This annual continuing disclosure report contains or references the following information:

Transcription

1 State Highway Fund Annual Continuing Disclosure Report For the Ended August 31, 2014 Filed by Texas Transportation Commission Pursuant to Undertaking Provided to Permit Compliance with SEC Rule 15c2-12 February 17, 2015 The financial information and operating data with respect to the Texas Transportation Commission (the Commission ) and the State Highway Fund (the State Highway Fund or SHF ) set forth below is to be provided annually in accordance with the contractual continuing disclosure undertakings of the Commission described in the various official statements for which the Commission has made such undertakings, including as an obligated person, as required by U.S. Securities and Exchange Commission Rule 15c2-12 (collectively, the Undertaking ). The titles and numbering of the tables set forth below containing the financial information and operating data required by the Undertaking, in some instances, may deviate from the titles and numbering used for comparable tables contained in some of the official statements that the Commission is obligated to update pursuant to the Undertaking. In addition, certain financial information and operating data presented below may be in addition to what may be required in any particular Undertaking. This annual continuing disclosure report contains or references the following information: I. Updated Annual Financial Information and Operating Data: Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8 Table 9 Table 10 Table 11 Table 12 Debt Service Requirements and Projected Coverage Statement of Revenue, Expenditures and Changes in Fund Balance State Highway Fund by Source State Motor Fuels Tax Credited to the State Highway Fund Taxable Gasoline & Diesel Fuel Consumption in Texas State Motor Vehicle Registration Fees Credited to the State Highway Fund Vehicles Registered in Texas Other State Revenue Sources Credited to the State Highway Fund Reimbursements from Federal Funds Federal Transportation Funds Apportioned & Allocated to the Department Federal Transportation Obligation Authority for Department Guaranteed Highway Programs Appropriations to Department from the State Highway Fund II. Texas Department of Transportation Annual Financial Report (Audited) The Texas Department of Transportation s Annual Financial Report (With Independent Auditors Report) for the Ended August 31, 2014 is hereby incorporated by reference and was previously filed with the Electronic Municipal Market Access System (EMMA) on December 31, 2014 under CUSIP Prefix 88283L. The report may be accessed over the internet at III. Supplemental Information Summary of State Highway Fund First Tier Revenue Bonds Sequestration Effects on the State Highway Fund Subsequent Events Page 1

2 I. Updated Annual Financial Information and Operating Data Outstanding First Tier Senior Obligation Debt Service Annual Continuing Disclosure Report State Highway Fund FY 2014 (Cont d) Table 1 State Highway Fund Debt Service Requirements and Projected Coverage For the Ended August 31, 2014 (In Millions) 2014 Pledged (3) Aggregate Debt Service Coverage (before BAB subsidy) Aggregate Debt Service Coverage (net of BAB subsidy) BAB Subsidy Payments Net Debt Service 2015 $ $ (25.07) $ $ 7, x 23.70x (25.06) , x 23.68x (25.06) , x 23.68x (25.06) , x 23.68x (25.06) , x 23.68x (25.06) , x 23.68x (25.06) , x 23.68x (25.06) , x 23.68x (25.06) , x 19.34x (23.91) , x 19.34x (23.61) , x 20.44x (23.18) , x 22.06x (21.82) , x 19.28x (18.13) , x 19.28x (12.45) , x 19.27x (6.33) , x 19.26x , x 40.92x , x 40.92x , x 40.91x , x 40.92x Total $ 6, $ (354.94) $ 6, Note: Numbers may not compute due to rounding. For purposes of illustration, the interest on the variable rate Series 2006-B and Series 2014-B Bonds, being a portion of the Outstanding First Tier Obligations, is assumed at 2.5%, including remarketing and liquidity fees, as applicable. The Build America Bonds ( BAB ) subsidy shown reflects a reduction due to the Sequester Cuts made in the federal fiscal year ending September 30, Going forward, a 7.3% reduction in BAB subsidy payments has been announced by the federal government for the federal fiscal year ending September 30, 2015, and in the table above, is assumed to apply to the BAB subsidy payments beginning with the April 1, 2015 payment and continuing through the federal fiscal year ending September 30, 2024 (October 1, 2024 payment). See "Supplemental Information: Sequestration Effects on the State Highway Fund" herein. (3) Pledged presented on a modified accrual basis. BAB subsidy payments are not included in Pledged. Page 2

