2010: Connecting with the Customer

Transcription

1 2010: Connecting with the Customer 2010 Annual Report E-470 Public Highway Authority

2 CHAMBERS RD GUN CLUB RD 144TH 25 Larkridge Regional Retail Center YORK ST THORNTON CONNECTING WITH THE CUSTOMER The E-470 toll road forms a 47-mile semi-circular beltway around metropolitan Denver s eastern area and provides an entrance to the Denver International Airport. The highway has been financed, constructed, operated and governed by the E-470 Public Highway Authority. The authority is a legal subdivision of the State of Colorado, composed COLORADO BLVD 160TH E $ U.S. 85 BRIGHTON 120TH 112TH 76 Barr Lake $ ADAMS COUNTY E-470 ROUTE E-470 MAINLINE TOLL POINT INTERCHANGE of five municipalities and three county governments: Adams, Arapahoe, and Douglas counties, and the municipalities of Aurora, Brighton, Commerce City, Parker, and Thornton. E-470 connects on the south to C-470 and on the north to the Northwest Parkway, a toll road managed by a separate highway authority. Built and opened in segments, the first five miles of the highway opened in Douglas County in June At that time, E-470 was one of the first toll roads in America to offer drivers the option of nonstop, open-road tolling, provided through EXpressToll, the electronic toll collection system. The final segment was opened in January In July of 2009, E-470 became a fully nonstop toll road, ending cash toll collection. Tolls are collected either through EXpressToll or License Plate Toll. 104TH 25 COMMERCE CITY 96TH D $ Denver International Airport PENA BLVD Rocky Mountain Arsenal National Wildlife Refuge 64TH 56TH TOWER RD PICADILLY RD C $ 25 26TH Downtown 225 COLFAX AVE 70 DENVER COLORADO BLVD 6TH Buckley Air Force Base 6TH PKWY MISSISSIPPI AVE PARKER RD AURORA JEWELL AVE SANTA FE DR EVANS ILIFF AVE B $ HAMPDEN AVE BELLEVIEW AVE Cherry Creek Reservoir QUINCY AVE Quincy Reservoir SMOKY HILL RD ORCHARD RD BROADWAY ARAPAHOE RD COUNTY LINE RD C Park Meadows Shopping District PEORIA ST Centennial Airport A $ ARAPAHOE COUNTY Southlands Shopping Center GARTRELL RD In addition to linking metropolitan Denver s eastern suburbs, E-470 connects drivers from throughout Colorado and southern Wyoming with the Denver International Airport. JAMAICA ST PEORIA ST JORDAN RD PARKER RD PARKER DOUGLAS COUNTY 1

3 E-470 PUBLIC HIGHWAY AUTHORITY LEADERSHIP BOARD MEMBERS FRANK WEDDIG Chair Commissioner, Arapahoe County W. R. SKIP FISCHER Vice Chair Commissioner, Adams County GARY LASATER Secretary Council Member, Town of Parker RANDY DRENNEN Treasurer Council Member, City of Thornton ED TAUER Mayor, City of Aurora DICK McLEAN Mayor, City of Brighton JIM BENSON Council Member, City of Commerce City JACK HILBERT Commissioner, Douglas County EXECUTIVE LEADERSHIP JOHN McCUSKEY Executive Director DAVID KRISTICK Deputy Executive Director, Director of Operations MATT ALEXANDER Director of Engineering and Roadway Maintenance JOE DONAHUE Director of Finance MIKE HART Director of Information Technology EX-OFFICIO MEMBER AGENCIES COLORADO DEPARTMENT OF TRANSPORTATION (CDOT) DENVER REGIONAL COUNCIL OF GOVERNMENTS (DRCOG) REGIONAL TRANSPORTATION DISTRICT (RTD) AFFILIATE MEMBERS CITY OF ARVADA CITY AND COUNTY OF BROOMFIELD CITY OF GREELEY WELD COUNTY 2

