InnovativeFinancingSchemes

InnovativeFinancingSchemes

Steve HemingerExecutive Director, MTC

Sonoma Transportation SummitJune 21, 2006

Vaudeville definition of “Innovative Finance”

Vaudeville definition of “Innovative Finance”

I Don’t Have Any Money.

Do You?

1. Is the Gas Tax

a Goner?

1. Is the Gas Tax

a Goner?

“Read my Lips: No New Taxes”

“Read my Lips: No New Taxes”

— George H. W. Bush, 1998

State Gas Tax Hasn’t Kept Pace

State Gas Tax Hasn’t Kept Pace

The state’s gas tax has lost one-third of its value

since 1964, adjusted for inflation.

Feds to the Rescue? Not Likely

Feds to the Rescue? Not Likely

Purchasing power of federal gas tax has also eroded due to inflation

The Gas Tax Vanishing ActThe Gas Tax Vanishing Act

• No federal rate increase since 1993

• Less than 1/3 of states have raised the state gas tax since 1993

• 6 of 15 states with tax hikes were due to automatic indexing

Far Higher Gasoline Prices Abroad

Far Higher Gasoline Prices Abroad

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Gasoline Prices for Selected Countries, 2005

2.You Say You Want a Devolution?

2.You Say You Want a Devolution?

“It’s our money, and we’re free to spend it any way we please…If you have money you spend it and win.”

“It’s our money, and we’re free to spend it any way we please…If you have money you spend it and win.”

— Rose Kennedy

Local Sales Tax Revenues Dwarf STIP

Local Sales Tax Revenues Dwarf STIP

All Bay Area counties except Napa and Solano

$23 billion over 30 years

Bay Area vs. State

Voting Results on Transportation Funding Ballot Measures:

Voting Results on Transportation Funding Ballot Measures:

Devolution LosersDevolution Losers

• Rural counties with small tax base and anti-tax ethos

• Large “lumpy” projects that don’t neatly fit within county shares

• Modes that lack electoral appeal: bikes vs. freight

3.Son, Can I Borrow the Charge Card?

3.Son, Can I Borrow the Charge Card?

Proposition 1B — Transportation Bond

Proposition 1B — Transportation Bond

Category Amount

Highway Improvements

$ 4.5

Transit Capital $ 4.0

Goods Movement $ 2.0

Local Roads $ 2.0

State Transportation Improvement Program

$ 2.0

Air Quality $ 1.2

State-Local Partnership

$ 1.0

State Route 99 $ 1.0

Transit Security $ 1.0

Highway Repairs $ 0.5

Other $ 0.7

Total $ 19.9

Dollars in billions

Bay Area’s Share ofLocal Streets and Roads

Funding

Bay Area’s Share ofLocal Streets and Roads

Funding

Dollars in millions

County Allocation

Alameda $ 75.0

Contra Costa $ 52.1

Marin $ 14.5

Napa $ 9.1

San Francisco $ 40.0

San Mateo $ 40.8

Santa Clara $ 91.7

Solano $ 24.3

Sonoma $ 27.9

Regional Total $375.4

Bay Area’s Share ofSTIP Funding

Bay Area’s Share ofSTIP FundingCounty Amount

Alameda $ 54.5

Contra Costa $ 35.2

Marin $ 10.3

Napa $ 6.4

San Francisco $ 27.8

San Mateo $ 28.7

Santa Clara $ 63.8

Solano $ 16.7

Sonoma $ 20.4

Subtotal $ 263.8

Interregional (Est.) $ 84.1

Regional Total $ 347.9

Dollars in millions

Agency Amount

AC Transit $ 107

BART $ 246

Caltrain $ 40

Golden Gate $ 40

SF Muni $ 336

SamTrans $ 47

VTA $ 144

Regional $ 347

Other $ 27

Total $ 1,334

Dollars in millions

Public Transit Funding — Bay Area Share

Public Transit Funding — Bay Area Share

Bay Area Funding Shortfall: $18 Billion

Bay Area Funding Shortfall: $18 Billion

80 percent of the region’s funds will go to maintain our existing road and transit system.

Even with passage of November 2006 bond, large shortfalls remain.

