A. Approve the revised Alameda Corridor East (ACE) program scope; and

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1 One Gateway Plaza Los Angeles, CA Tel metro. net 25 PLANNNG AND PROGRAMMNG COMMTTEE OCTOBER 17, 2012 SUBJECT: ACTON: ALAMEDA CORRDOR EAST PROGRAM APPROVE SCOPE CHANGE AND WORKNG CAPTAL LOAN RECOMMENDATON A. Approve the revised Alameda Corridor East (ACE) program scope; and B. Approve Working Capital Loan ("Loan") of up to $45 million and authorize the Chief Executive Officer (CEO) to enter into the appropriate agreements SSUE n their August 2, 2012 letter (Attachment A), the ACE Construction Authority requested approval to modify the scope of the ACE program and a working capital loan of $45 million from Metro to assist them with their cash flow needs due to significantly increasing construction activity in the near future. The revised program scope is the result of a recently completed Phase 2 grade separation study which updates and further refines the grade separation projects ACE adopted in their original program in As a result of this study, grade separations have been dropped and added for a total program cost of $1.597 billion, down from the $1.613 billion program adopted by the Board in The Loan is requested to accommodate the increasing level of construction activity ACE will be undertaking in the next several fiscal years. The Loan of up to $45 million from Metro is the most efficient and cost effective means of maintaining the program's schedule. Board approval of the scope modification and the Loan is being requested. DSCUSSON n November 2007, the Board approved a total Metro contribution to ACE of $274.3 million which reflects 17% of the total ACE program cost of $1.613 billion. Since then, the ACE program has made significant progress in designing and constructing projects as well as planning for future projects. ACE is constructing grade separations along both the Union Pacific Alhambra line that traverses the cities of Alhambra, San Gabriel, Rosemead, El Monte, ndustry, and Pomona as well as the Union Pacific Los Angeles

2 subdivision line that traverses the cites of Montebello, Pico Rivera, ndustry, and Pomona. Attachment B contains a map of the ACE project. To date, ACE has completed seven grade separations (Nogales Alhambra line, East End/Reservoir, Ramona, Temple Avenue, Brea Canyon Road, and Sunset), is nearing construction on three other projects (Baldwin, San Gabriel Trench, and Nogales Los Angeles subdivision line), and is in design for two other projects (Puente and Fairway Los Angeles subdivision line). Status The ACE Construction Authority recently completed a Phase 2 study that examined the remaining unconstructed grade separations in their program. This study, which is an update to the original 1998 grade separation study, examined vehicular and train volumes and delay, accident history and other safety factors, and prepared conceptual plans for each of the potential grade separations. As a result of these analyses, grade separation projects on Fullerton Road (Los Angeles subdivision) in the City of ndustry, Hamilton Blvd in Pomona, and Durfee Avenue in Pico Rivera ranked highly and have been added to the ACE program. Conversely, Rose Hills Road in the City of ndustry has been removed from the program. Furthermore, in the City of Montebello the Montebello Blvd. grade separation project has been substituted with the Greenwood Avenue underpass project. The Phase 2 study and the changes to the ACE program were approved by the ACE Construction Authority Board in October Due to these changes as well as refinement of project costs resulting from projects being completed or nearing construction, ACE has updated its overall program costs. The ACE program is now estimated to cost $1.596 billion, which is a decrease of $17 million from its previous estimate of $1.613 billion in Per existing Metro policy, Metro would be responsible for 17% of ACE program costs. Based on the current $1.596 billion cost estimate, Metro's 17% ACE funding commitment is estimated to be $271.4 million as opposed to the $274.3 million anticipated in t should also be noted that in addition to Metro's 17% commitment, Measure R provides $400 million for the ACE program. To date, $42 million of these funds have been committed to the San Gabriel Trench project with the remaining $358 million unallocated. Cash Flow The ACE Construction Authority is expecting to begin construction on three projects during Fall 2012: the Baldwin Avenue grade separation in El Monte, the Nogales Street grade separation in the City of ndustry, and the San Gabriel Trench project in San Gabriel. n total, the construction cost for these three projects is approximately $335 million. Added to these expenses are design and right-of-way acquisition activities for future grade separation projects which has an estimated cost of $93 million. This level of construction activity will have a significant impact on ACE's cash flow requirements. Al ameda Corridor East Program Page 2

