JANUARY 2017 DULLES CORRIDOR ENTERPRISE REPORT OF THE FINANCIAL ADVISORS

Transcription

1 JANUARY 2017 DULLES CORRIDOR ENTERPRISE REPORT OF THE FINANCIAL ADVISORS The Airports Authority established the Dulles Corridor Enterprise (DCE) Fund to segregate the financial activity associated with the operation, maintenance and improvement of the (DTR) and construction of the Dulles Corridor Metrorail Project (Rail Project) from the financial operations of the Airports. This report provides an update on the status of capital financing activities and other issues related to the DCE Fund. Action Items No Action Items to Report Informational Items Dulles Corridor Advisory Committee (DCAC) Meeting. The DCAC, which has eight members (two representatives each from the Airports Authority, Fairfax County, Loudoun County, and the Commonwealth of Virginia), met on December 1, The Committee received updates on the construction and financing of the Rail Project and a report on DTR toll revenue and transactions. The DCAC was created in 2007 to provide advice to the Airports Authority on issues related to the management, improvement and expansion of the Dulles Corridor, as well as potential adjustments to DTR toll rates to fund roadway improvements and the Rail Project. Potential Federal Infrastructure Investment Initiatives. The Financial Advisors are working with Finance and Government Affairs Staff to assess potential federal infrastructure investment initiatives that might benefit the Airports Authority. The objective is to be prepared to provide input and guidance should the Trump Administration and the new Congress actively consider some of the proposals that have surfaced recently. Financial assistance options include eliminating the alternative minimum tax (AMT) penalty on airport private activity bonds and authorizing some type of federal tax credit program. Potential regulatory actions include eliminating or raising the cap on airport passenger facility charges (PFCs) and streamlining PFC approvals by the FAA. January 18, 2017

2 Relevant News Items Dulles Greenway Toll Increase for On December 30, 2016, the owners of the Dulles Greenway toll facility filed a request with the Virginia State Corporation Commission (SCC) to increase toll rates. If approved, the toll rate for two-axle vehicles would increase by 15 cents, from $4.40 to $4.55, and the Congestion Management Toll (applicable only to weekday traffic in the peak period and direction) would increase from $5.35 to $ Public comments on the proposed toll increase will be accepted through February 3, The toll increase will become effective upon issuance of a final order by the SCC. Pursuant to of the Code of Virginia, the SCC shall approve any request to increase tolls by a percentage that is equal to the greater of the increase in the consumer price index plus 1 percent (calculated to be 3.04 percent), Real Gross Domestic Product growth (approximately 1.59 percent), or 2.80 percent. In addition to the percentage increase, the proposed toll rate increase includes a $ surcharge to offset a portion of a local property tax increase in Transform 66 Outside the Beltway Project. On December 7, 2016, the Commonwealth Transportation Board (CTB) authorized a loan from the State Infrastructure Bank (SIB) to Express Mobility Partners LLC, the private consortium selected to build and operate express toll lanes and related improvements on Interstate 66 outside the Capital Beltway. Express Mobility Partners can use up to $30 million of SIB loan proceeds to finance certain early work outlined in the Comprehensive Agreement with the Virginia Department of Transportation, including the preliminary design work needed for the public hearings and utility relocation plans. The SIB loan will not bear interest, but it must be repaid in full on or before the date the developer reaches financial close on the project financing, which is anticipated to occur by July Transform 66 Inside the Beltway Multimodal Components. On December 7, 2016, the CTB also approved several amendments to an agreement with the Northern Virginia Transportation Commission (NVTC) that was executed in January The amendments include documenting the decision by the CTB to fund the widening of a portion of Interstate 66 in the eastbound direction and increasing a loan to the NVTC from $5 million to $10 million. The revised agreement also specifies the terms and conditions under which NVTC can issue debt secured by toll revenues. 1 The toll rates do not include the $1.00 toll collected at the Mainline Toll Plaza by the Dulles Greenway owners on behalf of the Airports Authority for access to the.

3 MONTHLY UPDATE: OUTSTANDING DULLES CORRIDOR ENTERPRISE DEBT SHORT-TERM NOTES AND LOANS Commercial Paper Notes. The aggregate principal amount of Lien Commercial Paper Notes outstanding as of January 1, 2017, was $181,000,000. The Airports Authority can draw an additional $119,000,000 under this program. Program Commercial Paper Series One Authorized Amount Up to $300 Million Letter of Credit Provider Cost Dated Date Expiration Date JP Morgan 69 bps August 11, 2011 August 10, 2018 The following table shows the rolling three-month averages of the variable rates for the Commercial Paper Notes and the Securities Industry and Financial Markets Association (SIFMA) Index on a monthly basis for Variable Interest Rates (3-Month Rolling Average) Monthly CP 1 JPM SIFMA Spread December % 0.66% 0.07% November % 0.68% 0.03% October % 0.66% -0.04% September % 0.53% 0.01% August % 0.44% 0.03% July % 0.40% 0.02% June % 0.40% -0.09% May % 0.31% -0.11% April % 0.18% -0.08% March % 0.05% 0.02% February % 0.01% 0.05% January % 0.01% 0.05% 2 The SIFMA index is a national rate based on a composite of approximately 250 issuers of high-grade, seven-day, tax-exempt, variable rate demand obligation issues of $10 million or more.

