State of Florida Division of Bond Finance. Notice

Transcription

1 State of Florida Division of Bond Finance Notice The following Official Statement is placed on the internet as a matter of convenience only and does not constitute an offer to sell or the solicitation of an offer to buy bonds. Although the information has been formatted in a manner which should exactly replicate the printed Official Statement, physical appearance may differ due to electronic communication difficulties or particular user equipment. In order to assure accuracy, users should obtain a copy of and refer to the printed Official Statement. The user of this Official Statement assumes the risk of any discrepancies between the printed Official Statement and the electronic version of this document. Copies of the printed Official Statement may be obtained from: Florida Division of Bond Finance 1801 Hermitage Boulevard Suite 200 Tallahassee, Florida bond@fsba.state.fl.us Phone: (850) Fax: (850)

2 Refunding Issue This Official Statement has been prepared by the Division of Bond Finance to provide information about the 2005A Bonds. Selected information is presented on this cover page for the convenience of the reader. To make an informed decision, a prospective investor should read this Official Statement in its entirety. Unless otherwise indicated, capitalized terms have the meanings given in Appendices E and F. $93,560,000 STATE OF FLORIDA Department of Transportation Turnpike Revenue Refunding Bonds, Series 2005A Dated: April 15, 2005 Due: July 1, as shown on the inside cover Insured Ratings Underlying Ratings Bond Ratings Standard & Poor s Ratings Services AAA AA- Moody s Investors Service Aaa Aa2 Fitch Ratings AAA AA- Tax Exemption Redemption Security In the opinion of Bond Counsel, interest on the 2005A Bonds is excludible from gross income for federal income tax purposes and is not an item of tax preference for purposes of the alternative minimum tax; however, interest on the 2005A Bonds is taken into account in determining federal taxes imposed on corporations subject to the alternative minimum tax. The 2005A Bonds and the income therefrom are exempt from Florida taxes, except estate taxes and corporate net income and franchise taxes imposed by Chapter 220, Florida Statutes, as amended. See Appendix G - "Form of Approving Opinion of Bond Counsel" for assumptions and limitations made by Bond Counsel. The 2005A Bonds maturing on or after July 1, 2016 are subject to optional redemption. The 2005A Bonds are payable from Net Revenues of the Turnpike System, a reserve account and certain other funds held under the Resolution. The 2005A Bonds are not a general obligation or indebtedness of the State of Florida, and the full faith and credit of the State of Florida is not pledged to the payment of the 2005A Bonds. The payment of the principal of and interest on the 2005A Bonds will additionally be secured by a financial guaranty insurance policy to be issued by AMBAC Assurance Corporation simultaneously with the delivery of the 2005A Bonds. Lien Priority Additional Bonds Purpose The lien of the 2005A Bonds on the Net Revenues is the first lien on such revenues and will be on a parity with the Outstanding Bonds previously issued to finance or refinance capital improvements to the Turnpike System. The aggregate principal amount of Bonds which will be outstanding subsequent to the issuance of the 2005A Bonds is $2,076,380,000. Additional bonds payable on a parity with the 2005A Bonds and the Outstanding Bonds may be issued if historical and projected Net Revenues are at least 120% of debt service. This description of the requirements for the issuance of Additional Bonds is only a summary of the complete requirements. See "ADDITIONAL PARITY BONDS" herein for more complete information. Proceeds will be used, together with other legally available moneys, to refund a portion of the State of Florida, Department of Transportation Turnpike Revenue Bonds, Series 2000A and to pay certain costs of issuance. Interest Payment Dates January 1 and July 1, commencing July 1, Record Dates December 15 and June 15. Closing/Settlement It is anticipated that the 2005A Bonds will be available for delivery in New York, New York on May 26, Denominations Form Bond Registrar/ Paying Agent Bond Counsel Issuer Contact Maturity Structure $5,000 and integral multiples thereof. Printed certificates will be issued. Underwriters will be required to qualify the 2005A Bonds for the FAST Automated Securities Transfer System of The Depository Trust Company. U.S. Bank Trust National Association, New York, New York. Greenberg Traurig, P.A., Miami, Florida. Division of Bond Finance (850) , bond@fsba.state.fl.us The 2005A Bonds will mature on the dates and bear interest at the rates set forth on the inside front cover. April 28, 2005

3 MATURITY STRUCTURE Initial CUSIP Due Date Principal Amount Interest Rate Price or Yield* First Optional Redemption Date and Price WK9 July 1, 2006 $ 365, % 2.64% WL7 July 1, , WM5 July 1, , WN3 July 1, , WP8 July 1, , WQ6 July 1, ,160, WR4 July 1, ,270, WS2 July 1, ,400, WT0 July 1, ,520, WU7 July 1, ,640, WV5 July 1, 2016** 3,825, July 1, WW3 July 1, 2017** 4,015, July 1, WX1 July 1, 2018** 4,210, July 1, WY9 July 1, 2019** 4,425, July 1, WZ6 July 1, 2020*** 4,645, July 1, XA0 July 1, 2021*** 4,880, July 1, XB8 July 1, 2022*** 5,120, July 1, XC6 July 1, ,375, July 1, XD4 July 1, 2024*** 5,605, July 1, XE2 July 1, 2025*** 5,885, July 1, XF9 July 1, 2026*** 6,180, July 1, XG7 July 1, 2027*** 6,490, July 1, XH5 July 1, 2028*** 6,815, July 1, XJ1 July 1, ,155, July 1, 101 (Accrued interest from April 15, 2005 to be added) * Price and yield information provided by the underwriters. ** The yield on these maturities is calculated to a 101% call on July 1, ***The yield on these maturities is calculated to a 100% call on July 1, Copyright 2005, American Bankers Association. CUSIP data herein is provided by Standard & Poor's, CUSIP Service Bureau, a division of McGraw- Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Services.

4 The State of Florida has not authorized any dealer, broker, salesman or other person to give any information or to make any representations, other than those contained in this Official Statement, and if given or made, such other information or representations must not be relied on. Certain information herein has been obtained from sources other than records of the State of Florida which are believed to be reliable. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale made hereunder will, under any circumstances, create any implication that there has been no change in the affairs of the State of Florida since the date hereof. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of the 2005A Bonds by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. STATE OFFICIALS GOVERNING BOARD OF THE DIVISION OF BOND FINANCE GOVERNOR JEB BUSH Chairman ATTORNEY GENERAL CHARLIE CRIST Secretary CHIEF FINANCIAL OFFICER TOM GALLAGHER Treasurer COMMISSIONER OF AGRICULTURE CHARLES H. BRONSON J. BEN WATKINS III Director Division of Bond Finance JOSÉ ABREU, P.E. Secretary Department of Transportation COLEMAN STIPANOVICH Executive Director State Board of Administration CONSULTANTS TO THE STATE OF FLORIDA URS Corporation Traffic Engineers New York, New York PBS&J General Consulting Engineers Orlando, Florida BOND COUNSEL Greenberg Traurig, P.A. Miami, Florida

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6 E RT AT I O N M OF TRANSP O S D E PA R T NT DA OF FLO TE RI TA

7 TABLE OF CONTENTS Page INTRODUCTION... 1 AUTHORITY FOR THE ISSUANCE OF THE 2005A BONDS... 2 General Legal Authority... 2 Division of Bond Finance... 2 State Board of Administration of Florida... 2 Department of Transportation... 2 Florida Turnpike Enterprise... 2 Administrative Approval... 3 DESCRIPTION OF THE 2005A BONDS... 3 Registration and Payment... 3 Transfer and Exchange... 4 REDEMPTION PROVISIONS... 4 Optional Redemption... 4 Notice of Redemption... 4 THE REFUNDING PROGRAM... 5 Sources and Uses of Funds... 5 Application of the 2005A Bond Proceeds... 5 SECURITY FOR THE 2005A BONDS... 6 Pledge of Revenues A Bonds Insured... 6 Debt Service Reserve Account... 6 Outstanding Parity Bonds... 7 Ceiling on State Revenue Collections... 8 FINANCIAL GUARANTY INSURANCE... 8 Payment Pursuant to Financial Guaranty Insurance Policy... 8 Ambac Assurance Corporation... 9 Available Information... 9 Incorporation of Certain Documents by Reference ADDITIONAL BONDS Additional Parity Bonds Turnpike Debt Management Policy Junior Lien Obligations Planned Near-Term Bond Issues FLOW OF FUNDS Payment of Costs of Operation and Maintenance from State Transportation Trust Fund Application of Revenues TOLLS Toll Covenant Toll Collection and Rate Adjustments Historical Revenue THE TURNPIKE SYSTEM Existing Turnpike System Ongoing Maintenance and Other Improvements Project Development Process Insurance on Turnpike System Competing Facilities TURNPIKE SYSTEM FINANCIAL DATA Historical Summary of Balance Sheet/Net Asset Data Historical Summary of Revenues, Expenses and Changes in Retained Earnings/Net Assets Discussion of Results of Operation and Management Analysis Impact from Hurricanes Historical Summary of Revenues, Expenses and Debt Service Coverage Projected Revenue, Expense and Debt Service Coverage SCHEDULE OF DEBT SERVICE PROVISIONS OF STATE LAW Bonds Legal Investment for Fiduciaries Negotiability i

8 TAX MATTERS General Original Issue Premium and Discount State Taxes Intangible Personal Property Tax INDEPENDENT AUDITORS MISCELLANEOUS Investment of Funds Bond Ratings Verification of Mathematical Calculations Litigation Legal Opinion and Closing Certificates Continuing Disclosure Underwriting Execution of Official Statement Page Appendix A - Traffic Engineer s Letter... A-1 Appendix B - Audited Financial Statements of the Turnpike System for Fiscal Years 2004 and B-1 Appendix C - Unaudited Financial Statement of the Turnpike System for the Six-Month Period Ended December 31, C-1 Appendix D - Certification of Covenant to Pay Costs of Operation and Maintenance... D-1 Appendix E - Original Resolution, as Restated on December 8, E-1 Appendix F - Nineteenth Supplemental Turnpike Revenue Bond Resolution... F-1 Appendix G - Form of Approving Opinion of Bond Counsel... G-1 Appendix H - Form of Continuing Disclosure Agreement... H-1 Appendix I - Specimen of Municipal Bond Insurance Policy...I-1 ii

9 OFFICIAL STATEMENT Relating to $93,560,000 STATE OF FLORIDA Department of Transportation Turnpike Revenue Refunding Bonds, Series 2005A For definitions of capitalized terms not defined in the text hereof, see Appendices E and F. INTRODUCTION This Official Statement sets forth information relating to the sale and issuance of the $93,560,000 State of Florida, Department of Transportation Turnpike Revenue Refunding Bonds, Series 2005A, dated April 15, 2005, (the "2005A Bonds") by the Division of Bond Finance of the State Board of Administration of Florida (the "Division of Bond Finance"). Proceeds of the 2005A Bonds, together with other legally available moneys, will be used to refund a portion of the State of Florida, Department of Transportation Turnpike Revenue Bonds, Series 2000A, and to pay certain costs of issuance. The 2005A Bonds will be primarily payable from the Net Revenues of the Turnpike System. The lien of the 2005A Bonds on the Net Revenues is on a parity with certain Turnpike Revenue Bonds issued since April The 2005A Bonds are not secured by the full faith and credit of the State of Florida. The payment of the principal of and interest on the 2005A Bonds will additionally be secured by a financial guaranty insurance policy to be issued by AMBAC Assurance Corporation simultaneously with the delivery of the 2005A Bonds. Requests for additional information may be made to: Division of Bond Finance Phone: (850) Fax: (850) bond@fsba.state.fl.us Mail: P. O. Box Tallahassee, Florida This Official Statement speaks only as of its date, and the information contained herein is subject to change. Any statements made in this Official Statement which involve opinions or estimates, whether or not expressly stated, are set forth as such and not as representations of fact. No representation is made that any of the opinions or estimates will be realized. To make an informed decision, a full review should be made of the entire Official Statement. The descriptions of the 2005A Bonds and the documents authorizing and securing the same do not purport to be comprehensive or definitive. All references to and descriptions of such documents are qualified by reference to the actual documents. Copies of such documents may be obtained from the Division of Bond Finance. End of Introduction 1

10 General Legal Authority AUTHORITY FOR THE ISSUANCE OF THE 2005A BONDS The 2005A Bonds are being issued by the Division of Bond Finance on behalf of the Florida Department of Transportation (the "Department") pursuant to Article VII, Section 11(d) of the Florida Constitution, the State Bond Act, the Florida Turnpike Enterprise Law, and other applicable provisions of law. Article VII, Section 11(d), of the Florida Constitution provides that revenue bonds payable solely from funds derived directly from sources other than State tax revenues may be issued by the State of Florida or its agencies, without a vote of the electors, to finance or refinance capital projects. Sections (2) and , Florida Statutes, authorize the issuance of revenue bonds and the refunding of such bonds by the Division of Bond Finance pursuant to Article VII, Section 11(d), of the Florida Constitution. Division of Bond Finance The Division of Bond Finance, a public body corporate created pursuant to the State Bond Act, is authorized to issue bonds on behalf of the State or its agencies. The Governing Board of the Division of Bond Finance (the Governing Board ) is composed of the Governor, as Chairman, and the Cabinet of the State of Florida, consisting of the Attorney General as Secretary, the Chief Financial Officer as Treasurer and the Commissioner of Agriculture. The Director of the Division of Bond Finance may serve as an assistant secretary of the Governing Board. State Board of Administration of Florida The State Board of Administration of Florida (the Board of Administration ) was created by Article IX, Section 16 of the Florida Constitution of 1885, as amended, and is continued under Article IX, Section 9(c) of the Florida Constitution as revised in The Board of Administration is composed of the Governor, as Chairman, the Attorney General and the Chief Financial Officer. Under the State Bond Act, the Board of Administration determines the fiscal sufficiency of all bonds proposed to be issued by the State of Florida or its agencies. It also acts as the fiscal agent of the Department in administering the Sinking Fund and the Rebate Fund established pursuant to the Resolution as described below. Department of Transportation The Department operates under the Florida Transportation Code, which includes the Florida Turnpike Enterprise Law. The head of the Department is the Secretary of Transportation, nominated by the Florida Transportation Commission, appointed by the Governor and confirmed by the State Senate. The Governor appointed José Abreu Secretary of Transportation on March 5, 2003; his appointment was subsequently confirmed by the State Senate. Mr. Abreu had served as District Six Secretary of Transportation (Miami-Dade and Monroe Counties) from 1995 until his appointment as Secretary. The Department is a decentralized agency, with a Central Office, seven District Offices and the Turnpike Enterprise. Each of the District Secretaries and the Executive Director of the Turnpike Enterprise sit on the Executive Board of the Department. The Florida Turnpike Enterprise Law authorizes the Department to acquire, construct, maintain and operate the Turnpike System. Florida Turnpike Enterprise Some of the original portions of the Turnpike System were constructed and managed by the Florida State Turnpike Authority created in In 1969 the Department succeeded to all the powers, properties and assets of the Florida State Turnpike Authority. In 1994 the Turnpike District, one of eight Department District Offices, was created to manage the Turnpike System. 2

11 Chapter , Laws of Florida, reorganized the Turnpike District into the Florida Turnpike Enterprise (the "Enterprise"). The legislation provided Florida s Turnpike with autonomy and flexibility to pursue innovations and best practices found in the private sector and to apply those to the Turnpike System, which remains an asset of the Department. The management team remained unchanged, but has a refocused mission and vision. In addition to providing additional flexibility in project delivery and enhanced revenue opportunities, Chapter , Laws of Florida, authorized the incorporation of the Department s Office of Toll Operations into the Enterprise. The renamed Toll Operations Office collects tolls for the Turnpike System as well as four Department owned and operated facilities and three Department operated facilities. The Turnpike System operates as an Enterprise within the Department. The Enterprise is organized into four functional program areas with the director of each program area reporting to the Executive Director of the Enterprise. The four program areas are headed by: the Chief Financial Officer (CFO), the Chief Operating Officer (COO), the General Counsel, and the Director of Communications and Marketing. The CFO is responsible for Finance and Administration and the COO is responsible for Production and Planning, Business Development and Concession Management, Highway Operations, and Toll Operations. Most offices are located in the Turnpike Enterprise Headquarters at the Turkey Lake Service Plaza, Mile Post 263, on the Turnpike in Orange County. Toll Operations completed its transition to the Turkey Lake Headquarters in December The Highway Operations and Communications and Marketing offices are located in the Turnpike Operations Center at the Pompano Service Plaza, Mile Post 65, on the Turnpike in Broward County. Administrative Approval The Department, by resolution adopted on April 14, 2005, requested the Division of Bond Finance to issue the 2005A Bonds. The Governing Board authorized the issuance and sale of the 2005A Bonds by a resolution adopted on October 25, 1988, as amended and restated on December 8, 1998, and as supplemented by a resolution adopted on April 19, 2005 (collectively, the "Resolution"). The Board of Administration approved the fiscal sufficiency of the 2005A Bonds by a resolution adopted on April 19, DESCRIPTION OF THE 2005A BONDS The 2005A Bonds and the interest payable thereon are obligations of the Department, secured by and payable solely from a first lien pledge of the Net Revenues of the Turnpike System on a parity with the previously issued 1995A through 2004A Bonds currently outstanding. The 2005A Bonds will be issued as registered bonds in the denomination of $5,000 or integral multiples thereof. Interest is payable on July 1, 2005 for the period from April 15, 2005 through July 1, 2005 and semiannually thereafter on January 1 and July 1 of each year until maturity or redemption. The 2005A Bonds will mature as set forth on the inside front cover. Registration and Payment Principal of and premium, if any, on the 2005A Bonds will be payable to the Registered Owner upon presentation and surrender of the 2005A Bonds when due at the corporate trust office of U.S. Bank Trust National Association, New York, New York, as Bond Registrar/Paying Agent. Interest on the 2005A Bonds will be paid by check or draft mailed on each Interest Payment Date (or by wire transfer at the request of Registered Owners of $500,000 or more 2005A Bonds upon provision for payment of wire charges) to each Registered Owner thereof as of the Record Date next preceding each Interest Payment Date. The Division of Bond Finance and the Bond Registrar/Paying Agent may treat the Registered Owner of any 2005A Bond as the absolute owner thereof for all purposes, whether or not such 2005A Bond is overdue, and will not be bound by any notice to the contrary. 3