3 Currently, the ACE Construction Authority pays its contractors/vendors and is reimbursed by Metro within thirty days of receipt of an invoice from ACE. However, due to the time needed by ACE to process and submit invoices to Metro for reimbursement, there is a day delay between the time ACE pays its invoices and is reimbursed by Metro. To bridge this gap, ACE currently utilizes a $20 million Grant Anticipation Note (GAN) issued through the San Gabriel Valley Council of Governments. However, this will not be sufficient for ACE's cash flow needs given its upcoming construction schedule. Furthermore, ACE reports that securing a GAN for an amount sufficient to meet their projected cash flow needs might not be possible or significantly more costly than their current GAN. As a result, ACE is requesting a $45 million Loan from Metro to cover their cash flow needs in lieu of seeking a new GAN. The Loan for ACE of up to $45 million will be provided by Metro's issuance(s) of Proposition C taxable commercial paper. The actual "all in" costs of this borrowing, including interest, liquidity and issuance costs, will be reimbursed by ACE. ACE may apply any interest earnings on unexpended loan proceeds to pay for its obligations under the Loan. DETERMNATON OF SAFETY MPACT Approval of the ACE program update and Loan will have no impact on the safety of our employees and/or patrons. FNANCAL MPACT Approval of the $45 million Loan has no budget or adverse programmatic impact on the Measure R Highway sub-fund since it will be repaid in full, including interest and other costs. nterest will be paid on a monthly basis using a variable interest rate on the $45 million over the estimated 10 years of its program. Because the interest rate will vary, it is not possible to quantify the total amount of interest that will be incurred. n addition, there will be issuance costs of about $20,000 per commercial paper drawdown, of which there will not be more than three. Since ACE will be paying these costs from its future budget allocations, Metro's risk exposure is minimal and there is no cost to Metro for making this loan. mpact to Budget The Loan would have no impact on the budget. Additionally, the Loan cannot be used for bus and/or rail capital or operating expenditures. Alameda Corridor East Program Page 3

4 ALTERNATVES CONSDERED The Board could choose not to approve the scope modification or the Loan to the ACE Construction Authority. This is not recommended since it could significantly increase ACE's program costs, delay projects which would benefit from the current favorable construction climate and jeopardize other State and Federal funding, i.e., Proposition 1 B, Trade Corridor mprovement Fund (TCF), etc. Not approving the change in scope is not recommended because this change is consistent with the ACE Phase 2 grade separation study that utilized updated data and reflects current operating conditions. n addition, these changes are supported by both the ACE Board of Directors and San Gabriel Valley Council of Governments Governing Board. NEXT STEPS Upon Board approval we will prepare the agreements and/or amendments necessary for execution by the CEO. ATTACHMENTS A. ACE August 2, 2012 Request letter B. ACE Project Map C. ACE Project mplementation Prepared by: Philbert Wong, Transportation Planning Manager, (213) Shahrzad Amiri, Deputy Executive Officer, (213) Diego Cardoso, Executive Officer, (213) Alameda Corridor East Program Page 4

5 Mart Executive Director Countywide Planning Alameda Corridor East Program Page 5

6 Alameda Corridor-East Construction Authority Attachment A 4900 Rivergrade Rd. Ste. A120 rwindale, CA (626) fax (626) August 2, 2012 Mr. Arthur T. Leahy Chief Executive Officer Los Angeles County Metropolitan Transportation Authority One Gateway Plaza Los Angeles, CA Dear Art: The purpose of this letter is twofold - to request approval of the revised scope of the Alameda Corridor-East (ACE) Project as recently adopted by the ACE Construction Authority Board of Directors and the San Gabriel Valley Council of Governments and to request approval of a $45 million working capital loan. Revised ACE Project Scope n April of this year the ACE Construction Authority and the San Gabriel Valley Council of Governments (SGVCOG) completed an analysis of the remaining grade separations in the originally adopted project scope and approved a modified scope for completion of the project. The modified scope actually results in a modest overall program cost estimate reduction when compared to the previous program approved by MTA in The changes were made based on updated grade crossing delay forecasts and project costs and expanded evaluation criteria to include the California Public Utilities Comm ission (CPUC) project ranking methodology. Attachment A1 to this letter lays out the program modifications and estimated project costs. Working Capital Loan We currently accommodate the project cash flow requirements through $20 million in Grant Anticipation Notes (GAN) issued by the San Gabriel Valley Council of Governments with credit enhancement provided by a bank letter of credit. Our level of construction activity will be substantially increasing in the near future which will require a significantly higher amount of cash flow financing. A significant portion of our increased workload is made possible by MeasureR funding. Our existing letter of credit will expire in the relatively near future and we have been cautioned that obtaining a new one of the size we will need would be unlikely in the current financing environment and substantially more expensive in any event. Use of a working capital loan is a much more efficient and cost effective method of generating the necessary working capital. We have shared with your staff a cash flow estimate for five active projects over the next two year period which demonstrates the need for approximately $45 million in working capital.