3 Table 2 Statement of, Expenditures and Changes in Fund Balances State Highway Fund For s Ended August 31 (In Thousands) REVENUES: Taxes $ 40,356 $ 2,313,017 $ 2,366,486 $ 2,419,421 $ 2,488,136 Federal (3) 1,769,065 2,173,413 2,525,989 2,653,415 3,329,875 Federal Pass Through 22,022 8,495 5,811 1, State Pass Through Licenses, Fees and Permits 220, , ,952 85,417 26,239 Interest & Investment Income 42,000 46,176 21,288 16,275 22,739 Land Income 6,409 6,679 9,650 15,637 13,649 Settlement of Claims ,715 11,616 16,920 Sales of Goods and Services 203, ,066 7,871 53,108 34,501 Other 5,839 4, ,831 TOTAL REVENUES (4) 2,309,296 4,922,311 5,081,628 5,257,014 5,952,956 EXPENDITURES: Salaries and Wages 586, , , , ,831 Payroll Related Costs 214, , , , ,398 Professional Fees and Services 242, , , , ,224 Federal Pass Through Expenditures 10,930 11,881 16,334 24,157 14,407 State Grant Pass Through Expenditures ,508 - Travel 3,804 4,067 4,641 4,923 7,453 Materials and Supplies 321, , , , ,419 Communications and Utilities 52,638 47,933 45,984 45,514 45,236 Repairs and Maintenance (5) 1,217, ,847 1,493,112 1,888, ,523 Rentals and Leases 10,510 10,823 9,040 10,022 26,357 Printing and Reproduction 3,146 1,994 1,973 1,754 3,620 Claims and Judgments 11,189 8,142 5,861 6,155 11,668 Intergovernmental Payments 379, , , , ,846 Public Assistance Payments 23,109 15,818 34,938 10,388 21,780 Other Expenditures 208, ,746 22, , ,095 Total Transportation Expenditures 3,286,670 3,223,410 3,625,101 4,449,911 2,966,857 Principal on Pass-Through Tolls ,339 57, , ,889 Interest on State Highway Fund Bonds Other Financing Fees 13,241 5,555 5,132 1,977 7,156 Capital Outlay (5) 2,120,040 2,506,287 2,385,290 1,972,758 4,243,349 TOTAL EXPENDITURES 5,420,156 5,769,923 6,073,369 6,529,759 7,322,401 EXCESS (DEFICIT) OF REVENUES OVER (UNDER) EXPENDITURES (3,110,860) (847,612) (991,741) (1,272,745) (1,369,445) OTHER FINANCING SOURCES (USES): Operating Transfers In 3,381,834 1,265,717 1,721,623 1,565,247 1,814,231 Operating Transfers Out (929,458) (1,079,345) (1,063,308) (1,082,000) (838,441) Bond & Note Issued 1,727, ,533 Bonds Issued for Refunding ,262 Premiums on Bonds Issued ,586 Payments to Escrow for Refunding (945,414) Insurance Recoveries 10,558 10, Sale of Capital Assets 4,531 3,363 11,064 4,318 7,732 TOTAL OTHER FINANCING SOURCES (USES) 4,195, , , ,565 1,689,489 NET CHANGE IN FUND BALANCES 1,084,387 (647,268) (322,362) (785,180) 320,044 FINANCIAL STATEMENT-FUND BALANCES BEGINNING FUND BALANCES (6) (219,455) 864, , ,340 (471,546) Restatements (6) - (1,584) 383,622 36,303 3,245,412 BEGINNING FUND BALANCES, Restated (6) (219,455) 863, , ,643 2,773,866 ENDING FUND BALANCES (7) $ 864,932 $ 216,080 $ 277,340 $ (471,537) $ 3,093,910 Note: Numbers may not compute due to rounding. See footnotes to Table 2 on following page. [The Remainder of this Page is Intentionally Left Blank] Page 3

