CASH MANAGEMENT & CONTRACT AWARDS Brian Ragland, Chief Financial Officer Bill Hale, Chief Engineer Randy Hopmann, Director of District Operations Footer Text Date
I. Cash Management Practices 2
FY 2018-2019 Source of Funding (per SB1) Bond Proceeds (2.4%) SHF Surplus/CDA Fees (1%) Prop 7 Funds (10.9%) Prop 1 Funds (9.4%) TMF (3.8%) Traditional State Sources (33%) General Revenue (<0.1%) Federal Reimbursements (39.4%) Federal Reimbursements $10.5 B Traditional State Sources $8.8 B Proposition 1 Funds $2.5 B Proposition 7 Funds $2.9 B SHF Surplus/CDA Fees $0.3 B Bond Proceeds $0.6 B Texas Mobility Fund (TMF) $1.0 B General Revenue $0.0 B Total $ 26.6 B Totals and percentages may not sum due to rounding. 3
FY 2018-2019 Uses of Funding New Projects From Cash (3.8%) Administration & Support (2.2%) Other Modes & Services* (2.1%) Project Development Cost (14.9%) Pay Back Borrowed Funds (7.8%) Prop 7 (9.5%) Prop 1 (9.4%) Toll Subaccount Projects (1%) Projects begun prior to Biennium (12.1%) Maintain & Replace Existing System (37.1%) Projects begun prior to Biennium Maintain & Replace Existing System Proposition 1 Proposition 7 Pay Back Borrowed Funds New Projects from Cash Project Development Cost Other Modes & Services * Administration & Support Toll Subaccount Projects Total $3.2 B $9.9 B $2.5 B $2.5 B $2.1 B $1.0 B $4.0 B $0.6 B $0.6 B $0.3 B $26.6 B *Other Modes & Services includes Aviation, Public Transportation, Traffic Safety, Travel Information, and Rail. Totals and percentages may not sum due to rounding. 4
Generic Government Project Contract Award Cash Deposit for contractor payments Contractor Payment Note: Arrow size does not represent relative amounts. 5
Cash Forecast Monthly Cash Forecast (Base) Agency cash and funds management Legislative Appropriations Request (LAR) and Operating Budget development Twenty-four month letting target development Assists with biennial development of the STIP Financial Summary Provides base letting assumptions for up to ten years Annual UTP Planning Scenario Incorporates the base cash forecast assumptions plus potential future funding sources Guides planning assumptions for the ten year UTP and no longer constrained by the base forecast Updated once a year Revisions for significant changes in funding 6
Traditional State Highway Funding Motor Fuel Tax 20 cents/gallon on gasoline and diesel 15 cents/gallon on liquefied petroleum gas Last increase effective 1991 Revenue shared between State Highway Fund (SHF) 75% and Education 25% SHF received $2.58B (FY16) and $2.63B (FY17) Vehicle Registration Fees Collected at counties (fee of approximately $51) Revenue shared between counties and the state SHF received $1.44B (FY16 ) and $1.44B (FY17) Deposited consistently each month Predictable 7
Historical Monthly SHF Revenues $400.0 Motor Fuel Tax & Vehicle Registration Fees $350.0 $300.0 $250.0 Millions $200.0 $150.0 $100.0 $50.0 $- FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 8
Traditional SHF Funded Project Cash Flow Contract Award Cash Deposit for contractor payments Contractor Payment Note: Arrow size does not represent relative amounts. 9
Existing Commitments on Contracts (Traditional) $16.0 $14.0 $12.0 Billions $10.0 $8.0 $6.0 $4.0 $2.0 $0.0 Left to Pay Contract Amt. Cash Bal. Note: All amounts represented are traditional SHF including federal funds 10
Proposition 1 State Highway Fund 1 75% 25% Texas Oil & Gas Production Taxes Above Threshold 3/4 split evenly between State Highway Fund and Economic Stabilization Fund 1/4 of amount above threshold goes to General Revenue Preset Collections Threshold 3 Economic Stabilization Fund 2 1. Actual amounts deposited in the State Highway Fund may vary based on the minimum balance of the Economic Stabilization Fund set by the Legislature. 2. Economic Stabilization Fund is also commonly known as the Rainy Day Fund. 3. Preset collections threshold is set at 1987 oil and natural gas production tax levels: $599.8 million in natural gas production tax revenues and $531.9 million in oil production tax revenues. General Revenue Fund Legislature has the discretion to: Spend down the Economic Stabilization Fund (ESF); and/or Increase the ESF minimum sufficient fund balance threshold; and/or Direct how deposits will be spent Oil & Gas Production taxes volatility Market price sensitivity and fluctuating production levels Amount could be zero in any given fiscal year as a result of the above. Expires 2025. Legislature can extend. 11
