Finance & Administration Committee Information Item IV-A June 12, 2014 Metro 2025 Alternative Funding and Financing 37 of 100
Washington Metropolitan Area Transit Authority Board Action/Information Summary Action Information MEAD Number: 200821 Resolution: Yes No TITLE: Metro 2025 - Alternative Funding & Financing PRESENTATION SUMMARY: Staff will summarize and present results of work completed by area thought leaders on possible alternative ways to finance and fund the seven Metro 2025 initiatives. PURPOSE: Present findings of an expert panel on funding and financing options for Metro 2025. DESCRIPTION: Key Highlights: Metro convened a panel of experts to consider the following funding and financing mechanisms: Public Private Partnerships, Value Capture or Property Tax within Station Areas, Infrastructure Bank, Station Adoption, Regional Sales Tax and Enhanced Debt Instruments; Staff examined the potential applicability of these various financing mechanisms against the Metro 2025 capital program elements, geographic boundaries, and funding needs; and From this work, staff determined that several financing mechanisms appear worthy of future exploration and development with key funding partners. Background and History: In December 2013, the Board requested that staff seek advice from experts on alternative ways to finance and fund Metro 2025. The panel that staff convened represented the realm of transportation finance: from banking/finance on public-private partnerships; from academia on value capture and real estate economics; peer agencies on enhanced leverage; and jurisdictional partners on previous experience/lessons learned. Discussion: Working with the regional thought leaders, staff examined the potential applicability of 38 of 100
various financing mechanisms such as Public-Private Partnerships, Infrastructure Banks, and Value Capture against the Metro 2025 capital program elements, geographic boundaries, and funding needs. Underlying this analysis was the recognition that the ultimate funding need does not disappear in the face of a financing technique it may however, be modified in terms of structure, duration, or source. A report has been prepared that summarizes the most promising potential options that may be considered for each type of Metro 2025 project. As has been stated in every study related to WMATA s funding and financing issues, selecting a funding source or, in this case, a financing mechanism involves consideration of year-to-year stability, longer-run adequacy, and political feasibility, along with equity and efficiency issues. The different financing mechanisms have different characteristics in light of these considerations. The financing mechanisms that may be worthy of consideration and further development with the Maryland, Virginia, the District of Columbia and the other local governments of the Compact including the following that are detailed in the attached report: For any or all of the seven Metro 2025 initiatives Regional Sales Tax Additionally, the following elements of Metro 2025 may benefit from investigation of the following: Eight-car trains and core stations Value Capture System-wide Property Tax Supplement Core Stations Value Capture Station-Area Property Tax Station Adoption A combination of the above Priority Corridor Network Public-Private Partnerships Underground Pedestrian Passageways Value Capture Station-Area Property Tax Station Adoption A combination of the above FUNDING IMPACT: 39 of 100
Project Manager: Shyam Kannan Project Chief of Staff/Office of Planning Department/Office: There is no impact on funding at this time, since this information item only discusses alternative financing mechanisms. TIMELINE: June, 2013 - Board adoption of the new strategic plan, Momentum: The Next Generation of Metro. Previous Actions Anticipated actions after presentation May, 2014 - Board approval of the FY2015 capital budget and the FY2016-FY2020 capital improvement program, both of which include initial investments to advance Metro 2025 capital initiatives highlighted in the Momentum strategic plan. June to December 2014 At Board direction, further research or exploration of one or more of the options. September 2014 - Status report to Finance & Administration Committee on renewal of Capital Funding Agreement. 40 of 100
Washington Metropolitan Area Transit Authority Metro 2025 Alternative Funding & Financing Finance and Administration Committee June 12, 2014 41 of 100
Purpose Present findings of an expert panel on funding and financing options for Metro 2025 42 of 100