4 Table 2: Footnotes Audited financial statements were prepared for fiscal years 2012 and 2014 due to legislative requirements; all other years presented were unaudited. All financials are presented on a modified accrual basis of accounting. The State Highway Fund is considered a shared fund and is appropriated for use by multiple state agencies. The Texas Department of Transportation ( TxDOT ) is considered the controlling agency for the State Highway Fund and reports the total cash balance in the fund at fiscal year-end. TxDOT reports interagency transfers with other agencies that collect and deposit to or expend out of the State Highway Fund. In 2010, Operating Transfers In largely reflects the receipt of motor fuel tax revenues which, beginning in 2011, were reported as revenues. After 2010, Operating Transfers In primarily reflects vehicle registration fees transferred from the Department of Motor Vehicles. Operating Transfers Out mainly reflects transfers to Department of Public Safety for its cash expenditures out of the State Highway Fund. (3) In 2010, Federal are lower than other years primarily due to lower than expected reimbursements because of delays in project advancements and, to a lesser extent, the effects of decreased tapered match reimbursements from the federal government. Federal increased significantly in 2014 because of construction that began on major projects resulting in a corresponding increase in federal reimbursements for project capital expenditures. (4) Total, as reported in the Statement of Revenue, Expenditures and Changes in Fund Balance is different from Pledged as defined by the Master Resolution. For further information on Pledged, see the State Highway Fund Official Statement dated March 7, (5) In 2014, TxDOT adopted the depreciation approach for highways, for which the modified approach was previously used. Certain highway expenditures that were reported as Repairs and Maintenance expense in prior years are treated as capital outlays in 2014, which is the primary reason for the 2014 decrease to Repairs and Maintenance expense and increase to Capital Outlay. (6) Due to the implementation of GASB 65 in 2014, the beginning fund balance was restated by $3.2 billion to reflect the adjustments of deferred revenue for unamortized balances of upfront service concession arrangement payments received prior to (7) The Ending Fund Balances of the State Highway Fund declined from 2010 to 2013 largely due to the issuance in 2010 of State Highway Fund bonds and gradual expenditure over time of those bond proceeds. The substantial increase in 2014 mainly reflects the impact of Restatements (see note 6) and the issuance in 2014 of State Highway Fund bonds. Table 3: State Highway Fund by Source (In Millions) The following table sets out the amount of total State Highway Fund, which are derived from each of the following sources for the last five fiscal years: State motor fuels tax, State motor vehicle registration fees, other State revenue sources, and reimbursements from federal funds. Such sources are affected by a number of economic, demographic and environmental factors, including population growth in the State. in the following tables are presented on the modified accrual basis of accounting, unless otherwise indicated, and exclude Restricted. Total Fund have increased approximately 8.2% over the last five fiscal years. State Motor Fuels Tax State Motor Vehicle Registration Fees Other State Revenue Sources Reimbursements from Federal Funds Total Fund (Table 4) (Table 6) (Table 8) (Table 9) 2010 $ 2,230.1 $ 1,171.6 $ $ 1,791.1 $ 5, , , , , , , , , , , , , , , , ,441.1 [The Remainder of this Page is Intentionally Left Blank] Page 4

5 Table 4: State Motor Fuels Tax Credited to the State Highway Fund (In Millions) The State currently levies a motor fuels tax of $0.20 per gallon on gasoline and diesel fuel, and $0.15 per gallon equivalent on liquefied natural gas and compressed natural gas. Sales of motor fuels for the exclusive use of the federal government or a public school district in the State are exempt, and sales of liquefied gas for the exclusive use of the federal government, local county government or a public school district in the State are exempt. The Comptroller of Public Accounts (the "Comptroller") retains 1% of the gross receipts for administration and enforcement, and after providing for refunds or non-highway use collections, distributes the remainder as hereinafter described. Pursuant to Article VIII, Section 7-a of the Texas Constitution, 25% of the net revenues generated from the State motor fuels tax (net of enforcement, administrative and refund charges) are deposited to the credit of the "Available School Fund" in support of the State s primary and secondary schools, and 50% of such revenues are deposited to the credit of the SHF. The remaining 25% is deposited to the county and road district highway fund, which is administered by the Comptroller, until a maximum of $7.3 million annually has been deposited, after which the remaining amount is deposited to the SHF. The following table sets out the amount of the State motor fuels tax credited to the SHF for the last five fiscal years, which has increased at an average annual rate of approximately 2.3% over the last five fiscal years, and the approximate percentage of Total Fund for such years that constituted State motor fuels taxes. Not shown in the table below, is the average Total Fund from the State Motor Fuels Tax over the last five fiscal years, excluding Reimbursements from Federal Funds, which is approximately 59.4%. State Motor Fuels Tax Total Fund 2010 $ 2, % , % , % , % , % Table 5: Taxable Gasoline and Diesel Fuel Consumption in Texas (In Millions of Gallons) Total motor fuel consumption has increased at an average annual rate of approximately 4.4% over the past five fiscal years, with gasoline consumption increasing at an average annual rate of approximately 2.8% and diesel consumption increasing at an average annual rate of approximately 9.1% during such period. The following table sets out the amount of the taxable gasoline and diesel fuel consumption in the State for the last five fiscal years. Gasoline Diesel , , , , , , , , , ,946.9 [The Remainder of this Page is Intentionally Left Blank] Page 5