12 Transfer and Exchange Each 2005A Bond will be transferable or exchangeable only upon the registration books by the Registered Owner thereof or an attorney duly authorized in writing, upon surrender of such 2005A Bond to the Bond Registrar/Paying Agent together with a written instrument of transfer (if so required) satisfactory in form to the Division of Bond Finance and the Bond Registrar/Paying Agent, duly executed by the Registered Owner or a duly authorized attorney. Upon surrender to the Bond Registrar/Paying Agent for transfer or exchange of any 2005A Bond, duly endorsed for transfer or accompanied by an assignment in accordance with the Resolution, the Bond Registrar/Paying Agent will deliver in the name of the transferee(s) a fully registered 2005A Bond of authorized denomination of the same maturity for the aggregate principal amount which the Registered Owner is entitled to receive. Neither the Division of Bond Finance nor the Bond Registrar/Paying Agent may charge the Registered Owner or transferee for any expenses incurred in making any exchange or transfer of the 2005A Bonds. However, the Division of Bond Finance and the Bond Registrar/Paying Agent may require payment from the Registered Owner of a sum sufficient to cover any tax, fee, or other governmental charge that may be imposed in relation thereto. Such governmental charges and expenses must be paid before any such new 2005A Bond is delivered. The Bond Registrar/Paying Agent will not be required to issue, transfer or exchange any 2005A Bonds on the Record Date. Optional Redemption REDEMPTION PROVISIONS The 2005A Bonds maturing in the years 2006 through 2015 are not redeemable prior to their stated dates of maturity. The 2005A Bonds maturing in 2016 and thereafter are redeemable prior to their stated dates of maturity, at the option of the Division of Bond Finance, (i) in part, by maturities to be selected by the Division of Bond Finance, and by lot within a maturity if less than an entire maturity is to be redeemed, or (ii) as a whole, on July 1, 2015, or on any date thereafter, at the principal amount of the 2005A Bonds so redeemed, together with interest accrued to the date of redemption, plus the following premium expressed as a percentage of the principal amount of the 2005A Bonds so redeemed, if redeemed in the following period: Notice of Redemption Redemption Period Premium July 1, 2015 through June 30, 2016 One Percent (1%) July 1, 2016 and thereafter Without Premium Notices of redemption of 2005A Bonds or portions thereof will be mailed at least 30 days prior to the date of redemption to Registered Owners of record as of 45 days prior to the date of redemption. Such notices of redemption will specify the serial numbers of the 2005A Bonds to be redeemed, if less than all, the redemption price, the date fixed for redemption, and the place for presentation, and will state that interest on the 2005A Bonds called for redemption will cease to accrue upon the redemption date. Failure to give any required notice of redemption as to any particular 2005A Bonds will not affect the validity of the call for redemption of any 2005A Bonds in respect of which no such failure has occurred. Any notice mailed as provided in the Resolution will be conclusively presumed to have been given, whether or not the Registered Owner receives the notice. 4

13 THE REFUNDING PROGRAM The proceeds derived from the sale of the 2005A Bonds, together with other legally available moneys, will be used to refund the State of Florida, Department of Transportation Turnpike Revenue Bonds, Series 2000A (the "Series 2000A Bonds"), maturing in the years 2011 through 2029, inclusive, in the outstanding principal amount of $89,625,000 (the "Refunded Bonds"). This refunding is being effectuated to achieve debt service savings. Simultaneously with the delivery of the 2005A Bonds, the Division of Bond Finance will cause to be deposited a portion of the proceeds of the 2005A Bonds in an irrevocable escrow account (the "Escrow Deposit Trust Fund"), under an agreement (the "Escrow Deposit Agreement") to be entered into between the Division of Bond Finance and the Board of Administration (the "Escrow Agent"). The Board of Administration will invest those proceeds in direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (the "Federal Securities"). The maturing Federal Obligations, the earnings thereon, and the cash on deposit in the Escrow Deposit Trust Fund will be sufficient to pay (1) the semiannual interest payments accruing through and (2) the principal of and the required redemption premium of 1% on the Refunded Bonds on July 1, Once the proceeds are deposited in the Escrow Deposit Trust Fund, the Refunded Bonds will no longer have any claim upon the Net Revenues of the Turnpike System and will have a claim only upon the Escrow Deposit Trust Fund. No funds held in escrow will be available to pay debt service on the 2005A Bonds. Sources And Uses of Funds Sources: Par Amount of 2005A Bonds... $ 93,560,000 Plus: Net Original Issue Premium... 5,307,249 Available Funds in Sinking Fund... 2,154,164 Accrued Interest ,788 Total Sources... $101,520,201 Uses of Funds: Deposit to Escrow Deposit Trust Fund... $100,128,294 Underwriters Discount 2 738,778 Deposit to the Sinking Fund for Accrued Interest ,788 Costs of Issuance ,341 Total Uses... $101,520,201 1 Accrued interest from April 15, 2005 to the date of delivery of the 2005A Bonds. 2 Includes a municipal bond insurance premium of $453,427 to be paid by the underwriters to Ambac Assurance Corporation simultaneously with delivery of the 2005A Bonds. Application of the 2005A Bond Proceeds Upon receipt of the proceeds of the 2005A Bonds, the Department of Transportation will transfer and apply such proceeds as follows: (A) (B) The accrued interest on the 2005A Bonds will be transferred to the Board of Administration and deposited in the Sinking Fund created by the Resolution. The amount necessary to pay all costs and expenses of the Division of Bond Finance in connection with the preparation, sale and issuance of the 2005A Bonds, including a reasonable charge for the services of the Division of Bond Finance, will be transferred to the Division of Bond Finance to be deposited in the Bond Fee Trust Fund and the Arbitrage Compliance Trust Fund pursuant to written instructions at the delivery of the 2005A Bonds unless such amount will be provided from another legally available source. 5

14 (C) All remaining proceeds will be transferred to the Board of Administration for deposit into a trust fund, to be known as the "State of Florida, Department of Transportation Turnpike Revenue Refunding Bonds, Series 2005A Escrow Deposit Trust Fund." After the redemption of the Refunded Bonds, any excess proceeds not used for such purpose will be transferred to the Sinking Fund and shall be used for any purpose for which moneys may be legally used from such fund (including the payment of debt service). SECURITY FOR THE 2005A BONDS Pledge of Revenues The 2005A Bonds will be secured by a pledge of and a first lien on, and will be payable solely from, the Net Revenues of the Turnpike System on a parity with the previously issued 1995A through 2004A Bonds (the "Outstanding Bonds") and any Additional Bonds hereafter issued on a parity therewith pursuant to the Resolution. See "ADDITIONAL BONDS" below. The aggregate outstanding principal amount of parity bonds subsequent to the issuance of the 2005A Bonds will be $2,076,380,000. The 2005A Bonds are also secured by a subaccount in the Debt Service Reserve Account which also secures the Outstanding Bonds. The Resolution, which was originally adopted in 1988, defines Net Revenues as the Revenues derived from the operation of the Turnpike System after deducting the Cost of Operation and Cost of Maintenance. Pursuant to legislation adopted in 1997, the Department covenanted on August 21, 1997, to pay all costs of operation and maintenance of the Turnpike System from the State Transportation Trust Fund (the "STTF"), in effect making 100% of the Turnpike System Gross Revenues available for debt service. The costs of operation and maintenance paid from the STTF are to be reimbursed from the Turnpike General Reserve Fund only after provision has been made for payment of debt service and other amounts required with respect to Turnpike Revenue Bonds. See "FLOW OF FUNDS - Payment of Costs of Operation and Maintenance from State Transportation Trust Fund," "FLOW OF FUNDS - Application of Revenues," and "TOLLS - Toll Covenant" below. The 2005A Bonds are "revenue bonds" within the meaning of Article VII, Section 11(d), of the Florida Constitution, and are payable solely from funds derived directly from sources other than State tax revenues. The 2005A Bonds do not constitute a general obligation or indebtedness of the State of Florida or any of its agencies or political subdivisions and will not be a debt of the State of Florida or of any agency or political subdivision thereof, and the full faith and credit of the State is not pledged to the payment of the principal of, premium, if any, or interest on the 2005A Bonds. The issuance of the 2005A Bonds does not, directly or indirectly or contingently, obligate the State of Florida to use State funds, other than the Net Revenues, to levy or to pledge any form of taxation whatsoever or to make any appropriation for payment of the principal of, premium, if any, or interest on the 2005A Bonds. 2005A Bonds Insured The payment of the principal of and interest on the 2005A Bonds will additionally be secured by a financial guaranty insurance policy to be issued by Ambac Assurance Corporation simultaneously with the delivery of the 2005A Bonds. For a more complete description of the municipal bond insurance policy, see "FINANCIAL GUARANTY INSURANCE" below. Debt Service Reserve Account Generally The Division of Bond Finance may establish multiple subaccounts in the Debt Service Reserve Account for one or more Series of Bonds, each of which is available to cure deficiencies in the Sinking Fund only with respect to the Series of Bonds for which such subaccount is established. The Debt Service Reserve Requirement for each subaccount in the Debt Service Reserve Account is the lowest of: 6

15 (i) (ii) 125% of the average Annual Debt Service Requirement for the then current and succeeding fiscal years; Maximum Annual Debt Service; (iii) 10% of the aggregate of the original proceeds received from the initial sale of all Outstanding Bonds; or (iv) the maximum debt service reserve permitted with respect to tax-exempt obligations under the U.S. Internal Revenue Code, as amended, with respect to the Bonds for which such subaccount has been funded. The Resolution provides that one or more Reserve Account Credit Facilities may be deposited in the Debt Service Reserve Account in lieu of funding it with cash. Moneys in the Debt Service Reserve Account may be used only for deposit into the Interest Account, Principal Account and Bond Amortization Account when the other moneys available for such purpose are insufficient therefor. The 2005A Bonds The 2005A Bonds will be secured by the subaccount in the Debt Service Reserve Account that also secures the 1995A through 2004A Bonds (the "Subaccount"). The Subaccount is funded by (i) a debt service reserve account surety bond (the "Ambac Surety Bond") issued by Ambac Assurance Corporation ("Ambac") in an amount equal to $84,763,631.25, which secures the 1995A Bonds, 1997A Bonds, 2003A Bonds, 2003B Bonds and Bonds issued to refund such Bonds; (ii) a debt service reserve account surety bond issued by MBIA Insurance Corporation ("MBIA") in an amount equal to $15,797,275, which secures the 1998A Bonds and Bonds issued to refund the same, if any; (iii) a debt service reserve account surety bond issued by MBIA in an amount equal to $13,930,750, which secures the 1998B Bonds, Bonds issued to refund such Bonds, if any, and Bonds issued on a parity therewith; (iv) a debt service reserve account surety bond issued by MBIA in an amount equal to $12,852,456, which secures the 2003C Bonds and any Bonds issued on a parity therewith; (v) a reserve insurance policy issued by Financial Security Assurance Inc. in the amount of $7,047,562.50, which secures the 1999A Bonds and any Bonds issued on a parity therewith; (vi) a reserve insurance policy issued by Financial Security Assurance Inc. in the amount of $17,526,837.50, which secures the 2004A Bonds and any Bonds issued on a parity therewith; (vii) a debt service reserve account surety bond issued by Financial Guaranty Insurance Company ("FGIC") in the amount of $8,046,218.75, which secures the 2000A Bonds and any Bonds issued on a parity therewith; and (viii) a debt service reserve account surety bond issued by FGIC in the amount of $14,100,386.50, which secures the 2000B Bonds and any Bonds issued on a parity therewith. The reserve fund requirement for the 2005A Bonds will be funded by the FGIC Surety Bond which provided the reserve fund requirement for the Refunded Bonds. If more than one Reserve Account Credit Facility is deposited into a subaccount in the Debt Service Reserve Account, the Resolution provides that drawings thereunder will be made on a pro rata basis, calculated by reference to the maximum amounts available thereunder. If a disbursement is made under a Reserve Account Credit Facility, the Department is obligated to either reinstate such instrument immediately following such disbursement to the amount required to be maintained in the Debt Service Reserve Account or to deposit into the applicable subaccount in the Debt Service Reserve Account funds in the amount of the disbursement made under the surety bonds, or a combination of such alternatives as will equal the amount required to be maintained. Outstanding Parity Bonds The Division of Bond Finance has issued several series of Department of Transportation Turnpike Revenue and Revenue Refunding Bonds which will be Outstanding in the aggregate principal amount of $2,076,380,000 7

16 subsequent to the issuance of the 2005A Bonds and which are payable from the Net Revenues. The 2005A Bonds are secured by a lien on the Net Revenues on a parity with the Outstanding Bonds. See "ADDITIONAL BONDS" below. Ceiling on State Revenue Collections The Florida Constitution limits the amount of taxes, fees, licenses and charges for services imposed by the Legislature and collected during any fiscal year to the amount of revenues allowed for the prior fiscal year, plus an adjustment for growth. Growth is defined as the amount equal to the average annual rate of growth in Florida personal income over the most recent 20 quarters times the State revenues allowed for the prior fiscal year. The revenues allowed for any fiscal year could be increased by a two-thirds vote of the Legislature. Included among the categories of revenues which are exempt from the revenue limitation, however, are revenues pledged to State bonds. The constitutional limitation has not had, and is not expected to have, an adverse effect on the amount of the Net Revenues available to pay debt service on the 2005A Bonds. FINANCIAL GUARANTY INSURANCE (The information contained under the heading "FINANCIAL GUARANTY INSURANCE" has been obtained from Ambac Assurance, which is solely responsible for its content. This information has not been reviewed by, is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation of, the State.) The payment of the principal of and interest on the 2005A Bonds will be guaranteed by a financial guaranty insurance policy to be issued by Ambac Assurance Corporation ("Ambac Assurance") simultaneously with the delivery of the 2005A Bonds. Reference is made to Appendix I for a specimen of Ambac Assurance s financial guaranty insurance policy. Payment Pursuant to Financial Guaranty Insurance Policy Ambac Assurance has made a commitment to issue a financial guaranty insurance policy (the "Financial Guaranty Insurance Policy") relating to the 2005A Bonds effective as of the date of issuance of the 2005A Bonds. Under the terms of the Financial Guaranty Insurance Policy, Ambac Assurance will pay to The Bank of New York, in New York, New York or any successor thereto (the "Insurance Trustee") that portion of the principal of and interest on the 2005A Bonds which shall become due for payment but shall be unpaid by reason of nonpayment by the State Board of Education (as such terms are defined in the Financial Guaranty Insurance Policy). Ambac Assurance will make such payments to the Insurance Trustee on the later of the date on which such principal and interest becomes due for payment or within one business day following the date on which Ambac Assurance shall have received notice of nonpayment from the Bond Registrar/Paying Agent. The insurance will extend for the term of the 2005A Bonds and, once issued, cannot be canceled by Ambac Assurance. The Financial Guaranty Insurance Policy will insure payment only on stated maturity dates and on mandatory sinking fund installment dates, in the case of principal, and on stated dates for payment, in the case of interest. If the 2005A Bonds become subject to mandatory redemption and insufficient funds are available for redemption of all outstanding 2005A Bonds, Ambac Assurance will remain obligated to pay principal of and interest on outstanding 2005A Bonds on the originally scheduled interest and principal payment dates including mandatory sinking fund redemption dates. In the event of any acceleration of the principal of the 2005A Bonds, the insured payments will be made at such times and in such amounts as would have been made had there not been an acceleration. In the event the Bond Registrar/Paying Agent has notice that any payment of principal of or interest on a 2005A Bond which has become due for payment and which is made to a Registered Owner by or on behalf of the State Board of Education has been deemed a preferential transfer and theretofore recovered from its Registered Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction, such Registered Owner will be entitled to payment from Ambac Assurance to the extent of such recovery if sufficient funds are not otherwise available. 8