7 Mr. Arthur T. Leahy, CEO LACMTA August 2, 2012 Page 2 We have greatly appreciated the MTA staff's support for the ACE Project over the last 13 years and thanks to Measure R we are about to embark on an accelerated pace of project development. Positive consideration of these requests would be a critical element of our continued success. Please let me know if you or your staff needs any further information. Sincerely, 12-ll; Rick Richmond Chief Executive Officer Attachment cc: Terry Matsumoto Shahrzad Amiri

8 To Ports LEGEND - Existing Single Track ALHAMBRA MONTEREY PARK - Existing Double Track ---- Proposed Double Track * Grade Separation Completed 0 Awa tng Fuel L ne Relocation Grade Separation 2012 Construction SAN GABREL ==..:::a= e g. C) (j) ia;m g S' D8. )>C. Adopted Future Grade Separations A Street Closure/Grade Crossing E:limination Safely and/or T raflic Signal Con trot Measures TEMPLE CTY? iii ft q; "'. ' b : q, "' ro ro f?s. Los Angel!es County, CA :<ii 1'11 <!>,;:) <!> "',;:). ' WN <:-,... '!::" ro "f' "' i:i ;::. "< BALD r,; -$' -,J: ",:;.'1;):). e- ' ljj.::r <Q'i # :!"..,... Q;. " "f'v! vo q, 'lj '?'...;- q, ):). 9.'?' 'll,l;..q_ $ ;!' '?' 'lj 'lj q;.''ljrll.!f' '<.;:; t:i; -.. tj-'li t' cj t:.;,'lio v'li RWNDALE "TT =.. (j) 5' NDUSTRY t:$.t;. iff Q. "TT 5.. (j) 8- ::1 \A/EST COVNA COVNA WALNUT A),-. c9 0 <:>,.;. -1> 0. ( 9> "\'\ <.:..!'/ (>' :z - 13.>. -a "' (>' if ;! z 0 (Q "" ;;; "' sa f.o, "\'\ -a ;! POMONA D!AMOND BAR 19 <.: 9' ( <g,. 9' "'o ':>. ; "'0 / o- f L- 1 \ ( Uli llf) '.;. ( 0/ifH)' ' LAVERNE "'0 "" (1) 3::: :X: 2!. "" ::> 3 (J'J - g:... :::s o:l ' :c, c.. - w ' ' ' "'0 ::0., 0 J) 3.,... "" 0., < ll... - sa., en m "' :::s ll "" )>, - ::>,.../ :s m o ; c. )>., < (1)..;;..; ; - r 1,. \::..., l - 'l '-'i. t f - CLAREMONT ONTARtO Combiued Alhambra and Los Angeles Subdivision, >, N ' ' A " ' ' Ala,meda Corridor-East Project Area

9 ATTACHMENT C ACE Project lmlementation ($000)! Current Project Grade Cost (Act./Est.) MTA 17% City Project Status Seps Safety mprovements $34,141 $5,804 Various Completed January 2004 Nogales Street (Alhambra) ndustry/west $49,698 $8,449 Covina Completed AuQust East End/Reservoir $79,012 $13,432 Pomona Completed June Ramona Boulevard $51,350 $8,730 El Monte Completed April Temple Avenue ncludes Temple Ave. 4t Track Project. Completed Winter $92,126 $15,660 Pomona Brea Canyon Road ndustry/diamond $67,396 $11,457 Bar Completed October Sunset Avenue $87,359 $14,851 ndustry Completed Winter Baldwin Avenue $80,665 $13,713 El Monte Construction expected to beqin Fall San Gabriel Trench 9, 10, 11, $330,300 $56,151 San Gabriel Construction expected to begin Fall Puente Avenue lndustry/la $ $ County n Design 13 Fairway Drive (Los lndustry/la Angeles) $106,073 $18,032 County n Design 14 Fairway Drive (Alhambra) $82,828 $14,081 ndustry n Planning 15 Fullerton Road (Los Angeles) $142,517 $24,228 ndustry n Design 16 Hamilton Boulevard $79,080 $13,444 Pomona n Design 17 Durfee Avenue $69,723 $11,853 Pico Rivera n Design 18 Turnbull Canyon Road lndustry/la $96,027 $16,325 County n PlanninQ 19 Rose Hills Rd. - - ndustry Project removed from program. Greenwood Avenue Montebello Boulevard $ $ Montebello Montebello Blvd. project replaced by Greenwood Ave. project. 20 $1,596,470 $271,400