NCDOT Funding Overview Joint Appropriations Subcommittee on Transportation Mark L. Foster, CFO H. Tasaico February 16, 2011
Transportation Outlook NCDOT Funding Sources Transportation Funding Equity Cash Management Finance Strategy Conclusions 2
State Transportation System - Largest Capital Asset Per State CAFR - Over $40B Invested Replacement Value - $450B Economic Value - $$$$$$$ (Commerce/Jobs/Lifestyle) 3
System Responsibility State Lane-mile and Ranking Total Disbursements per Lanemile and Ranking US Average US Average Texas 1 Texas 32 North Carolina 2 North Carolina 48 48 Virginia 3 Virginia 47 South Carolina 4 South Carolina 50 Georgia 11 Georgia 24 Florida 13 Florida 3-100,000 200,000 Lane-Miles - 50 100 150 200 4
Public Road Ownership US Average Texas North Carolina Virginia South Carolina State County Local Federal Georgia Florida - 50 100 150 200 250 300 350 Miles in Thousands 5
Local Government Highway Funding Sources ($ in Billions) 0 1 2 3 4 5 6 7 8 Texas North Carolina Virginia State/Federal Governemt Local Government User Fees Property Tax South Carolina Georgia Florida 6
2010 Transportation Texas Institute (TTI) Urban Mobility Report - National Statistics Congestion Costs 1982 - $24 billion 2009 - $115 billion Wasted Fuel 2009-3.9 billion gallons equal to 130 days of flow in the Alaska Pipeline. Commuter Cost (Annual) Commuter Delay 1982 14 hours (NC- 5) 1982 - $351 (NC- $78) 2009 34 hours (NC- 26) 2009 - $808 (NC- $635) 7
US Logistics Survey No NC city ranked in top 50 logistics friendly cities 8
3,500 Age of NCDOT Bridges (not including culverts) 3,000 2,500 Bridges Deficient Bridges 2,000 1,500 1,000 500 0 <1930 1930 1940 1950 1960 1970 1980 1990 2000 9
NC Ranking & Population Growth 14 12 10 Current Census (in Millions) 8 6 Rank:11 Rank:11 Rank:10 Rank:10 Rank:9 Rank:8 Rank:7 4 (VA - 12 SC - 26) (Surpassing New Jersey) (Surpassing Michigan) (Surpassing Georgia) (Surpassing Ohio) 2 0 2000 2005 2010 2015 2020 2025 2030 10
Purchasing Power of NCDOT Highway Construction Dollars (Since 2002) 11
Increased Freight Growth - Driven By: Consumption Population Production Expanding durable and non-durable goods manufacturing Trade Import and Export Growth Supply Chain Practices Changing Logistics Strategies 12
Freight Tonnage by Mode, 2005-2035 With moderate economic growth at about 2.8% CAGR Freight tonnage will nearly double by 2035 13
25-Year Needs 140 120 100 $27 NON-HWY HWY & BRG $ in Billions 80 60 $65B Gap $17 40 $95 $67 20 0 2005 Dollars 2001 Dollars 14 14
Strategic Prioritization Model $54 Billion in Total Transportation Needs Approx. $10.5 Billion in Revenue (Years 2015-2020) Highways $9B in available revenue Data-driven MPO and RPO ranked projects Non-Hwy Transportation $1.5B in available revenue Units establish priorities Coordinated with MPOs $45B in needs 1,100 projects = $38B Other highway needs = $7B $9B in needs 900 Non-Highway Projects 15
Transportation Outlook NCDOT Funding Sources Transportation Funding Equity Cash Management Finance Strategy Conclusions 16
State Transportation Revenue Sources 28% Federal Funds Motor Fuel Tax 55% Highway Use Tax 15% Fees 30% 47% Highway Fund 24% Highway Trust Fund Motor Fuel Tax 92% Fees 8% 1% Other Federal Aid & Department Receipts 17
MFT Rate & Fuel Consumption Fee Rates & Transactions Vehicle Prices, Units Sold & Rate Sources Motor Fuel Tax 55% DMV Fees 30% Highway Use Tax 15% Sources, Funds, Allocation & Distribution 75% 10% 100% Highway Fund 2/3 Total State Revenues Highway Trust Fund 1/3 Total State Revenues Allocation 1¾ Cent of MFT to: Secondary Roads Powell Bill Remainder through Appropriations Transfers to General Fund, Turnpike & GAP ( 172.5M) Mobility Fund ($15M Administration ($44M) Remaining: 61.95% Intrastate* 25.05 Urban Loops* 6.5% Secondary Roads 6.5% Powell Bill *Federal-Aid Match ($236M) & Debt Service ($85M) funded from these programs 18