17 The Financial Guaranty Insurance Policy does not insure any risk other than nonpayment, as defined in the policy. Specifically, the Financial Guaranty Insurance Policy does not cover: 1) payment on acceleration, as a result of a call for redemption (other than mandatory sinking fund redemption) or as a result of any other advancement of maturity; 2) payment of any redemption, prepayment or acceleration premium; and 3) nonpayment of principal or interest caused by the insolvency or negligence of any trustee or paying agent, if any. If it becomes necessary to call upon the Financial Guaranty Insurance Policy, payment of principal requires surrender of 2005A Bonds to the Insurance Trustee together with an appropriate instrument of assignment so as to permit ownership of such 2005A Bonds to be registered in the name of Ambac Assurance to the extent of the payment under the Financial Guaranty Insurance Policy. Payment of interest pursuant to the Financial Guaranty Insurance Policy requires proof of Registered Owner entitlement to interest payments and an appropriate assignment of the Registered Owner s right to payment to Ambac Assurance. Upon payment of the insurance benefits, Ambac Assurance will become the owner of the 2005A Bond, appurtenant coupon, if any, or right to payment of principal or interest on such 2005A Bond and will be fully subrogated to the surrendering Registered Owner s rights to payment. The insurance provided by the Financial Guaranty Insurance Policy is not covered by the Florida Insurance Guaranty Association. Ambac Assurance Corporation Ambac Assurance is a Wisconsin-domiciled stock insurance corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin and licensed to do business in 50 states, the District of Columbia, the Territory of Guam, the Commonwealth of Puerto Rico and the U. S. Virgin Islands, with admitted assets of approximately $8,329,000,000 (unaudited) and statutory capital of approximately $5,224,000,000 (unaudited) as of December 31, Statutory capital consists of Ambac Assurance s policyholders surplus and statutory contingency reserve. Standard & Poor s Credit Markets Services, a Division of The McGraw-Hill Companies, Moody s Investors Service and Fitch Ratings have each assigned a triple-a financial strength rating to Ambac Assurance. Ambac Assurance has obtained a ruling from the Internal Revenue Service to the effect that the insuring of an obligation by Ambac Assurance will not affect the treatment for federal income tax purposes of interest on such obligation and that insurance proceeds representing maturing interest paid by Ambac Assurance under policy provisions substantially identical to those contained in its Financial Guaranty Insurance Policy shall be treated for federal income tax purposes in the same manner as if such payments were made by the issuer of the 2005A Bonds. Ambac Assurance makes no representation regarding the 2005A Bonds or the advisability of investing in the 2005A Bonds and makes no representation regarding, nor has it participated in the preparation of, the Official Statement other than the information supplied by Ambac Assurance and presented under the heading "FINANCIAL GUARANTY INSURANCE." Available Information The parent company of Ambac Assurance, Ambac Financial Group, Inc. (the "Company"), is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). These reports, proxy statements and other information can be read and copied at the SEC s public reference room at 450 Fifth Street, N.W., Washington, D.C Please call the SEC at SEC-0330 for further information on the public 9

18 reference room. The SEC maintains an internet site at that contains reports, proxy and information statements and other information regarding companies that file electronically with the SEC, including the Company. These reports, proxy statements and other information can also be read at the offices of the New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York, New York Copies of Ambac Assurance s financial statements prepared in accordance with statutory accounting standards are available from Ambac Assurance. The address of Ambac Assurance s administrative offices and its telephone number are One State Street Plaza, 19th Floor, New York, New York, and (212) Incorporation of Certain Documents by Reference The following document filed by the Company with the SEC (File No ) is incorporated by reference in this Official Statement: The Company s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 and filed on March 15, All documents subsequently filed by the Company pursuant to the requirements of the Exchange Act after the date of this Official Statement will be available for inspection in the same manner as described above in "Available Information." Additional Parity Bonds ADDITIONAL BONDS The Division of Bond Finance may issue Additional Bonds payable from Net Revenues on a parity with the Outstanding Bonds and the 2005A Bonds, for the purpose of financing the cost of construction or acquisition of Turnpike Projects, or for the purpose of refunding Bonds, but only under the following terms, limitations and conditions: (a) The Board of Administration must approve the fiscal sufficiency of the Additional Bonds prior to the sale thereof; (b) Sufficient Revenues will have been collected and transferred to the Board of Administration to make all prior and current payments under the Resolution, and neither the Division of Bond Finance nor the Department will be in default thereunder; (c) All principal of and interest on Bonds which became due on or prior to the date of delivery of the Additional Bonds must be paid; (d) A certificate must be filed with the Board of Administration and the Division of Bond Finance signed by an Authorized Officer of the Department setting forth the amount of Net Revenues collected during the immediately preceding fiscal year or any 12 consecutive months selected by the Department out of the 15 months immediately preceding the date of such certificate; (e) A certificate must be filed with the Board of Administration and the Division of Bond Finance by the Traffic Engineer stating the estimate of the amount of Net Revenues to be collected during the current fiscal year and each fiscal year thereafter, to and including the third complete fiscal year after the Consulting Engineer's estimated date for completion and placing in operation of the Turnpike Projects to be financed by the proposed Additional Bonds, taking into account any revisions to be effective during such period of the Tolls and other income in connection with the operation of the Florida Turnpike; 10

19 (f) Determinations must be made by both the Board of Administration and the Division of Bond Finance that: (1) the amount shown by the certificate described in paragraph (d) are not less than 120% of the amount of the Annual Debt Service Requirement for the current fiscal year on account of all Bonds then Outstanding; (2) the amount shown by the certificate described in paragraph (e) for the current fiscal year and for each fiscal year to and including the first complete fiscal year after the Consulting Engineer's estimated date for completion and placing in operation of the Turnpike Projects to be financed by the proposed Additional Bonds are not less than 120% of the Annual Debt Service Requirement for each such fiscal year on account of all Bonds then Outstanding and the proposed Additional Bonds; and (3) the amount shown by the certificate described in paragraph (e) for each of the three complete fiscal years after the Consulting Engineer's estimated date for completion and placing in operation of the Turnpike Projects to be financed by the proposed Additional Bonds are not less than 120% of the Maximum Annual Debt Service for each such fiscal year on account of all Bonds then Outstanding and the proposed Additional Bonds. The debt service requirement of Bonds to be refunded and defeased from the proceeds of the proposed Additional Bonds is not to be taken into account in making such determinations. Refunding bonds issued for a net debt service savings in each fiscal year are exempt from the provisions of (d), (e) and (f) above. After the issuance of the 2005A Bonds, $84,645,000 of Turnpike Revenue Bonds will remain authorized, validated and unissued. Turnpike Debt Management Policy The Department has established debt management guidelines for the Turnpike System designed to assure a sound financial decision making process and affirm the future financial viability of the Turnpike System. The guidelines provide that the Department will borrow only to fund capital requirements, not operating and maintenance costs, and that the final maturity of bonds issued to finance Turnpike improvements may not exceed the useful lives of such improvements. The guidelines also call for the Department to adjust its capital plans in order to maintain annual debt coverage ratios of at least 1.5 times Net Revenue or 2.0 times Gross Revenue, and to periodically prepare cash forecasts and financial plans. Junior Lien Obligations The Division of Bond Finance and Department covenant that until the Bonds are defeased, they will not issue any other obligations, except Additional Bonds, nor voluntarily create or cause to be created any other debt, lien, pledge, assignment, encumbrance or other charge, having priority to or being on a parity with the lien of the Registered Owners of the Bonds upon the Net Revenues. Any such other obligations secured by the Net Revenues, other than the Bonds and Additional Bonds, will contain an express statement that such obligations are junior, inferior, and subordinate to the Bonds theretofore or thereafter issued, as to lien on and source and security for payment from the Net Revenues. The Resolution authorizes the Division of Bond Finance to issue junior lien bonds which will ascend to parity status with the Bonds upon compliance with the requirements for Additional Bonds set forth above. The Department has also covenanted not to issue any obligations, or create, cause or permit to be created, any debt, lien, pledge, assignment, encumbrance, or any charge upon any of the properties of the Turnpike System except as otherwise provided in the Resolution. Subordinated Debt. The Turnpike System periodically incurs debt due to the Department. The lien of this debt on the net revenues of the System is junior and subordinate to that of the Bonds. The $112.1 million long-term payable at December 31, 2004 is made up of loans and advances made by the Department to the Turnpike System for the purpose of 11

20 advancing improvement and expansion projects with repayments deferred until projects have been incorporated into the System operations. The Department has made loans to the Turnpike System from the State Infrastructure Bank (SIB), the Toll Facilities Revolving Trust Fund (TFRTF) and the State Transportation Trust Fund (STTF). STTF loans have been made for two purposes: to accelerate the acquisition of the Sawgrass Expressway, and to subsidize Operation and Maintenance on expansion projects. The following table shows the scheduled repayment of the subordinate debt. Subordinated Debt Repayments 1 As of 12/31/04 Turnpike System (in Thousands of Dollars) FY 2010 and FY 2006 FY 2007 FY 2008 FY 2009 thereafter Totals SIB Loans $2,482 $17,482 $2,482 $2,482 $44,384 $ 69,312 Sawgrass Loan - 2, ,400 STTF O&M Subsidy ,404 37,404 TFRTF Repayments ,000 3,000 $2,482 $19,882 $2,482 $2,482 $84,788 $112,116 1 The only subordinated debt which requires the payment of interest is the Sawgrass Loan, which has an interest rate of % and annual interest payments of $124, Source: Turnpike System unaudited financial statements for the six-month period ended December 31, 2004, included in Appendix C. Planned Near-Term Bond Issues The Department has established a policy of cash management allowing bond issuance to be based on cash flow requirements over the construction period of the capital improvements undertaken by the Enterprise. Over the period of the Turnpike's Five Year Plan (Fiscal Years 2006 through 2010), the Turnpike anticipates bond issuances totaling approximately $2.0 billion. In June 2003, the Florida Legislature enacted Ch which increased the authorized ceiling on bond issuance to $4.5 billion. Bond sales planned for Fiscal Years 2006 through 2010 will exhaust $4.3 billion of the bond authorization, leaving $0.2 billion of current authorization remaining to finish funding projects programmed in the Five Year Plan with projected cash outlays beyond Fiscal Year Bond issuance is expected to occur annually as needed to fund the continuation of projects under construction and start new projects. The next issuance is planned for late calendar year 2005 (Fiscal Year 2006) in the amount of approximately $460 million. The issue will provide partial funding for (i) the widening of the Bee Line West Expressway, (ii) the widening of the Sawgrass Expressway from Atlantic Boulevard to Coral Ridge, (iii) the purchase of right-of-way for I-4 express lanes in Orange County, (iv) the commencement of construction on the Jog Road and Kissimmee Park Road Interchanges and (v) the modification of the SW 8 th Street Interchange in Miami-Dade County. Funding will also be provided to reimburse the General Reserve Fund for previously expended preliminary engineering costs associated with these projects, and to continue funding projects funded by the 2004A Bonds, which include the widening of the Mainline, modification of the SR 408/Turnpike Mainline Interchange and construction of the SR 710 Interchange. Fiscal Year 2007: Approximately $530 million will be required for construction of an interchange between SR 417 and the Turnpike Mainline, construction of various widening projects on the Mainline, reconstruction of the Hollywood Boulevard Interchange in Broward County, conversion of the Sawgrass Expressway to an Open-Road-Tolling (ORT) facility (ORT is a non-stop, cashless environment where all tolls are collected electronically), funding of Traffic Management Improvements, the purchase of additional right-of-way for I-4 express lanes, reimbursement of the General Reserve Fund for previously expended Preliminary Engineering costs associated with these projects, and to continue to fund those projects funded by prior bond issues that have not been completed. Fiscal Year 2008: It is anticipated that approximately $464 million will be necessary to begin widening the HEFT south of SW 177 th Street to south of Kendall Drive, begin construction on widening the Mainline between Beulah Road and SR 50, begin construction on the replacement of the Golden Glades Toll Plaza, reimburse the General Reserve Fund for previously 12

21 expended Preliminary Engineering costs associated with these projects, and continue to fund those projects funded by prior bond issues that have not been completed. Fiscal Year 2009: A bond issue of approximately $291 million will be needed to begin widening the Mainline from Lantana to Lake Worth, begin construction of Express Lanes at the Homestead Plaza on the HEFT, begin construction of improvements to the Lake Worth Road Interchange, reimburse the General Reserve Fund for previously expended Preliminary Engineering costs associated with these projects, and continue to fund those projects funded by prior bond issues that have not been completed. Fiscal Year 2010: A bond issue of approximately $216 million will be required to begin widening the HEFT from SW 216 th Street to SW 117 th Avenue, partially fund the construction of the I-4 Connector project in Tampa (a toll road connecting I-4 with the Crosstown Expressway for direct access to the Port of Tampa and Downtown Tampa), reimburse the General Reserve Fund for previously expended Preliminary Engineering costs associated with these projects, and continue to fund those projects funded by prior bond issues that have not been completed. FLOW OF FUNDS The Resolution establishes: (i) the "Revenue Fund", (ii) the "Operation and Maintenance Fund" or "O&M Fund" (and the "Cost of Operation Account" and the "Cost of Maintenance Account" therein), (iii) the "Sinking Fund" (consisting of the "Interest Account," the "Principal Account," the "Bond Amortization Account," the "Debt Service Reserve Account" and the "Bond Redemption Account"), (iv) the "Renewal and Replacement Fund" or "R&R Fund," (v) the "Operation and Maintenance Reserve Fund" or the "O&M Reserve Fund," (vi) the "General Reserve Fund" and (vii) the "Rebate Fund." All Revenues are deposited daily into a special account in one or more depositories (the "Collection Account"). At least weekly the Department transfers all moneys in the Collection Account to the Board of Administration for deposit into the Revenue Fund. Except for the O&M Fund and the O&M Reserve Fund, such funds and accounts constitute trust funds for the purposes provided in the Resolution, and the Registered Owners of the Bonds have a lien on all moneys in such funds and accounts until applied as provided therein. See "MISCELLANEOUS - Investment of Funds" below. Payment of Costs of Operation and Maintenance from State Transportation Trust Fund Although the Resolution requires that moneys in the Revenue Fund first be applied to pay the Costs of Operation and Maintenance, the Department has covenanted (the "Covenant") to pay such Costs of Operation and Maintenance from the State Transportation Trust Fund (the "STTF"). By its terms, the Covenant (i) is a contract enforceable by the Registered Owners, (ii) is not subject to repeal, impairment or amendment which would materially and adversely affect the rights of Registered Owners, and (iii) may be amended only upon compliance with the procedures for amending the Resolution. The Covenant requires that the STTF be reimbursed from moneys available in the Turnpike System General Reserve Fund, the last fund in the flow of funds. If such moneys are insufficient to reimburse the STTF, the Department must take actions (including deferring projects and increasing tolls) to increase available revenues. If such actions would adversely impact the security of the Registered Owners or the integrity of the Turnpike System, the reimbursement obligation would become a debt of the Turnpike System to the STTF, payable from the General Reserve Fund. The terms of the Covenant were approved as part of validation proceedings with respect to previously authorized Turnpike Revenue Bonds. The full text of the Covenant is reproduced herein as Appendix D. The STTF is funded by various transportation-related taxes, fees, fines and surcharges, including motor fuel taxes and motor vehicle license taxes, (collectively, the "State Tax Component"), as well as federal aid, interest earnings and miscellaneous revenues. By law, 15% of STTF receipts are reserved for public transportation projects. STTF receipts are available to pay the costs of operation and maintenance on the Turnpike System only after payment of debt service on certain non-turnpike bond programs and costs of operation and maintenance on certain expressway systems. The following table shows the STTF funds available to meet the Covenant for the last five fiscal years and as projected for the current and next five fiscal years. The information for the Fiscal Years was not prepared in 13

