JOINT OPERATIONS & FINANCE COMMITTEE MEETING · JOINT OPERATIONS & FINANCE COMMITTEE MEETING ... continued strategic consulting and outreach services for the long-range ... the Capital

SAN JOAQUIN HILLS TRANSPORTATION CORRIDOR AGENCY FOOTHILL/EASTERN TRANSPORTATION CORRIDOR AGENCY

JOINT OPERATIONS & FINANCE COMMITTEE MEETING

AGENDA

Ross Chun, Chair of the Board of Directors of the San Joaquin Hills Transportation Corridor Agency and Ed Sachs, Chair of the Board of Directors of the Foothill/Eastern Transportation

Corridor Agency, hereby call the following joint meeting of the Operations & Finance Committee to be conducted at the following time and location:

May 25, 2017 11:30 a.m. – 2:00 p.m.

TCA Offices Board Room

125 Pacifica, Irvine, CA 92618

AGENDA DESCRIPTIONS The agenda descriptions are intended to give notice to members of the public of a general summary of items of business to be transacted or discussed. The listed action represents staff's recommendation. The Committee may take any action that it deems to be appropriate on the agenda item and is not limited in any way by the notice of the recommended action. In compliance with the Americans with Disabilities Act, if you require special accommodation for this meeting, you should notify the Clerk of the Board 24 hours prior to the meeting at (949) 754-3402. The agenda for this meeting is posted at the TCA office and also on the Website at www.thetollroads.com. Materials distributed to the majority of the members of the TCA Board of Directors or Committee in connection with any matter subject for consideration at this meeting in open session are available for public inspection at the TCA offices.

I. CALL TO ORDER

INVOCATION (Chair Chun)

PLEDGE OF ALLEGIANCE (Chair Sachs)

Joint Operations & Finance Committee Agenda May 25, 2017

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ROLL CALL – SAN JOAQUIN HILLS BOARD OF DIRECTORS Chair Ross Chun City of Aliso Viejo Vice-Chair Melody Carruth City of Laguna Hills Director Katrina Foley City of Costa Mesa Director Richard A. Viczorek City of Dana Point Director Christina Shea City of Irvine Director Fred Minagar City of Laguna Niguel Director Bert Hack City of Laguna Woods Director Ed Sachs City of Mission Viejo Director Scott Peotter City of Newport Beach Director Kathy Ward City of San Clemente Director Brian L. Maryott City of San Juan Capistrano Director Sal Tinajero City of Santa Ana Director Todd Spitzer County of Orange, 3rd District Director Lisa Bartlett County of Orange, 5th District

ROLL CALL – FOOTHILL/EASTERN BOARD OF DIRECTORS

Chair Ed Sachs City of Mission Viejo Vice-Chair Christina Shea City of Irvine Director Jose F. Moreno City of Anaheim

Director Joseph L. Muller City of Dana Point Director Scott Voigts City of Lake Forest

Director Mark Murphy City of Orange Director Tony Beall City of Rancho Santa Margarita

Director Kathy Ward City of San Clemente Director Brian L. Maryott City of San Juan Capistrano Director Sal Tinajero City of Santa Ana Director Charles Puckett City of Tustin

Director Peggy Huang City of Yorba Linda Director Todd Spitzer County of Orange, 3rd District Director Shawn Nelson County of Orange, 4th District

Director Lisa Bartlett County of Orange, 5th District

II. PUBLIC COMMENTS At this time, members of the public may address the Joint Operations & Finance Committee regarding any items within the subject matter jurisdiction of the Committees, but no action may be taken on off-agenda items unless authorized by law. Comments shall be limited to three (3) minutes per person and twenty (20) minutes for all comments, unless different time limits are set by the Chair subject to the approval of the Committees.


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III. CONSENT CALENDAR

There are no items for discussion under the Consent Calendar.

IV. COMMITTEE BUSINESS (ITEMS 1-6)

Items 1 & 2 will be discussed jointly and then voted on as separate items. 1. SAN JOAQUIN HILLS TRANSPORTATION CORRIDOR AGENCY FISCAL

YEAR 2018 ANNUAL BUDGET (Amy Potter, Chief Financial Officer) FILE NO.: 2017S-015 Approve Resolution No. S2017-02 entitled “A Resolution of the Board of Directors of the San Joaquin Hills Transportation Corridor Agency Approving the Budget for Fiscal Year 2018” in the amount of $138,853,369. Recommendation: Staff is seeking Committee approval to present this item for consideration by the Boards of Directors for approval at the June 8, 2017 meeting. Attachment: DRAFT Staff Report 2. FOOTHILL/EASTERN TRANSPORTATION CORRIDOR AGENCY FISCAL

YEAR 2018 ANNUAL BUDGET (Amy Potter, Chief Financial Officer) FILE NO.: 2017F-015 Approve Resolution No. F2017-02 entitled “A Resolution of the Board of Directors of the Foothill/Eastern Transportation Corridor Agency Approving the Budget for Fiscal Year 2018” in the amount of $221,444,437. Recommendation: Staff is seeking Committee approval to present this item for consideration by the Boards of Directors for approval at the June 8, 2017 meeting. Attachment: DRAFT Staff Report 3. MAILHOUSE SERVICES – CONTRACT AWARD (Alphan Turkeli, Program Manager, Customer Service) FILE NO.: 2017J-020 As a means to manage costs, the Agencies utilize a third-party to provide bulk mailing services for various notices, statements and letters. Staff recently completed a request for bid to identify the lowest responsive and responsible bidder to provide the requested services and will update the Committee on the outcome and resulting staff recommendation for award. Recommendation: Staff is seeking Committee approval to present this item for consideration by the Boards of Directors for approval at the June 8, 2017 meeting. Attachment: DRAFT Staff Report


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4. BIOLOGICAL SERVICES TASK ORDERS (Valarie McFall, Chief Environmental Planning Officer) FILE NO.: 2017J-034 The Boards awarded a contract with Psomas (Contract No. K001109) and Land IQ, LLC (Contract No. K001110) to provide on-call biological consulting services for the Agencies. These on-call contracts provide staff support for various tasks, including, but not limited to, mitigation site assessments, habitat assessments, biological analyses, document reviews, construction oversight, surveys and document preparation, restoration and resource management plans. Consistent with the services identified in the contracts, staff recommends the issuance of TO-006 to Psomas to provide on-road biological fieldwork and TO-002, TO-003 and TO-004 to Land IQ, LLC to provide mitigation site and biological support for the Upper Chiquita Conservation Area. Recommendation: Staff is seeking Committee approval to present this item for consideration by the Boards of Directors for approval at the June 8, 2017 meeting. Attachment: DRAFT Staff Report 5. STATE AND FEDERAL LEGISLATIVE ADVOCACY SERVICES (Barbie Daly, Director of Government & Legislative Affairs) FILE NO.: 2017J-027 State and federal legislative advocacy and consulting services are necessary due to the many legislative and regulatory issues associated with planning, financing and building infrastructure and the continued operation of the existing toll roads. TCA has contracted with firms for legislative advocacy services since 1987. Currently, Robert W. Naylor Advocacy represents the Agencies in Sacramento while Akin Gump Strauss Hauer and Feld, LLP provides legislative advocacy services in Washington D.C. Their continued work is Sacramento and Washington, D.C. is critical to the objectives and mission of the Agencies. Recommendation: Staff is seeking Committee approval to present this item for consideration by the Boards of Directors for approval at the June 8, 2017 meeting. Attachment: DRAFT Staff Report 6. STRATEGIC PLANNING CONSULTING SERVICES (Mike Chesney, Chief Strategy Officer) FILE NO.: 2017F-019 Engagement of experienced strategic planning support services in FY18 with strong regional and local knowledge is recommended to support the Agency’s initiative to improve mobility in South Orange County to support overall regional mobility. These contracts, amendments, and task orders will provide staff with continued strategic consulting and outreach services for the long-range strategic planning efforts that benefit mobility in the South Orange County area and the broader Southern California region. The next steps in this outreach effort are to further engage the stakeholders and to educate and communicate the process and next steps of the formal environmental phase on the South County Mobility Improvements.


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Recommendation: Staff is seeking Committee approval to present this item for consideration by the Boards of Directors for approval at the June 8, 2017 meeting. Attachment: DRAFT Staff Report

V. ADJOURNMENT The next regular meeting of the San Joaquin Hills Operations & Finance Committee and the Foothill/Eastern Operations & Finance Committee will be held on an “as needed basis” as determined by the Chairs of both Boards of Directors. Meeting notices, with date and time, will be posted a minimum of 72 hours prior to the meeting.

