Transportation and Economic Development Zone TEDZ an Innovative Highway Funding Option. March 2012

Transcription

1 Transportation and Economic Development Zone TEDZ an Innovative Highway Funding Option March 2012

2 What is Transportation and Economic Development Zone TEDZ? The Transportation and Economic Development Zone TEDZ proposed legislation would: n Be used throughout the state for major highway projects that will lead to significant economic and sales tax both inside and outside of the TEDZ boundary n Used for state highway projects of $100 million or more n Sales tax and economic impacts are measured over the base year the preceding 12 month period n Sets up two threshold tests to be evaluated by an economist hired by Idaho Transportation Department Board and the Idaho Department of Commerce: 1. The project must have Revenue Positive Sales Tax Impacts which is new sales tax on a cumulative basis over the base year which pays for the debt service and meets the appropriate debt service coverage ratio 2. The project must have Revenue Positive Economic Impacts which measures the cumulative state revenues within the TEDZ zone over the life of the financing; the economic impacts must be a minimum of 2 times the project cost n Requires the majority of local jurisdictions within a TEDZ boundary to approve of the formation of the TEDZ n Creates a continuously available source of funding debt service so the project can obtain an investment grade rating to minimize the borrowing costs n Unused funds after a 10 year period are distributed to the general fund n Puts in place checks and balances involving ITD, Commerce, the Idaho State Tax Commission and independent economic studies 2

3 Why TEDZ Legislation This Session? n The 2013 Federal Highway Bill may create incentives using the Transportation Infrastructure Finance and Innovation Act TIFIA $1 billion in funding for rural state projects Below market rate interest 2%+/- Increase participation from 33% to 49% of total project cost n A continuously appropriated repayment source is necessary to enable a qualified bond issuing agency to secure an investment grade rating and meet the requirements of TIFIA n Every year we delay funding of important infrastructure projects, the price tag goes up n Creates billions in new state revenue and thousands of new jobs n Allows ITD to use its federal highway funds for other state needs n Creates a financing vehicle to allow growth to pay for growth n The state is getting ahead of the curve 3

4 What is the Central Valley Expressway Coalition? March 2012

5 THE CENTRAL VALLEY EXPRESSWAY COALITION n The Central Valley Expressway Coalition is a grassroots Coalition formed in 2010 to emphasize the importance of SH-16 to Idaho's economic recovery and to show the growing support behind efforts to complete the SH-16 extension to I-84. Its goals are to: Consolidate efforts/support for the completion of the Central Valley Expressway (SH-16) Project all the way from Emmett to I-84 and speak with one voice Illustrate the economic impact of this project to the Treasure Valley and ultimately to the entire State of Idaho Explore all available options for alternative means of funding in order to see the project to completion Put Idahoans back to work by providing construction jobs and commercial opportunities along the new Central Valley Expressway Corridor (Emmett to I-84) 5

6 ABOUT THE CVE n SH-16 is a 21.5 mile corridor, from Emmett to I-84, which has been identified as the Central Valley Expressway or CVE n Two Environmental Impact Statements have been completed covering the entire CVE. The southern 6.5 mile extension from SH-44 to I-84 was completed in 2011 and the segment north of SH-44 was completed in 2006 n The design for the CVE includes four lanes, gradeseparated interchanges and full access control n Total project cost is approximately $700M. Approximately $140M has been funded to date by the State of Idaho. The cost to complete the CVE is $560M estimated in 2006 Existing 2 lane Connecting cities and counties; creating an Employment Super Corridor n The CVE will connect seven cities to I-84 - Nampa, Caldwell, Meridian, Eagle, Star, Middleton, and Emmett. Four of these cities currently have limited Interstate access n The CVE will connect three counties to I-84 - Ada, Canyon, and Gem Counties and two highways - SH-44 and US 20/26 the largest growth corridor around an existing highway in the Treasure Valley 6