Highway Fund Highway Trust Fund Sources, Funds, Allocation & Distribution (Cont.) 4.7%Other Construction $85.4M 13.3% Admin $237.8M 16.1% Other Agencies $288.6M 4.9% Powell Bill $87.1M $61.6 M Secondary Roads $15 M Mobility Fund $44.5 M Admin $72.9M General Fund 52.1% Maintenance $933.6M $127.M Loops $394.1M Intrastate Distribution Maintenance 90% Mileage + 10% Population Contract Resurfacing 50% Needs + 37.5% Mileage + 12.5% Population Secondary Road Construction County Mileage/Statewide Population Powell Bill 75% Population + 25% Mileage Equity Formula 50% Population + 25% Remaining Mileage + 25% Equal Share $44.4 M Powell Bill 19
Transportation Revenue Sources 2001 to 2010 - Actual 2011 to 2015 - Forecasted 3,500 3,000 Fees + Investments Highway Use Motor Fuel Revenues $325M less than in 2007 Revenues Return to 2007 levels 2,500 $ in Millions 2,000 1,500 1,000 500 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 State Fiscal Year 20
Cash Model Revenue Comparison - Forecast vs Actual 21
Fuel Consumption Annual Change 10% 5% 0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011-5% Gasoline Diesel -10% SFY 2011 Through November -15% 22
Motor Fuel Tax Collection Terminal Locations 23
Federal Gasoline Tax 0.1 cent 18.4 cents L.U.S.T. Trust Fund 15.44 cents Highway Account 2.86 cents Mass Transit Account Effective October 1, 1997 In cents per gallon 24
Federal Diesel Tax 0.1 cent 24.4 cents L.U.S.T Trust Fund 21.44 cents Highway Account 2.86 cents Mass Transit Account Effective October 1, 1997 In cents per gallon 25
Federal Highway Rate of Return Source GAO Note: Calculations compare the share of the total funding each state received through the apportioned programs and High Priority Projects in FY2005-2009 with the estimated share of the national total that each state contributed into the Highway Account in the corresponding revenue years (FY2003-2007). 26
Current Federal Programs FHWA 62 FTA 20 FRA 6 NHTSA 12 FMCSA 8 Total 108 27
Federal Trust Fund Outlook 30 20 10 0-10 -20 1995 2000 2005 2010 2015 Highway Account Balance in Billions Transit Account Balance in Billions 12 10 8 6 4 2 - (2) (4) (6) (8) 1995 2000 2005 2010 2015 28
Federal Reauthorization Status 2012 Budget Proposal will be released on February 14 Authorization SAFETEA-LU Expired 9/30/2009 Deadlock over Financing Plan Size of Multi-modal Program Diversified Revenue Portfolio Sustainability Appropriation 3 rd CR through 3/4/2011 (155/365 th of FFY 2010 Funding) Loss of Firewall Earmarks are almost certainly dead 29
Highway Programs National Impact $7B North Carolina Share Potential Funding Reductions FFY 2011 $190M (or 20% of FFY 2010) FFY 2012 $200M (or 21% of FFY 2010) FFY 2013 $220M (or 23% of FFY 2010) Reductions could start in FFY 2011 Transit Programs National Impact $2.5B North Carolina Share FFY 2011 $21M (or 23% of FFY 2010) FFY 2012 $21M (or 23% of FFY 2010) FFY 2013 $21M (or 23% of FFY 2010) Reductions could start in FFY 2011 30
Transportation Outlook NCDOT Funding Sources Transportation Funding Equity Cash Management Finance Strategy Conclusions 31
North Carolina Highway Trust Fund HB 399 became law on July 27, 1989 Four Goals established: Complete the Intrastate Highway System Build multi-lane connector or Loop roads near seven major urban areas (Asheville, Charlotte, Durham, Greensboro, Raleigh, Wilmington and Winston-Salem) Pave State Maintained Dirt Roads Increase by 50% Street Aid to Municipalities allocation (Powell Bill Funds) 32
North Carolina Highway Trust Fund (continued) Established Distribution (Equity) Formula Applies To All Funds Established Seven Regions Within the State Distributed as follows Completed Intrastate System Mileage Current at 77% Until 90% After 90% Population 1 50% 66% Equal Share 25% 34% Remaining Miles 25% - To Complete 1 As Certified by the State Demographer 33