22 compliance with guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, to the best of the Department s knowledge and belief, was prepared on a reasonable basis and reflects the best currently available estimates. Projections are statements of opinion and are subject to future events which may cause the actual results to differ materially from those set forth herein. Undue reliance should not be placed on these projections. Neither the Turnpike System s independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the projected financial information contained in these tables, nor have they expressed any opinion or form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with the projected financial information. 1 2 Turnpike Operation and Maintenance Coverage from STTF (In Millions) Fiscal Year Ended June 30 STTF Receipts Available 1 Prior Lien Obligations 2 Available for Turnpike Operation & Maintenance Turnpike Operation & Maintenance 3,4 Turnpike Operation & Maintenance Coverage $1, , , , , , , ,538.2 $ $ 1, , , , , , , ,343.3 $ x 15.04x 15.32x 14.27x 13.45x 13.87x 14.83x 14.52x , , x , , , , x 14.20x Amounts for Fiscal Years 2000 through 2004 are actual. Projections for Fiscal Years are based on the March 2005 Revenue Estimating Conference estimates of State Transportation Trust Fund Revenue, adjusted by the Department to reflect (i) the statutory percentage reserved for public transportation projects, and (ii) exempt revenues, and (iii) interest earnings and miscellaneous revenues from the Department s Cash Forecast of the STTF dated August 3, Prior Lien Obligations include Right-of-Way Acquisition and Bridge Construction Bond Program debt service, authority Operation and Maintenance loans, and Turnpike Enterprise Operations and Maintenance and Toll Facility Revolving Trust Fund loans based on the Department s Cash Forecast of the STTF dated August 3, Projections for Fiscal Years 2005 through 2010 are from the Turnpike s financial projections dated August 20, Actual expenses for Fiscal Year 2000 do not include the Sawgrass Expressway. Source: State of Florida Department of Transportation. Application of Revenues The Resolution provides that on the 15th day of each month, Revenues are first deposited in the O&M Fund in amounts equal to 1/12th of the Cost of Operation and 1/12th of the Cost of Maintenance. In July 2004, the Department made deposits in the Cost of Operation and Cost of Maintenance Accounts to bring their balances up to 1/12th of the budgeted Cost of Operation and 1/12th of the budgeted Cost of Maintenance for Fiscal Year 2005, respectively. Because the Costs of Operation and Maintenance are to be paid from the STTF, the moneys on deposit in the O&M Fund will not need to be drawn down and no Revenues will be deposited therein. On the 15th day of each month, to the extent necessary, Revenues are deposited (i) first, into the Interest Account in the Sinking Fund, in an amount equal to 1/6th of the interest payable on the Bonds on the next Interest Payment Date; and (ii) next, to the Principal Account in the Sinking Fund in an amount equal to 1/12th of the principal amount of Serial Bonds maturing on the next annual maturity date, and into the Bond Amortization Account in such amounts as may be 14

23 required for the payment of Term Bonds. Any deficiencies in the Interest Account, the Principal Account and the Bond Amortization Account will be restored from the first Net Revenues available to the Department. After funding the accounts in the Sinking Fund, Revenues are deposited into each subaccount in the Debt Service Reserve Account to the extent necessary to maintain an amount equal to the Debt Service Reserve Requirement established for the Bonds. Thereafter, Revenues are deposited in the Renewal and Replacement Fund to the extent necessary to pay 1/12th of the amount certified by the Consulting Engineer for the current fiscal year as being necessary for the purposes of the Renewal and Replacement Fund. The Department may withdraw and transfer to any other fund any excess amount certified by the Consulting Engineer as not being necessary for the purposes of the Renewal and Replacement Fund. Moneys in the Renewal and Replacement Fund are used to pay the cost of replacement or renewal of capital assets or facilities of the Turnpike System, or extraordinary repairs of the Turnpike System, excluding non-toll roads other than Feeder Roads. The moneys in the Renewal and Replacement Fund may be deposited into the Interest Account, Principal Account and Bond Amortization Account only when the moneys in the Revenue Fund and the Debt Service Reserve Account are insufficient therefor. Revenues are next deposited into the O&M Reserve Fund to the extent necessary to maintain an amount on deposit in the O&M Reserve Fund at least equal to 1/8th of the sum of the Cost of Operation and the Cost of Maintenance for the current fiscal year as set forth in the Annual Budget of the Department. Any moneys in the O&M Reserve Fund in excess of the amount required to be maintained therein may be transferred at the direction of the Department to the General Reserve Fund. The balance of any moneys remaining in the Revenue Fund not needed for the foregoing payments are deposited in the General Reserve Fund and applied by the Department for any lawful purpose; provided, however, that no such deposit may be made unless all payments described above, including any deficiencies for prior payments, have been made in full to the date of such deposits. Toll Covenant TOLLS The Department has covenanted in the Resolution to fix, establish and collect Tolls for the use of the Turnpike (except non-toll roads) at such rates, and revise such Tolls from time to time whenever necessary so that the Revenues will be sufficient in each fiscal year to pay at least 100% of the Cost of Maintenance and Cost of Operation, and so that the Net Revenues will be sufficient in each fiscal year to pay at least 120% of the Annual Debt Service Requirement for the Bonds and at least 100% of all other payments required by the Resolution. Excess Revenues collected in any fiscal year will not be taken into account as a credit against the foregoing requirements for any subsequent fiscal year. The Department will be without power to reduce Toll rates or remove Tolls from all or a portion of the Turnpike System except in the manner provided in the Resolution, until all the Bonds and interest thereon have been fully paid and discharged, or such payment has been fully provided for. Any such Toll reduction or removal would require a survey and recommendation of the Traffic Engineers, who must certify that in their opinion the amount of Tolls to be produced after such rate reduction or Toll removal in each fiscal year thereafter will continue to be sufficient to comply with the Toll rate covenants above. For purposes of the Resolution, conversion from one system of Toll collection (such as a ticket system) to another system of Toll collection (such as a barrier/ramp system) is not considered a removal of Tolls. On or before each February 1, the Department must (i) review the financial condition of the Turnpike System and the Bonds in order to estimate whether the Revenues for the following fiscal year will be sufficient to comply with the Toll covenants; (ii) make a determination with respect thereto by resolution; (iii) file with the Board of Administration certified copies of such resolutions, together with a certificate of an Authorized Officer of the Department setting forth a reasonably detailed statement of the actual and estimated Revenues and other pertinent information for the year for which such determination was made. If the Department determines that the Revenues for the following fiscal year may not be 15

24 sufficient, it will forthwith cause the Traffic Engineers to make a study and to recommend a schedule of Tolls which will provide Revenues sufficient to comply with the Toll requirements in the following fiscal year and to restore any deficiency at the earliest practicable time, but not later than the next July 1. Failure to comply with the Toll covenant set forth above will not constitute a default under the Resolution if there is not a failure to pay principal and interest on the Bonds when due and (i) the Department complies with the provisions of the preceding paragraph; or (ii) the Traffic Engineers certify that a Toll schedule which will comply with such Toll covenant is impracticable at that time, and the Department establishes a schedule of Tolls recommended by the Traffic Engineers to comply as nearly as practicable with such Toll covenant. Toll Collection and Rate Adjustments Both the Resolution and State law require the Department to fix, adjust, charge and collect tolls on the Turnpike System sufficient to pay the costs of the Turnpike System. The Department follows the public notice requirements set forth in the Administrative Procedures Act (the "APA") when fixing or adjusting toll rates. The APA process results in the public notice occurring close to the time the toll rate is implemented for existing projects. For new projects, the Department is required by law to publish and adopt a proposed toll rate during the planning and project development phase. The Turnpike System uses several methods of toll collection and typically collects a higher toll rate on expansion projects. A barrier/ramp (coin) system is used on all of the existing Turnpike System, other than the segment of the Mainline between Boynton Beach and Kissimmee, which uses a ticket system. An electronic toll collection program has been implemented statewide which uses a patron transponder/account system, known as SunPass. Historical Revenue Total toll and concession revenues for the Turnpike System are summarized in the table below. As indicated in the table, total Turnpike System revenues increased from approximately $221 million in Fiscal Year 1995 to nearly $530 million in Fiscal Year This represents an annual compounded growth rate of approximately 10 percent. During the early 1990 s, almost all of the Turnpike System revenues were collected on the Mainline. However, with the diversification of the Turnpike System through the opening of expansion projects, the Mainline now accounts for approximately 75 percent of toll revenues. As expansion projects continue to be added to the system and their respective revenues ramp-up, the Turnpike Enterprise anticipates that expansion project revenues, as a percentage of the total system, will continue to gradually increase. Florida s Turnpike System Historical Revenue ($000) Southern Total Total Fiscal Sawgrass Seminole Veterans Connector Polk Suncoast Toll Concession Turnpike Year Mainline Expressway Expressway Expressway* Extension* Parkway* Parkway* Revenue Revenue System 1995 $183,597 $17,735 $ 6,505 $ 5,960 N/A N/A N/A $213,797 $ 6,726 $220, ,913 19,299 8,542 9,945 $ 25 N/A N/A 243,724 6, , ,818 22,018 10,721 11,469 1,455 N/A N/A 266,481 6, , ,188 23,860 12,243 12,690 1,751 N/A N/A 289,732 7, , ,613 26,896 14,272 13,891 2,051 $ 849 N/A 310,572 7, , ,073 29,955 16,032 14,891 2,413 7,016 N/A 340,380 7, , ,718 34,531 16,774 17,361 2,581 10,227 $2, ,304 8, , ,736 36,669 18,344 20,491 2,700 12,009 9, ,937 8, , ,444 38,832 23,281 22,645 3,035 13,662 12, ,461 8, , ,459 42,609 27,403 26,064 3,596 16,209 14, ,223 8, ,736 * These are expansion projects; revenue is reflected based on the opening of the respective project. Source: Turnpike System Fiscal Year 2004 Comprehensive Annual Financial Report and the 2004 audited financial statements. 16

25 In May 2001, the Department successfully completed the final phase of the statewide implementation of SunPass. SunPass is the electronic toll collection (ETC) system operated by the Turnpike Enterprise and is used on all Department owned and operated toll facilities. SunPass transponders are interoperable with other ETC systems in the State including the Orlando-Orange County Expressway Authority s E-Pass ETC system. SunPass provides Turnpike users who subscribe to the system with non-stop travel through the Turnpike toll plazas. Tolls are registered automatically, through the use of a transponder, after an account has been established with sufficient advance payment. Florida s Turnpike System Cumulative Revenues for the Six-Months Ended December 31 Fiscal Year 2005 vs. Fiscal Year 2004 Actual Revenue Actual Revenues ($000) Six Months Ended December 31, Increase (Decrease) in Actual Revenue for the Six Months Ended December 31, 2003 and 2004 Turnpike System Component FY 2004 FY 2005 Amount ($000) % Change Mainline $180,668 $201,308 $20, % Sawgrass Expressway 19,688 21,649 1, Seminole Expressway 12,839 14,504 1, Veterans Expressway 12,127 13,614 1, Southern Connector Extension 1,548 2, Polk Parkway 7,511 8, Suncoast Parkway 7,030 7, Total Toll Revenue $241,411 $269,013 $27, % Concession Revenue 4,364 3,858 (506) (11.6) Turnpike System Grand Total $245,775 $272,871 $27, % Source: Traffic Engineer s Annual Report for the Turnpike System for Fiscal Year 2004 and Unaudited Financial Statements for the six months ended December 31, 2004 (Fiscal Year 2005). In Fiscal Year 2005, between August 10, 2004 and September 24, 2004, the Governor issued four executive orders declaring states of emergency in Florida due to the threats from hurricanes Charley, Frances, Ivan and Jeanne. To aid with the evacuation and recovery efforts, tolls were suspended on the Turnpike System for approximately twenty-one days in total for the four hurricanes. The resulting revenue loss is estimated at approximately $32 million on the Turnpike System. As such, the Fiscal Year 2005 forecasts have been appropriately reduced for those amounts. The following table provides a summary of ETC revenues for the Turnpike System since ETC inception. As indicated in the table, SunPass revenues grew to 42 percent of the total Turnpike System toll revenue in Fiscal Year SunPass participation is projected to grow as ramp-up continues at the toll plazas that recently deployed SunPass, and as SunPass Challenge initiatives are implemented. The SunPass Challenge initiatives have been funded in the Work Program and call for operational improvements including increasing the number of SunPass only lanes, adding new capacity at select toll plazas and improving signage. In addition, the initiative calls for increased marketing efforts, refinements to the violation enforcement system (VES) and tolls infrastructure enhancements necessary to support the increased volume of SunPass transactions and accounts. (Remainder of page intentionally left blank) 17

26 Due to the March 7, 2004 (Fiscal Year 2004) toll rate increase for cash customers only on all Turnpike System facilities except for Polk Parkway and Suncoast Parkway, revenues for Fiscal Year 2005 increased since the first six months of Fiscal Year 2005 are at a higher toll rate than Fiscal Year The twenty-five percent increase, rounded to the quarter for toll collection efficiency, establishes a pricing preference for SunPass customers. As such, the ten percent volumebased SunPass discount was discontinued concurrent with the toll rate increase. Florida s Turnpike System Electronic Toll Collection (ETC) Fiscal Year 1997 through Fiscal Year 2005 (Since ETC Inception) Fiscal Year Total Toll Revenue ($000) Total ETC Revenue** ($000) Percentage ETC Revenue 1997 $266,481 $2, % ,732 4, ,572 8, ,380 31, ,304 58, , , , , , , Months* FY 2005 $269,013 $123, % * Fiscal Year 2005 represents unaudited revenue for the first six months (partial year) of Fiscal Year ** SunPass and E-Pass are included in Electronic Toll Collection (ETC) Revenue. E-Pass, under an agreement with the Orlando-Orange County Expressway Authority, was used on some Turnpike facilities until SunPass was fully implemented in Fiscal Year Source: Turnpike System Fiscal Year 2004 Comprehensive Annual Financial Report and Enterprise Toll Operations. Toll Rate Increases After the opening of Florida s Turnpike in 1957, tolls were increased in Under legislative direction to equalize toll rates on the Turnpike System, the Department implemented toll increases in 1989, 1991, 1993 and 1995 on various portions of the Turnpike Mainline. During this time traffic continued to increase along with Florida s increase in population, employment, commerce and tourism. The impact of the toll increases on traffic growth has been minimal. This impact is commonly referred to as "elasticity." The elasticity factor represents the relative decrease in traffic corresponding to a given increase in toll. The higher the factor, as an absolute value, the more apt a facility is to lose traffic, which can be due to diversions to competing facilities, changes in travel modes and consolidation of trips. The effect of such elasticity depends on the degree of competitiveness, in terms of parallel highways, their level of congestion, and the characteristics of the traffic stream (i.e., local drivers with knowledge of the alternative routes versus tourists with limited knowledge). On March 7, 2004, tolls were increased on the Mainline, Sawgrass Expressway, Seminole Expressway, Veterans Expressway and Southern Connector Extension. This toll rate increase was for cash customers only, at 25 percent rounded to the quarter. The toll for SunPass customers remained the same, effectively giving these customers a discount of 25 percent or more and contributing to an increase in SunPass participation levels. For example, the two-axle toll at the Golden Glades barrier plaza increased from $0.75 to $1.00, representing the 25 percent increase rounded to the quarter (i.e., effectively a 33 percent increase). However, SunPass customers at these ramps continue to pay a $0.75 toll. Additionally, some ramps did not increase due to per-mile constraints. For example, customers entering the HEFT from SR 836 do not pay a toll initially, but pay 25 cents if they exit one mile south (i.e., 25 cents-per-mile) at US 41. As such, tolls collected at this ramp were already significantly higher than the average rate of approximately seven cents-per-mile for cash 18

27 customers, and therefore, were not adjusted. The recently opened Polk Parkway and Suncoast Parkway expansion projects were not programmed with a toll rate increase in order to allow traffic to ramp-up on these facilities. Additionally, a 10 percent SunPass frequent-user discount had been in effect on all sections of the Turnpike since the implementation of SunPass. The discount was prompted by legislation directing the Department to perform a pilot project, as SunPass was implemented, offering at least a 10 percent discount to Turnpike commuters who used SunPass on the Turnpike. The Department determined that the pilot project discount would be offered as a 10 percent volume-based retroactive discount to all patrons, regardless of vehicle classification (i.e., number or axles), who paid tolls with SunPass 40 or more times a month per transponder. The discount was registered on the patron s transponder/account at the beginning of each calendar month for all transactions incurred during the previous month. Given the reduced toll rates for SunPass transactions as compared to cash transactions, beginning with the toll increase in March 2004, this 10 percent discount program was discontinued on all sections of the Turnpike System. The significant increase in revenue during Fiscal Year 2004 is attributable to the March 2004 toll increase. However, unlike previous toll increases, no significant decrease in traffic was observed and traffic transactions increased at a similar rate to Fiscal Year This minimal impact on traffic is due to cash customers having a choice to convert to SunPass, thereby avoiding a toll rate increase, as well as to the general lack of less congested alternatives. After the most recent toll increase in Fiscal Year 2004, no subsequent toll increase has been forecast or committed to for the future. However, as with previous toll increases implemented by the Turnpike, it is expected that future increases will be required in order to keep pace with inflation. Turnpike management therefore anticipates increasing tolls across the system every ten years, which would cause the next increase to occur in or about Fiscal Year Toll rate increases had been scheduled on all expansion projects in their 10 th and 15 th years after opening. Now, these increases are expected to be part of the aforementioned system-wide toll increases that occur every ten years. Although Fiscal Year 2014 does occur within the confines of the forecast included in Appendix A, no toll increase has been included in the forecast in order to present a conservative estimate of future toll revenues. Existing Turnpike System THE TURNPIKE SYSTEM The Turnpike System consists of several components. The principal one, the 320-mile Mainline, extends in a north-south direction from I-75 at Wildwood in Sumter County to Florida City in southern Miami-Dade County, with an east-west segment intersecting at Orlando in Orange County. The Mainline consists of 5 different sub-components: the Homestead Extension of Florida s Turnpike (HEFT), the Southern Coin System, the Ticket System, the Northern Coin System and the Bee Line West Expressway. In addition to the Mainline, the Turnpike operates the 18-mile Seminole Expressway in Seminole County, the 15- mile Veterans Expressway in Hillsborough County, the 6-mile Southern Connector Extension in Orange and Osceola Counties, the 25-mile Polk Parkway in Polk County, the 42-mile Suncoast Parkway in Hillsborough, Pasco and Hernando counties and the 23-mile Sawgrass Expressway in Broward County. Recently Completed Projects: The Turnpike recently completed the construction of safety improvements on the HEFT, construction of noise walls on the Mainline in Palm Beach County, and the widening of the Sawgrass Expressway from Sunrise Boulevard to Atlantic Avenue and the CR 470 Interchange which opened in January These projects were funded from the 2003C Bond issue. Projects Currently Under Construction. Construction of the first 6-mile section of the Western Beltway Part C project began in May 2004, with construction of the last 5-mile section beginning in November Projects funded from the 2003C Bonds that are currently under construction include: the SR 710 Interchange; replacement of a Mainline bridge in northern Miami-Dade County; widening of the Mainline in Palm Beach County; construction of safety improvements to State Road 60 and the Veterans Expressway; installation of equipment and improvements for the Traffic Management Center; and, SunPass only lanes at various locations on the Mainline. 19