Growing Reliance on Non-User Fees

Growing Reliance on Non-User Fees

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Type of Revenue

1995 1999 ChangePercent Change

State Borrowing

($ in millions)

92$4,316 $ 8,298 $3,982

Other Local Taxes Includes Sales Taxes $ 4,487 $ 7,079 $ 2,592 58

Other State Taxes $ 6,565 $ 8,560 $ 1,995 30

Local General Funds$

12,326 $ 15,857 $ 3,531 29

Local Property Taxes $ 5220 $ 6384 $ 1164 22

State User Fees $36,200 $42,730 $6,530 18

4.Does the Road Toll for Thee?

4.Does the Road Toll for Thee?

Original Toll Concept — River Chains

Original Toll Concept — River Chains

Congestion TollsCongestion TollsProject Type Status

Singapore Cordon Operational 1975

Norway Cordon Operational 1986

London Cordon Operational 2003

Stockholm Cordon Operational 2006

Orange County, SR 91 HOT Operational 1995

San Diego I-15 HOT Operational 1996

Houston Katy Freeway HOT Operational 1998

Minneapolis I-394 HOT Operational 2005

Denver I-25 HOT Operational 2006

Seattle Route 167 HOT Planned 2007

Alameda County I-680 HOT Planned 2009

Orange County SR 91 Express Lanes

Orange County SR 91 Express Lanes

San Diego I-15 Express Lanes

San Diego I-15 Express Lanes

Proposed Alameda I-680 ConceptProposed Alameda I-680 Concept

Limited access

Double-yellow stripe separation with intermediate access (access design under study)

Toll varies by time of day, day of week

Early polling: 60% to 70% support (project area)

Conceptual Regional HOT Network

Conceptual Regional HOT Network

Federal Legislation — SAFETEA

Federal Legislation — SAFETEA

Value Pricing Pilot Program

• 15 demonstration projects

• $11 to $12 million/year

Broad permission to convert HOV to HOT

• Must maintain service levels (45 mph minimum)

• Encourages directing excess revenue to ridesharing and highway safety programs

5.Have I Got a Bridge to Sell You?

5.Have I Got a Bridge to Sell You?

Current U.S. Toll Road Privatizations —

A Brief History

Current U.S. Toll Road Privatizations —

A Brief History

May 23, 2003 October 2004 August 2005 February 2006 May 2006

Road SR 125, South Bay Expressway

Chicago Skyway Dulles GreenWay Indiana Toll Road Pocahontas Parkway

Location San Diego, CA Chicago, IL Dulles, VA Indiana Richmond, VA

Length 9.3 miles 7.8 miles 14 miles 157 miles 9 miles

Buyer Macquarie (Australia) Macquarie (Australia), Cintra (Spain)

Macquarie (Australia) Macquarie (Australia), Cintra (Spain)

Transurban (Australia)

Concession length 35 years from 2006 99 years 51 years 75 years 99 years

Relevant government body(s)

San Diego County, Caltrans, SANDAG, USDOT

City of Chicago VDOT Indiana State VDOT

San Diego, CA

Chicago, IL

Dulles, VA

Richmond, VA

Indiana

Current Privatized U.S. Toll Roads — Investment and Operating Profile

Current Privatized U.S. Toll Roads — Investment and Operating Profile

Concessionnaire

/Operator Project

Description Concession Duration

Concession Price

Price/ EBITDA (x) Leverage

Price/ Year/Mile Comment

SR 125 South Bay, San Diego, CA

Macquarie 9.3 mile road linking State 95 to State 54

35 years from

construction

$668 mm NM 75% $2.1mm Construction estimated to be completed late 2006

Chicago Skyway, IL Macquarie & Cintra

7.8 mile urban toll road linking Chicago to I-80 in Indiana

99 years $1.83bn 49.5x 65% (85% post

refinancing)

$2.4mm Brownfield Road

Price net of Cap Ex

Dulles Greenway, VA

Macquarie 14 mile urban toll road

51 years $533mm 19.8x <50% $0.7mm Brownfield Road, widening project

Indiana Toll Road, IN

Macquarie & Cintra

157 mile east-west inter-city toll road

75 years $3.85bn 63.5x 81% $0.3mm Brownfield Road, major trucking and commercial traffic