Relationship Between Divisions and Funding Regions G 14 13 11 F 12 10 9 D E 7 8 6 C 5 4 3 A 2 B 1 34
1989 Equity Formula 50% POPULATION OF REGION AS PERCENT OF STATE 25% REMAINING INTRASTATE SYSTEM MILES 25% EQUAL SHARE Loops, CMAQ, Competitive Federal Grant Funds, Appalachian Development, Mobility Fund Excluded & Yadkin River Bridge Phase 1 GARVEE Bonds 35
Urban Loops Exemptions to Distribution Formula Effective Date Original law Competitive Awards or Discretionary Grants through July 1, 1999 Federal Appropriations Federal Congestion Mitigation and Air Quality funds July 1, 2000 (CMAQ) Yadkin River Bridge Phase I GARVEE Bond July 1, 2010 Payments Appalachian Development Highway System Funds July 1, 2010 Mobility Fund July 1, 2010 NOTE: The Equity Formula only applies to about a third of DOT Expenditures. The General Assembly and the Department have created other formulas that apply to DOT expenditures on maintenance, rail, transit, aviation, etc. Turnpike Gap Funding is also exempt from Equity Distribution. 36
38.4% TIP Construction $1,452.9M GARVEE Bonds 82.0 Federal Funds State Funds Mobility Fund Turnpike (excluding Bond Finance) 828.1 501.8 39.0 84.0 GHSP & Other 0.3% $13.1M Other Modes $255.2M 6.8% Aviation Rail Public Transit Ferries Bike & Ped Administration $321.5M DOT DMV DOH Trust Fund 37.8 25.9 114.6 41.1 35.8 108.2 131.5 37.3 44.5 NCDOT Budget & Equity Formula Debt Service $166.5M GO Bonds 84.5 8.5% 9.5% 4.4% 71.4% All Construction & Maintenance Funds Subject to Equity 1/3 of Total NCDOT Budget State Agency Transfers $361.3M General Fund Highway Patrol Public Instruction Other Agencies 90.0 201.5 54.0 15.8 Municipal Aid $131.5M 3.5% 3.9% Other Construction $147.1M Secondary Roads Discretionary Funds Spot Safety Public Service Roads Small Urban Const. 117.1 12.0 9.1 1.9 7.0 24.7% Highway Maintenance $933.9M 37
All NCDOT Expenditures 1990-2010 38
Transportation Outlook NCDOT Funding Sources Transportation Funding Equity Cash Management Finance Strategy Conclusions 39
Benefits of Cash Management Promotes sound financial management Integrates all business functions Maximizes cash to deliver projects and programs Provides interactive planning and forecasting tools Enables innovative financing Establishes management controls to minimize financial risk 40
NCDOT Financial Planning & Cash Model Fully Integrated NC ---------------------------------------------------------------------------------- --------------------------- 20 yr Long Range NCDOT North Carolina Comprehensive Plan N.C. Transportation Plan Economic Indicators Revenue Projections Program & Resource Plan Work Program 5 yr 10 yr Strategic Planning Prioritization STIP Budget Cash Model Innovative Finance: GARVEE Design Build DB Finance Tolling TIFIA Annual Maintenance Biennium Budget of Effort Spend Plans 1 yr 41
Cash Management Legislation SB1005 created financial management policies 2002 Session Authorized combining of Highway Fund & Highway Trust dollars to maximize program delivery Cash flow basis authorized projects to be programmed, awarded, and paid over time Required the establishment of management controls & forecasting procedures Established cash target equivalent to 12% of anticipated revenues plus estimated Powell Bill allocation NCGS 143C-6-11 Established cash balance floor equivalent to approximately 5% of anticipated revenues 42