4 Previous Years Variable Interest Rates (12-Month Rolling Average) Calendar Year CP 1 JPM SIFMA Spread % 0.41% -0.03% % 0.03% 0.04% % 0.05% 0.05% % 0.09% 0.06% FFGA Notes. On December 17, 2012, the Airports Authority issued $200 million of fixed rate notes secured by the remaining federal funding anticipated to be received pursuant to a Full Funding Grant Agreement (FFGA) with the Federal Transit Administration for Phase 1 of the Rail Project. The final principal payment of $100 million was made on December 1, The FFGA Notes are no longer outstanding. Program Amount Issued Rate Lender Dated Date Scheduled Final Maturity FFGA Notes, Series 2012 $200 Million 2.16% Bank of America December 1, 2012 December 1, 2016 DULLES TOLL ROAD REVENUE BONDS The total amount of outstanding Revenue as of January 1, 2017, including accretion, is $2,488,229, The tables on the following pages provide detail on each series of bonds. 3 The amount outstanding includes approximately $287 million of net accreted value on outstanding capital appreciation bonds, convertible capital appreciation bonds and the Transportation Infrastructure Finance and Innovation Act (TIFIA) loan. Interest on those securities is not paid currently. It accretes from the date of issuance and is compounded semi-annually on each April 1 and October 1 until the applicable maturity date, conversion date or payment commencement date, whereupon interest will be payable semi-annually.

5 Series 4 Dated Date Originally Issued Par Amount Table 1: Revenue Amount Outstanding by Series and Credit Ratings Outstanding as of 01/01/2017 Lien Tax Status Moody's Rating S&P Rating Credit Enhancement A 8/12/2009 $ 198,000,000 $ 198,000,000 First A2 A- None 2009B 8/12/ ,056, ,606,222 Baa1/ A2(Insured) BBB+/ AA(Insured) $188,266,435 Assured Guaranty 2009C 8/12/ ,234, ,775,000 Convertible A2 (Insured) AA (Insured) $158,234,960 Assured Guaranty 2009D 8/12/ ,000, ,000,000 America 2010A 5/27/ ,813,219 84,259, B 5/27/ ,801, ,139,735 Convertible 2010D 5/27/ ,000, ,000,000 Subordinate America Baa2 BBB+ None 2014A 5/14/ ,760, ,760,000 TIFIA Series 8/20/ ,300, ,689,062 Junior Federal Loan Baa2 A- None $ 2,200,967,405 $ 2,488,229,335 4 Series 2010C was authorized but not issued. 5 insured by Assured Guaranty are rated AA (stable outlook) by S&P and A2 (stable outlook) by Moody s. 6 The Airports Authority can issue up to $1,278 million of TIFIA Series 2014 (excluding capitalized interest) to finance eligible Phase 2 project costs.

6 Table 2: Revenue Interest Rates and Call Provisions Series Outstanding as of 01/01/2017 Lien Tax Status and Structure Principal Amortization Yields 7 Call Provisions A $ 198,000,000 First % to 5.375% October 1, 2019 at Par 2009B 286,606, % to 7.91% Non-Callable 2009C 249,775,000 Convertible % October 1, 2026 at Accreted Value 2009D 400,000,000 America % (4.85% net of full subsidy) Any Business Day at Make-Whole Redemption Price 2010A 84,259, % Non-Callable 2010B 210,139,735 Convertible % October 1, 2028 at Accreted Value 2010D 150,000,000 Subordinate 2014A 421,760,000 America % (5.20% net of full subsidy) Any Business Day at Make-Whole Redemption Price % April 1, 2022 at Par TIFIA Series ,689,062 Junior Federal Loan % Any Business Day at Par $ 2,488,229,335 7 The all-in interest cost for the Series 2009, 2010 and 2014A bond issues is percent, percent and percent, respectively, which results in an overall average cost of capital of percent. The potential cost of capital, including, TIFIA will vary depending on when funds are drawn and the timing of future TIFIA payments and prepayments. 8 The Make-Whole Redemption Price is the greater of (i) 100 percent of the principal amount of the to be redeemed and (ii) the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date of the to be redeemed discounted to the date on which the are to be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30- day months, at the adjusted Treasury Rate plus 50 basis points, plus accrued and unpaid interest on the to be redeemed on the redemption date.

7 Refunding Opportunities The Series 2009A First Lien can be refunded in advance of the 2019 call date. Under current market conditions, a hypothetical tax-exempt refinancing might generate approximately $2.6 million of net present value savings. Series Callable Par/ Maturities Coupon Range Call Date Call Premium Net PV Savings Negative Arbitrage 2009A $198,000,000 ( 30-44) 5.00% % 10/01/19 0% (at par) $2.6 mm 1.31% $13.2 mm The Financial Advisors do not recommend considering an advance refunding transaction at this time because of the significant negative arbitrage in the required refunding escrow. In addition, the potential annual debt service reductions that could be achieved by refinancing the 2009A are relatively small and would not impact projected debt service coverage ratios or projected DTR toll rates. The Financial Advisors will continue to monitor relevant interest rates and the potential savings from a refinancing of the Series 2009A bonds.