West Texas Intermediate (WTI) Prices & Prop 1 $160 $140 $120 $100 $80 $60 $40 $20 $0 Sep-2005 Jan-2006 May-2006 Sep-2006 Jan-2007 May-2007 Sep-2007 Jan-2008 May-2008 Sep-2008 Jan-2009 May-2009 Sep-2009 Jan-2010 May-2010 Sep-2010 Jan-2011 May-2011 Sep-2011 Jan-2012 May-2012 Sep-2012 Jan-2013 May-2013 Sep-2013 Jan-2014 May-2014 Sep-2014 Jan-2015 May-2015 Sep-2015 Jan-2016 May-2016 Sep-2016 Jan-2017 May-2017 Sep-2017 $2.0 $1.8 $1.6 $1.4 $1.2 $1.0 $0.8 $0.6 $0.4 $0.2 $0.0 Billions Prop 1 Deposit (Assumed) Prop 1 Deposit (Actual) WTI ($/BBL) 12
Prop 1 Funded Program - Encumbrance Contract Award Cash Deposit for contractor payments Contractor Payment Note: Arrow size does not represent relative amounts. 13
Existing Commitments on Contracts (Proposition 1) Left to Pay vs. Cash Balances $2.5 $2.0 $1.5 Billions $1.0 $0.5 Left to Pay Cash Bal. $0.0 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 14
Potential Cash Flow Approaches for Prop 1 Lowest Amount Average Amount Appropriated Amount (Comptroller Estimate) 15
Proposition 7 (First Deposit - September 2018) Beginning Fiscal Year 2018 Sales and Use Tax Remainder of Sales and Use Tax (General Revenue Fund) Next $2.5 billion Legislature has the discretion to: reduce Prop 7 transfer to SHF up to 50% with a 2/3 vote, and appropriate portion to pay debt service on Prop 12 general obligation bonds (approximately $300M per fiscal year) First $28 billion of Sales and Use Tax (General Revenue Fund) State Highway Fund Beginning Fiscal Year 2020 Motor Vehicle Sales and Rental Tax 35% Amount above $5 billion First $5 billion of Motor Vehicle Sales and Rental Tax Expiration - 2029 for motor vehicle sales/rental tax portion - 2032 for sales and use tax portion - May be extended in 10 year increments by Legislature 16
Prop 7 Funded Program Encumbrance (First Deposit - September 2018) Contract Award Cash Deposit for contractor payments Contractor Payment Note: Arrow size does not Represent relative amounts 17
Potential Cash Flow Approaches for Prop 7 Appropriated Amount (Comptroller Estimate) Minimum Expected Amount - ½ of Total less Debt Service ($2.5 billion/2 - $300 m = $950 million) 18
Prop 1 & Prop 7 Estimated Revenues FY 2017 - FY 2027 Prop 1 & Prop 7 Estimated Revenues (Minimum/Maximum) $5.5 $5.0 $4.5 $4.0 Prop 7 postponed per 85 th Legislature SB1 Prop 1 beyond statutory expiration* Billions $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 Prop 1 Transfer Prop 7 Transfer Min Max $0.0 Min Max Min Max Min Max Min Max 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 (1) Estimated Total Revenue with Maximum Reductions include the following reductions: 100% of Prop 1 as the transfer to SHF could potentially drop as low as zero, if the Economic Stabilization Fund sufficient fund balance is not maintained. 50% of Prop 7 as the transfer to the SHF could potentially be reduced up to 50% by legislature, as per current statute. Approximately $300M per fiscal year, as Prop 7 may be used to repay general obligation bonds (Prop 12). FY19 is $613M as it covers both FY18 and FY19 debt service payments. * Represents the estimated Prop 1 Transfer if continued beyond the statutory expiration in FY25. Min Max Min Max Min Max Min Max Min Max Min Max Min Max 19
State Highway Fund Operating Cash Balance As of Dec. 31, 2015 As of Dec. 31, 2017 Controlled by Commission Controlled by MPOs SHF Cash Balance 4,793,819,395 3,773,714,497 Less dedicated/obligated funds: Prop 1 (2,760,705,312) (1,908,655,990) X Prop 7 - - X Prop 14 / SHF Bonds (81,335,033) (145,147,606) X State Infrastructure Bank (332,635,198) (340,412,884) X SH 121 Concession (1,149,605,930) (765,671,595) X SH 130 (Seg. 5 & 6) Concession (131,322,330) (51,200,271) X SH 161 Concession (79,958,654) (44,881,327) X CTTS Holding - O&M Fund (43,800,221) - X Tx. State Cemetery Fund (10,000,000) - X SH 288 Concession - (15,858,472) X NTE Seg. 1 & 2W Concession (169,783) (8,939,745) X I-635 (LBJ) Concession - (1,734,805) X Traditional Operating SHF Cash Balance 204,286,935 491,211,801 Cash Reserved for Payroll (71,983,275) (72,550,609) Remaining Balance for Operations 132,303,660 418,661,192 Short-term borrowing outstanding 0 0 20
Short-term Borrowing Transportation Code Sec. 201.115 Cannot exceed 2 times average monthly revenue to SHF Limited to approx. $1.47 billion based on Traditional Revenues Limited to approx. $1.59 billion based on Total SHF Revenues Current Facility = $250 million Used for Cash Management purposes only 21