7 SUPPORT FOR THE CVE I view the extension of Highway 16 critical to my Project 60 plan to grow Idaho's Gross Domestic Product to $60 billion. [It] will provide a valuable marketing tool to our Department of Commerce and will help get Idahoans back to work. Gov. C.L. Butch Otter This project represents the first of its kind in Idaho, demonstrating a vision for transportation improvements that are critical to the economic vitality of the region. This expressway will provide a critical north-south connection at the heart of the valley and should be pursued David W. Turnbull, President Brighton Corporation As a lifelong Idahoan, I believe that the economic value of [the CVE] will extend far beyond the Treasure Valley and will reap benefits to the entire state of Idaho Let's work together to find the funds necessary to get this road built! Harry Bettis, Cattle Rancher This is the project through which Idaho will achieve economic recovery and address its strategic mobilization needs. Sen. Chuck Winder, Asst. Majority Leader 7

8 CVE COALITION STAKEHOLDERS Cities & Local Government City of Caldwell City of Eagle City of Emmett City of Meridian City of Middleton City of Nampa City of Star Ada County Commissioners Canyon County Commissioners Gem County Commissioners COMPASS Economic Development Organizations & Chambers Boise Valley Economic Partnership (BVEP) Idaho Chamber Alliance Boise Metro Chamber of Commerce Gem County Chamber of Commerce Star Chamber of Commerce Gem County EDC Eagle-Emmett-Star Technology Corridor (ESTech) The CORE in Meridian Industry Associations Ada County Association of REALTORS (ACAR) Emmett Valley Association of REALTORS Idaho Association of REALTORS Idaho Associated General Contractors (AGC) Idaho Building Contractors Association (IBCA) Building Contractors Association of Southwest Idaho (BCASWI) Caldwell Association of REALTORS Private Businesses The M3 Companies, LLC Benchmark Construction Dynamis Energy, LLC The Land Group, Inc. Micron Hewlett-Packard Brighton Corporation College of Western Idaho (CWI) CH2M Hill Evans Realty Co. (Emmett & Eagle) Lee & Associates Harry Bettis Syringa Bank URS Camille Beckman 3 Horse Ranch Vineyards Idaho Distributing Company Idaho Legislative Support Gov. C.L. Butch Otter Lt. Gov. Brad Little Rep. Mike Moyle, District 14, House Majority Leader Rep. Reed DeMordaunt, District 14 Sen. Chuck Winder, District 14, Senate Asst. Majority Leader Sen. Melinda Smyser, District 11 Rep. Carlos Bilbao, District 11 Advisory Capacity Idaho Transportation Dept. Idaho Department of Commerce 8

9 CENTRAL VALLEY EXPRESSWAY ECONOMIC AND JOB GROWTH n Dr. John Church, an economist, estimates that there would be $6.2B of new state tax revenue within the CVE corridor for the state over a 30 year period n According to the U.S. Department of Transportation statistics, construction of the CVE will create 16,800 direct construction jobs n In addition to construction related jobs, by its 10th year the SH-16 corridor will have created 17,600 direct permanent jobs n By its 30 th year it will have created 33,100 direct permanent jobs 9

10 Projected Treasure Valley Growth

11 GROWTH PROJECTIONS REQUIRE CONSTRUCTION OF THE CVE n 40% of projected growth will occur near the SH-16 corridor over the next 30 years n Population in Ada and Canyon counties grew 74% and 57%, respectively, between 1980 and 2000 n The population in the Treasure Valley is forecasted to reach 1,046,000 by 2035 from a current population of approximately 600,000 n Historical population growth rates in the Treasure Valley exceed those of the state and nation. From 1980 to mid-2007, US Census data reveals that the population of Ada and Canyon counties rose roughly 115%, compared to increases of approximately 59% for Idaho and 33% for the US n In percentage terms, the growth in these counties was roughly double that of Idaho and 350% of the US growth rate n The CVE corridor must be constructed to provide adequate transportation infrastructure 11