28 Ongoing Maintenance and Other Improvements The Turnpike Enterprise continues to maintain the Turnpike System at the high standards established by the Department, allowing for future expansion and capacity improvements commensurate with increases in population, tourism and economic development. See "TURNPIKE SYSTEM FINANCIAL DATA Discussion of Results of Operation and Management Analysis" below. With the completion of the Western Beltway scheduled for December 2006, the Turnpike will have completed the expansion program established by the legislature in the early 1990 s. The Turnpike s 5-year work program will concentrate on system-wide improvements to provide additional capacity on and access to the Turnpike System. Significant improvements to be undertaken during the upcoming five-year work program cycle consist of: an aggressive widening program that will add 161 lane-miles to the Mainline of which 69 lane-miles are in South Florida, 28 lane-miles to the Sawgrass Expressway, 35 lane miles to the HEFT and 16 lane-miles to the Beeline Expressway; completing four new interchanges, one of which is in South Florida; completing three interchange modifications, one of which is in South Florida; and completing the SunPass Challenge projects that will increase to 200 the number of SunPass dedicated lanes available to customers. The Turnpike will also resurface over 465 lane-miles of pavement and invest in Intelligent Transportation System (ITS) technology to expand communications and traffic management capabilities and to improve the flow of traffic. These improvements are designed to help meet the transportation needs of the State and keep pace with demand in order to sustain a satisfactory level of annual revenue growth. Project Development Process The Florida Turnpike Enterprise Law requires that proposed Turnpike Projects must be developed in accordance with the Florida Transportation Plan. Updated annually, the Florida Transportation Plan defines the State s transportation goals and objectives to be accomplished over a period of at least 20 years. Turnpike Projects must also conform to the Department s tentative work program guidelines. The work program lists the Transportation projects planned for each of the next five fiscal years and, after review by the Florida Transportation Commission, forms the basis for the governor s budget recommendation to the Legislature. In developing the tentative work program, the Department is required to provide turnpike toll and bond financed projects such that the ratio of projects in Miami-Dade, Broward and Palm Beach Counties to the total is not less than 90% of the ratio of attributable user net toll collections within those counties to the total attributable user net toll collections of the Turnpike System. Proposed Turnpike projects must meet a statutory test for economic feasibility which requires the estimated net revenues of the project to be sufficient to pay at least (i) 50% of the debt service on any bonds issued to finance such project by the end of the 12 th year of operation and (ii) 100% of the debt service on such bonds by the end of the 22 nd year of operation. Chapter , Laws of Florida, modified the period for which the test of economic feasibility applies from (i) 5 years and (ii) 15 years to the current (i) 12 years and (ii) 22 years. Although the test was modified so that additional transportation projects could be constructed, the test remains designed to guard against a project being unable to support its own debt and is applied only to the portion of the project cost funded by bond proceeds. The feasibility test is not applied to new interchanges, which are subjected to established evaluation processes and strict needs tests. The Florida Department of Environmental Protection reviews the environmental feasibility of proposed Turnpike Projects prior to their inclusion in the tentative work program. Projects which impact a local transportation system must be included in the transportation improvement plan of the affected metropolitan planning organization or county, as applicable. Insurance on Turnpike System The Turnpike System has obtained comprehensive insurance coverage from a combination of the Florida Property Insurance Trust Fund and the Department s Bridge and Turnpike Insurance Program. Primary insurance with the Florida Property Insurance Trust Fund is provided through the Florida Department of Financial Services, Division of Insurance, self-insurance program which is offered to all state agencies and includes a private coinsurance rider to protect the Florida Property Insurance Trust Fund against loss from major perils. Insurance under the Florida Property Fund is provided to 20

29 cover physical loss to buildings and contents as a result of fire, flood, lightning, windstorm or hail, explosion and smoke. The Florida Property Insurance Trust Fund provides a lower deductible than is provided with the Department s Bridge and Turnpike Insurance Program. Additional insurance with the Department s Bridge and Turnpike Insurance Program is provided by a Florida Department of Management Services state contract with insurance brokers that defines perils, hazards, and coverage for several toll road systems in Florida. Coverage is extended to major bridges, overpasses and underpasses and use and occupancy on system operations. Use and occupancy (business interruption) coverage is subject to a seven day waiting period and must be directly related to the physical damage that creates the inability to collect tolls. The waiving of tolls for evacuation and recovery efforts is not covered under the policy. As a component of the Department, the Turnpike System participates in the Florida Casualty Insurance Risk Management Trust Fund, a self-insurance fund which provides insurance for State employee workers compensation, general liability, fleet automotive liability, federal civil rights actions, and court-awarded attorney s fees. In addition, employees are covered by the State s Employee Health Insurance Fund. The Resolution requires that insurance proceeds, other than use and occupancy insurance, be used to restore or replace damaged facilities, to redeem Bonds, or to reimburse the Department if it has advanced funds for restoration or replacement. Proceeds of use and occupancy insurance must be deposited in the Revenue Fund. See Appendix E, the Original Resolution. Competing Facilities In addition to the Turnpike projects, other transportation improvements have the potential to affect future Turnpike traffic to varying degrees. For example, I-95 has been progressively widened in Miami-Dade, Broward and Palm Beach Counties, to ease its congestion. Although most of this widening has been completed, I-95 remains congested. The next sections to be widened on I-95 are primarily in Palm Beach and St. Lucie Counties. Some of these widenings are underway, while others are planned for Fiscal Year 2006 and beyond. The Tri-County Commuter Rail system between Miami and West Palm Beach, which began operation in January 1989, provides a public transportation alternative to the Turnpike and I-95 in South Florida. A high-speed rail system between Tampa Bay, Orlando and Miami was proposed in January 1999; however, Governor Bush eliminated funding for the project. In November 2000, a constitutional amendment for high-speed rail was adopted directing the State to proceed with the development of a high-speed rail system linking Florida s five largest urban areas. In July 2001, the Florida Legislature created the Florida High Speed Rail Authority (FHSRA) to implement the system. However, in November 2004, the issue was placed back on the ballot in the form of a new constitutional amendment to repeal the one passed in The new amendment was adopted and the high-speed rail mandate was repealed. Although a high-speed rail system is no longer required by law, the FHSRA is discussing the funding and construction of such a system with the private sector. The FHSRA conducted a study in November 2002 to examine the demand for ridership of a new high-speed rail between Tampa and Orlando International Airport, which would most likely be the first segment of any system developed by the private sector. The study considered two proposed alignments, one along the Bee Line West Expressway route and the other along the Central Florida GreeneWay (SR 417). If a high-speed rail line is constructed along either of these routes, the maximum potential reduction in toll revenues is approximately $1.0 million annually. This amount is relatively immaterial compared to the total revenues on the Turnpike System as a whole (less than two-tenths of one percent). However, the Turnpike will continue to monitor the development of this project and its potential impact to the Turnpike. Currently, the revenue forecast does not reflect this possible reduction in toll revenue. 21

30 TURNPIKE SYSTEM FINANCIAL DATA The following tables and their components should be read in conjunction with Appendix B, the audited financial statements of the Turnpike System and Appendix C, the unaudited financial statements of the Turnpike System for the sixmonths ended December 31, Historical Summary of Balance Sheet/Net Asset Data The following schedule shows balance sheet information for the Turnpike System. This schedule was derived from the combined financial statements included in the annual financial statements of the Turnpike System as audited for June 30 of each fiscal year shown. The Turnpike Enterprise implemented Governmental Accounting Standards Board (GASB) Statement 34 for the Turnpike System in Fiscal Year 2002 and has not restated Fiscal Years 1999 and 2000 for such implementation. The Sawgrass Expressway was included in the combined financial statements for these years although it did not become part of the Turnpike System until Fiscal Year (Remainder of page intentionally left blank) 22

31 Historical Summary of Balance Sheet Data Turnpike System (In Thousands) As of June 30, Assets * Current Assets: Cash and investments $ 252,021 $ 258,131 Receivables 6,114 12,003 Prepaid expenses Total Current Assets 258, ,627 Restricted Assets: Cash and investments 333, ,527 Fixed Assets 3,227,986 3,593,508 Deferred Charges, net 13,682 13,169 Advances to Other Governments Total Assets $3,833,394 $4,163,962 Liabilities and Fund Equity Current Liabilities: Construction contracts and retainage $ 24,790 $ 35,607 Due to Department 21,515 24,337 Due to Other Governments and funds Deposits payable Deferred revenue Bonds payable 34,705 40,730 Total Current Liabilities 81, ,278 Long-Term Portion of Bonds Payable, net 1,713,617 1,785,227 Due to Other Governments 5,088 4,437 Due to Right-of-Way Program 26,948 27,058 Advances Payable-Department 27,784 34,998 Total Liabilities 1,855,052 1,952,998 Fund Equity Contributed capital 567, ,204 Retained earnings: Reserved 16,820 13,691 Unreserved 1,394,273 1,631,069 Total Retained Earnings 1,411,093 1,644,760 Total Fund Equity 1,978,342 2,210,964 Total Liabilities & Fund Equity $3,833,394 $4,163,962 * Florida s Turnpike System adopted GASB Statement 33 relating to the accounting for contributions for capital projects in Fiscal Year 2001 and restated Fiscal Year 2000 accordingly. Source: Florida s Turnpike System financial statements as audited for Fiscal Years 1999 and In Fiscal Year 2002, the Turnpike Enterprise implemented GASB Statement 34 for the Turnpike System and also restated Fiscal Year 2001 financial statements for comparability. The following schedule summarizes statement of net assets information as reflected in the audited financial statements (the Fiscal Year 2003 and 2004 financial statements are included in their entirety as Appendix B.) 23

32 Historical Summary of Net Asset Data Turnpike System (In Thousands) As of As of June 30, Dec. 31, 2004 Assets (Unaudited) Current Assets: Cash and Cash Equivalents $246,215 $294,156 $277,825 $274,132 $561,187 Investments 23,601-32,669 27,439 28,978 Receivables, net Accounts 3,844 4,544 2,907 1,710 1,497 Interest 2,978 1,140 1,733 1,001 2,592 Due from Other Governments 5,206 6,136 4, ,864 Prepaid expenses Total current assets 282, , , , ,400 Restricted Non-Current Assets: Restricted cash and cash equivalents 225, ,124 80, , ,100 Restricted Investments 1,278-4, ,086 Total restricted assets 226, ,124 85, , ,186 Non Depreciable Capital Assets: Land 668, , , , ,093 Infrastructure-Highway System and Improvements 2,303,636 2,454,917 2,614,133 2,792,838 2,894,058 Construction in progress 801, , , ,199 1,003,904 Total non-depreciable capital assets 3,773,337 4,042,691 4,283,282 4,522,465 4,667,055 Depreciable Capital Assets: Building and improvements 167, , , , ,519 Furniture and equipment 41,608 50,011 55,176 61,248 63,422 Less: accumulated depreciation (61,799) (74,224) (86,686) (100,891) (108,960) Total depreciable capital assets 147, , , , ,981 Deferred Charges, net 11,962 10,782 9,574 12,792 14,664 Other Assets ,912 9,282 Advances to Other Governments Total non-current assets 4,158,999 4,333,423 4,531,098 5,200,119 5,317,168 Total Assets 4,441,388 4,639,788 4,850,984 5,504,919 5,915,568 Liabilities and Net Assets Liabilities: Current Liabilities: Construction contracts and retainage payable 22,102 21,489 17,454 32,440 23,984 Current portion of bonds payable 49,955 52,330 54,415 60,165 62,470 Due to Department of Transportation 52,505 46, ,064 37,686 29,139 Due to other governments Deposits payable Interest payable ,243 Deferred revenue Total current liabilities 125, , , , ,154 Non-Current Liabilities: Long-Term Portion of Bonds Payable, net 1,684,987 1,633,796 1,579,740 2,042,154 2,320,711 Due to Other Governments 6,566 5,621 2, Due to Right-of-Way Acquisition and Bridge Construction Trust Fund 23,358 16,658 9,958 3,258 - Advances Payable to Department of Transportation 163, ,528 92,996 98, ,116 Deferred revenue from other governments ,520 9,282 Total non-current liabilities 1,878,329 1,830,603 1,685,112 2,154,624 2,442,318 Total Liabilities 2,004,050 1,951,874 1,908,234 2,286,127 2,560,472 Commitments and Contingencies Net Assets: Invested in capital assets, net of related debt 2,201,564 2,455,444 2,687,958 2,971,929 3,028,430 Restricted for debt service 1, , ,105 Restricted for renewal and replacement 11,028 2,667 18,513 24,674 21,840 Restricted for land acquisitions 18, Unrestricted 204, , , , ,721 Total Net Assets $2,437,338 $2,687,914 $2,942,750 $3,218,792 $3,355,096 Source: For purposes of comparison, Florida s Turnpike System financial statements for Fiscal Years 2001 and 2002 are presented in the same format as the Fiscal Year 2003 and 2004 audited financial statement numbers. Amounts as of December 31, 2004 are from unaudited financial statements prepared by the Enterprise. 24

33 Historical Summary of Revenues, Expenses and Changes in Retained Earnings/Net Assets The following schedule shows the revenues, expenses and changes in retained earnings for the Turnpike System. These schedules were derived from the combined financial statements included in the annual financial statements of the Turnpike System as audited for June 30 of each year shown. The Turnpike Enterprise implemented GASB Statement 34 for the Turnpike System in Fiscal Year 2002 and has not restated Fiscal Years 1999 and 2000 for such implementation. The Sawgrass Expressway was included in the combined financial statements for these years although it did not become part of the Turnpike System until Fiscal Year Historical Summary of Revenues, Expenses and Changes in Retained Earnings Turnpike System (In Thousands) As of June 30, * Operating Revenues: Toll facilities $310,572 $340,380 Concessions 7,534 7,597 Miscellaneous 1,445 2,601 Total Operating Revenues 319, ,578 Operating Expenses: Operations and maintenance 91, ,812 Renewals and replacements 23,235 18,723 Depreciation 6,174 7,291 Total Operating Expenses 121, ,826 Operating Income 198, ,752 Nonoperating Revenues (Expenses): Interest income 15,409 16,489 Interest expense (53,824) (56,090) Other, net (570) 417 Total Nonoperating Expenses, net (38,985) (39,184) Contributions for Capital Projects - 52,054 Net Income 159, ,622 Depreciation on Contributed Assets 1,045 1,045 Retained Earnings: Beginning of year 1,250,757 1,411,093 End of year $1,411,093 $1,644,760 * Florida s Turnpike System adopted GASB Statement 33 relating to the accounting for contributions for capital projects in Fiscal Year 2001 and restated Fiscal Year 2000 accordingly. Source: Florida s Turnpike System financial statements as audited for Fiscal Years 1999 and

