Surface Transportation Finance Surface Transportation Finance Transportation Systems Institute T t ti S t I tit t M May 19, 2010 y 19 2010 , Transportation Systems Institute Transportation Systems Institute OVERVIEW OF HIGHWAY FINANCE OVERVIEW OF HIGHWAY FINANCE 1
Investment Requirements Investment Requirements Highway and Transit Systems Highway and Transit Systems Average Annual Capital Needs and Gap Estimates, All Levels of Government 2008 ‐ 2035 (in 2008 dollars) 64% 64% 56% % Source: National Surface Transportation Infrastructure Financing Commission 2 Capital Funding Capital Funding by Level of Government by Level of Government 3 2
Revenue Sources for Investment in Revenue Sources for Investment in Surface Transportation Assets Surface Transportation Assets • Federal ‐ aid highway program F d l id hi h • State funds o motor vehicle fuel taxes, license fees, registration fees, sales taxes o motor vehicle fuel taxes, license fees, registration fees, sales taxes • State general fund monies • State general fund monies • Local funds l f d o motor vehicle fuel taxes, registration fees, local option sales taxes , g , p • Tolls • Tolls • Fare box revenues F b • Other o value capture concession/advertising programs naming rights o value capture, concession/advertising programs, naming rights “F “Funding” vs. “Financing” di ” “Fi i ” 4 Transportation Systems Institute Transportation Systems Institute FEDERAL AID HIGHWAY PROGRAM FEDERAL ‐ AID HIGHWAY PROGRAM 3
Federal ‐ aid Funding Federal aid Funding d l id di • Apportionments pp U S FY09 U.S. FY09 $35.8 billion $35 8 billi Maine $152 M New Hampshire New Hampshire $158 M $158 M Vermont Vermont $147 M $147 M • Obligation Limitation Obligation Limitation U.S. FY09 U S FY09 $32.7 billion $32 7 billi Maine $142 M New Hampshire New Hampshire $146 M $146 M Vermont Vermont $134 M $134 M 6 Key Financial Elements Key Financial Elements of a Grant Program of a Grant Program • Fiscal Constraint l • Obligation Obligation • Expenditure Expenditure • Federal Share Federal Share • Project Closeout Project Closeout 7 4
STIP Fiscal Constraint STIP Fiscal Constraint • Four ‐ year Surface Transportation Four year Surface Transportation Improvement Program Improvement Program • Full funding can reasonably be anticipated for Full funding can reasonably be anticipated for all projects in the program ll p j j t i th p g 8 Obligation Obligation • An amount shall be recorded as an obligation An amount shall be recorded as an obligation of the U.S. only when supported by of the U.S. only when supported by documentary evidence of a binding d t id f bi di agreement that is in writing (31 USC 1501) agreement…that is in writing…(31 USC 1501) • The execution of the project agreement shall • The execution of the project agreement shall be deemed a contractual obligation of the be deemed a contractual obligation of the F d Federal Government for the payment of the l G f h p y f h Federal share of the cost of the project (23 Federal share of the cost of the project. (23 USC 106) USC 106) 9 5
Expenditure Expenditure • A State must expend and account for grant A State must expend and account for grant funds in accordance with State laws and funds in accordance with State laws and procedures for expending and accounting for procedures for expending and accounting for it its own funds. f d • Applicable OMB cost principles agency • Applicable OMB cost principles, agency regulations, and the terms of the grant regulations, and the terms of the grant agreement will be followed in determining the t ill b f ll d i d t i i th allowability of costs. (49 CFR 18) allowability of costs (49 CFR 18) • Cash Management Improvement Act Cash Management Improvement Act 10 Federal Share Federal Share Interstate 90%, Other 80%, Except for: Interstate 90%, Other 80%, Except for: • Sliding Scale Sliding Scale • Donations D i • Toll Credits T ll C dit • Emergency Relief • Emergency Relief • Safety • Safety • Land Management Agency Funds • Land Management Agency Funds • Federal Lands Highways Program Funds Federal Lands Highways Program Funds 11 6
