Debt Financing Prepared By: Lee Helgerson, Debt Manager October 1, - PowerPoint PPT Presentation

Governor’s Transportation Vision Panel Transportation Finance Subcom m ittee Debt Financing Prepared By: Lee Helgerson, Debt Manager October 1, 20 15

Agend a • Oregon’s Bonding Process • ODOT Debt Financing Program s • Highw ay User Tax Revenue ( HUTR) Bonds • Facility Bonds • Certificates of Participation ( COPs) • Article XI -Q General Obligation ( GO) Bonds • Article XI , Section 7 State Highw ay GO Bonds • Lottery Revenue Bonds • Oregon Transportation Infrastructure Bank (OTIB) • Future State and Local Funding Options 1

Oregon’s Bond ing Process • Governor Proposes • Legislature Approves • State Treasurer I ssues • State Agencies Adm inister Rating Agencies Moody’s, S&P, Fitch Credit Analysis Legislature Capital Markets Governor Considers & State Treasurer Underwrite, Buy,& Budget & Bonding Approves Bonding Issues State Bonds Sell Oregon State Proposal Bill Bonds State Agencies Bond Program Managers 2

Highw a y User Ta x Rev enue Bond s Direct revenue bonded debt • Special revenue obligations of the State • Payable solely from dedicated State Highway Fund revenues • Does not constitute a debt or general obligation of the state Oregon Transportation I nvestm ent Act ( OTI A) : • From 2001 to 2010 , the State committed over $2.4 billion of bond proceeds for transportation projects Jobs and Transportation Act ( JTA) : • 2009 legislation authorized $840 million in bonding for highways and bridges  October 2013, the State issued $450 million in net bond proceeds for JTA projects  The remaining $390 million in JTA bond authorization is projected to be issued in Fall 2016 3

Fa cility Bond s Certificates of Participation ( COPs ) • Appropriation credits • $75 million issued over last decade  State Radio Project (SRP) Article XI -Q GO Bonds • New program – First issuance in 2011 • Constitutes a general obligation of the State • Generally replaces the more costly COPs • Self-supporting or General Fund Supported • $158 million issued on behalf of ODOT  State Radio Project (SRP)  State Transportation Building Renovation 4

Ov erv iew of Outsta nd ing Debt $ 2 .5 billion of debt supported by the Highw ay Existing Gross Debt Service by Lien $ Millions; By Fiscal Year; As of September 28, 2015 Fund currently outstanding • $1.5 billion senior lien HUTR bonds rated 250 AAA/ Aa1/ AA+ by S&P , Moody’s, and Fitch 200 Millions • $826.2 million subordinate lien HUTR bonds rated AA+ / Aa2/ AA 150 • $169.5 million of COPs and XI-Q bonds 100 50 Rem aining $ 3 9 0 m illion of JTA authorization - planned for Fall 2 0 1 6 : 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 • $195 million fixed rate senior HUTR Bonds • $195 million variable rate subordinate HUTR Senior Subordinate Facility Bonds Bonds Existing and Projected Gross Debt Service by Lien $ Millions; By Fiscal Year; As of September 28, 2015 Current Outstanding Par Amount by Lien Highway Trust Fund Bonds 250 $ Millions; As of September 28, 2015 200 Millions 150 100 35% Senior 50 65% Subordinate - 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 Senior Subordinate Facility Bonds Future Senior Future Subordinate 5

Com p osition of Debt Existing Gross Debt Service by Product Approxim ately 1 1 % of HUTR Bonds are $ Millions; By Fiscal Year; As of September 28, 2015 variable rate 250 • $265 million bank direct purchase SIFMA 200 indexed floating rate notes Millions • Supported by considerable cash balances 150 100 Projected to rise to 1 7 % of outstanding HUTR 50 Bonds after 2 0 1 6 JTA issuance • Still below 20% ‘rule of thumb’ limit - 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 Fixed Rate Variable Rate Facility Bonds Currently and Projected Outstanding Par Amount by Product Existing and Projected Gross Debt Service by Product $ Millions; By Fiscal Year; As of September 28, 2015 Highway Trust Fund Bonds $ Millions; As of September 28, 2015 250 Current Projected Millions 200 11% 17% 150 100 50 89% 83% - Fixed Rate 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 Variable Rate Fixed Rate Variable Rate Facility Bonds Future Fixed Rate Future Variable Rate 6