Pocahontas Parkway, VA

Transurban 9 mile toll facility located in Richmond, VA

99 years $611mm N/ A 69% $0.7mm Distressed asset, traffic well below T&R forecast

Overview of U.S. toll road acquisitionsOverview of U.S. toll road acquisitions

Ownership Structure of Current Privatized U.S. Toll

Roads

Ownership Structure of Current Privatized U.S. Toll

Roads

•Concession structure rather than outright sale of the asset

•Concession terms range from 35 to 99 years

•Concession agreement determines toll pricing, operational and maintenance requirements

CommentComment SR 125SR 125 Chicago SkywayChicago Skyway

Pocahontas ParkwayPocahontas ParkwayIndiana Toll RoadIndiana Toll RoadDulles GreenwayDulles Greenway

Gov’t. Body

Macquarie Infrastructure Corp. (MIG)

ASX listed (MIG) $9bn market cap. Managed by Macquarie

Bank

99 yearconcession

$300mm

VDOT, VA State

MIG

ASX listed (MIG) $9bn market cap.

51 yearconcession

$533mm

VDOT, VA State

Transurban

ASK listed (TCL) $4bn market cap.

99 yearconcession

$600mm

City of Chicago

Skyway Vehicle

Spain listed $ market

cap.

99 yearconcession

$1.83bn

Cintra MIG

ASX listed $9bn market

cap.

55% 45%

State of Indiana

ITR Vehicle

Spain listed $ market

cap.

99 yearconcession

$3.85bn

Cintra MIG

ASX listed $9bn market

cap.

50% 50%

Projects Under Agreement Or In Progress

Projects Under Agreement Or In Progress

State Description Est. Size Stage in Progress Est. Completion Private Partner

I-81 VA Four lane widening project with separation of truck and car lanes

$7.9bn Selected by VA in March 2004; project yet to be undertaken

TBD STAR Solutions (Adam, APAC, KBR, English, Wilbur Smith)

Coalfields Expressway

VA New four-lane highway connecting the WV Coalfields Expressway to Wise County

$2.3bn KBR finished design/ engineering for initial section of highway; announced partnership with coal producers on J an. 13, 2006

TBD KBR (with Pioneer and Alpha)

Capital Beltway HOT Lanes

VA HOT lanes in both directions along 14 miles and add a connection to the road and I-95

$985m Signed PPP agreement in April 2005; construction scheduled to begin within a year

TBD Fluor-Transurban

I-95/I-395 VA Improvement along 56 miles adding a third lane to existing HOV lanes

$913m Advisory panel recommendation of Fluor-Transurban made in November 2005; no action taken

Spring 2007 Fluor-Transurban

Route 28 VA Special district tax financed widening from six to eight lanes; interchange upgrading

$200m Four of six interchanges upgraded; fifth in progress

TBD Clark Construction

I-75/575 GA High volume of widening projects along I-75 $1.2bn Received $48m contract in late 2005; larger project expected

TBD GTP (Bechtel, Gilbert, Matthews)

South Bay Expressway

CA 14.9 km four lane toll road, SR125 $635m Under construction Winter 2006 Macquarie

Port of Corpus Christi

TX 1,000 acre port development, including road/ rail/ waterway extension and marine terminal capital improvements

$274m In late 2005, PCCA entered into a six-month exclusive agreement to develop a concession agreement

TBD Dragados S.P.L.

I-205 Corridor

Sunrise Project

Newberg-Dundee

OR - Lane widening and interchange improvements

- Construction of five-mile limited access four-lane facility

- Proposed 11 mile bypass corridor

$1bn+ Identified as preferred partner in November 2005; currently undertaking pre-development financing study

TBD OTIG (Macquarie, Hatch Mott MacDonald, Preston Gates Ellis)

Project Overviews

Key Policy QuestionsKey Policy Questions

1. How high could tolls really get?

2. Why doesn’t the public agency just raise tolls itself?

3. Where does the lease revenue go?

4. What if the asset needs to be replaced during the term of lease?

For more information, visit:

http://www.mtc.ca.gov

For more information, visit:

http://www.mtc.ca.gov