125 Pacifica, Suite 100, Irvine, CA 92618-3304 · (949) 754-3400 Fax (949) 754-3467

TheTollRoads.com Members: Aliso Viejo · Anaheim · Costa Mesa · County of Orange · Dana Point · Irvine · Laguna Hills · Laguna Niguel · Laguna Woods · Lake Forest

Mission Viejo · Newport Beach · Orange · Rancho Santa Margarita · Santa Ana · San Clemente · San Juan Capistrano · Tustin · Yorba Linda

San Joaquin Hills Foothill/Eastern Transportation Transportation Corridor Agency Corridor Agency Chair: Chair: Ross Chun Ed Sachs Aliso Viejo Mission Viejo

June 8, 2017 Dear Chairman Chun and San Joaquin Hills Transportation Corridor Agency Board of Directors:

I am pleased to present you with the Fiscal Year 2018 budget. The budget was developed through an extensive effort that involved review of current expenses and revenue trends, bond indenture requirements, customer service enhancements and capital project plans that will advance the San Joaquin Hills Transportation Corridor Agency’s mission to enhance mobility in Orange County and Southern California.

The Agency continues to be financially solid following the refinancing of the Agency’s debt in 2014 and continued year-over-year transaction and revenue growth that has outpaced budgeted projections. Transactions and toll revenue in Fiscal Year 2017 are projected to be up by approximately 4.0% and 6.6% respectively over Fiscal Year 2016. In light of the growth over recent years and responsible financial policies approved by the Board of Directors, Standard and Poor’s Global Ratings upgraded the San Joaquin Hills Agency senior lien bonds to BBB from BBB- and upgraded the junior-lien bonds to BBB- from BB+ with a stable outlook for both.

The proposed Fiscal Year 2018 expenditures budget of $138.9 million shows a decrease of approximately $700,000 from the Fiscal Year 2017 expenditures budget primarily related to reductions in capital improvement costs.

The Fiscal Year 2018 budget assumes transactional toll revenue growth of 5.5 percent that is achieved by implementing a 2.0 percent toll increase for non-FasTrak® transactions at all locations (FasTrak tolls will be discounted by $1 at each toll point), and an expected 2.9 percent growth in traffic. Small annual toll increases are important to ensure that revenue growth continues to meet the Agency’s goals. FasTrak and non-FasTrak rate increases range from $0.04 to $0.16 depending on toll point and time of day.

The following goals guided the development of the Fiscal Year 2018 budget:

(1) Support the Capital Improvement Plan (CIP) (2) Provide enhancements to Customer Service (3) Increase revenues to demonstrate the Agency’s ability to meet future coverage and debt

service requirements (4) Build cash reserves to protect against economic downturns, allow for future pay-as-you-

go CIP financing, and preserve the flexibility for early debt repayment (5) Allow the Agency to fill its Supplemental Reserve (6) Support the credit ratings upgrade strategy and meet investor expectations.

In Fiscal Year 2017 we made major strides to improve the experience for 73 Toll Road drivers with the award of a contract to outsource back office customer service with clear performance requirements to better meet our customer’s needs. This milestone directly supports the initiative to enhance customer service and will allow us to make even larger strides in Fiscal Year 2018. I look forward to working with all of you.

Sincerely,

Michael A. Kraman Chief Executive Officer

2018

San Joaquin Hills

Transportation Corridor Agency

Fiscal Year Proposed Budget

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San Joaquin Hills Transportation Corridor Agency

Budget Process and Format

Fiscal Year 2018 Proposed Budget

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Table of Contents Budget Process and Format .................................................................................................... 3

Budget Process .........................................................................................................3 Budget Format .........................................................................................................4

Sources and Expenditures ...................................................................................................... 7

Sources and Expenditures ........................................................................................7 Sources Summary ....................................................................................................9 Expenditures Summary ..........................................................................................17 Expenditures Detail ................................................................................................21

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Budget Process The San Joaquin Hills Transportation Corridor Agency’s (SJHTCA) Board of Directors and the Master Indentures of Trust (Indentures), established in the context of the Agency’s 1997 and 2014 bond issuances, provide the financial parameters for the Agency in the development of the budget. The Indentures provide the scheduled future debt service payments and the required debt service coverage ratios that must be obtained each fiscal year and establish financial constraints, which may impact the Agency’s ability to undertake additional projects. At the beginning of the process, the executive team set the objectives for FY18 while considering both near-term and long-term Agency goals and direction from the Board of Directors. Department managers reviewed the status of projects for the current year and developed project initiatives for the next fiscal year with the Agency’s goals and objectives in mind:

(1) Support the Capital Improvement Plan (CIP) (2) Provide enhancements to Customer Service (3) Increase revenues to demonstrate the Agency’s ability to meet future coverage

and debt service requirements (4) Build cash reserves to protect against economic downturns, allow for future pay-

as-you-go CIP financing, and preserve the flexibility for early debt repayment (5) Allow SJHTCA to fill its Supplemental Reserve (6) Support the credit ratings upgrade strategy and meet investor expectations

The finance staff worked jointly with each department to compile budget expenditure requests. The project initiatives and budget requests were then reviewed by executive management. The Agency’s traffic and revenue consultant attended the March 2017 Board meeting and presented an overview of the Agency’s toll revenue history, toll rate elasticity, and how current economic trends may affect toll transactions. The proposed annual budget was presented to the SJHTCA Board of Directors at a workshop on April 19, 2017, to obtain direction and feedback. The workshop included a review of toll rates, revenues, and expenditures. Questions received during the workshop were then addressed, and the annual budget is now being presented to the Board of Directors for adoption at the June 8, 2017 Board meeting for the fiscal year starting July 1, 2017. Approval of the budget requires the consent of at least two-thirds of the Board Members. Expenditures during the year must be made in accordance with the Agency’s policies. Expenditures in excess of the total of each budget category, as defined in the budget resolution, cannot be made without the approval of a budget resolution by at least two-thirds of the Board Members. The Agency is required to file copies of the annual budget with the trustee on or before the 20th day of July each fiscal year in accordance with the Indentures. All budgets are developed on a basis consistent with Generally Accepted Accounting Principles. The Chief Executive Officer (CEO) has the authority to make budget transfers within each of the following four categories as long as the total budget amount per category is maintained and the expenditures are made within Board approved policies:

· Administration

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· Planning, Environmental and Construction · Toll Operations · Debt Service

Transfers within each category are subject to the controls in place under the Indentures, the contracts and procurement manual, the investment policy, the staffing and compensation plan, and enabling legislation. Transfers within a category are often made for accounting purposes and given the budget includes estimates, transfers within a category allow department managers to manage within their department thereby reducing the need in many cases to amend the budget if procured costs do not match the original estimates. Transfers within each budget category are reported to the Board of Directors on a quarterly basis. Transfers between categories require the Board of Directors’ approval. These budget categories are presented on page 22 along with detail subcategories. Budget categories and subcategories are discussed in the Expenditures Summary section beginning on page 17. All budget appropriations lapse at year-end and any amounts not accrued at each year-end must be re-appropriated in the next fiscal year. Budget Format The FY18 proposed Expenditures budget for the SJHTCA totals $138.9 million. The Agency has one enterprise fund that records all activity on the accrual basis of accounting. The Agency establishes a budget for this one fund including Planning, Environmental and Construction, Toll Operating Expenses and Equipment (Toll Operations), and Debt Service. Expenses directly related to the SJHTCA are charged entirely to the Agency and those incurred on behalf of both the Agency and the Foothill/Eastern Transportation Corridor Agency (F/ETCA) are allocated between F/ETCA and SJHTCA (the Agencies) based on the estimated benefit to each. As part of the annual budget process, allocations between the Agencies are reviewed. Within each Agency, for funding purposes and calculation of debt coverage, costs are further allocated between Planning, Environmental and Construction, and Toll Operations, based on the estimated benefit to each activity. The following discussion presents a broad description of the type of activities included in the three budget fund categories. These three fund categories are represented as separate columns on page 22 to illustrate how each budget category and subcategory is allocated between the budget fund categories. A more detailed discussion of the expenditures proposed for FY18 is included in the Sources and Expenditures section of this document beginning on page 7. Planning, Environmental and Construction Expenses (budget fund category) The proposed budget for these activities and projects in FY18 totals $7.5 million. The budget for Planning, Environmental and Construction includes capital improvement plan projects, ongoing environmental mitigation and other environmental services, such as demographic and regional transportation studies, and all non-operating administration costs. These expenses are recorded in the Agency’s audited financial statements as an addition to construction in progress. Certain projects are then transferred to Caltrans, as