$ millions Revenues Other Modes Construction Expenditures Cash Balance Target 1250 1000 750 500 Other Expenditures Maintenance Expenditures Closing Cash Balance Cash Balance Floor REVENUES State revenues, Federal Aid, GARVEE, Tolls Partnerships CONSTRUCTION EXPENDITURES GARVEE Expenditures & Debt Service Ecological Enhancement Program NC Moving Ahead & SB 1005 TIP (PE, ROW, Construction) Other Construction Turnpike Authority Internal Orders CMAQ MAINTENANCE EXPENDITURES Primary, Secondary, & Urban Systems Contract Resurfacing System Preservation & Disaster Funding OTHER MODES Public Transportation & New Starts Ferry, Railroad and Airports 250 0 OTHER EXPENDITURES Administration State Agencies, General Fund & Turnpike Transfers State aid to municipalities Debt Service and Other Programs Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec 43
100 Cash Flow vs. Budget 80 60 Budget Cash Flow 40 20 0 Year 1 Year 2 Year 3 Year 4 44
120 100 80 60 40 20 0 Construction Contractors Payment History by Let Year Millions Apr '00 Oct '00 Apr '01 Oct '01 Apr '02 Oct '02 Apr '03 Oct '03 Apr '04 Oct '04 Apr '05 Oct '05 Apr '06 Oct '06 Apr '07 Oct '07 Apr '08 Oct '08 Apr '09 Oct '09 Apr '10 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 45
Cash Model - 10 Year Work Program SFY 2011 - SFY 2020 46
Transportation Outlook NCDOT Funding Sources Transportation Funding Equity Cash Management Finance Strategy Conclusions 47
Finance Strategy Prioritization of Existing Resources Policy to Projects Outcomes Based Value Engineering Asset Management Funding Flexibility Outsourcing Public/Private Resources (P3) Municipal Agreements Design Build/Design Build Finance P3 (Public & Private) Sponsorships Sustainable Leverage GARVEE Bonds Toll Financing 48
Public-Private Partnerships (P3) Provide a new source of capital for state and local governments 49
Spectrum of Private Sector Risk and Involvement
Active P3 s within NCDOT Design Build / Design Build Finance 55 Design Build projects active/complete to date 14 Projects Advertised for future award Yadkin River Bridge savings $95M Monroe Connect/Bypass bid savings $100M Charlotte projects accelerated up to 7 years with cost savings $130M Contractual Agreements Authorize public/private sector role in delivery and financing of transportation projects (30-50 per month) Interstate Maintenance Contractor maintains 135 miles (I-77, I-85, I-485 & I-277) Mecklenburg & Cabarrus counties Randolph County Rest Area Operated by Safe-T-Concierge 51
Turnpike Authority - Mid-Currituck Bridge Public Private Partnership Financial analysis including evaluation of private financing versus traditional toll financing underway 52
Future Initiatives - Potential P3 Opportunities Charlotte "Gateway Station" commuter rail and transit multi-modal center I-77 HOT Lanes 53
Rail Initiatives/Opportunities NCDOT adds third passenger service Raleigh to Charlotte Ridership increases 46% $545M to Accomplish Corridor Plan City of Charlotte LYNX Light Rail Passenger Service exceeds national growth rates 54
55
Debt Affordability 2010 Study Findings 56 77.6 84.2 79.2 81.5 79.2 60.3 48.9 61.2 25.0 84.0 99.0 112.0 112.0 112.0 112.0 112.0 8 9 250 200 150 100 50 0 Availability Funding GAP Funding Debt Service 6% of Transportation Revenue 6.5% 6.3% 6.3% 6.2% 5.8% 5.4% 5.3% 3.9% 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year Total Debt Service ($ Millions)
Conclusion Finance has an Integral Role in Achieving NCDOT Goals and Performance Fiscally Balanced, 10-Year Work Plan Cash Model is Important Tool for Program Delivery and Contingency Planning Strategic Use of Innovative Finance has Accelerated Project Delivery and Saved $millions 57
Key Issues and Opportunities Sustainability of Gas Tax Revenues Address Changing Technology Transition Strategy Impact of Federal Rescissions and Budget Cutbacks Funding Flexibility to Achieve Performance Outcomes Both Federal and State Dollars Protect and Enhance NC s Largest Economic Asset Continued Focus on Resource Prioritization, Internal Efficiencies, & Outsourcing Opportunities Broaden Strategic Use of Innovative Finance and Partnerships Expand Ability to Recover Inflationary Costs as World Economy Recovers 58