4 E-470 s interchange with I-25 and C IN REVIEW: CONNECTING WITH THE CUSTOMER 3 In 2010, E-470 underwent a number of changes a change in leadership occasioned by the sudden passing of our executive director, a bond tender offer to restructure our debt obligations, and a shift in our approach to scheduled toll increases. But the biggest changes came in how we connect with our customers. We listened to what they wanted regarding expanded toll payment convenience and heard their desire to have us provide more equitable ways of dealing with unpaid tolls. Responding to the feedback from our customers formed our overriding agenda for We are confident that the improvements we made have contributed to increased usage of E-470 by License Plate Toll (LPT) customers and further strengthened our customer-friendly reputation among present and potential customers. LICENSE PLATE TOLL OPTION ADDED In July 2009, E-470 discontinued cash toll collection and became one of the nation s first fully nonstop toll roads, collecting tolls through EXpressToll or the newly introduced LPT. That was a large step toward expanded customer convenience. Customers could now enter the road without cash or a transponder. But, as we learned in listening to our LPT customers, we had a considerable way to go to make this tolling innovation truly as convenient as it needed to be. LPT customers told us they wanted more control of when and how they could pay their toll bills. Meeting this demand required a highly involved process of technical and operational changes (more fully described on pages 5 and 6) that culminated in September, when LPT customers were provided with many of the payment options that heretofore were available only to our EXpressToll customers. A CUSTOMER-FRIENDLY OFFER ON UNPAID TOLL VIOLATIONS As a transition into a new billing process, in 2010 we provided customers who had toll violations the opportunity to clear their obligations at a reduced cost. In addition, we adopted policies and procedures that greatly reduced a customer s costs for late fees and civil penalties. This helped spur payments of long overdue unpaid tolls and added to our collected toll revenues. IN MEMORIAM EDWARD J. DeLOZIER This year we mourned the death of a superb leader and good friend, Ed DeLozier, our executive director since Starting out as a toll collector on the New Jersey Turnpike, his death in April 2010 ended an impressive career as one of the best known and most

5 Above and at right: Scenes from E-470 s major emergency preparedness exercise. EMERGENCY PREPAREDNESS THROUGH MULTI-JURISDICTIONAL COOPERATION Along with a number of other local health and public safety agencies, and Buckley Air Force Base, in October we undertook a major emergency preparedness exercise. The purpose of the exercise was to test the agencies joint response plan and to build inter-agency teamwork and working relationships. The successful emergency response simulation exercise involving military aircraft was staged adjacent to an E-470 toll plaza near Buckley. E-470 RECOGNIZED WITH THE ALFRED P. SLOAN AWARD We received the Alfred P. Sloan Award for Business Excellence in Workplace Flexibility. This award, presented to us in December, recognizes employers that are successfully using flexibility as part of an effective workplace strategy, including meeting business goals and benefiting employees by helping them meet their responsibilities on and off the job. AN UNTIMELY LOSS, A SMOOTH TRANSITION We mourned the sudden passing in April of our executive director, Ed DeLozier. E-470 s board of directors appointed John McCuskey, our longtime deputy executive director and director of finance, as E-470 s new executive director. David Kristick was promoted to deputy executive director in addition to his current position as director of operations, and Joe Donahue was promoted to director of finance. All three had the benefit of at least a decade of experience with E-470, thus easing the transition. Responding to the feedback from our customers formed our overriding agenda for highly respected toll road experts worldwide. Ed was admired and respected by his E-470 staff and board of directors for his knowledgeable, even-handed management style and sense of humor. Measured in miles, there was much he accomplished during his tenure with E-470. He oversaw the completion in January 2003 of the final 26 miles of the 47-mile tollway. He then led the transition from our construction focus to our current emphasis on expanding customer convenience, including the implementation of License Plate Toll. Revered as an innovator by his industry peers, he was active in many leadership roles with the International Bridge, Tunnel and Turnpike Association (IBTTA). At the time of his death, he was first vice president of IBTTA s board. He was to become president in

6 License Plate Toll customers in 2010 were provided a number of new tools to enable them to Take Toll Control. INNOVATING TO EXPAND CUSTOMER CONVENIENCE 5 Through continual customer surveys and direct feedback, we are always learning how to better serve our customers. Since our July 4, 2009 conversion to fully nonstop tolling, we have been particularly interested in seeking input from our License Plate Toll (LPT) customers about their level of satisfaction with this new method of toll payment. While surveys indicated generally satisfactory reactions from our LPT customers, we also received feedback that they wanted more control over how and when they could access their account information and make their payments. Recently, my son was in Colorado and came home very impressed with your toll system... He was thrilled to not have to stop and search for cash. SHARON FROM ILLINOIS OPTIONS ADDED FOR LPT CUSTOMERS To address LPT customers requests, in 2010 our staff put in many hundreds of hours to develop and implement convenient new options. As a result, LPT customers can now establish an online account to view and pay their tolls without waiting for their monthly statements to arrive in the mail. The new tool we created in 2010, Online Account Manager, offers LPT customers more accessible account information, convenience and control. Those customers now have several new methods to pay their tolls. LPT customers may register and update their account information online, choose to receive monthly LPT statements via instead of postal mail, deposit pre-paid tolls of any amount to their account, or pay for individual tolls incurred prior to a statement being generated. Customers can also leave credit card information on file for the convenience of making payments at any time or instruct us to debit the card for the amount owed when the monthly statement is due. OFFERING A FRESH START FOR CUSTOMERS WITH OVERDUE ACCOUNTS When E-470 opened its first segment in 1991, the process of identifying toll violators and then collecting payments from them was exceptionally more time-consuming and costly than it is now. In order to create significant disincentives for toll violations, we imposed relatively stiff penalties and fines that could mount rapidly. Those collection policies and procedures that were created in the past often resulted in present-day LPT customers with overdue payments being charged hundreds of dollars or more in administrative fees, civil penalties, and court costs. Things have changed. Thanks to the technology we use for LPT, today we have largely automated the process of identifying and billing customers who do not pay via EXpressToll. That prompted us to develop