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required. It is at the point of transfer to Caltrans that the costs of the project are then expensed on the audited financial statements as a contribution to Caltrans. To date, 16 miles of the SJHTCA toll system have been transferred to Caltrans. The costs associated with such projects are budgeted in the year the expense is incurred, not when the project is transferred to Caltrans. Planning, Environmental and Construction Administration costs are defined as office, personnel, legal, consulting, and other customary and normal expenditures associated with the direct management and administration of the Agency’s planning, environmental and construction related activities, including the development impact fee program, and are allocated as discussed above. The primary sources of funds for Planning, Environmental and Construction Expenses are unrestricted cash on hand from previous years’ development impact fee collections and surplus revenues. Surplus revenues are toll, fee and penalty revenues in excess of amounts needed for operating expenses, debt service payments and funding the indenture required reserves in the year the revenue is collected. The senior and junior lien debt service reserve fund requirements totaling $179.3 million have been fully met. The supplemental debt service reserve has a requirement of $93.1 million and is funded with one-half of surplus revenues until the requirement has been met. The supplemental debt service reserve is projected to be $93.1 million by the end of FY18. Surplus revenues are not under bond Indenture requirements (see description of bonds in the Debt Service section on the following page) and may be spent at the Board of Directors’ discretion for any lawful purpose. Each year, $5.0 million of development impact fees received by the Agency is available to fund expenditures or increase the surplus revenue fund; the balance of development impact fees collected during the year are also made available for the same purpose if they are not needed to fund debt service payments. Other sources of funds for these activities include investment earnings and grant funds awarded to the Agency. See tables on page 33 for detail of unrestricted cash and the supplemental debt service reserve. Toll Operations (budget fund category) The Toll Operations budget includes funding for the toll operations activities including operating administration costs. The proposed FY18 Toll Operations budget is $23.8 million. The primary sources of funds available for Toll Operations are toll revenues, penalties, fees, and interest earnings from certain accounts specified within the Indentures. Unrestricted cash as described above is also available for funding operations equipment and capital purchases. Amounts allocated to Toll Operations are costs associated with maintaining and operating the toll equipment, software and systems as well as the customer service centers, toll collection processing, and all other related operating expenses. The major costs budgeted for Toll Operations’ activities include the contract costs associated with the operation and maintenance of the Agency’s toll systems lane hardware and software; and customer service and toll compliance services which include the operation of the customer service center and toll processing, review and processing of vehicle plate images, and violation

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collection processing services. Also included in Toll Operations are toll equipment purchases such as transponders, system software, in-lane toll and violation processing equipment, and project development costs. In addition, a portion of Agency administration costs allocated to operation activities such as insurance, salaries and benefits, rents, consulting, legal, office expense and marketing are included in this fund category. Debt Service (budget fund category) Debt Service includes annual principal and semi-annual accrued interest payments related to long-term debt. A portion of the outstanding bonds are capital appreciation bonds and convertible capital appreciation bonds, which are structured so that the principal amount accretes (increases) each year at the stated interest rate. Accretion can be simply described as deferred interest that is added to the bonds’ principal balance and is recorded as interest expense and an increase to debt on the financial statements. Debt accretion has been excluded from the budget because it is a non-cash item and is reflected in the budget as part of the principal payments in the years scheduled to be paid. The proposed FY18 budget for Debt Service is $107.5 million. In 1993, the Agency issued long-term toll revenue bonds to finance construction of the San Joaquin Hills Transportation Corridor. The bonds were initially refinanced in 1997, amended in 2011, and ultimately refinanced in 2014. The 2014 transaction refinanced the debt to 2050, placed the Agency in a solid financial position, significantly improved the Agency’s debt metrics and achieved the following:

· Upgraded the credit ratings issued by Fitch and Standard & Poors to investment grade on the senior lien bonds

· Restored toll setting authority to the Board and provided for inflationary toll rate increases (small annual adjustments rather than infrequent larger lump sum adjustments)

· Created increased margin to build cash reserves in order to withstand future economic downturns and allow for potential early debt repayment in the future

Debt Service, which is primarily funded from toll revenues, grows at an average of 2.4% per year until it reaches maximum annual debt service of $186 million in FY 2041. Per the Indentures, the Agency’s Adjusted Net Toll Revenue (toll related revenues plus interest income on certain accounts, less operating expenses) must be at least 110% of the current year’s aggregate debt payments (all debt service scheduled for the fiscal year) and at least 130% of the current year’s senior lien debt payments. This is often referred to as 1.10x and 1.30x debt service coverage, respectively. When compiling the operations budget, the Agency staff ensures that the revenues and expenses budgeted provide the necessary coverage ratio as defined in the Indentures. The attached FY18 proposed budget results in an aggregate coverage ratio of 1.55x and a senior lien coverage ratio of 1.81x. The Debt Coverage Calculation Schedule showing the calculation is included on page 32 of this document.

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Sources

and

Expenditures


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Sources and Expenditures The Sources and Expenditures of Funds Statement summarizes the Agency’s projected total sources and expenditures for the year ending June 30, 2018. Total sources include revenues budgeted in FY18 as well as cash on hand from development impact fees and surplus revenues collected and available to the Agency from previous years and amounts in the debt service accounts. Below is a summary of total funds on hand and the amount of these funds available to fund the FY18 budget as well as future budgets (in thousands). Estimated Total Funds on Hand at 6/30/17 453,937$

July Activity Related to FY17 (37,958) Adjusted Estimated Total Funds on Hand at 6/30/17 415,979

Less Maintenance Facility Commitment (8,075) Less Operating Reserves (16,636) Less Arbitrage Tax Rebate Funds (1,225) Less Long-Term Debt Service Funds (16,847) Less Debt Service Reserves (263,502)

109,694$

Cash Restricted For Debt Service 19,864$ All Other Cash Available to Fund Current and Future Budgets 89,830

Estimated Cash Available to Fund Current and Future Budgets 109,694$

Estimated Cash Available, excluding Reserves, to Fund Current and Future Budgets

Total expenditures include all FY18 budgeted expenses requiring a cash outlay. The Sources and Expenditures of Funds Statement on the following page shows sources less cash expenditures to arrive at cash available to fund subsequent budgets. The following statement includes the approved FY17 budget, as amended, including transfers within the CEO’s authority, staff projected FY17 sources and expenditures based on actuals through March 2017 and the proposed budget for FY18.

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FY 2017Amended Budget FY 2017 FY 2018As of 3/31/2017 Estimated Actuals Proposed Budget

Sources:Net Toll Revenue 144,319 150,025 157,468 Penalties 25,800 22,490 22,500 Fees 9,313 9,594 9,700 Development Impact Fees 5,000 3,086 3,000 Interest Earnings 1,132 1,849 2,354 Cash Restricted For Debt Service 19,124 19,124 19,864 All Other Cash Available to Fund Current and Future Budgets 66,592 66,592 89,830

Total Sources of Funds 271,280 272,760 304,716

Expenditures:Planning, Environmental and Construction 10,005 6,594 5,937 Planning, Environmental and Construction Administration 1,599 1,332 1,561 Toll Operating Administration 7,009 6,908 8,075 Customer Service and Toll Compliance 10,991 9,678 10,897 Toll Systems 1,280 1,154 1,175 Toll Facilities 283 272 283 Toll Equipment 1,926 1,865 3,402 Debt Service 106,490 106,490 107,523

Total Expenditures 139,583 134,293 138,853

Subtotal 131,697 138,467 165,863

27,307 28,773 8,799 Projected Cash Available to Fund Subsequent Budgets 104,390 109,694 157,064

Less Restricted Cash For Future Debt Service 19,864 19,864 19,870

Projected Available Cash 84,526 89,830 137,194

Projected Deposits to the Supplemental Debt Service Reserve From Revenues and Interest Income

San Joaquin Hills Transportation Corridor AgencySources and Expenditures of Funds Statement

Fiscal Years 2017 through 2018($000)