6 Table 6: State Motor Vehicle Registration Fees Credited to the State Highway Fund (In Millions) The State currently charges motor vehicle registration fees under a number of statutory provisions. The Texas Department of Motor Vehicles) shares motor vehicle registration responsibilities with county governments that assist with this function. from vehicle registrations are shared between the SHF and the counties and have increased at an average annual rate of approximately 4.0% during the last five fiscal years. The table below sets out the amount of such revenues credited to the SHF for the last five fiscal years, the approximate percentage of total motor vehicle registration fee revenues represented by such amount, and the approximate percentage of Total Fund for such years that constituted motor vehicle registration fees. Not shown in the table below, is the average annual Total Fund from Motor Vehicle Registration Fees over the last five fiscal years, excluding Reimbursements from Federal Funds, which is approximately 32.3%. State Motor Vehicle Registration Fees Total State Motor Vehicle Registration Fees to Total Collections, Net Total Fund 2010 $ 1, % 22% , % 19% , % 20% , % 20% , % 18% Represents estimated percentage of total state motor vehicle registration and license fees to total collections, net of refunds, for the State, counties, and for specialty license plates. Table 7: Vehicles Registered in Texas (In Millions) The following table sets out the number of vehicles registered in the State for the last five fiscal years, which has increased at an average annual rate of 2.6% over the last five fiscal years: Number of Vehicles [The Remainder of this Page is Intentionally Left Blank] Page 6

7 Table 8: Other State Credited to the State Highway Fund (In Millions) The State generates or receives funds from a variety of sources that are credited to the SHF. Such sources of funds include, without limitation, sales taxes on motor lubricants, funds from local governments that are participating in State highway projects, interest earnings on the dedicated funds deposited to the credit of the SHF, oversize and overweight trailer permit fees, vehicle title certificate fees, revenues from Texas Highways magazine, and other reimbursements received by the Department. With the exception of the sales tax on motor lubricants and interest earnings on dedicated funds, these other revenue sources are not dedicated or committed by constitutional provision to the SHF. The following table sets out the aggregate amount of funds generated from these sources and credited to the SHF for the last five fiscal years and the approximate percentage of the Total Fund for such years generated from such sources. Not shown in the table below, is the average annual Total Fund from Other State Revenue Sources over the last five fiscal years, excluding Reimbursements from Federal Funds, which is approximately 8.3%. Other State Total Fund 2010 $ % % % % % Excludes loan repayments received by the State Infrastructure Bank and amounts credited to the SHF from the Texas Mobility Fund for payment to contractors. For administrative purposes, expenses of the Texas Mobility Fund are processed through the SHF and reimbursed from the Texas Mobility Fund. Table 9: Reimbursements from Federal Funds (In Millions) Federal transportation program funds credited to the SHF for the last five fiscal years, and the portion of the Total Fund represented by federal reimbursements, are shown in the following table. Such funds have increased at an average annual rate of approximately 17.3% over the last five fiscal years Reimbursements from Federal Funds Total Fund 2010 $ 1, % , % , % , % , % See section entitled Supplemental Information for information regarding the potential impact of recent developments affecting programs funded by the federal government, including federal reimbursements. Excludes funds received for projects financed through the American Reinvestment and Recovery Act (ARRA) beginning in Federal increased significantly in 2014 because of construction that began on major projects, resulting in a corresponding increase in federal project capital expenditures. [The Remainder of this Page is Intentionally Left Blank] Page 7