Thought Leaders Expertise Banking/Finance on public-private partnerships Academia on value capture and real estate economics Peer agencies on enhanced leverage Jurisdictional partners on previous experience/lessons learned 43 of 100
Summary of Panel Discussions Funding and financing not synonymous Financing does not create new money Applying tools to existing integrated system poses challenges TIFIA becoming less and less attractive Linkage to recurring, predictable revenue streams Metro s cost inflation presents jurisdictional challenges 44 of 100
Alternative Financing Explored Public-Private Partnerships (P3) Real Estate Value Capture Infrastructure Bank Station Adoption Regional Sales Tax Enhanced Debt Instruments 45 of 100
Examples from Around the Nation Agency or Jurisdiction NJ Transit s Hudson-Bergen Light Rail Line Charlotte, NC Commuter Rail Red Line Fairfax County s Dulles Rail Transportation Improvement District California s Infrastructure and Economic Development Bank Los Angeles County s Measure R Tool Public-Private Partnership Value Capture Station Area Tax District Infrastructure Bank Regional Sales Tax 46 of 100
Alternatives Pros & Cons Public Private Partnerships (P3) + Initial private capital equity to supplement public funds + Potential for risk sharing with partner + Potential for maintaining state of good repair - Requirement of a steady fund flow to repay partner Metro 2025 Application: Red Line, Metrobus Priority Corridor Network 47 of 100
Alternatives Pros & Cons Value Capture or Property Tax within Station Areas + Strong relationship to certain Metro 2025 projects + Allows partners to invest in local projects - Difficulty of capital financing based on TIF revenue - Overlap of jurisdictions established value capture - Less powerful in areas where land is already developed Metro 2025 Application: Core Stations, Passageways 48 of 100
System-Wide Value Capture $3,000,000,000 $2,717,848,191 Impact of a $0.03/$100 AV Property Tax (Hypothetical) Properties within 1/2 Mile of Metrorail $2,500,000,000 $2,000,000,000 $2,031,315,249 $1,500,000,000 $1,340,265,268 $1,000,000,000 $706,428,421 $500,000,000 $0 0% 2% 5% 10% 49 of 100
Alternatives Pros & Cons Infrastructure Bank + Large-sum of upfront capital + Hybrid bank Private sector contributions - Requirement of a revenue base of taxes and/or fees - Possibility of insufficient revenues - Hybrid bank Highly complex investment agreements Metro 2025 Application: None 50 of 100
Alternatives Pros & Cons Station Adoption + Enhancements and improvements via local organization - Constraints of Metro safety and security protocols - Possible restrictions of Metro labor agreements - Diversion of current advertising revenue to the partner Metro 2025 Application: Core Stations 51 of 100
Station Area Value Capture Present Value of Property Tax Surcharge, Various Rates (1/4 Mile from Station, 20 Yrs, Assuming 5% Cost of Capital) $60,000,000 $52,782,000 $50,000,000 $44,728,000 $44,191,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $5,285,000 $10,571,000 $26,427,000 $6,792,000 $13,584,000 $33,960,000 $8,946,000 $17,891,000 $4,542,000 $9,084,000 $22,711,000 $6,220,000 $12,440,000 $31,100,000 $8,838,000 $17,676,000 $10,556,000 $21,113,000 $0 Dupont Circle Farragut North Farragut West Foggy Bottom GWU Gallery Pl- Chinatown McPherson Sq Metro Center $0.01 $0.02 $0.05 52 of 100
Alternatives Pros & Cons Regional Sales Tax + Ability to piggyback on existing funding + Generation of significant revenues + Relative stability year-to-year, though subject to cycles - Difficulty to revisit major transportation funding Metro 2025 Application: All seven initiatives 53 of 100
Regional Sales Tax Value Estimate Potential Annual Revenue Estimates (Sales Tax Surcharge, $2012) Jurisdiction 0.25% Rate 0.5% Rate 0.75% Rate 1% Rate District of Columbia $ 40,000,000 $ 80,000,000 $ 120,000,000 $ 160,000,000 Montgomery County $ 38,000,000 $ 77,000,000 $ 115,000,000 $ 153,000,000 Prince George's County $ 23,000,000 $ 46,000,000 $ 69,000,000 $ 92,000,000 Arlington County $ 10,000,000 $ 19,000,000 $ 29,000,000 $ 39,000,000 Alexandria $ 6,000,000 $ 12,000,000 $ 18,000,000 $ 24,000,000 Fairfax County $ 41,000,000 $ 81,000,000 $ 122,000,000 $ 162,000,000 Fairfax City $ 3,000,000 $ 5,000,000 $ 8,000,000 $ 10,000,000 Falls Church $ 1,000,000 $ 2,000,000 $ 3,000,000 $ 3,000,000 WMATA Compact Subtotal $ 162,000,000 $ 322,000,000 $ 484,000,000 $ 643,000,000 Loudoun County $ 15,000,000 $ 30,000,000 $ 44,000,000 $ 59,000,000 54 of 100 Compact + Loudoun Total $ 177,000,000 $ 352,000,000 $ 528,000,000 $ 702,000,000
Summary of Alternatives Applicability 55 of 100