Description

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Sources Summary With the growth of Southern California’s economy, FY17 transactions and transactional toll revenue are expected to be up approximately 4.0% and up 6.6%, respectively, over FY16. The 2014 bond refinance transaction greatly improved debt service coverage margins and the ability to withstand future economic downturns. Regardless, it will be important to continue to take measures ensuring that revenue growth continues in FY18 to meet the Agency’s goals. The Agency has also used customer incentives and promotions to maintain and build transactions and revenues. Given the purpose of promotions is to increase revenue, tolls used as incentives for promotions will be recorded as an offset to revenue in accordance with accounting principles and the Indentures. In FY18, marketing incentive programs will continue to be implemented to convert customers who pay online with One-Time-Toll to FasTrak or ExpressAccounts. In addition, paid advertising will continue to emphasize increased awareness of the Toll Roads value proposition. Staff works with the Agency’s traffic and revenue consultant, Stantec Consulting Services Incorporated (Stantec) to review the effect of prior year toll rates and prepare an analysis for the upcoming year. During the April 2017 budget workshop, staff discussed the analysis with the Board and recommended toll rates based on the results of prior year increases and toll elasticity, assumptions included in the bond finance documents, building cash reserves, and economic factors. The FY18 budget for sources of funds is based on the traffic and revenue consultant’s toll rate analysis and the feedback received from the Board of Directors during the budget workshop (see Net Toll Revenue section below). At the beginning of FY18, the Agency expects to have total cash adjusted for accrual items of $416.0 million. The expected adjusted cash balance includes debt service reserve and operating reserve funds of $280.1 million, $16.8 million reserved for Long-Term Debt Service, $8.1 million reserved for a commitment to construct a Caltrans maintenance facility, $1.2 million reserved for arbitrage and tax rebate, and $109.7 million of cash on-hand available to fund the current and future years’ budgets. These available funds are primarily from development impact fees, surplus revenues and interest earnings. During FY18, Net Toll Revenue, Penalties, Fees, Development Impact Fees, and Interest Earnings are budgeted at $195.0 million. Below are brief explanations of each of these funding sources. Net Toll Revenue The FY18 budget assumes transactional toll revenue of $166.9 million which represents a 5.5% increase over projected FY17 transactional toll revenue. The budget for FY18 Net Toll Revenue of $157.5 million, or 80.7% of total revenue, is a combination of the Agency’s estimate of transactional toll revenue reduced by estimated processable and unprocessable transactions (offset by toll revenue recovered from processed violations) and non-revenue transactions. As a result of the conversion to All Electronic Tolling (AET) and the resulting shift in payment patterns, including some patrons who may have previously paid with cash but are now initially identified instead as processable violation transactions, toll revenue recovered during the violation process is appropriately classified

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as Net Toll Revenue. The Agency currently waives the penalty for first time violators if the toll is paid within 30 days. Unprocessable violations (primarily vehicles with no license plates) and non-revenue transactions (primarily California Highway Patrol, Caltrans, and Agency vehicles used on the road for operations and maintenance) are expected to occur at a rate of 4.4% of transactional toll revenue or $7.4 million in FY18. Processable transactions offset by toll revenue recovered from processed violations is budgeted at $2.1 million or 1.3% of transactional toll revenue in FY18. The proposed 5.5% transactional toll revenue increase is achieved by implementing a 2.0% non-FasTrak rate increase. The FasTrak rates increase at amounts that maintain the $1.00 discount from the non-FasTrak rates. The proposed toll rates are expected to result in transaction growth of 2.9% based on the Stantec analysis. The growth rate assumes continued economic improvement and an increase in traffic congestion on routes parallel to the toll roads thereby increasing the value of time savings obtained by choosing the toll road option. The table on the following page shows the FY18 current toll rates and the proposed FY18 toll rates by location, split between non-FasTrak and FasTrak, and pre- & post-peak/ peak / off-peak / weekend if applicable. In summary, FasTrak and non-FasTrak rates increase by $0.04 to $0.16 per tolling location.

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CurrentLocation Time/Type Rates Rate Change

La Paz Non-FasTrak* 2.40$ 2.45$ 0.05$ FasTrak 1.40$ 1.45$ 0.05$

Aliso Creek Non-FasTrak* 2.99$ 3.05$ 0.06$ FasTrak 1.99$ 2.05$ 0.06$

El Toro Non-FasTrak* 3.62$ 3.69$ 0.07$ FasTrak 2.62$ 2.69$ 0.07$

Catalina View** Non-FasTrak Off-Peak 6.36$ 6.49$ 0.13$ FasTrak Off-Peak 5.36$ 5.49$ 0.13$ Non-FasTrak Peak Hour 7.92$ 8.08$ 0.16$ FasTrak Peak Hour 6.92$ 7.08$ 0.16$ Non-FasTrak Pre- & Post-Peak * 7.61$ 7.76$ 0.15$ FasTrak Pre- & Post-Peak 6.61$ 6.76$ 0.15$ Weekend Non-FasTrak 6.10$ 6.22$ 0.12$ Weekend FasTrak 5.10$ 5.22$ 0.12$

Newport Coast Non-FasTrak* 3.36$ 3.43$ 0.07$ FasTrak 2.36$ 2.43$ 0.07$

Bonita Canyon Non-FasTrak* 2.04$ 2.08$ 0.04$ FasTrak 1.04$ 1.08$ 0.04$

* One Time Toll (OTT) rate** 3-4 Axle Vehicles 2 Times Rate 5+ Axle Vehicles 4 Times Rate

Proposed 2% Increase

The Agency estimates that it will receive a total of $150.0 million in Net Toll Revenue in FY17. This consists of $158.2 million of transactional toll revenue reduced by estimated processable and unprocessable transactions of $16.9 million offset by toll revenue collected from processed violations of $8.7 million. Penalties Penalties revenue is budgeted for FY18 at $22.5 million, representing 11.5% of total revenues and consists of violation penalties related to toll violations. The intent of violation penalties is to act as a deterrent and ensure collection of toll revenues. Penalties revenue is recorded as collected. As mentioned in the Net Toll Revenue section above, the toll related to a violation is properly classified in Net Toll Revenue. The Agency continues its efforts in signing patrons up for accounts and informing infrequent users of the available payment options in order to avoid handling through the violation process. The Agency also implemented agreements with major rental car companies in April 2016 which have proved successful in reducing violations. The Agency will continue initiatives in FY18 to attempt to address violations, such as signage, and providing materials to support communication to the community at large and visitors. Penalties revenue for FY17 is estimated to be $22.5 million. The FY18 Penalties budget is conservative with consideration given to the current trends in collections, the estimated transactions for FY18, the current processable transactions rate at 6.5% of traffic, the

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existing policy of $57.50 on the first notice of violation and $42.50 on delinquency notice, and the Agency’s policy of waiving penalties for first-time violators. Fees Fees are budgeted for FY18 at $9.7 million, representing 5.0% of total revenues. Fees revenue consists of $8.3 million for account maintenance fees from FasTrak accountholders, and $1.4 million of other miscellaneous fees related to operations (i.e., invoice fees, suspended account and returned check fees, lost, stolen or damaged transponder fees, and fees related to programs with San Francisco Airport and rental car agencies). Fees revenue for FY17 is estimated to be $9.6 million. The FY18 budget for account maintenance fees is based on the Agency’s current policy in which a fee of $2.00 per transponder is charged to FasTrak accountholders in each month where monthly tolls incurred on F/ETCA or SJHTCA facilities are less than the threshold of $25 per transponder. When an account has multiple transponders, the aggregate tolls incurred by an account are considered when determining whether any account maintenance fees are charged. During FY18 the Agencies will transition to providing all accountholders with electronic account activity statements versus mailed statements. If an accountholder would like to continue to receive mailed statements, the statements will be provided monthly for a fee of $1.00 per statement. Development Impact Fees The Agency adopted a Development Impact Fee Program in 1986. The fee program is based on the general principle that development within the “area of benefit” of the corridor will benefit from the construction of the corridor. Development Impact Fees (DIF) are assessed on new residential and non-residential (commercial, industrial, etc.) development. Development Impact Fees for FY17 are expected to approximate $3.1 million. The Agency is estimating Development Impact Fees to be $3.0 million for FY18, representing 1.6% of total revenues, based upon recent trends and development. The chart on the following page is provided to illustrate the historical trend of Development Impact Fees collected.

14

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

09 10 11 12 13 14 15 16 *17 *18

Amou

nt ($

000'

s)

Fiscal Year

San Joaquin Hills Transportation Corridor AgencyDevelopment Impact Fees

Ten Year Trend

*Estimate

Interest Earnings Interest Earnings represent earnings on funds held in trust for bondholders, funds held for operations and funds held in custody accounts at the trustee for the Agency. Budgeted Interest Earnings are based upon the existing investment portfolio. Total Interest Earnings budgeted for FY18 of $2.3 million represent approximately 1.2% of total revenues. Interest Earnings for FY17 are estimated to be $1.8 million.

