formula Proposition A and Proposition C State Funds Local Agency $ 5.7 Billion 46

47 The Financial Base: Existing Transit Funds $2,500 30/10 Funding by Source (Dollars in Millions) $2,000 $1,500 $1,000 $500 Measure R Base- $1.7 B Other- State, Local & Federal- $5.7 B $ Fiscal Year 47

48 America Fast Forward Tax Credit Bonds $2,500 30/10 Funding by Source (Dollars in Millions) $2,000 $1,500 QTIBs- $5.7 B $1,000 $500 Measure R Base- $1.7 B Other- State, Local & Federal- $5.7 B $ Fiscal Year 48

49 America Fast Forward TIFIA Loans $2,500 30/10 Funding by Source (Dollars in Millions) $2,000 $1,500 QTIBs- $5.7 B TIFIA- $1.6 B $1,000 $500 Measure R Base- $1.7 B Other- State, Local & Federal- $5.7 B $ Fiscal Year 49

50 National QTIB Program: Estimated Net Tax Expenditures Proposed Qualified Transportation Improvement Bonds: Estimated Fiscal Impact of $45 Billion Program (Dollars in Billions) $50 $4.5 B/Yr Key Assumptions Issuance $4.5 billion/year over 10 years Debt Rate 4.91%* Avg. Tax Rate 28% Discount Rate 7.00%** * Treasury set QTCB rate as of ** OMB prescribed discount rate for benefit cost analyses of public investment programs $45 $40 $35 $30 $25 $20 $15 $10 $5 Net Tax Expenditures $0 50

51 National QTIB Program: Estimated Scored Budget Cost Proposed Qualified Transportation Improvement Bonds: Estimated Fiscal Impact of $45 Billion Program (Dollars in Billions) $50 10 Year Budget Window Key Assumptions Issuance $4.5 billion/year over 10 years Debt Rate 4.91%* Avg. Tax Rate 28% Discount Rate 7.00%** * Treasury set QTCB rate as of ** OMB prescribed discount rate for benefit cost analyses of public investment programs $45 $40 $35 $30 $25 $20 $15 Est. Scored Budget Cost: $8.75 B $10 $5 Net Tax Expenditures (Cumulative) Net Tax Expenditures $0 51

52 National QTIB Program: Estimated Total Fiscal Impact Proposed Qualified Transportation Improvement Bonds: Estimated Fiscal Impact of $45 Billion Program (Dollars in Billions) $50 $45 10 Year Budget Window Principal and Debt Structure Maximum Principal Outstanding net of Sinking Fund Balance Key Assumptions Issuance $4.5 billion/year over 10 years Debt Rate 4.91%* Avg. Tax Rate 28% Discount Rate 7.00%** * Treasury set QTCB rate as of ** OMB prescribed discount rate for benefit cost analyses of public investment programs $40 $35 $30 $25 $20 $15 Est. Scored Budget Cost: $8.75 B $10 $5 Net Tax Expenditures (Cumulative) Net Tax Expenditures $0 52

53 National QTIB Program: Estimated Present Value Fiscal Impact Proposed Qualified Transportation Improvement Bonds: Estimated Fiscal Impact of $45 Billion Program (Dollars in Billions) $50 $45 10 Year Budget Window Principal and Debt Structure Maximum Principal Outstanding net of Sinking Fund Balance Key Assumptions Issuance $4.5 billion/year over 10 years Debt Rate 4.91%* Avg. Tax Rate 28% Discount Rate 7.00%** * Treasury set QTCB rate as of ** OMB prescribed discount rate for benefit cost analyses of public investment programs $40 $35 $30 $25 $20 $15 Est. Scored Budget Cost: $8.75 B PV Net Tax Expenditures (Cumulative) Est. Total Economic (PV) Cost: $16.56 B $10 $5 Net Tax Expenditures (Cumulative) Net Tax Expenditures $0 53

54 America Fast Forward Creating Jobs the Right Way Arthur T. Leahy Chief Executive Officer, Los Angeles County Metropolitan Transportation Authority Pam O Connor Board Member, Santa Monica s Big Blue Bus and Los Angeles County Metropolitan Transportation Authority David Yale Deputy Executive Officer, Regional Programming, Los Angeles County Metropolitan Transportation Authority

55 Transportation Tuesdays Online Third in webinar series for transit CEOs & board members on economic sustainability January 17, 2012 CREATIVE FINANCING AND PUBLIC TRANSPORTATION The audio and PowerPoint for today s webinar will be available within the week at under Resource Library (top of home page) Professional Development APTA Webcasts, Webinars & Online Training

56 Transportation Tuesdays APTA Executive/Board Webinar Series on Economic Sustainability Eight Webinars November through June (2 3 p.m. Eastern) November 8, 2011: Congestion reduction charge & property tax millage December 6, 2011: Election results January 17, 2012: Financing tools February 7, 2012: State commissions March 6, 2012: Public private partnerships April 10, 2012: Naming rights and other miscellaneous revenue sources May 15, 2012: Value capture June 19, 2012: Road tolls APTA reserves the exclusive right to revise the program and dates.