12 THE ECONOMY IN THE BOISE MSA 3,000,000 Ada/Canyon Popula0on Growth Projec0ons 2,500,000 Popula0on 2,000,000 1,500,000 1,000,000 1,100,000 Low Median High 500, , Year NOTE: Population in Ada County between 1980 and 2000 (included a recession of the same magnitude that we have just experienced) grew by 74% or 3.7% per year Source: COMPASS Community Choices Population Forecast, March

13 THREAT OF EPA NON-ATTAINMENT DESIGNATION UNDER THE CLEAN AIR ACT n The Boise MSA is dangerously close to exceeding the EPA's current Non- Attainment air quality standards for ozone: n Non-Attainment repercussions: Idaho DEQ would be required to create a plan to bring the area into compliance within 3 years This plan would include strict restrictions on industrial uses Industrial restrictions would cost existing companies millions and deter new industry Failure to remedy Non-Attainment can result in a loss of highway funding Building permit moratorium n The EPA is considering lowering the standards further: Standards in 2013 could fall to as low as 60 parts per billion, immediately putting the Treasure Valley into Non-Attainment In order to avoid Non-Attainment repercussions, the Treasure Valley must improve its air quality n Reducing congestion on Eagle Rd, Chinden Blvd, and State St, as well as easing congestion on I-84, Garrity Blvd, Meridian Rd and Ten Mile Rd, will help avoid reaching Non-Attainment 13

14 PROJECTED GROWTH IN THE CVE CORRIDOR CVE 14

15 15

16 THE CVE CORRIDOR WILL PROVIDE RELIEF FROM FUTURE CONGESTION 16

17 WITHOUT THE CVE, THE VALLEY S ALREADY CONGESTED ROADS CEASE TO FUNCTION 17

18 An Example of How the SH-16 TEDZ Would Work

19 ECONOMIC ANALYSIS FOR SH-16 TEDZ BOUNDARY Dr. John Church, an Idaho economist with an extensive background in Idaho economic studies, prepared a TEDZ boundary example on slides based upon the TEDZ draft legislation using the following assumption: REVENUE POSITIVE SALES TAX AND ECONOMIC IMPACTS Analysis of the Revenue Positive Sales Tax Impacts and Revenue Positive Economic Impacts for a TEDZ zone with a 5 mile corridor on each side of SH-16 from 1-84 to Emmett FINANCING STRUCTURE Total Project Cost - $700M (including $140M already authorized by GARVEE (Phase 1)); $560M remaining cost for threshold test for Revenue Positive Economic Impacts GARVEE Funding n $140M project cost for phase one included in the total project cost Private Activity Bonds or Governmental Bonds n $358M bonds at 4% interest rate; three years capitalized interest with a 27 year amortization The Transportation Infrastructure Finance and Innovation Act TIFIA n $245M bonds at 2% interest rate; three years capitalized interest with a 27 year amortization 19

20 GARVEE FUNDING FOR SH-16 FROM SH-44 TO US 20/26 n n n n n n The state has already funded $140M or 20% of the total projected CVE cost to date The Idaho Transportation Board was granted a total of $140M in funding under its GARVEE program by the Idaho Legislature in order to complete construction of the first segment (yellow highlight) The first segment includes a new Boise River bridge connecting US 20/26 and SH-44, two major east/west state highways The first segment is the most environmentally sensitive Construction of the first segment of the CVE is starting in If the remainder of the CVE proposal is fully funded, it could be constructed by Environmental work and clearances are completed and right of way acquisition is ongoing 20

21 SH-16 TEDZ BOUNDARY EXAMPLE n The following is a summary of revenue projections within a TEDZ Zone extending 5 miles from SH-16 n The scenario meets both economic development thresholds EXAMPLE TEDZ boundary 21