15

Revenue Pie Chart – FY17 Budget as compared to FY18 Budget The pie charts on the following page show a comparison of FY17 budgeted revenues to FY18 proposed budgeted revenues.

Budgeted revenues increased $9.4 million to $195.0 million in FY18 from budgeted revenues of $185.6 million in FY17 due to an increase in Net Toll Revenue, Fees, and Interest Earnings, offset by decreases in Penalties and Development Impact Fees. Net Toll Revenue is expected to increase from $144.3 million budgeted in FY17 to $157.5 million in the FY18 budget as a result of current transaction and revenue trends and toll rate changes. Penalties are projected to be lower in FY18 by $3.3 million compared to the FY17 budget as a result of actual violation collections and current transaction and transactional toll revenue trends. See Penalties discussion on page 12 for more information. Fees are budgeted to increase in FY18 by $0.4 million compared to the FY17 budget. FY18 budgeted Development Impact Fees decreased by $2.0 million compared to FY17 Budget based on recent collection trends and development. Interest Earnings are expected to increase by approximately $1.1 million primarily resulting from working with the Agency’s investment advisor to implement an active management strategy which has allowed the Agency to take advantage of the Federal Open Market Committee increasing the Fed funds interest rate.

16

Net Toll Revenue 77.8% $144.3M

Penalties 13.9% $25.8M

Fees 5.0% $9.3M

DIF 2.7% $5.0M

Interest 0.6% $1.2M


FY 2017 RevenueBudget

Total FY17 Total Budget Revenue $185.6M



Fees 5.0% $9.7M

DIF 1.6% $3.0M

Interest 1.2% $2.3M

FY 2018 RevenueProposed Budget

Total FY18 Total Budget Revenue $195.0M

17

Expenditures Summary In response to the economic downturn in the recent past, the Agency worked diligently to significantly decrease operating expenses and reduce headcount, while continuing to provide quality customer service and ensuring that equipment, systems, and facilities remained in a good state of repair. This provided for a lower base to absorb inflationary growth. As a result of the improving economy and a steady return of revenues to levels recorded prior to the economic downturn in FY08, the Agency prepared the FY18 expense recommendation considering the cost impact of increasing transactions and revenues. In addition, the budget includes proposed inflationary increases in major operating contracts, operations initiatives, capital projects costs, and staffing to manage the growth in operations and capital project initiatives. Detail of expenditures can be found on pages 21-31. The FY18 proposed budget for expenses was developed with the Agency’s continued commitment to fiscal responsibility and overarching goals. The proposed budget for FY18 includes total expenditures of $138.9 million. The following are brief explanations of the various expenditures. Planning, Environmental and Construction (Excluding Administration) This category mainly consists of costs associated with the Agency’s current Capital Improvement Plan including Toll Booth Removal, Signage, and various studies to monitor the Agency’s compliance with permits and other environmental documents. The FY18 proposed budget for these expenses is $5.9 million, approximately 4.3% of the total budget. The funding for these expenses is the cash on hand from previous development impact fee collections and Agency surplus revenues. The Planning, Environmental and Construction projected actuals for FY17 total $6.6 million. The decrease of $0.7 million in the FY18 budget is primarily related to reductions in the conveyance of mitigation land and the Toll Booth Removal project, partially offset by an increase in the Signage project. Administration The total proposed budget for Administration expenses is $9.6 million for FY18, or approximately 6.9% of the total proposed budget. The Administration category includes all employee compensation (3.0% of the total budget) as well as overhead-type expenses, such as office expenses, legal, insurance, administrative consulting services, marketing, and travel expenses. Rents and leases expense includes the fair market rental lease payments that the Agency pays to the F/ETCA related to its portion of the Pacifica building and related common area maintenance and tenant improvement costs. These costs are budgeted in total but are allocated between the two primary activities of the Agency: Planning, Environmental and Construction and Toll Operations. The allocation of costs between the two types of activities is necessary in determining the appropriate funding

18

source as well as for the calculation of debt service coverage per the Indentures. The resulting allocation can be seen in the columns for each activity on page 22 of this document. Projected Administration expenses for FY17 total $8.2 million. The increase in the FY18 proposed budget from the FY17 projected actuals is primarily due to Customer Service Center Modernization, consulting for the Agency’s Business Intelligence project, and the System-Wide Traffic Optimization Study. Toll Operations (Excluding Administration) Toll Operations include toll system costs associated with maintaining the Agency’s system lane hardware and software currently under contract with TransCore LP, customer service center and violation processing management and staff currently under contract with Faneuil, Inc., customer service system maintenance and toll processing under contract with BRiC-TPS LLP, and image based transaction processing currently under contract with Global Agility Inc. Also included in this category are toll facilities costs for maintaining the Agency’s buildings utilized in the operation of the road, and toll equipment such as transponders and server replacements. The proposed FY18 budget for these expenses is $15.8 million or 11.4% of the total budget. Toll Operations, excluding Administration, is projected to total $13.0 million in FY17. The FY18 budget is million higher than projected FY17 actuals primarily due to increases in labor for improved customer service and other customer service and compliance costs directly related to revenues, consultant support for the Customer Service Center Back Office System Replacement Project, scheduled Consumer Price Index adjustments for the system lane hardware and software maintenance contracts, and an increase in transponder purchases. Debt Service The Debt Service category includes the annual principal and semi-annual interest payments to be made on all outstanding bonds. These payments for FY18 are budgeted at $107.5 million, or 77.4% of the total budget. Debt Service for FY17 will total $106.5 million. Future years’ Debt Service, which is primarily funded from toll revenues, grows at an average of 2.4% per year until it reaches maximum annual debt service of $186 million in FY 2041.

19

Expenditures of Funds – FY17 Amended Budget as compared to FY18 Budget The pie charts on the following page show a comparison of the FY17 amended budget and the FY18 proposed budget by type of expense. The FY18 proposed budget of $138.9 million, as compared to the prior year’s amended budget of $139.6 million, shows a decrease of $0.7 million, or 0.5%. The net decrease is primarily related to reductions in CIP that include the Toll Booth Removal project, and the conveyance of mitigation land. The decreases are partially offset by increases to the Customer Service Center Back Office System Replacement Project, the Signage Project, the System-Wide Traffic Optimization Study, and Customer Service Center Modernization. Budgeted Debt Service payments for FY18 increased by $1.0 million over FY17, as scheduled in the Indentures.

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Admin 6.1% $8.6M

Plan, Env & Constr 7.2% $10.0M

Toll Cust Serv & Compliance 7.9% $10.9M

Toll Systems 0.9% $1.3M

Toll Facilities 0.2% $0.3M

Toll Equipment 1.4% $2.0M

Debt Service 76.3% $106.5M


FY 2017 ExpendituresAmended Budget

Total FY17 Expenditures $139.6M

Admin 6.9% $9.6M





Toll Equipment 2.5% $3.4M


FY 2018 ExpendituresProposed Budget

Total FY18 Expenditures $138.9M

21

Expenditures Detail The schedule on the following page details the budget as summarized on pages 23-31 into more specific categories (budget subcategories). Many of the Administration subcategories are allocated between Planning, Environmental and Construction and Toll Operations expenses.