8 Table 10: Federal Transportation Funds Apportioned and Allocated for Texas (In Millions) The following table provides a history of the apportionments and allocations, as applicable, to the Department for certain federal highway funding programs in the State for the last five federal fiscal years. Federal Guaranteed Highway Programs Discretionary/ Allocated Highway Programs Transit Programs Total 2010 $ 3,296.2 $ 2.7 $ 60.8 $ 3, , , , , , , , ,416.5 Based upon data from the United States Department of Transportation. Excludes federal funds apportioned and allocated for the State s Aviation Programs. Transit Programs reflect funds that are administered by or flow through TxDOT and awarded to sub-recipients. Funds given directly to sub-recipients in the State are excluded. Table 11: Federal Transportation Obligation Authority limitation for Texas Guaranteed Highway Programs (In Millions) The following table provides a history of the obligation authority limit to the Department for Guaranteed Highway Programs in the State for the last five federal fiscal years. Federal Obligation Authority limitation 2010 $ 3, , , , ,359.7 Excludes obligation authority limitation for the State's Aviation and Transit Programs. The overall Obligation Authority limitation received for the Guaranteed Highway Program has historically been less than the apportionment. However, in 2014, the Obligation Authority limitation exceeded the total FY 2014 apportioned funds since TxDOT requested and received additional funds from a redistribution of Obligation Authority that other states were not able to use in the fiscal year. This redistribution allowed TxDOT to spend more on projects in FY 2014 than we had anticipated. Table 12: Appropriations to the Department from the State Highway Fund (In Millions) The following table sets out the appropriation of funds by the Legislature to the Department for the five most recent State biennia, including the current State biennium and the approximate percentage of total appropriations from the SHF represented by such appropriations. State Biennium Amount Appropriated Total State Highway Fund Appropriations $13, % , , , , Amounts include appropriations made to other State Agencies (e.g., the Employees Retirement System of Texas) for the benefit of the Department. Minor revisions reflect final adjustments to the General Appropriations Act. The Department received an increase in SHF appropriations in fiscal year mainly due to a large beginning balance in the fund, increased federal funds, and higher than anticipated registration fee revenue. Page 8

9 II. Texas Department of Transportation Annual Financial Report (Audited) The Texas Department of Transportation s Annual Financial Report (With Independent Auditors Report) for the Ended August 31, 2014 is hereby incorporated by reference and was previously filed with the Electronic Municipal Market Access System (EMMA) on December 31, 2014 under CUSIP Prefix 88283L. The report may be accessed over the internet at III. Supplemental Information Summary of State Highway Fund First Tier Revenue Bonds (In Thousands) Original Principal Amount Principal Amount Outstanding as of 08/31/14 Description Series 2006 $ 600,000 $ 54,665 Series 2006-A 852, ,020 Series 2006-B (Variable Rate Bonds) (3) 100, ,000 Series ,241, ,870 Series , ,175 Series 2010 (Taxable Build America Bonds Direct Payment) 1,500,000 1,500,000 Series 2014-A 1,157,795 1,157,795 Series 2014-B (SIFMA Index Floating Rate Bonds) 300, ,000 Total $ 5,915,185 $ 4,310,525 See TxDOT 2014 Annual Financial Report Schedule 2A- Miscellaneous Bond Information, page 118. See TxDOT 2014 Annual Financial Report Schedule 2B- Changes in Bond Indebtedness, page 120. (3) The related Standby Bond Purchase Agreements to such bonds have the same security as such bonds. Sequestration Effects on the State Highway Fund Pursuant to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, certain automatic reductions in federal spending (the "Sequester Cuts") took effect as of March 1, 2013 for the federal fiscal year ending September 30, As a result of the Sequester Cuts, the Department experienced a reduction of $4.1 million in apportionment and obligation authority from the National Highway Performance Program, which is administered by the Federal Highway Administration for highway projects that are located on the National Highway System in FY The Department currently anticipates a reduction of $2.8 million for the federal fiscal year ending September 30, The Sequester Cuts also affected the subsidy payments to be made by the federal government to issuers of "direct-pay" tax credit bonds, such as Build America Bonds ("BABs"). The Commission issued $1,500,000,000 of its State Highway Fund First Tier Revenue Bonds, Taxable Series 2010 (Build America Bonds - Direct Payment) (the "Series 2010 Bonds") as BABs and elected to receive a subsidy payment from the United States Treasury equal to 35% of the amount of each interest payment on the Series 2010 Bonds. For federal fiscal year 2015, BAB subsidy payments processed between October 1, 2014 and September 30, 2015 will be reduced by 7.3%. This equates to a reduction of approximately $2.0 million in BAB subsidy payments related to the Series 2010 Bonds if two payments are processed in federal fiscal year On February 15, 2014, the Bipartisan Budget Act of 2013 was amended to, among other things, extend the planned Sequester Cuts to 2024, however, at this time, the Commission and Department make no representations as to whether the Sequester Cuts will remain in effect and cause a reduction in receipt of federal funds or BABs subsidy payments for any future year. Page 9