Hybrid Approach for Letting Continue committing, to full extent, future deposits of traditional funding Accelerate portions of new funding using risk based approach and within direction of commission Potential accelerations: Amounts in a current Appropriations Act 50% of estimated future Prop 7 less debt service requirements Conservative portion of estimated future Prop 1 22
II. Contract Awards Processes 23
Program Funding Targets for December Update of 2018 UTP Funding Category Proposed 10-Year Distribution 1- Maintenance $ 13,942,960,000 2 - Metro and Urban Corridor $ 12,152,110,000 4 - Connectivity (Regional) $ 6,342,870,000 4 - Connectivity (Congestion) $ 5,082,460,000 5 - CMAQ (3 MPOs) $ 2,182,990,000 6 - Bridge $ 3,406,350,000 7 - Federal STP-MM (Large MPO) $ 4,335,730,000 8 - Safety $ 3,313,920,000 9 - TAP $ 849,800,000 10 - Supplemental Transportation Projects $ 648,930,000 11 - District Discretionary $ 1,072,530,000 11 - Energy Sector $ 2,110,420,000 12 - Strategic Priority $ 5,052,680,000 12 - Strategic Priority (TexasClearLanes) $ 4,947,140,000 Total Allocated Funds $ 65,440,890,000 Non-traditional Funds Not in Base (Cat 3 & Federal Earmarks) $ 5,172,990,000 TOTAL ALL FUNDS $ 70,613,880,000 24
Building the Contract Letting Factory 25
What Does Your Transportation Dollar Provide? Current UTP funding provides the following types of projects: 45% - Congestion 23% - Connectivity 32% - Preservation All projects help to improve the safety of our infrastructure system. 26
Project Portfolio Management Built Bottom-Up from Local to Statewide 27
Project Portfolio Management Built Bottom-Up from Local to Statewide 28
The New Way to INCREASE Contract Awards The goal is consistent and predictable contract awards. 2018 Unified Transportation Program $70 billion/10 years OR $7 billion/year Design-Bid-Build (DBB) $55 billion to $60 billion /10 years OR $5.5 billion to $6.0 billion/year (avg.) Small (<$15 Million) (80% - 90% total number of projects) Medium ($15 Million to $50 Million) (5% - 15% total number of projects) Large (>$50Million) (< 5% total number of projects) Design-Build (DB) $10 billion to $15 billion/10 years OR $1.0 to $1.5 billion/year (avg.) 3 projects/year (Minimum of $150 million/project) 29
FY 18 Statewide Lettings At beginning of FY 18, scheduled statewide letting was $4.8 billion. $1.2 billion is being accelerated from within the UTP. To date, $940.0 million has been added with more to come. $183.0 million has been delayed from FY 18 letting for various reasons. $4.80 billion + $0.94 billion - $0.18 billion = $5.53 billion Projected statewide letting goal for FY 18 is $6.0 billion. FY 18 Project Portfolio Statewide Letting Small Projects (<$15M) 672 90% Medium Projects (>$15M <$50M) 54 7% Large Projects (>$50M) 19 3% Total Number of Projects 745 100% Totals and percentages may not sum due to rounding. 30
FY 2018 Statewide Letting Planned vs. Actual Monthly $1,000 $800 Millions $600 $400 $200 $0 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Original Estimate Current Estimate Scheduled Letting Actual Letting 31
$6,000 FY 2018 Statewide Letting Planned vs. Actual Accumulative $5,500 $5,000 $4,500 $4,000 $3,500 Millions $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Original Estimate Current Estimate Scheduled Letting Actual Letting 32
$700 FY 2019 Conceptual Statewide Letting $600 $500 $400 Millions $300 $200 $100 $0 Sep 18 Oct 18 Nov 18 Dec 18 Jan 19 Feb 19 Mar 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Scheduled Letting 33
$1,100 $1,000 $900 $800 FY 2018 and Conceptual FY 2019 Statewide Letting Actual Lettings Thru Scheduled Thru August 2018 Conceptual for FY 2019 $700 $600 Millions $500 $400 $300 $200 $100 $0 Scheduled Letting Actual Letting 34
FY 18 Total Lettings, Obligations, and Design-Build Procurement How To Get to $7 Billion/Year Statewide Lettings = $5.53 billion Local lettings = $752.6 million (Cities, counties, regional mobility authorities, other toll authorities, etc.) Design-Build Procurement = $500.0 million (Executed SH 249 in Montgomery/Grimes Counties October 3, 2017) Other obligations = $313.6 million (Public transportation, air quality studies, etc.) Totals and percentages may not sum due to rounding. Billions of Dollars 8 7 6 5 4 3 2 1 0 Other Obligations Design-Build Local Lettings Statewide Lettings To date, total lettings, obligations, and DB procurement for FY 18 = $7.1 billion 35