7 a streamlined and less punitive way to treat customers with overdue toll payments, and, in so doing, enhance the likelihood of receiving those payments. The civil penalty for each unpaid toll transaction was permanently reduced from $70 to $25 and the $7 administrative fee per toll transaction for past-due tolls was eliminated, replaced with a single $5 late fee covering all past-due tolls during a billing cycle. We provided more time and more opportunities for a customer to pay unpaid tolls before referring the account to collections or, if necessary, issuing a civil penalty notice. In addition, we provided a reset opportunity for delinquent accounts by allowing them to pay only their tolls that were in the toll violation or collection process and avoid the accumulation of civil penalties, court costs, and collection fees. With improved License Plate Toll payment options and less punitive ways of handling customers with overdue toll payments, customers and our Customer Service Representatives found more to smile about in I always use E-470 to make my round trips from Boulder to DIA (Denver International Airport) One of the biggest parts of a trip is ensuring a smooth commute to and from the airport. E-470 fits that bill perfectly. KEVIN VAISHNAV CHEMICAL ENGINEER FROM BOULDER FREQUENT E-470 CUSTOMER 6

8 2010 FINANCIAL OVERVIEW 2010 OPERATING REVENUES (UNAUDITED) 2010 Budget 2010 Actual Tolls $ 102,642,000 $ 94,309,900 Violations 2,500,000 4,388,000 Investment Income 7,500,000 7,360,700 Vehicle Registration Fees 8,930,000 9,101,600 Highway Expansion Fees 190, ,300 Cell Tower Leases 140, ,800 Permits and Fees 175, ,100 Processing Fees 700, ,300 Miscellaneous Income 450, , REVENUES: $116.9 MILLION 81% TOLLS 6% INVESTMENT INCOME 8% VEHICLE REGISTRATION FEES 5% ALL OTHER REVENUES Total $ 123,227,000 $ 116,908, OPERATING BUDGET (UNAUDITED) 2010 Budget 2010 Actual Operating Fund Revenue $ 123,227,000 $ 116,908, DEBT SERVICE COVERAGE 1.39 Operating Fund Expenses 29,104,700 28,227, Vehicle Registration Fee Debt Service 2,488, , Funds Available for Senior Debt $ 91,633,400 $ 88,351,600 Senior Bonds Debt Service $ 68,581,000 $ 63,576,700 Senior Bonds Debt Service Coverage MINIMUM REQUIRED BUDGETED COVERAGE ACTUAL COVERAGE 7

9 E-470 passes above, and has an interchange with, Pena Boulevard at Denver International Airport. The airport terminal is in the background INCOME STATEMENT AND BALANCE SHEET STATEMENT OF REVENUE, EXPENSES, AND CHANGES IN NET DEFICIT (UNAUDITED) 12 months ended December 31, 2010 Operating Revenue toll operations $ 99,001,315 Operating Expenses Toll road operations 26,747,549 Salaries and benefits 4,958,936 General and administrative 2,075,209 Total operating expenses before depreciation expense 33,781,694 Depreciation expense 33,853,332 Total operating expenses 67,635,026 Operating income 31,366,289 Non-Operating Revenue (expense) Vehicle registration fees 8,646,549 Investment income gain (loss) 10,840,867 Derivative instruments gain (loss) (17,118,480) Interest expense (95,419,612) Other income 1,615,570 Total non-operating revenues (expense), net (91,435,106) Changes in net assets (60,068,817) Net Deficit, beginning of year (378,067,422) Net Deficit, end of year $ (438,136,239) STATEMENT OF NET DEFICIT (UNAUDITED) Assets 12 months ended December 31, 2010 Current assets $ 113,369,783 Non-current assets 167,438,766 Capital assets (net of accumulated depreciation) 722,770,401 Bond issuance costs (net of accumulated amortization) 40,398,615 Total assets 1,043,977,565 Liabilities and Net Deficit Current liabilities 60,264,543 Non-current liabilities 1,421,849,261 Net Assets Total liabilities 1,482,113,804 Invested in capital assets, net of related debt (134,983,088) Restricted for debt services 1,269,497 Unrestricted (304,422,648) Total net deficit (438,136,239) Total liabilities and net deficit $ 1,043,977,565 8