22 REVENUE POSITIVE SALES TAX: EXAMPLE SH-16 TEDZ n This TEDZ boundary is larger than necessary to meet the Revenue Positive Sales Tax Impact; note years 6-10 has $286,987,864 in Revenue Positive Sales Tax Impact after debt service n The Example SH-16 TEDZ boundary within the first 5 years is projected to produce $61M of Cumulative Revenue Positive Sales Tax after debt service and cumulative net impacts after 10 years of $348,859,917 n There is Cumulative Revenue Positive Tax after debt service during all periods. This means that the projected tax growth in the SH-16 TEDZ boundary produces net positive tax and meets the first economic threshold of the TEDZ Legislation YEAR Revenue Posi/ve Sales 119,201, ,971, ,833,400 Tax Impacts 1,266,731,700 3,290,145,800 Capitalized Interest 54,081,922 Debt Service (111,411,069) (176,983,536) (176,983,536) (176,983,536) (353,967,072) Revenue Posi/ve Sales 61,872, ,987, ,849,864 Tax Impacts aier Debt 1,089,748,164 2,936,178,728 Service Cumula/ve Net Impacts 61,872, ,859,917 1,020,709,781 2,110,457,945 5,046,636,673 22

23 Revenue Positive Economic Impact Summary n Example TEDZ boundary (5 Miles) Meets both economic threshold tests $6,251,525,730 over a 30 Year period Total debt service is only 16% of the Revenue Positive Impact Estimated cumulative positive economic impacts over a 30 year period are approximately 10 times project cost n Bottom Line: TEDZ boundary will be determined by an independent economic analysis ensuring the project will meet the economic development thresholds described in the TEDZ legislation Growth along the SH-16 corridor will pay for the transportation project (Growth Paying for Growth) The proposed TEDZ legislation is a creative way to fund major highway infrastructure projects using the net gains in sales tax which are due to increased economic development activity 23

24 IMPLEMENTATION OF THE TEDZ LEGISLATION

25 HOW IS A TEDZ PROJECT APPROVED? 1. The ITD and Department of Commerce would select an approved state highway project 2. The ITD and the Idaho Department of Commerce would jointly select an economist 3. The economist completes an economic study confirming the economic benefits and sets the boundaries 4. The economic study would be reviewed and approved by the ITD Board and Commerce 5. The TEDZ boundary would be set and a majority of the political subdivisions within the TEDZ boundary would have to approve the formation 6. Idaho Commerce Department would present the TEDZ boundaries and economic study to the Idaho State Tax Commission 7. Within 30 days the Idaho State Tax Commission accepts the economic study and TEDZ boundary 8. Prior to bond issuance the Idaho State Treasurer shall certify to a qualified bond issuing agency that sufficient funds can be continuously appropriated for the financing 9. The qualified bond issuing agency would obtain an approved investment grade bond rating and proceed with the financing 10. ITD would construct the approved state highway project 11. Within 60 days of formation and acceptance the Idaho State Tax Commission shall commence depositing state sales tax into the state highway project account after use of capitalized interest 12. Any deposits into the state highway project account not used for debt service or direct payments within 10 years of deposit revert to the general fund 25

26 Why SH-16 TEDZ Now? The SH-16 TEDZ project will accelerate economic development and growth in the state of Idaho creating billions of dollars in positive economic impacts and thousands of jobs it is a projected 16% of the Revenue Positive Economic Impacts over the term of the financing Growth in the Idaho and the Treasure Valley will happen with or without adequate transportation; it is only a matter of time and over time the total project cost for right of way acquisition and construction of SH-16 will only increase Right of way & construction cost will be lower - a 15% savings could result in a savings of $75,000,000 or more Frees up ITD for other state projects The SH-16 TEDZ zone will create surplus new sales tax which will meet the Revenue Positive Sales Tax test growth paying for growth Significant long term economic benefits over $6.2 billion or times estimated cost will meet the Revenue Positive Economic Impact test A corridor with large land holdings that can be marketed for major employment given its connection to I-84 and the short commute time to the airport Presents new economic development opportunities for the Department of Commerce, BVEP and others to market nationally and internationally JOBS! JOBS! JOBS! CVE will create 16,800 direct construction jobs. 26

27 Thank You! 27