34 In Fiscal Year 2002, the Turnpike Enterprise implemented GASB Statement 34 for the Turnpike System and also restated Fiscal Year 2001 financial statements for comparability. The following schedule summarizes revenues, expenses and changes in net assets information; the audited financial statements for Fiscal Years 2003 and 2004 are included in their entirety as Appendix B hereto. Historical Summary of Revenues, Expenses and Changes in Net Assets Turnpike System (In Thousands) Six-Month Period Ended Fiscal Year Ended June 30 Dec. 31, (Unaudited) Operating Revenues: Toll facilities $ 373,304 $410,937 $450,461 $521,223 $269,013 Concessions 8,274 8,621 8,564 8,513 3,858 Other 2,636 2,339 2,976 5,123 2,051 Total Operating Revenues 384, , , , ,992 Operating Expenses: Operations and maintenance 115, , , ,332 73,760 Renewals and replacements 20,963 40,746 39,776 51,627 34,229 Depreciation 8,101 12,795 13,166 15,033 8,268 Total Operating Expenses 144, , , , ,257 Operating Income 239, , , , ,665 Nonoperating Revenues (Expenses): Interest income 17,098 16,432 19,703 20,161 13,175 Interest expense (62,561) (55,180) (47,720) (61,736) (29,996) Other, net (669) (964) (882) (2,538) 266 Total Nonoperating Expenses, net (46,132) (39,712) (28,899) (44,113) (16,555) Income Before Contributions and Special Items 193, , , , ,110 Contributions for Capital Projects 61,228 42,953 5,660 17,550 1,823 Special Loss on Refunding of Bonds 28, Special Contributions to Other Governments (15,262) (7,629) Increase in Net Assets 226, , , , ,304 Net Assets: Beginning of year 2,210,964 2,437,338 2,687,914 2,942,750 3,218,792 End of year $2,437,338 $2,687,914 $2,942,750 $3,218,792 $3,355,096 Source: Florida s Turnpike System financial statements as audited for Fiscal Years 2001 through 2004 and Unaudited Financial Statements for the six-months ended December 31,

35 Discussion of Results of Operation and Management Analysis Operating revenues for the period 1999 through 2003 increased from $319,551,000 to $462,001,000 representing an average annual growth of approximately 9%. However, in Fiscal Year 2004, operating revenues grew to $534,859,000, a 15.8% increase over the revenues earned in Fiscal Year This growth in revenue is attributable to three factors: (1) continued strong growth in the system; (2) a 25% toll rate increase for cash customers that was implemented March 7, 2004; and, (3) in conjunction with the toll rate increase, the elimination of the SunPass 10% frequent user discount. Revenues for the first six months of Fiscal Year 2005 are 11% above those earned for the same period in Fiscal Year The Turnpike continues to invest in the system in order to keep pace with demand. In Fiscal Year 2004, 10 additional lane-miles were added to the Sawgrass Expressway. The Turnpike has also completed the addition of 16 lane- miles on the HEFT. These improvements, and the addition of new interchanges such as the one at SR 80 on the Mainline in Palm Beach County, allow the Turnpike to keep pace with demand and generate a growing revenue base. Fiscal Year 2004 was also marked by strong growth in the use of the SunPass Electronic Toll Collection system. With the ability to process nearly four times the volume of vehicles through a dedicated lane as compared to an automatic or manual lane, SunPass has allowed for increased processing throughput in the barrier toll plazas resulting in significant time savings for Turnpike patrons. For the fiscal year ended June 30, 2004, SunPass accounted for 42% of toll revenues generated on the Turnpike System. The number of SunPass transponders in circulation has risen from 7,500 in April 1999 to over 1,450,000 in June With over 1,800,000 transponders is circulation as of February 2005, SunPass transactions now account for 54.5% of toll transactions. The Turnpike has embarked on further investments in SunPass lanes that will double the number of dedicated SunPass lanes to 200. As of June 30, 2004, an additional 37 SunPass dedicated lanes were in operation. The SunPass Challenge also set as a goal a participation rate of 50% of system transactions to be generated by SunPass by December The Turnpike reached this milestone in April 2004, eight months ahead of schedule. Operations and Maintenance expenses increased by 14.8% over those incurred in Fiscal Year 2003, which is greater than the average of 10% for the preceding 5-year period. There are several factors that contribute to this increase. The indirect costs allocated by the Department rose by 53% from $12.9 million in Fiscal Year 2003 to $19.7 million in Fiscal Year Also, the net cost of transponders increased from $1.5 million in Fiscal Year 2003 to $6.8 million in Fiscal Year A significant quantity of transponders was received prior to year-end to ensure adequate supply as the toll rate increase was implemented. As a result, over 400,000 transponders were in inventory at June 30, The revenue from the sale of these transponders will be recognized in future months helping to offset the cost of any future purchases. Due to the increase in SunPass participation, the SunPass customer base increased from 900,000 accounts in Fiscal Year 2003 to over 1.4 million in Fiscal Year The cost of staffing the SunPass Service Center increased along with the credit card fees associated with the automatic replenishment of customer accounts. Other costs such as toll equipment repair, Florida Highway Patrol, and privatized toll collect contracts increased in relation to the increase in lanes and traffic. For the first six months of FY 2005, Operations and Maintenance costs are tracking closely to the projection for the fiscal year. The Turnpike s infrastructure remains in excellent condition. The State Maintenance Engineer for the Department separately evaluates the maintenance condition of Department facilities. A rating of 80 is considered satisfactory with a rating of 100 being the highest possible. In Fiscal Year 2004, the Department s rating for the Turnpike was 92, which was the highest in the Department. The Turnpike s maintenance rating has been at 90 or above every year since Impact from Hurricanes Between August 10, 2004 and September 24, 2004 (Fiscal Year 2005), the Governor issued four executive orders declaring states of emergency in Florida due to the threats from hurricanes Charley, Frances, Ivan and Jeanne. To aid with the evacuation and recovery efforts, tolls were suspended on the Turnpike System for approximately 21 days in total for the four hurricanes. The resulting revenue loss is estimated at approximately $32 million on the Turnpike System. The forecasts contained herein have accordingly been reduced for those amounts. This loss will not affect the Turnpike s ability to deliver its work program since the new revenue forecast exceeds the previous estimate even with the adjustment for hurricane losses. In fact, the Turnpike will be able to add projects to its work program because the new forecast significantly increases funding levels for the next five years over those previously estimated. 27

36 In addition, the cost of physical damage to the Turnpike System is estimated at $8.5 million as a result of damage to signs, fencing, traffic control devices, toll plaza buildings and debris removal. The Turnpike is eligible to apply to the Federal Highway Administration (FHWA) for recovery of these damages. Generally, emergency repairs associated with restoring traffic, minimizing damage and protecting the facility is 100% recoverable within the first 180 days of loss. Permanent repairs to restore the facility to pre-disaster condition is 80-90% recoverable. For those losses that are not recovered from the FHWA, the Turnpike will look to its insurance coverage; for those costs not covered by insurance and for insurance deductibles, the Turnpike will attempt to recover eligible costs from the Federal Emergency Management Agency (FEMA). Historical Summary of Revenues, Expenses and Debt Service Coverage The following schedule summarizes the operating revenue and expense for the Turnpike System. For comparative purposes, debt service coverage is shown based both on Net Revenue, in accordance with the flow of funds pursuant to the Resolution, and on Gross Revenue, consistent with the Department s Covenant to Pay Costs of Operation and Maintenance. See "FLOW OF FUNDS" above. Historical Summary of Revenue and Expense and Debt Service Coverage Turnpike System (In Thousands) Fiscal Year Ended June 30, Gross Revenue 1 Tolls $283,676 $310,425 $373,304 $410,937 $450,461 $521,223 Concession 7,534 7,597 8,274 8,621 8,564 8,513 Miscellaneous Revenue 777 2,601 2,636 2,339 2,976 5,123 Total 291, , , , , ,859 Operations and Maintenance Expenses 1 (87,203) (99,850) (115,778) (121,021) (130,984) (150,332) Net Revenue $204,784 $220,773 $268,436 $300,876 $331,017 $384,527 Annual Debt Service $102,544 $116,594 $131,017 $142,610 $138,467 $165,398 Net Revenue 2 Annual Debt Service Coverage 2.00x 1.89x 2.05x 2.11x 2.39x 2.32x Gross Revenue 3 Annual Debt Service Coverage 2.85x 2.75x 2.93x 2.96x 3.34x 3.23x Maximum Annual Debt Service $120,464 $128,510 $142,610 $142,610 $156,695 $167,228 Net Revenue 2 Max Annual Debt Service Coverage 1.70x 1.72x 1.88x 2.11x 2.11x 2.30x Gross Revenue 3 Max Annual Debt Service Coverage 2.42x 2.49x 2.69x 2.96x 2.95x 3.20x 1 Revenues and Operations and Maintenance Expense for Fiscal Years 1999 through 2000 exclude Sawgrass Expressway operations which were not included in the pledged revenues of the system until the Sawgrass Expressway was acquired by the Turnpike System in Fiscal Year After payment of Cost of Operation and Cost of Maintenance, as provided in the Resolution. 3 In accordance with the Department s Covenant to pay costs of operation and maintenance from State Transportation Trust Fund. 28

37 Projected Revenue, Expense and Debt Service Coverage The following tables of projected revenue, expense and debt service coverage were prepared by the Department for internal management purposes and not with a view towards complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. To the best of the Department s knowledge and belief, this prospective financial information was prepared on a reasonable basis and reflects the best currently available estimates and judgments. Projections are statements of opinion and are subject to future events which may cause the actual results to differ materially from those set forth herein. Undue reliance should not be placed on these projections. Neither the Turnpike System s independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the projected financial information contained in these tables, nor have they expressed any opinion or form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with the projected financial information. Forecast Turnpike System Net Revenues (In Thousands) Fiscal Gross Revenue 1 Year Tolls Concession Total Operating Expenses 2 Net Revenue 2005 $552,485 $7,491 $559,976 $148,270 $411, ,025 7, , , , ,132 7, , , , ,478 8, , , , ,111 8, , , , ,500 8, , , , ,051 8, , , , ,890 9, , , , ,829 9, , , , ,462 9, , , , ,735 9, , , ,912 1 Projected revenues are as shown in Appendix A, the Traffic Engineer s Letter. No assurance can be given that there will not be material 2 differences between such projections and actual results. Operating Expense projections provided by the Enterprise. (Remainder of page intentionally left blank) 29

38 Net Revenue projections for the Turnpike System in the following table are based upon the projections for revenue and operation and maintenance expense. For comparative purposes, Debt Service Coverage is shown based both on Net Revenue, in accordance with the flow of funds pursuant to the Resolution, and on Gross Revenue consistent with the Department s Covenant to Pay Costs of Operation and Maintenance. See "FLOW OF FUNDS" above. Projected Revenue, Expense and Debt Service Coverage Turnpike System (In Thousands) Fiscal Years Ending June 30, Gross Revenue 1 Tolls $552,485 $609,025 $633,132 $655,478 $681,111 Concession 7,491 7,740 7,996 8,260 8,466 Total 559, , , , ,577 Operations and Maintenance Expenses 2 148, , , , ,751 Net Revenue $411,706 $465,150 $479,684 $496,361 $515,826 3,4 Annual Debt Service $173,109 $158,671 $158,683 $158,702 $158,715 Net Revenue 5 Annual Debt Service Coverage 2.38x 2.93x 3.02x 3.13x 3.25x Gross Revenue 6 Annual Debt Service Coverage 3.23x 3.89x 4.04x 4.18x 4.34x Maximum Annual Debt Service 7 $173,109 $158,839 $158,839 $158,839 $158,839 Net Revenue 5 Max Annual Debt Service Coverage 2.38x 2.93x 3.02x 3.12x 3.25x Gross Revenue 6 Max Annual Debt Service Coverage 3.23x 3.88x 4.04x 4.18x 4.34x 1 The revenue projections are as shown in Appendix A, the Traffic Engineer s Letter. No assurance can be given that there will not be material differences between such projections and actual results. 2 Operating Expense projections provided in Appendix A, the Traffic Engineer s Letter. 3 Annual Debt Service for Fiscal Year 2005 Annual Debt Service is net of $1,242,860 of accrued interest from the sale of the 2004A Bonds and $498,788 of accrued interest from the sale of the 2005A Bonds. 4 Annual debt service for Fiscal Years 2006 through 2009 is shown net of the Series 1995 debt service payment which has been provided for in an escrow account and the sinking fund. The Series 1995 Bonds maturing on and after July 1, 2006 will be redeemed on July 1, After payment of Cost of Operation and Cost of Maintenance, as provided in the Resolution. 6 In accordance with the Department s Covenant to pay costs of operation and maintenance from State Transportation Trust Fund. 7 Maximum Annual Debt Service occurs in Fiscal Year The Department does not generally publish the business plan or strategies for the Turnpike System or make external forecasts of its anticipated financial position or results of operations. Accordingly, the Department does not intend to update or otherwise revise the prospective financial information to reflect circumstances occurring after the date hereof. (Remainder of page intentionally left blank) 30

39 SCHEDULE OF DEBT SERVICE The table below shows the debt service on the Outstanding Bonds subsequent to the refunding to be accomplished with a portion of the proceeds of the 2005A Bonds, the debt service on the 2005A Bonds and the total debt service. Payments due on July 1 are deemed to accrue in the preceding fiscal year. Outstanding Fiscal Year Bonds 2005A Bonds Debt Service Total Ending June 30 Debt Service 1 Principal Interest Total Debt Service 2005 $173,925,660 - $ 924,606 $ 924,606 $ 174,850, ,926,704 $ 365,000 4,379,600 4,744, ,671, ,941, ,000 4,366,825 4,741, ,683, ,958, ,000 4,353,700 4,743, ,702, ,972, ,000 4,342,000 4,742, ,714, ,094, ,000 4,330,000 4,745, ,839, ,183,774 3,160,000 4,316,513 7,476, ,660, ,094,363 3,270,000 4,205,913 7,475, ,570, ,103,719 3,400,000 4,075,113 7,475, ,578, ,107,463 3,520,000 3,960,363 7,480, ,587, ,003,331 3,640,000 3,837,163 7,477, ,480, ,081,144 3,825,000 3,655,163 7,480, ,561, ,156,769 4,015,000 3,463,913 7,478, ,635, ,276,444 4,210,000 3,263,163 7,473, ,749, ,285,031 4,425,000 3,052,663 7,477, ,762, ,959,631 4,645,000 2,831,413 7,476, ,436, ,104,494 4,880,000 2,599,163 7,479, ,583, ,274,144 5,120,000 2,355,163 7,475, ,749, ,016,781 5,375,000 2,099,163 7,474, ,490, ,117,675 5,605,000 1,870,725 7,475, ,593, ,217,906 5,885,000 1,590,475 7,475, ,693, ,281,194 6,180,000 1,296,225 7,476,225 77,757, ,276,513 6,490, ,225 7,477,225 77,753, ,317,863 6,815, ,725 7,477,725 47,795, ,264,475 7,155, ,975 7,476,975 40,741, ,268, ,268, ,373, ,373, ,372, ,372, ,373, ,373, ,524, ,524,650 $3,301,854,573 $93,560,000 $73,140,944 $166,700,944 $3,468,555,516 1 Outstanding debt service for the outstanding previously issued 1995A through 2004A Bonds net of Series 1995A Bonds maturing on or after July 1, 2006 which will be called for redemption on July 1, 2005 from funds being held in escrow. Note: Numbers may not add due to rounding. 31

40 Bonds Legal Investment for Fiduciaries PROVISIONS OF STATE LAW The State Bond Act provides that all bonds issued by the Division of Bond Finance are legal investments for state, county, municipal or other public funds, and for banks, savings banks, insurance companies, executors, administrators, trustees, and all other fiduciaries and also are securities eligible as collateral deposits for all state, county, municipal, or other public funds. Negotiability The 2005A Bonds will have all the qualities and incidents of negotiable instruments under the Uniform Commercial Code - Investment Securities Law of the State. General TAX MATTERS The Internal Revenue Code of 1986, as amended (the "Code"), includes requirements which the Division of Bond Finance, the Board of Administration and the Department must continue to meet after the issuance of the 2005A Bonds in order that interest on the 2005A Bonds not be included in gross income for federal income tax purposes. The failure by the Division of Bond Finance, the Board of Administration and the Department to meet these requirements may cause interest on the 2005A Bonds to be included in gross income for federal income tax purposes retroactive to their date of issuance. The Division of Bond Finance, the Board of Administration and the Department have covenanted in the Resolution to comply with the requirements of the Code in order to maintain the exclusion of interest on the 2005A Bonds from gross income for federal income tax purposes. In the opinion of Bond Counsel, assuming continuing compliance by the Division of Bond Finance, the Board of Administration and the Department with the tax covenant referred to above, under existing statutes, regulations, rulings and court decisions interest on the 2005A Bonds is excludible from gross income for federal income tax purposes. Interest on the 2005A Bonds is not an item of preference for purposes of the alternative minimum tax imposed on individuals and corporations; however, interest on the 2005A Bonds is taken into account in determining adjusted current earnings for purposes of computing the alternative minimum tax imposed on corporations. Bond Counsel is further of the opinion that the 2005A Bonds and the interest thereon are exempt from taxation under the laws of the State of Florida, except as to estate taxes and taxes imposed by Chapter 220, Florida Statutes, on interest, income or profits on debt obligations owned by corporations as defined therein. Original Issue Premium and Discount The 2005A Bonds maturing on July 1 in the years 2006 through 2012 and 2015 (the Noncallable Premium Bonds ) and the 2005A Bonds maturing on July 1 in the years 2016 through 2022 and 2024 through 2028 (the Callable Premium Bonds ) were sold at a price in excess of the amount payable at maturity in the case of the Noncallable Premium Bonds or their earlier call date in the case of the Callable Premium Bonds. Under the Code, the difference between the amount payable at maturity of the Noncallable Premium Bonds and the tax basis to the purchaser and the difference between the amount payable at the call date of the Callable Premium Bonds that minimizes the yield to a purchaser of a Callable Premium Bond and the tax basis to the purchaser (other than a purchaser who holds a Noncallable or Callable Premium Bond as inventory, stock in trade or for sale to customers in the ordinary course of business) is bond premium. Bond premium is amortized for federal income tax purposes over the term of a Noncallable Premium Bond and over the period to the call date of a Callable Premium Bond that minimizes the yield to the purchaser of the Callable Premium Bond. A purchaser of a Noncallable or Callable Premium Bond is required to decrease his adjusted basis in the Premium Bond by the amount of amortizable bond premium attributable to each taxable year he holds the Premium Bond. The amount of amortizable bond premium attributable to each taxable year is determined at a constant interest rate compounded actuarially. The amortizable bond premium attributable to a taxable year is not deductible for federal income tax purposes. Purchasers of the Noncallable or Callable Premium Bonds should consult their own tax advisors with respect to the precise 32