Project Closeout Project Closeout • Promptly release excess obligations Promptly release excess obligations • Submit final voucher • Submit final voucher 12 Oversight Oversight • Grantees must monitor grant and subgrant Grantees must monitor grant and subgrant supported activities to assure compliance with t d ti iti t li ith applicable Federal requirements and that applicable Federal requirements and that performance goals are being achieved. (49 CFR 18) f l b i hi d (49 CFR 18) • Major Projects • Major Projects o $500M: Financial Plan & Project Management Plan $500 a c a a & oject a age e t a o $100M: Financial Plan $100M Fi i l Pl • FIRE – Financial Integrity Review and Evaluation FIRE Financial Integrity Review and Evaluation 13 7
Innovative Finance Research Innovative Finance Research • 23 USC 502 23 USC 502 • Test and Evaluation 045 • Test and Evaluation 045 o Expedite projects reduce costs leverage federal o Expedite projects, reduce costs, leverage federal f funds d • Special Experimental Project 015 S i l E i t l P j t 015 o Increase project management flexibility, improve Increase project management flexibility improve efficiency, expedite project implementation, efficiency, expedite project implementation, develop new revenue streams ‐ PPPs develop new revenue streams PPPs 14 Grant Related Financing Tools Grant Related Financing Tools • State Infrastructure Banks State Infrastructure Banks • Section 129 Loans • Section 129 Loans • GARVEE Bonds • GARVEE Bonds • Advance Construction • Advance Construction US Total US Total $46 1 B $46.1 B (as of 4 ‐ 30 ‐ 10) Maine Maine $186 M $186 M New Hampshire $137 M Vermont Vermont $160 M $160 M 15 8
Transportation Systems Institute Transportation Systems Institute MUNICIPAL BOND MARKET MUNICIPAL BOND MARKET Tax ‐ Exempt Bond Structure Tax Exempt Bond Structure • Assumptions • Results l AA tax ‐ exempt rates $ $13 million average annual payment o o 30 year maturity 30 i $190 million total interest $190 illi t t l i t t o o $200 $200 million par amount illi t $390 million total debt service $390 million total debt service o o Level debt service amortization Level debt service amortization o 17 9
Historical Interest Rates Historical Interest Rates 10 ‐ Year Treasury Revenue Bond Revenue Bond Index 18 Yield Curves Yield Curves (Indicative Rates for a AA Municipal Issuer) (Indicative Rates for a AA Municipal Issuer) 19 10 10
2009 Municipal Market ($409 Billion) 2009 Municipal Market ($409 Billion) $ Credit C dit Purpose P Interest Rate Mode Interest Rate Mode Tax Status Tax Status 20 Municipal Market Sectors Municipal Market Sectors Municipal Market 2000 Municipal Market 2009 Development Development Development Development 4% 2% General P Purpose Education 22% 22% 22% General General Education Purpose 24% 24% 31% 31% Utilities Utilities Electric Power El t i P 7% 4% Environmental Environmental Electric Power Facilities 3% 2% 2% Environmental Facilities 3% 3% Health Care Transportation Utilities 11% 13% 13% H Health Care lth C 10% 10% 9% Housing Housing Public Public 3% Housing Transportation Facilities Facilities 10% 10% 12% 5% 5% 3% 21 11 11
Surface Transportation Financing Tools Surface Transportation Financing Tools • Highway toll road and transit revenue bonds Highway, toll road, and transit revenue bonds • Grant Anticipation Revenue Vehicles • Grant Anticipation Revenue Vehicles (GARVEE Bonds) (GARVEE Bonds) • Build America Bonds (BABs) Build America Bonds (BABs) • Private Activity Bonds (PABs) Private Activity Bonds (PABs) • Transportation Infrastructure Finance and Transportation Infrastructure Finance and Innovation Act (TIFIA) i ( ( ) ) 22 Structuring a Municipal Bond Financing Structuring a Municipal Bond Financing • Select working group g g p • Develop preliminary plan of finance • Develop preliminary plan of finance • Draft legal and disclosure documents Draft legal and disclosure documents • Present proposed credit/financing structure to the P t d dit/fi i t t t th rating agencies rating agencies • Finalize plan of finance and legal/disclosure documents Fi li l f fi d l l/di l d t • Market the bonds to investors (retail and institutional) Market the bonds to investors (retail and institutional) • Price the bonds P i h b d • Close the financing • Close the financing 23 12 12
Transportation Systems Institute Transportation Systems Institute PROJECT FINANCE STRATEGIES & PROJECT FINANCE STRATEGIES & PUBLIC PRIVATE PARTNERSHIPS (P3) PUBLIC PRIVATE PARTNERSHIPS (P3) Discussion Outline Discussion Outline P3 ≠ Project Finance P3 ≠ Project Finance B Basic Project Finance Strategy i P j t Fi St t Evolution of the P3 Market Evolution of the P3 Market 25 13 13
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