Debt by Progra m Most of the existing debt service supports the Existing Gross Debt Service by Program $ Millions; By Fiscal Year; As of September 28, 2015 OTI A I / I I and OTI A I I I program s 250 • Maximum total annual debt service supported by the Highway Fund is approximately $207 million Millions 200 • Approximately $33 million of annual debt service 150 supports OTIA I/ II • Approximately $112 million of supports OTIA III 100 – $10 million of federal BABs subsidies applied as revenues to 50 support the Series 2010A Taxable Build America Bonds • Approximately $28 million supports JTA - 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 • Approximately $23 million supports COPs and XI-Q bonds Non-OTIA OTIA I/II OTIA III JTA Facility Bonds Existing and Projected Debt Service by Program Com pletion of the bonding for JTA in the Fall of $ Millions; By Fiscal Year; As of September 28, 2015 2 0 1 6 w ill increase aggregate m axim um annual 250 debt service to approxim ately $ 2 1 0 m illion • Debt service will be structured to fill in the gap Millions 200 between FY2018 and FY2028 150 • Coverage of aggregate HUTR bond debt service from FY2015 Pledged Revenue or $588.3 100 million expected to remain strong at 2.8x 50 - 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 Non-OTIA OTIA I/II OTIA III JTA Facility Bonds Future JTA 7

Sta te Highw a y GO Bond s Constitutional authority - Article XI , Section 7 1 9 7 4 - Last new m oney issuance 2 0 1 5 Legislative Assem bly in its HB 5 0 0 5 approved $ 3 5 m illion in State Highw ay GO Bonds for highw ay safety im provem ent projects: US 26, 116 th – 136 th : $17,000,000 • • State Highway 34: $3,000,000 • OR 126 Eugene to Florence: $7,000,000 • I-5/ I-205 Cable Barrier: $2,500,000 • US 26 Warm Springs to Downtown: $1,500,000 • I-84 (Pendleton – La Grande): $4,000,000 8

Lottery Rev enue Bond s • $ 8 1 0 m illion ODOT adm inistered Lottery Bonds issued since program inception in 1 9 9 4 • Funding restricted to non-highw ay eligible m ultim odal purposes • Program funding includes: o Connect Oregon - $ 3 8 2 m illion issued  $42 million authorized in 2015-17 Biennium o Local Governm ent Projects - $ 4 2 8 m illion issued  $10 million for Port of Coos Bay authorized in 2015-17 Biennium 9

Oregon Tra nsp orta tion Infra structure Ba nk (OTIB) Established in 1 9 9 6 as one of the original State I nfrastructure Banks ( SI Bs) Funded w ith Federal funds and State m atching funds Total initial capitalization ~ $ 3 4 .5 m illion • Federal > $8.5 million • State match > $2 million • Other SHF contribution > $2 million • SHF Line of Credit > $22 million OTIB Loans Originated • 40 loans originated totaling $85 million, serving 29 communities in all 5 ODOT regions. 10

Oregon Tra nsp orta tion Infra structure Ba nk (OTIB) Benefits to Oregon Com m unities • Generally “AA” Costs of Borrowing Through Pledge of Highway User Tax Apportionment • Draw Down Construction Loans • Low Cost of Financing (1% ) • Flexible Terms • No Prepayment Penalty • DOJ Standardized Loan Documents • Matching Funds for State & Federal Funding or Grants 11

Future Sta te Fund ing Op tions New revenue stream s could support additional borrow ing for State-level projects Transportation I nfrastructure Bonds • Convenient rule of thumb for Highway Revenue Bonds: o $21 million in new annual revenue can support approximately $100 million in new bonding for projects while still preserving targeted debt service coverage and existing high credit ratings o Assumes 25-year bond maturity with a minimum 3–times pledged revenue to debt service coverage ratio Tolls • Tolls can also provide additional funding and borrowing opportunities o Bridges o Managed Lanes 12

Future Sta te Fund ing Op tions Public-Private Partnerships ( P3 s) can help facilitate m ajor transportation initiatives • Public sector participation in major projects can facilitate more efficient project delivery and reduce costs • P3 can mean anything from a design-build contract for construction, to a full risk transfer to a private party through a design-build-finance-operate-maintain concession agreement 13