41 determination for federal income tax purposes of the treatment of bond premium upon sale, redemption or other disposition of Noncallable or Callable Premium Bonds and with respect to the state and local consequences of owning and disposing of Noncallable or Callable Premium Bonds. Under the Code, the difference between the principal amount of the 2005A Bonds maturing July 1 in the years 2013, 2014, 2023 and 2029 (the "Discount Bonds") and the initial offering price to the public, excluding bond houses and brokers, at which price a substantial amount of such Discount Bonds of the same maturity was sold constitutes original issue discount. Original issue discount represents interest which is excluded from gross income; however, such interest is taken into account for purposes of determining the alternative minimum tax on corporations. Original issue discount will accrue over the term of a Discount Bond at a constant interest rate compounded actuarially. A purchaser who acquires a Discount Bond in the initial offering at a price equal to the initial offering price thereof as set forth on the cover page of the Official Statement for the Bonds will be treated as receiving an amount of interest excludible from gross income equal to the original issue discount accruing during the period he holds the Discount Bond, and will increase his adjusted basis in such Discount Bond by the amount of such accruing discount for purposes of determining taxable gain or loss on the sale or other disposition of such Discount Bond. The federal income tax consequences of the purchase, ownership and redemption, sale or other disposition of Discount Bonds, which are not purchased in the initial offering at the initial offering price may be determined according to rules which differ from those described above. Owners of Discount Bonds should consult their own tax advisors with respect to the precise determination for federal income tax purposes of interest accrued upon sale, redemption or other disposition of Discount Bonds and with respect to the state and local tax consequences of owning and disposing of Discount Bonds. Except as described herein, Bond Counsel will express no opinion regarding the federal income tax consequences resulting from the ownership of, receipt or accrual of interest on, or disposition of the Series 2005A Bonds. Prospective purchasers of Series 2005A Bonds should be aware that the ownership of Series 2005A Bonds may result in collateral federal income tax consequences, including (i) the denial of a deduction for interest on indebtedness incurred or continued to purchase or carry Series 2005A Bonds or, in the case of a financial institution, that portion of the owner's interest expense allocable to interest on a Series 2005A Bond, (ii) the reduction of loss reserve deduction for property and casualty insurance companies by 15% of certain items, including interest on the Series 2005A Bonds, (iii) the inclusion of interest on the Series 2005A Bonds in the effectively connected earnings and profits (with adjustments) of certain foreign corporations doing business in the United States for purposes of a branch profits tax, (iv) the inclusion of interest on the Series 2005A Bonds in the passive income subject to federal income taxation of certain Subchapter S corporations with Subchapter C earnings and profits at the close of the taxable year, and (v) the inclusion in gross income of interest on the Series 2005A Bonds by recipients of certain Social Security and Railroad Retirement benefits. State Taxes The 2005A Bonds and the income thereon are exempt from taxation by the State or any county, municipality, political subdivision, agency, or instrumentality of the State, except estate taxes imposed by Chapter 198, Florida Statutes, as amended, and net income and franchise taxes imposed by Chapter 220, Florida Statutes, as amended. Florida laws governing the imposition of estate taxes do not provide for an exclusion of state or local bonds from the calculation of the value of the gross estate for tax purposes. Florida s estate tax is generally calculated on the basis of the otherwise unused portion of the federal credit allowed for state estate taxes. Under Chapter 198, Florida Statutes, all values for state estate tax purposes are as finally determined for federal estate tax purposes. Since state and local bonds are included in the valuation of the gross estate for federal tax purposes, such obligations would be included in such calculation for Florida estate tax purposes. Prospective owners of the 2005A Bonds should consult their own attorneys and advisors for the treatment of the ownership of the 2005A Bonds for estate tax purposes. The exemption is not applicable to any tax imposed by Chapter 220, Florida Statutes, on interest, income, or profits on debt obligations owned by corporations and other specified entities. 33

42 Intangible Personal Property Tax The State currently levies an intangible personal property tax on items situated in this state such as shares of stock, mutual funds, bonds, notes, certain obligations for the payment of money, and accounts receivable, pursuant to Chapter 199, Florida Statutes. The tax rate is 1 mill per dollar of valuation. All taxpayers, other than married couples filing jointly, are entitled to an exemption on the first $250,000 of value otherwise subjected to tax. For married couples filing jointly, the exemption is $500,000. INDEPENDENT AUDITORS The financial statements of the Turnpike System as of and for the Fiscal Years ended June 30, 2004 and 2003 included in Appendix B of this Official Statement have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing therein. Investment of Funds MISCELLANEOUS All State funds are invested by either the Chief Financial Officer or the Board of Administration. At closing, the 2005A Bond proceeds will be deposited as described above under the heading "REFUNDING PROGRAM - Application of the 2005A Bond Proceeds." Funds Held Pursuant to the Resolution - The Resolution directs the manner in which funds held in the various funds and accounts for the Bonds may be invested. The Board of Administration manages all funds created pursuant to the Resolution, except for the Turnpike Plan Construction Fund, the Renewal and Replacement Fund and the General Reserve Fund, which are held in the State Treasury. Moneys in the funds and accounts may generally be invested and reinvested in Permitted Investments as defined in the Resolution, except that the Renewal and Replacement Fund and the General Reserve Fund may be invested as provided by law. All investments must mature not later than the dates on which moneys are needed for their authorized purposes. Income and interest received upon any investments of the moneys is deposited in the Revenue Fund and used in the same manner and order of priority as other moneys on deposit therein, unless otherwise provided by resolution; provided that investment earnings on moneys in the Rebate Fund and the Turnpike Plan Construction Fund are deposited therein, respectively. Investment by the Chief Financial Officer - Funds held in the State Treasury are invested by internal and (since 1991) external investment managers. The ratio of internally managed funds to externally managed funds within the Treasury's investment portfolio has ranged from approximately 83% internal vs. 17% external on June 30, 1991, to approximately 40% internal vs. 60% external on December 31, As of December 31, 2004, the ratio was 50% internal vs. 50% external. The total portfolio value was $5,130,416,324 on June 30, 1991, and $16,879,456,457 on December 31, Funds managed internally provide for routine as well as unexpected disbursements, with investment objectives being safety of principal and liquidity. The weighted average maturity of internal investments varies between four months and nine months. Investment objectives are met by use of investments with the credit ratings of "BBB" and above which are readily convertible to cash with no loss of principal. The external manager program was created to provide enhanced investment returns on funds not needed to meet cash flow. External investment strategy focuses on medium-term, fixed-income securities, rather than money market instruments, in order to take advantage of higher returns historically achieved by such securities. Portfolio managers with varied specialities are hired to actively manage funds. These funds may be invested in demand notes, U.S. Government and agency obligations, corporate debt, including convertible bonds, municipal debt, and mortgage-backed securities. Investment in longer-term, fixed-income securities, convertible bonds and mortgage-backed securities exposes assets to changes in market value. Mortgage-backed securities and convertible bonds have investment characteristics that 34

43 differ from those of traditional fixed-income securities, which can result in greater price and yield volatility than is the case with traditional fixed-income securities. The maximum term of investments by external managers in the regular medium term program is six years. The mix of securities used to achieve this duration is at the discretion of the manager. These managers may use leveraging techniques such as reverse repurchase agreements or forward purchase commitments which are not covered by cash or near cash assets. Investment by the Board of Administration - The Board of Administration manages investment of assets on behalf of the members of the Florida Retirement System (the "FRS"). It also acts as sinking fund trustee for most State bond issues and manages a short-term investment pool for local governments and smaller trust accounts on behalf of third party beneficiaries. The Board of Administration adopts specific investment policy guidelines for the management of its funds which reflect the long-term risk, yield, and diversification requirements necessary to meet its fiduciary obligations. As of December 31, 2004, the Board of Administration directed the investment/administration of 28 trust funds in over 175 portfolios. As of December 31, 2004, the total market value of the FRS (Defined Benefit) Trust Fund was $109,753,637,775. The Board of Administration pursues an investment strategy which allocates assets to different investment types. The longterm objective is to meet liability needs as determined by actuarial assumptions. Asset allocation levels are determined by the liquidity and cash flow requirements of the FRS, absolute and relative valuations of the asset class investments, and opportunities within those asset classes. Funds are invested internally and externally under a Total Fund Investment Plan. The Board of Administration uses a variety of derivative products as part of its overall investment strategy. These products are used to manage risk or to execute strategies more efficiently or more cost effectively than could be done in the cash markets. They are not used to speculate in the expectation of earning extremely high returns. Any of the products used must be within investment policy guidelines designed to control the overall risk of the portfolio. The Board of Administration invests assets in 27 designated trust funds other than the FRS (Defined Benefit) Trust Fund. As of December 31, 2004, the total market value of these trust funds equaled $34,062,057,380. Each fund is independently managed by the Board of Administration in accordance with the applicable documents, legal requirements and investment plan. Liquidity and preservation of capital are preeminent investment objectives for most of these funds, so investments for these are restricted to high quality money market instruments (e.g., cash, short-term treasury securities, certificates of deposit, banker's acceptances, and commercial paper). The term of these investments is generally short, but may vary depending upon the requirements of each trust and its investment plan. Investment of bond sinking funds is controlled by the resolution authorizing issuance of a particular series of bonds. The Board of Administration's investment policy with respect to sinking funds is that only U.S. Treasury securities, and repurchase agreements backed thereby, be used. Bond Ratings It is anticipated that Standard & Poor s Ratings Services, Moody s Investors Service and Fitch Ratings (herein referred to collectively as Rating Agencies ), will assign their ratings of AAA, Aaa and AAA, respectively, to the 2005A Bonds with the understanding that upon the delivery of the 2005A Bonds, a policy insuring the payment when due of the principal of and interest on the 2005A Bonds will be issued by Ambac Assurance Corporation. Additionally, Standard & Poor s Rating Services, Moody s Investors Service and Fitch Ratings have assigned underlying ratings (i.e., without regard to municipal bond insurance) of AA-, Aa2 and AA-, respectively, to the 2005A Bonds. Such ratings reflect only the respective views of such Rating Agencies at the time such ratings were issued, and an explanation of the significance of such ratings may be obtained from any of the respective rating agencies. 35

44 The State furnished to such Rating Agencies certain information and material in respect to the State and the 2005A Bonds. Generally, Rating Agencies base their ratings on such information and materials and on investigations, studies and assumptions made by the Rating Agencies. There is no assurance that such ratings will be maintained for any given period of time or that they may not be lowered, suspended or withdrawn entirely by the Rating Agencies, or any one of them, if in their or its judgment, circumstances warrant. Any such downward change in, suspension of or withdrawal of such ratings may have an adverse effect on the market price of the 2005A Bonds. Verification of Mathematical Calculations The arithmetical accuracy of the mathematical computations supporting the adequacy of the maturing principal amounts of, and interest earned on, the investments purchased with funds deposited pursuant to the Escrow Deposit Agreement to pay the principal of, redemption premium and interest on the Refunded Bonds, and the arithmetical accuracy of the mathematical computations relating to the investment of funds in the Escrow Deposit Trust Fund, supporting the conclusion that the 2005A Bonds will not be "arbitrage bonds" under the Internal Revenue Code of 1986, will be verified by Causey Demgen & Moore, Inc., Certified Public Accountants, as a condition of the delivery of the 2005A Bonds. Litigation There is no litigation pending, or to the knowledge of the Department or the Division of Bond Finance, threatened, which if successful would have the effect of restraining or enjoining the issuance or delivery of the 2005A Bonds or questioning or affecting the validity of the 2005A Bonds or the proceedings and authority under which the 2005A Bonds are to be issued. The Department and the Division of Bond Finance from time to time engage in certain routine litigation the outcome of which would not be expected to have any material adverse effect on the issuance and delivery of the 2005A Bonds or the Turnpike System. At the present time, the Turnpike Enterprise has six contingent liabilities, involving a total potential exposure of approximately $61.5 million in routine disputes with contractors. In addition, there is one eminent domain case in which an order of taking has been appealed by the property owner. Its reversal could result in construction delays on the project and related claims made by the contractor. There are also two recently filed actions, the first of which involves a Declaratory Judgment seeking construction of a utility master agreement for fixing responsibility for utility relocation costs. The Turnpike Enterprise could be required to absorb the costs of a utility's relocation in the approximate amount of $120 million if the terms of the agreement are construed against the Turnpike Enterprise. The second action involves a temporary restraining order sought by a utility to halt the Turnpike Enterprise's construction of its mainline expansion. The temporary restraining order is also mentioned because of the potential delay damages that could be incurred by the contractor should an injunction be entered. In each of these contingent liabilities and lawsuits, the Turnpike Enterprise's ultimate exposure should not exceed its total appropriated funds for road and bridge construction. If, however, the final payments on these matters exceed such appropriation, the Department would modify its work program to make funds available to pay such claims and judgments. Regardless, revenues of the existing Turnpike System are expected to be more than adequate to pay debt service on all outstanding Turnpike System Revenue Bonds including the 2005A Bonds. Legal Opinion and Closing Certificates The legal opinion of Greenberg Traurig, P.A., Miami, Florida, approving certain legal matters, will be provided on the date of delivery of the 2005A Bonds, as well as the printed bonds and a certificate, executed by appropriate State officials, to the effect that to the best of their knowledge the Official Statement, as of its date and as of the date of delivery of the 2005A Bonds, does not contain an untrue statement of a material fact or omit to state a material fact which should be included herein for the purpose for which the Official Statement is intended to be used, or which is necessary to make the statements contained herein, in the light of the circumstances under which they were made, not misleading. Such legal opinion will be printed on the 2005A Bonds. A proposed form of the legal opinion of Bond Counsel is attached hereto as Appendix G. 36

45 Continuing Disclosure The Department will undertake, for the benefit of the beneficial owners and Registered Owners of the2005a Bonds, to provide, or cause to be provided, certain financial information and operating data and to provide notices of certain material events. Such financial information and operating data will be transmitted to each Nationally Recognized Municipal Securities Information Repository ("NRMSIR") and to the state information depository (if a state information depository is established for the State of Florida). As of the date hereof, no state information depository has been established for the State of Florida. Notices of material events will also be transmitted to each NRMSIR. The form of the undertaking is set forth in Appendix H, Form of Continuing Disclosure Agreement. This undertaking is being made in order to assist the underwriters in complying with Rule 15c2-12 of the Securities and Exchange Commission. Neither the Department nor the Division of Bond Finance has failed to make any disclosures required by the Rule. The names and addresses of the NRMSIRs referred to above are: Bloomberg Municipal Repositories 100 Business Park Drive Skillman, NJ (609) Standard & Poor s J. J. Kenny Repository 55 Water Street, 45th Floor New York, NY (212) DPC Data Inc. One Executive Drive Fort Lee, NJ (201) Interactive Data Attn: NRMSIR 100 William Street, 10th Floor New York, NY (212) The Division of Bond Finance also intends to transmit this Official Statement to the above NRMSIRs. Underwriting Banc of America Securities LLC (the "Underwriters") have agreed to purchase the 2005A Bonds at an aggregate purchase price of $98,128, (which represents the par amount of the 2005A Bonds plus an original issue premium of $5,307, and minus the Underwriters discount of $738,778.23, which includes a municipal bond insurance premium of $453,426.57) plus accrued interest from April 15, 2005 to the date of delivery of the 2005A Bonds. Underwriters may offer and sell the 2005A Bonds to certain dealers (including dealers depositing bonds into investment trusts) and other at prices lower than the offering price stated on the inside front cover. (Remainder of page intentionally left blank) 37

46 Execution of Official Statement The execution and delivery of this Official Statement have been duly authorized by the Department and the Division of Bond Finance. FLORIDA DEPARTMENT OF TRANSPORTATION JOSÉ ABREU, P.E. Secretary DIVISION OF BOND FINANCE OF THE STATE BOARD OF ADMINISTRATION OF FLORIDA on behalf of the STATE OF FLORIDA DEPARTMENT OF TRANSPORTATION JEB BUSH Governor, as Chairman of the Governing Board J. BEN WATKINS III Director Division of Bond Finance 38