10 Subsequent Events Proposition 1 During the 3rd called special session of the 83rd State Legislature that ended on August 5, 2013, Senate Joint Resolution Number 1 ("SJR 1") was passed by the Texas Legislature and was approved by the State s voters as proposition 1 ( Proposition 1 ) at the November 4, 2014 general election. Proposition 1 authorized the use and dedication of certain money transferred to the SHF to assist in the completion of transportation construction, maintenance and rehabilitation projects, not including toll roads. Proposition 1 requires the Comptroller to transfer from the General Revenue Fund an amount of certain excess oil and gas production taxes to the Economic Stabilization Fund ( ESF ) and the SHF. House Bill 1 ("HB 1"), which was also approved during the 3rd called special session of the 83rd State Legislature, establishes a legislative process to ensure an appropriate amount of revenue is available in the ESF each biennium. HB 1 further provides that the Comptroller, before making any transfers to the ESF or the SHF each year, shall determine whether the sum of the balance of the ESF plus any projected transfers to the ESF is less than the sufficient balance adopted by the State Legislature. If the Comptroller determines that this amount is less than the sufficient balance adopted by the State Legislature, then the Comptroller shall reduce the allocation to the SHF and increase the allocation to the ESF, in an equal amount, until the sufficient balance adopted by the State Legislature for the ESF is achieved. Absent any appropriations by the Legislature, the ESF balance is expected to be $11.1 billion at the end of the biennium, below the ESF constitutional limit of an estimated $16.1 billion based on the Comptroller s biennial revenue estimate for the biennium. In December 2014, the Legislature s Joint Select Committee to Study the Balance of the ESF set the minimum balance of the ESF which resulted in a $1.74 billion distribution in FY 2015 to the SHF. With approval from the Legislature, TxDOT plans to distribute FY 2015 funds as follows: 40 percent to Metropolitan Planning Organizations to address congestion; 30 percent to TxDOT districts to address connectivity; 15 percent to TxDOT districts to address maintenance needs; and 15 percent to TxDOT districts for state highways in areas affected by energy development activities. Supplemental Resolution At the January 29, 2015 Commission meeting, the Commission approved a supplemental resolution authorizing the issuance of up to $700.1 million for additional new money, and refunding of certain outstanding State Highway Fund obligations, to achieve a debt service savings or to refund outstanding variable rate bonds. This approval ceases to be effective on January 31, 2016, unless the Commission acts to extend the effective date of the resolution. Appointments to the Commission On February 13, 2015, Governor Greg Abbott announced the appointments of J. Bruce Bugg Jr. and Tryon Dexter Lewis to the Commission, for terms set to expire February 1, The appointments are subject to confirmation by the Texas Senate. If confirmed, Mr. Bugg and Mr. Lewis will replace Ted Houghton and Fred Underwood, whose terms expired February 1, 2015, but who will continue to serve until their replacements take office. By law the governor designates one of the commissioners to serve as chair. As of February 17, 2015 Governor Abbott has not designated a chair. Page 10