22

594 2387

Plan, Environ Toll Operations DebtCategory & Construction Exp & Equip Service Total

Administration:Regular Salaries 586 2,357 - 2,943 Internship Program 8 30 - 38 Board Compensation 18 72 - 90 Benefits 235 910 - 1,145 Employer Taxes 10 42 - 52 Insurance 56 685 - 741 Legal Expense 240 639 - 879 Telephone/Comm 13 51 - 64 Office Expense 40 225 - 265 Educ, Seminar, Membership, Mtgs 28 160 - 188 Consulting and Other Services 145 848 - 993 Marketing - 828 - 828 Publications & Subscriptions 1 4 - 5 Rents & Leases 140 559 - 699 Building Services 2 7 - 9 Transportation & Travel 26 108 - 134 Office Equipment 9 34 - 43 Pacifica Fixed Assets 4 516 - 520

Total Administration 1,561 8,075 - 9,636 Planning, Environmental and Construction:

Capital Improvement Plan (CIP):Toll Booth Removal 1,275 - - 1,275 Signage 3,127 - - 3,127 Total Capital Improvement Plan 4,402 - - 4,402

Other Planning, Environmental and Construction:Environmental 265 - - 265 Design Program Mgmt 430 - - 430 Design Special Studies & Other 600 - - 600 ROW Acquisitions, Appraisals & Other 240 - - 240 Total Other Planning, Environ and Constr 1,535 - - 1,535

Total Planning, Environmental and Construction 5,937 - - 5,937 Toll Operations:

Customer Service and Toll Compliance - 10,897 - 10,897 Toll Systems - 1,175 - 1,175 Toll Facilities - 283 - 283

Subtotal Toll Operations - 12,355 - 12,355 Operations Equipment:

Transponder Equipment - 1,938 - 1,938 Toll Equipment & Capital Expenditures - 1,464 - 1,464 Total Equipment - 3,402 - 3,402

Total Toll Operations - 15,757 - 15,757 Debt Service - - 107,523 107,523 Total Expenditures 7,498 23,832 107,523 138,853

San Joaquin Hills Transportation Corridor AgenciesFiscal Year 2018 Proposed Budget

($000)

Budget Fund Categories

23

Staffing The policies of the Transportation Corridor Agencies (TCA) require approval by the Boards of Directors for all new salary grade classifications, changes to the staffing plan (number of approved positions), and the total compensation budget. Compensation and staffing programs are then administered by the CEO under the approved budget. During the budget process each year, the CEO recommends changes to the existing programs for the upcoming fiscal year. The recommended staffing plan for FY18 is 68 funded positions and is allocated 62% to F/ETCA and 38% to this Agency. The FY18 budget includes one reclassification, five positions eliminated from the customer service walk-in center due to outsourcing, one eliminated Toll Facilities position, and two headcount additions to support human resources and environmental projects initiatives:

· Human Resources Generalist · Environmental Analyst

The following chart shows the change in funded headcount from 2007 through 2017 and the projected 2018 headcount on a combined Agency basis (F/ETCA and SJHTCA). The decrease in FY15 was due to the end of cash toll collections.

65

70

75

80

85

90

95

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18Proposed

Combined AgencyFunded Headcount Trend

Headcount Funded

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The functional area organization chart on the following page illustrates the duties and responsibilities for each executive’s division and the number of full time equivalent positions. In addition to the regular duties and responsibilities that are required to manage the Agencies, there are a number of project initiatives that staff work on each year to achieve Agency goals and objectives. Some of the longer-term projects have been included on the organization chart.

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TCA Organizational Structure Fiscal Year 2018

· Customer Interaction Management

· Call Centers · Walk-In Customer

Service Centers · Revenue Collection · Account

Management · Toll Compliance &

CHP Program · Toll System

Implementation & Operations

· Cyber Security & Corporate System Support

· Legislative Support · National Toll

Standards · Interoperability · Data Management

Chief Executive Officer 3 FTEs

Communications & Marketing

7.25 FTEs

· SR241/91 Express Connector

· South County Mobility Improvement

· Oso Bridge & Los Patrones Parkway

· Capital Improvement Plan

· Special Projects · Design · Engineering · Construction

Management · Real Property · Caltrans Interface · Facilities

Maintenance

· Communications Strategy

· Marketing · Media Relations · Special Events · Website · Graphics · Presentations · Publications · E-newsletters · Issue

Management · Social Media · Customer

Communication Consistency

· Tourism & Visitor Outreach

· The Toll Roads Rewards Program

· Environmental Outreach

· 241/91 Express Connector Outreach

· Sponsorships

F/ETCA Board

· SR 241/91 Express Connector



· Habitat Stewardship · Environmental

Compliance · Regional

Transportation Plan Coordination

· Project Permitting · Intergovernmental

Project Review · Mitigation Land

Transfer · NCCP/HCP

Compliance · Wildlife Safety

Fencing · Open Space



· Develop, Implement & Execute the Strategic Plan & Initiatives

· Translate Strategic Priorities Into Comprehensive & Actionable Plans

· Build Relationships With Stakeholders & Partners at the Local, State & Federal Levels

· Educate & Garner Active Support for TCA

· Establish Open & Candid Communication With Supporters & Opponents

· Discuss Commonalities While Exploring a Wide Range of Solutions

· Develop Annual State & Federal Legislative Platforms

· Legislative Initiatives

· Long-Term Financial Planning & Bond Finance

· Financial Reporting and Cash Flow Management

· Accounting · Toll Operations

Accounting/ Reconciliation/ Auditing

· Annual Audit · Budgeting · Treasury · Finance · Debt Compliance · Investor Relations · Insurance/Risk

Management · Internal Audit · Development Impact

Fee Program · Administration · Human Resources · Recruiting · Benefits &

Compensation · Employee Relations · Training &

Development · Contracts &

Procurement · Legislative Financial

Support

Finance, Contracts, HR

& Administration

31.5 FTEs

Toll Operations & IT

12 FTEs

Engineering & Facilities 7.5 FTEs

Environmental Planning 3.5 FTEs

Strategy & Public Affairs

3.5 FTEs

SJHTCA Board

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Administration - Compensation (Regular Salaries and Benefits) The Agency employee compensation budget is $4.1 million. TCA salaries are reviewed each year through the annual performance review process. The Agency does not provide for any type of automatic step or Cost of Living Adjustment (COLA) increases. Benefits include contributions to a cafeteria plan (medical, dental, and vision) and retirement plans. In general, budgeted benefits are determined by applying estimated rates for these plans to estimated headcount. If benefit rates come in lower than expected, the budget is not spent. FY18 benefits are 38.9% of salaries. The FY18 employer contributions to OCERS have been budgeted at 27.23% for legacy employees and 24.36% for employees hired on or after January 1, 2013 under the Public Employees’ Pension Reform Act – PEPRA. Each of these rates includes a component of 13.79% that represents payment of the Agencies’ unfunded actuarial accrued liability (UAAL). The Agency’s UAAL is estimated as of December 31, 2016 at approximately $4.4 million. The UAAL is amortized over 20 years. The Agencies monitor the UAAL and believe that it is manageable as it is paid each year as part of the employer contribution. In FY16, the Agency completed a detailed classification study of salary ranges through a consultant and FY17 salary ranges were adjusted based on the results of the study. For FY18, the staffing plan includes a 3% adjustment to salary ranges based on current public and private sector data. The recommendation to revise the Agency’s salary ranges does not in itself, result in any change to individual employee salaries. Employee salary adjustments are only based on merit increases and/or promotions. A 4.0% merit pool of $105,587 based on the current public and private sector data, with organizations, has been included in the budget. The recommended merit pool will allow the Agency to remain competitive, reward employees for their performance, and help retain current employees. The annual review process includes: employee input on the employee’s perspective of accomplishments and future goals, supervisor review and evaluation of employee accomplishments and establishment of goals for the next year, executive team member review of all performance reviews for the department, human resources review of all employee performance reviews for consistency, and submittal of performance reviews to the CEO for approval. The performance reviews are rated based on employee performance and include the following rating categories: Exceptional, Exceeds Expectations, Meets Expectations, Needs Development, and Unsatisfactory. The merit increase will be assigned according to ratings category and is expected to range from 2.5% to 5%. A 3.0% non-base building performance incentive pool of $79,190 has been included in the budget and is linked to the FY18 Agency initiatives. This will allow the CEO to reward outstanding achievement on special projects and/or initiatives in accordance with the Agencies’ performance incentive award policy. TCA has contained costs through a net reduction in headcount (81 to 68) since FY11 and reduced benefits by shifting pension and health benefits costs to employees and reduction of accrued leave. Our philosophy and approach to contract out many of our services continues to keep our salaries/benefits lower and manageable.

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Administration - Insurance Insurance expense is budgeted at $0.7 million, approximately 0.5% of the total budget. The major components of insurance include earthquake, property, general and excess liability, cyber, and workers’ compensation coverage as detailed in the annual Current Insurance Coverage Report which was provided at the February 2017 Board of Directors meeting. Policies are marketed and placed by the Agency’s insurance broker, Alliant Insurance Services, Inc., who provides all of the Agencies’ insurance procurement needs. All insurance is maintained in accordance with the requirements of the Indentures and as prudent business activities dictate. Administration - Legal Expenses Legal Expenses are budgeted at $0.9 million, 0.6% of the total budget. Amounts in this category include, but are not limited to, general counsel representation, legislation, support for ongoing and potential litigation, legal consulting related to contract issues, financing, development impact fees, human resources, and claims litigation. Legal expenses are invoiced separately by individual matter, or type of legal issue, and are managed by the individual department managers who have requested the assistance. Composite rates for general counsel are $247 per hour. Negotiated blended rates related to complex contract issues, and certain real estate issues are $300 per hour. In addition, litigation rates are billed at prevailing rates that vary between $325 and $840 per hour depending on the level of experience of the attorney involved, and state lobbyists bill at a rate of $445 per hour. Below is a breakdown of legal expenses by major category:

Toll Operations $ 368,000 Contracts 176,000 General/Other 150,000 Human Resources 66,000 Development Impact Fees 50,000 Financing 38,000 Environmental 30,000 Construction 1,000 Total $ 879,000

Administration - Consulting and Other Services The Consulting Services category is $1.0 million, which represents approximately 0.7% of the total budget and, as detailed below, includes service fees, maintenance and third party assistance contracts for both recurring needs and special projects, such as payroll processing, investment and financial advisory services, annual audit services, and the implementation and project management costs associated with the Business Intelligence project. It also includes a state and national interoperability consultant and testing support, printing and distribution of publications, federal and state advocacy, and community/public relations services.