47 APPENDIX A TRAFFIC ENGINEER S LETTER Dated April 11, 2005 TO THE STATE OF FLORIDA DEPARTMENT OF TRANSPORTATION STATE OF FLORIDA Regarding Turnpike System Revenue Forecast

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49 April 11, 2005 Mr. William F. Thorp, C.P.A. Florida s Turnpike Enterprise, Chief Financial Officer Florida Department of Transportation Milepost 263, Florida s Turnpike Building 5315, Turkey Lake Service Plaza Ocoee, Florida Dear Mr. Thorp: In accordance with your request, we have reviewed our forecast of future toll and concession revenue for Florida s Turnpike System for FY 2005 through FY This forecast includes the revenue impact of actual growth observed in FY 2004 as well as future events such as new interchanges, a new expansion project, toll rate increases and toll suspensions attributable to hurricanes. Our review procedures included a comparison of actual revenues for the first six months of FY 2005 to the same period for the prior year FY Additionally, actual revenues for the current six-month period were compared to our forecast for FY The following table provides this comparison. Florida's Turnpike System Comparison of Cumulative Revenues for the Six Months Ended December 31 FY 2005 Actual vs. FY 2004 Actual and FY 2005 Estimated Revenue Actual Revenue ($000) Six Months Ended December 31, Increase (Decrease) in Actual Revenue for the Six Months Ended December 31, 2003 and 2004 Estimated * Revenue Six Months Ended FY 2005 Comparison of Actual to Estimated Revenue for the Six Months Ended December 31, 2004 Amount Amount Amount Turnpike System Component FY 2004 FY 2005 ($000) Change ($000) ($000) Change Mainline $180,668 $201,308 $20, % $189,239 $12, % Sawgrass Expressway 19,688 21,649 1, ,354 1, Seminole Expressway 12,839 14,504 1, ,424 1, Veterans Expressway 12,127 13,614 1, , Southern Connector Extension 1,548 2, , Polk Parkway 7,511 8, , Suncoast Parkway 7,030 7, , Total Toll Revenue $241,411 $269,013 $27, % $252,724 $16, % Concession Revenue 4,364 3,858 (506) (11.6) 3, TURNPIKE SYSTEM GRAND TOTAL $245,775 $272,871 $27, % $256,550 $16, % Note: Toll revenues reported net of $5.4 million in SunPass rebates for six months ended December 31, 2003 (FY 2004). SunPass rebate program discontinued concurrent with the March 7, 2004 toll rate increase for cash customers on all Turnpike facilites except the Polk and Suncoast Parkways. * Prorated from the forecast for FY 2005 in the Traffic Engineer's FY 2004 Annual Report. This forecast included reductions of approximately $32 million for revenue loss due to toll suspensions related to evacuation and recovery efforts for four hurricanes. For the six-month period ended December 31, 2004, total revenues exceed the prior year by eleven percent. Further, actual revenues for the current period exceed the forecast by over six percent. For conservative purposes, however, the FY 2005 forecast shown on the following page is not revised upwards by this surplus. Individually, all revenue components, except for concession revenue, are higher than the prior year and are exceeding their respective forecast. Concession revenues for the first six months of FY 2005 decreased by approximately twelve percent from the prior year due to a five year contract extension with HMSHost Tollroads, effective January 1, 2004, that revised the percentage of Turnpike revenue received from concession sales. The forecast includes revenue impacts prompted by the opening of the following interchanges on the Mainline: CR 470 in March 2005, Becker Road in July 2005, SR 710 in March 2006, Kissimmee Park Road in December URS Corporation 1625 Summit Lake Drive Tallahassee, FL Tel: Fax:

50 2006, Jog Road in November 2007, SR 417 in September 2009 and NW 74th Street in December While forecast to open in March 2005, the CR 470 interchange on the Northern Coin System opened early to traffic on January 22, The revenue forecast also includes revenues from the Western Beltway, Part C, expected to open to traffic in December The Western Beltway, Part C, is a 22-mile, four-lane, limited-access toll facility that provides an alternative north-south bypass route between the Turnpike Mainline west of Orlando and I-4 southwest of Walt Disney World. This toll facility is being jointly developed by the Turnpike and the Orlando Orange County Expressway Authority. The revenue forecast disclosed herein is strictly for the 11-mile Turnpike portion that extends from I-4 in Osceola County to Seidel Road in Orange County. Due to the March 2004 (FY 2004) toll rate increase for cash customers only on all Turnpike System facilities except for Polk Parkway and Suncoast Parkway, revenues for FY 2005 are projected to increase since FY 2005 will have eight months at a higher toll rate than FY The 25 percent increase, rounded to the quarter for toll collection efficiency, establishes a pricing preference for SunPass customers. As such, the 10 percent volume-based SunPass discount was discontinued concurrent with the toll rate increase. In FY 2005, between August 10, 2004 and September 24, 2004, the Governor issued four executive orders declaring states of emergency in Florida due to the threats from hurricanes Charley, Frances, Ivan and Jeanne. To aid with the evacuation and recovery efforts, tolls were suspended on the Turnpike System for approximately 21 days in total for the four hurricanes. The resulting revenue loss is estimated at approximately $32 million on the Turnpike System. As such, the forecasts have been appropriately reduced for those amounts. The following table provides the revenue forecast for Florida s Turnpike System for FY 2005 through FY As indicated, Turnpike System revenues are forecast to increase from approximately $560 million in FY 2005 to $832 million in FY Beyond the impacts of the March 2004 toll rate increase, this revenue forcast does not include any additional toll rate increases. Florida's Turnpike System Revenue Forecast ($000) FY 2005 through FY 2015 Fiscal Year Mainline Sawgrass Expressway Seminole Expressway Veterans Expressway Southern Connector Extension Polk Parkway Suncoast Parkway Western Beltway, Part C Total Toll Revenue Gross Concession Revenue Total Turnpike System 2005 $413,722 $43,993 $29,654 $28,074 $4,281 $16,945 $15,816 $552,485 $7,491 $559, ,678 47,339 33,004 30,827 4,603 19,356 18, ,025 7, , ,670 48,283 34,683 32,090 4,703 20,854 19,845 $1, ,132 7, , ,402 49,375 36,351 33,297 4,814 22,337 21,486 2, ,478 8, , ,916 50,816 37,988 34,638 4,977 23,784 23,121 2, ,111 8, , ,270 52,214 39,638 36,008 5,152 25,175 24,728 3, ,500 8, , ,121 53,561 41,163 37,298 5,319 26,490 26,283 3, ,051 8, , ,627 54,852 42,544 38,494 5,475 27,705 27,763 4, ,890 9, , ,917 56,080 43,820 39,583 5,640 28,803 29,143 4, ,829 9, , ,594 57,342 45,135 40,770 5,809 29,955 30,600 5, ,462 9, , ,969 58,586 46,439 41,949 5,974 31,087 32,062 5, ,735 9, ,316 Should you have any questions, please do not hesitate to contact us. Very truly yours, URS Corporation Hugh W. Miller, Jr., Ph.D., P.E. Vice President William A. Nelsen, C.P.A. Vice President

51 APPENDIX B

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93 APPENDIX C FLORIDA S TURNPIKE SYSTEM DEPARTMENT OF TRANSPORTATION STATE OF FLORIDA Financial Statements for the Six-Month Period Ended December 31, 2004 (Unaudited)

94 FLORIDA S TURNPIKE SYSTEM DEPARTMENT OF TRANSPORTATION STATE OF FLORIDA TABLE OF CONTENTS FINANCIAL STATEMENTS Page Transmittal Letter 1 Statement of Net Assets 2 Statement of Revenues, Expenses and Changes in Net Assets 4 Statement of Cash Flows 5 Note to Financial Statements 7

95 Mr. Ben Watkins Division of Bond Finance State Board of Administration Post Office Box Tallahassee, FL ACCOUNTANT S REPORT We have prepared the accompanying Statement of Net Assets; Statement of Revenues, Expenses and Changes in Net Assets; and Statement of Cash Flows for the period ended December 31, These statements were prepared in conjunction with the State of Florida, Florida Department of Transportation, Turnpike Revenue Refunding Bonds, Series 2005A, offering. The accompanying unaudited interim financial statements have been prepared by management without audit. They do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. All adjustments of a normal recurring nature which, in the opinion of management, are necessary to present a fair statement of financial position, results of operations and cash flows at December 31, 2004 for the six-month period then ended have been made. The unaudited results of operations for the six-month period ended December 31, 2004 are not necessarily indicative of the results to be expected for the full year. Sincerely, William F. Thorp, CPA Chief Financial Officer Florida s Turnpike Enterprise April 19, 2005

96 FLORIDA'S TURNPIKE SYSTEM DEPARTMENT OF TRANSPORTATION STATE OF FLORIDA STATEMENTS OF NET ASSETS DECEMBER 31, 2004 AND JUNE 30, 2004 (Unaudited) (in thousands) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 561,187 $ 274,132 Investments 28,978 27,439 Receivables: Accounts 1,497 1,710 Interest 2,592 1,001 Due from other governments 3, Prepaid expenses Total current assets 598, ,800 RESTRICTED NON-CURRENT ASSETS: Restricted cash and cash equivalents 445, ,796 Restricted investments 39, Total restricted assets 484, ,595 NON-DEPRECIABLE CAPITAL ASSETS: Land 769, ,428 Infrastructure-Highway System and improvements 2,894,058 2,792,838 Construction in progress 1,003, ,199 Total non-depreciable capital assets 4,667,055 4,522,465 DEPRECIABLE CAPITAL ASSETS: Buildings and improvements 187, ,998 Furniture and equipment 63,422 61,248 Less: accumulated depreciation (108,960) (100,891) Total depreciable capital assets 141, ,355 DEFERRED CHARGES-Net 14,664 12,792 OTHER ASSETS 9,282 10,912 Total non-current assets 5,317,168 5,200,119 TOTAL ASSETS $ 5,915,568 $ 5,504,919 2

97 FLORIDA'S TURNPIKE SYSTEM DEPARTMENT OF TRANSPORTATION STATE OF FLORIDA STATEMENTS OF NET ASSETS DECEMBER 31, 2004 AND JUNE 30, 2004 (Unaudited) (in thousands) LIABILITIES AND NET ASSETS LIABILITIES: CURRENT LIABILITIES: Construction contracts and retainage payable $ 23,984 $ 32,440 Current portion of bonds payable 62,470 60,165 Due to Department of Transportation 29,139 37,686 Due to other governments Deposits payable Interest payable 1,243 - Deferred revenue Total current liabilities 118, ,503 NON-CURRENT LIABILITIES: LONG-TERM PORTION OF BONDS PAYABLE, net of premiums of $38,722 and $38,366, respectively, and deferred losses on early retirement of debt of $32,786 and $34,112, respectively 2,320,711 2,042,154 DUE TO OTHER GOVERNMENTS DUE TO RIGHT OF WAY ACQUISITION AND BRIDGE CONSTRUCTION TRUST FUND - 3,258 ADVANCES PAYABLE TO DEPARTMENT OF TRANSPORTATION 112,116 98,834 DEFFERED REVENUE FROM OTHER GOVERNMENTS 9,282 9,520 Total non-current liabilities 2,442,318 2,154,624 TOTAL LIABILITIES 2,560,472 2,286,127 COMMITMENTS AND CONTINGENCIES NET ASSETS: Invested in capital assets, net of related debt 3,028,430 2,971,929 Restricted for debt service 39, Restricted for renewal and replacement 21,840 24,674 Unrestricted 265, ,388 TOTAL NET ASSETS $ 3,355,096 $ 3,218,792 3

98 FLORIDA'S TURNPIKE SYSTEM DEPARTMENT OF TRANSPORTATION STATE OF FLORIDA STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS SIX MONTHS ENDED DECEMBER 31, 2004 AND TWELVE MONTHS ENDED JUNE 30, 2004 (Unaudited) (in thousands) OPERATING REVENUES: Toll facilities $ 269,013 $ 521,223 Concessions 3,858 8,513 Other 2,051 5,123 Total operating revenues 274, ,859 OPERATING EXPENSES: Operations and maintenance 73, ,332 Renewals and replacements 34,229 51,627 Depreciation 8,268 15,033 Total operating expenses 116, ,992 OPERATING INCOME 158, ,867 NON-OPERATING REVENUES (EXPENSES): Interest income 13,175 20,161 Interest expense (29,996) (61,736) Other-net 266 (2,538) Total nonoperating expenses-net (16,555) (44,113) INCOME BEFORE CONTRIBUTIONS FOR CAPITAL PROJECTS AND SPECIAL CONTRIBUTIONS 142, ,754 CONTRIBUTIONS FOR CAPITAL PROJECTS 1,823 17,550 SPECIAL CONTRIBUTIONS TO OTHER GOVERMENTS (7,629) (15,262) INCREASE IN NET ASSETS 136, ,042 NET ASSETS: Beginning of year 3,218,792 2,942,750 End of year $ 3,355,096 $ 3,218,792 4

99 FLORIDA'S TURNPIKE SYSTEM DEPARTMENT OF TRANSPORTATION STATE OF FLORIDA STATEMENTS OF CASH FLOWS SIX MONTHS ENDED DECEMBER 31, 2004 AND TWELVE MONTHS ENDED JUNE 30, 2004 (Unaudited) (in thousands) OPERATING ACTIVITIES: Cash received from customers $ 269,013 $ 525,105 Cash payments to suppliers for goods and services (93,794) (167,244) Cash payments to employees (16,628) (32,546) Other operating revenues 5,322 10,821 Net cash provided by operating activities 163, ,136 NONCAPITAL FINANCING ACTIVITIES: Repayments to other Department of Transportation funds (7,629) (15,262) Net cash used in noncapital financing activities (7,629) (15,262) CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from issuance of revenue bonds-net 284, ,749 Repayments to Right of Way Acquisition and Bridge Construction Trust Fund (6,700) (6,700) Principal paid on revenue bond maturities - (58,615) Interest paid on revenue bonds (53,327) (106,783) Interest paid on advances from Department of Transportation (331) (4,830) Accrued interest received on revenue bonds 1,243 3,040 Payment of bond issuance costs (2,529) (4,597) Proceeds from the sale of capital assets 60 3 Payments to acquire or construct capital assets (121,032) (178,043) Repayments to Department of Transportation (5,753) (101,364) Fiscal charges and other payments (348) (1,067) Net cash provided by capital and related financing activities 95,700 68,793 INVESTING ACTIVITIES: Proceeds from the sale or maturity of investments 56,529 10,040 Interest on investments 13,100 24,755 Purchase of investments (96,254) (2,336) Net cash (used in) provided by investing activities (26,625) 32,459 NET INCREASE IN CASH AND CASH EQUIVALENTS 225, ,126 CASH AND CASH EQUIVALENTS-Beginning of year 780, ,802 CASH AND CASH EQUIVALENTS-End of year $ 1,006,287 $ 780,928 5

100 FLORIDA'S TURNPIKE SYSTEM DEPARTMENT OF TRANSPORTATION STATE OF FLORIDA STATEMENTS OF CASH FLOWS SIX MONTHS ENDED DECEMBER 31, 2004 AND TWELVE MONTHS ENDED JUNE 30, 2004 (Unaudited) (in thousands) RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Operating income $ 158,665 $ 317,867 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation expense 8,268 15,033 Other non-cash disbursements and receipts (996) 821 (Increase) decrease in: Due from other governments (527) 4,285 Accounts receivable (81) 687 Prepaid expenses (282) - (Decrease) increase in: Due to Department of Transportation (1,619) (2,600) Due to other governments (10) 32 Deposits payable 50 - Deferred revenues Total adjustments 5,248 18,269 Net cash provided by operating activities $ 163,913 $ 336,136 SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING, CAPITAL AND FINANCING ACTIVITIES: Bond premium accretion-net $ (4,882) $ (8,781) Amortization of deferred charges 658 1,379 Amortization of deferred losses on early retirement of debt 1,327 7,811 Net book value of disposed capital assets Contributions for capital projects 1,823 17,550 Change in unrealized (gain) loss on investments (101) 1,066 In-kind goods and services revenue

101 FLORIDA S TURNPIKE SYSTEM DEPARTMENT OF TRANSPORTATION STATE OF FLORIDA NOTE TO FINANCIAL STATEMENTS PERIOD ENDED DECEMBER 31, 2004 (Unaudited) 1. UNAUDITED INTERIM FINANCIAL STATEMENTS The accompanying unaudited interim financial statements have been prepared by management without audit. They do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. All adjustments of a normal recurring nature which, in the opinion of management, are necessary to present a fair statement of financial position, results of operations and cash flows at December 31, 2004 for the six-month period then ended have been made. The unaudited results of operations for the six-month period ended December 31, 2004 is not necessarily indicative of the results to be expected for the full year. 7

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103 D-1 APPENDIX D

104 D-2