10 An entry ramp to smooth sailing on E was our first full year of fully nonstop tolling. In the background: Pike s Peak. FINANCIAL HIGHLIGHTS IN OUR FIRST FULL YEAR OF FULLY NONSTOP TOLLING As we have in the past, we were diligent in taking steps to safeguard our financial foundation, providing the ability to combine financial flexibility with prudent debt management. Three steps, in particular, highlighted the year: We refunded a portion of our indebtedness. We established a policy of toll increases that are implemented more frequently, although in smaller increments. We created an expanded toll pricing incentive to encourage License Plate Toll (LPT) customers to become EXpressToll customers. LPT customers who transition to EXpressToll help boost our cash flow and significantly reduce our toll processing expense. in 2009 to 51.3 million a 6.9 percent increase. This is an encouraging sign. LPT accounted for 14.1 million toll transactions in 2010 (27.5 percent of all transactions); EXpressToll transactions totaled 37.2 million. Toll and violation revenues grew 3.2 percent, to $98.7 million compared to $95.6 million the prior year. A total of 96 percent of all E-470 toll transactions billed are collected. E-470 YEARLY TOLL TRANSACTIONS AND REVENUE TRAFFIC VOLUME: TOTAL TOLL TRANSACTIONS TOLL AND VIOLATION REVENUE (DOLLARS) TRAFFIC REBOUNDS 2010 was our first complete year of fully nonstop tolling, and we closely monitored what the level of acceptance would be for LPT and how this would impact our traffic and revenues. MILLIONS $77.8 $92.2 $94.4 $89.9 $95.6 $ As for traffic, we measure that in terms of the number of transactions. After two years of declining traffic, we were pleased to see a rebound, with transactions rising in 2010 from 48.0 million

11 The board voted in 2010 to raise tolls on January 1, 2011 for both EXpressToll and License Plate Toll customers, while increasing the discount for EXpressToll customers to 20 percent. BOND REFUNDING To ensure adequate debt coverage, we refunded $103.5 million in near-term bond indebtedness through a tender offering (rather than a call). This enabled us to restructure our debt obligations for the next five years and sustain our stable debt management program, ensure strong reserves, and continue to exceed liquidity requirements. This prudent approach to financial management continued to be reflected in our bond ratings. DEBT SERVICE RESERVES In 2010, we once again exceeded our 1.3 minimum debt ratio requirement. We budgeted for coverage of 1.34 and realized actual coverage of TOLL INCREASE APPROVED E-470 is not tax-funded and tolls are the largest source of revenue to pay down our bond debt as well as meet operational expenses. to meet the increasing debt payment. Scheduled toll increases the most recent in 2003, 2006, and 2009 have helped E-470 keep pace with debt service obligations to bondholders. Rather than waiting three years to boost tolls, as has been the practice in the past, our board in November decided to implement smaller, incremental increases on an annual basis. This will result in improved cash flow, as well as in cumulatively larger toll revenues. On January 1, 2011, tolls were increased for all customers, but by a greater amount for LPT customers, who pay a premium toll rate. EXpressToll customers now receive a larger differential than the 10 percent that had been in effect since LPT was introduced in EXpressToll customers now pay 20 percent less than LPT customers at mainline toll plazas, more reflective of the higher LPT operational billing costs per transaction to E-470. To ensure toll revenues help meet current and future needs, our board of directors in November approved a toll increase for both EXpressToll and LPT customers that took effect January 1, It was the first toll increase since January 1, SMALLER INCREMENTAL TOLL INCREASES; EXPANDED RATE INCENTIVE FOR EXPRESSTOLL CUSTOMERS E-470 s plan of finance was originally adopted and approved by our board of directors in 1990 and reaffirmed in 1995 and again in The plan called for a toll increase every three years in order In 2010, our board voted to refund $103.5 million in near-term bonds. 10

12 E-470 Public Highway Authority East 6th Parkway Suite 100 Aurora, Colorado