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Financial Consulting $ 188,000 Strategic Planning 180,000 System-Wide Traffic Optimization Study 170,000 Business Intelligence Project Consulting 100,000 Communications & Customer Outreach 139,000 Other Consulting 59,000 Audit Services 57,000 Payroll & Personnel Services 50,000 Toll Operations Services 50,000 Total $ 993,000

Administration - Marketing Total expenditures for marketing and advertising are budgeted at $0.8 million, representing 0.6% of the total budget. This includes amounts paid for the Agency’s marketing consultant for creating and placing radio and digital advertising, designing and printing direct mail and account statement inserts; website design and programming services; and email communication to FasTrak and ExpressAccount holders including The Toll Roads Rewards program. These efforts are geared toward increasing account signups and toll road ridership. The following is the budget associated with these expenses:

Website Development $ 650,000 Analytics and Research 113,000 Marketing Consultant 50,000 Accountholder Email Communications 15,000 Total $ 828,000

Administration - Rents and Leases The budget for Rents and Leases totals $0.7 million, representing 0.5% of the total budget. This category is related to the Agency’s rental payments to the F/ETCA for its allocation of space in the Pacifica building and common area maintenance. The lease agreement calls for lease payments to be set annually based upon a current survey of fair market rates of comparable “all-in” leases in the Irvine area.

29

Administration - Pacifica Fixed Assets The Pacifica Fixed Assets category is budgeted at $0.5 million, representing 0.4% of the total budget. This category is related to equipment qualifying for capitalization and includes Customer Service Center Modernization. Planning, Environmental and Construction - Capital Improvement Plan The Capital Improvement Plan is budgeted at $4.4 million and represents 3.2% of the total budget. These projects are outlined in the Capital Improvement Plan to be presented to the Board of Directors on June 8, 2017 and summarized below:

Signage $ 3,127,000 Toll Booth Removal 1,275,000 Total $ 4,402,000

Planning, Environmental and Construction - Other Planning, Environmental and Construction This category totals $1.5 million or 1.1% of the total budget and includes funding for traffic trend and capacity analyses, design program management, title and survey work related to mitigation parcels, in-house consulting assistance, and coordination with the Southern California Association of Governments and OCTA to ensure the Agency’s projects are described accurately in regional transportation plans.

Traffic Trends/Capacity Analysis $ 600,000 Design Program Management 430,000 Surveying & Title 240,000 Mitigation & Permits 153,000 Environmental Staff Assistance & Other 112,000 Total $ 1,535,000

Toll Operations - Toll Customer Service and Toll Compliance The Toll Customer Service and Toll Compliance category totals $10.9 million, approximately 7.9% of the total budget, and primarily includes funding for the service center operations and toll compliance activities comprised of customer service and violation processing staff and management costs for the customer service operator Faneuil, Inc., customer service system maintenance and toll processing costs for BRiC-TPS LLP, and image based transaction processing costs for Global Agility Inc. Also included in this category are credit card processing fees assessed on all FasTrak, ExpressAccount, and violation credit card transactions, printing, postage, and mailing services, judgment recovery and collection costs, CHP violation enforcement, and telephone system expenses.

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Fees are included in this category for the Costco, AAA, and Albertsons FasTrak enrollment programs. The budget associated with these expenses is detailed below:

Credit Card Processing Fees $ 3,530,000 Customer Service Contract 3,475,000 Postage & Printing 1,961,000 Customer Service System Maintenance 1,149,000 Enforcement Services & Other 472,000 Other Customer Service 253,000 Projects 57,000 Total $ 10,897,000

Toll Operations - Toll Systems The Toll Systems category totals $1.2 million, or approximately 0.8% of the total budget and, as detailed below, primarily consists of fees for the software and hardware maintenance and operation contract with TransCore LP. Also included in this category are toll system spare parts and repairs, software licenses, and various computer maintenance contracts.

On-Road Toll System Maintenance $ 959,000 Computer/Software Maintenance & Support 118,000 Projects 98,000 Total $ 1,175,000

Toll Operations - Toll Facilities This category is budgeted at $0.3 million representing 0.2% of the total budget, and accounts for all costs associated with maintaining the Agency’s toll plazas such as utilities, janitorial services, and other various supplies and repairs.

On Road Building Maintenance Services $ 156,000 On Road Utilities 127,000 Total $ 283,000

Toll Equipment & Capital Expenditures The Toll Equipment & Capital Expenditures budget is $3.4 million, approximately 2.5% of the total budget. Toll Equipment & Capital Expenditures primarily consists of FasTrak transponder costs and the Customer Service Center Back Office System Replacement

31

Project. Other items include mobile app enhancements, uninterruptible power supply (UPS) replacements, and servers.

Transponders $ 1,939,000 CSC Back Office System Replacement Project 1,425,000 Other Equipment 38,000 Total $ 3,402,000

Debt Service The Debt Service category totals $107.5 million or 77.4% of the total budget and includes principal and interest payments on the Agency’s outstanding bonds. Scheduled debt service for FY18 include principal payments on the 1997 Bonds of $3.7 million and sinking fund deposits of $36.0 million due on January 15, 2018. Sinking fund deposits are considered debt service in the year the deposits are made, however, the funds are paid to bondholders in future years. Interest payments on the 2014 Bonds are $67.8 million for FY18, with $33.9 million to be paid on each January 15, 2018 and July 15, 2018. The FY17 budgeted aggregate and senior lien debt service coverage ratios shown on the following page meet the Indenture requirements of 1.10x and 1.30x, respectively. The budgeted coverage is 1.55x and 1.81x, respectively, and does not include the use of reserves or escrow defeasance. Adjusted Net Toll Revenues only includes certain revenues and interest earnings in certain accounts per the Indentures. Development impact fees are not included in the calculation. While development impact fees are not included in the budget calculation of the debt service coverage ratios, the Indentures allow for development impact fees that are remaining after each debt service payment to be added to the calculation thereby enhancing the debt service coverage calculation. The Indentures refer to this as Enhanced Adjusted Net Toll Revenues and this enhanced calculation will be used for actual debt service coverage covenant reporting. Current expenses include expenditures that are allocated to operations (as shown in the second column of the schedule on page 22).

32

FY18 Budget ($000)

Adjusted Net Toll Revenues

Total Toll Revenues Including Fees and Penalties 189,668 Interest Earnings * 1,155 Current Expenses - Funded From Toll Revenue (23,832)

Adjusted Net Toll Revenues 166,991

Aggregate Net Debt Service

Aggregate Debt Service 107,523

Aggregate Coverage Ratio (1.10x requirement) 1.55

Senior Lien Net Debt Service

Senior Lien Debt Service 92,093

Senior Lien Coverage Ratio (1.30x requirement) 1.81

* Reflects estimated earnings on specific accounts allowed for coverage as defined per the Indentures

Debt Coverage Calculation Fiscal Year 2018

33

Estimated Unrestricted Cash and Supplemental Debt Service Reserve Funds Below is the FY18 budgeted activity and estimated ending balances for unrestricted cash and supplemental debt service reserve funds, as described in more detail on page 5:

Estimated Available Cash at 6/30/17 88,910 Construction and Related Administration (7,498) Surplus Revenue * 51,688 DIF Revenue and Interest Income 4,094

Estimated Available Cash at 6/30/18 137,194

Estimated Supplemental Debt Service Reserve Funds at 6/30/17 84,253 Surplus Revenue * 8,413 Interest 386

Estimated Supplemental Debt Service Reserve Funds at 6/30/18 93,052

($000)

* Represents one-half of surplus revenue per the Indentures until the supplemental reserve funding is complete as is expected in FY18. Remaining Surplus Revenue funds the unrestricted cash reserves.

Estimated Unrestricted Cash($000)

Estimated Supplemental Debt Service Reserve Funds (Restricted)$93.1 Million Reserve Requirement

* Represents one-half of surplus revenue per the Indentures until the supplemental reserve funding is complete as is expected in FY18.

RESOLUTION NO. S2017-02

A RESOLUTION OF THE BOARD OF DIRECTORS OF THE SAN JOAQUIN HILLS TRANSPORTATION CORRIDOR AGENCY

APPROVING THE BUDGET FOR FISCAL YEAR 2018

On motion of Board Member___________________, the following Resolution was adopted. WHEREAS, Section VI, paragraph 6.1 of the Second Amended and Restated Joint Exercise of Powers Agreement creating the San Joaquin Hills Transportation Corridor Agency (the “JPA”), requires the adoption upon the approval of not less than two-thirds (2/3) of the Board Members, an annual budget for the ensuing fiscal year, pursuant to procedures developed by the Board; and WHEREAS, Section VI, paragraph 6.3 of the JPA requires all funds to be placed in object accounts and the receipt, transfer or disbursement of such funds during the term of the JPA shall be accounted for in accordance with Generally Accepted Accounting Principles (GAAP) applicable to governmental entities and all revenues and expenditures must be reported to the Board; and, WHEREAS, Section VI, paragraph 6.4 of the JPA states that all expenditures within the designations and limitations of the approved annual budget shall be made upon the approval of the Chief Executive Officer in accordance with the rules, policies and procedures adopted by the Board; and, WHEREAS, Section VI, paragraph 6.4 of the JPA further states that no expenditures in excess of those budgeted shall be made without the approval of not less than two-thirds (2/3) of the Board Members to a revised and amended budget which may, from time to time, be submitted to the Board; and, WHEREAS, Article VI, paragraph 6.5 of the Administrative Code of the Agency adopted on January 10, 1991, requires that all expenditures for travel, conference and business-related activities, and reimbursement of Board Members and Agency employees for such expenditures, be governed by the Board adopted Travel and Expense Policy;

NOW, THEREFORE the Board of the San Joaquin Hills Transportation Corridor Agency does resolve, declare, determine and order as follows:

1. Approves the annual budget for Fiscal Year 2018 (FY18) in the amount of

$138,853,369. The approval includes Administration, Planning, Environmental and Construction, Toll Operations, Debt expenses, the proposed staffing plan as described in the budget, and projected Revenues, including without limitation the adoption of the “proposed” toll rates, fees, and fines, as presented in the FY18 Annual Budget report.

2. Authorizes the Chief Executive Officer to reallocate within budget categories

as long as the budget for the following categories does not exceed the amount stated:

· Administration $9,636,017 · Planning, Environmental and Construction $5,937,126 · Toll Operations $15,756,805 · Debt Service $107,523,421

and subject to controls in place under the 1997 and 2014 Indentures of Trust,

the Board approved Contracts and Procurement Manual, Investment Policy, Staffing and Compensation Plan, and finally the Agency’s enabling legislation.

3. Resolves to carry forward the project description from the current 2017

Federal Transportation Improvement Program (FTIP) and 2016 Regional Transportation Plan/Sustainable Communities Strategy, and to include the updated schedule and project budget approved by this resolution in subsequent RTIP and RTP updates, for the Southern California Association of Governments (SCAG) region.

4. Directs the staff to forward the approved Annual Budget for FY18 to the

trustee.

This Resolution No. S2017-02, shall become effective immediately upon adoption. Adopted this 8th day of June, 2017, by the Board of Directors of the San Joaquin Hills Transportation Corridor Agency. Ross Chun, Chair San Joaquin Hills Transportation Corridor Agency

RESOLUTION NO. S2017-02

A RESOLUTION OF THE BOARD OF DIRECTORS OF THE SAN JOAQUIN HILLS TRANSPORTATION CORRIDOR AGENCY

APPROVING THE BUDGET FOR FISCAL YEAR 2018 ATTEST: I,__________________, Secretary/Clerk of the Board of the San Joaquin Hills Transportation Corridor Agency hereby certify that the foregoing Resolution No. S2017-02 was duly adopted on June 8, 2017, by the Board of Directors of the San Joaquin Hills Transportation Corridor Agency by the following vote: Yes: No: Absent: Abstain:

Martha Ochoa Secretary/Clerk of the Board San Joaquin Hills Transportation Corridor Agency

125 Pacifica, Suite 100, Irvine, CA 92618-3304 · (949) 754-3400 Fax (949) 754-3467

TheTollRoads.com Members: Aliso Viejo · Anaheim · Costa Mesa · County of Orange · Dana Point · Irvine · Laguna Hills · Laguna Niguel · Laguna Woods · Lake Forest

Mission Viejo · Newport Beach · Orange · Rancho Santa Margarita · Santa Ana · San Clemente · San Juan Capistrano · Tustin · Yorba Linda

San Joaquin Hills Foothill/Eastern Transportation Transportation Corridor Agency Corridor Agency Chair: Chair: Ross Chun Ed Sachs Aliso Viejo Mission Viejo

June 8, 2017 Dear Chairman Sachs and Foothill/Eastern Transportation Corridor Agency Board of Directors:

I am pleased to present you with the Fiscal Year 2018 budget. The budget was developed through an extensive effort that involved review of current expenses and revenue trends, bond indenture requirements, customer service advancements and major developments in capital project plans that will advance the Foothill/Eastern Transportation Corridor Agency’s mission to enhance mobility in Orange County and Southern California.

The Agency continues to be financially solid following the refinancing of the Agency’s debt in 2013 and 2015 and continued year-over-year transaction and revenue growth that has outpaced budgeted projections. Transactions and toll revenue in Fiscal Year 2017 are projected to be up by approximately 5.0% and 7.4% respectively over Fiscal Year 2016.

The proposed Fiscal Year 2018 expenditures budget of $221.4 million is an 11 percent increase over the Fiscal Year 2017 budget primarily due to the advancement of the 241/91 Express Connector project through the design phase, construction the Oso Bridge Project and the start of the formal Environmental Impact Report and Environmental Impact Statement analysis for the South Orange County Mobility Improvement program.

The Fiscal Year 2018 budget assumes transactional toll revenue growth of 4.8 percent that is achieved by implementing a 2.0 percent toll increase for non-FasTrak® transactions at all locations (FasTrak tolls will be discounted by $1 at each toll point), and an expected 2.8 percent growth in traffic. Small annual toll increases are important to ensure that revenue growth continues to meet the Agency’s goals. FasTrak and non-FasTrak rates increases range from $0.03 to $0.08 depending on toll point and time of day.

The following goals guided the development of the Fiscal Year 2018 budget:

(1) Support the Capital Improvement Plan (CIP) (2) Provide enhancements to Customer Service (3) Increase revenues to demonstrate the Agency’s ability to meet future coverage and debt

service requirements (4) Build cash reserves to protect against economic downturns, allow for future pay-as-you-

go CIP financing, and preserve the flexibility for early debt repayment (5) Support the credit ratings upgrade strategy and meet investor expectations.

In Fiscal Year 2017 we made major strides on delivering improvements and expansions to TCA’s toll road network by completing the public comment period for the 241/91 Express Connector environmental process, finalizing agreements with the County of Orange that will allow construction of the Oso Bridge Project to begin in Fiscal Year 2018, the award of a contract to outsource back office customer service with clear performance metrics requirements designed to improve the customer experience and the negotiation of a breakthrough settlement agreement with seven environmental groups that allows planning to move forward in analyzing new ideas for South Orange County traffic relief.

Together, these milestones support the Agency’s mission to improve mobility in the Southern California region and will allow us to make even larger strides in Fiscal Year 2018. I look forward to working with all of you.

Sincerely,

Michael A. Kraman Chief Executive Officer

2018

Foothill/Eastern

Transportation Corridor Agency

Fiscal Year Proposed Budget

1

Foothill/Eastern Transportation Corridor Agency

Budget Process and Format


2

Table of Contents Budget Process and Format .................................................................................................... 3

Budget Process .........................................................................................................3 Budget Format .........................................................................................................4

Sources and Expenditures ..................................................................................................... 7

Sources and Expenditures ........................................................................................7 Sources Summary ..................................................................................................10 Expenditures Summary ..........................................................................................17 Expenditures Detail ................................................................................................21

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Budget Process The Foothill/Eastern Transportation Corridor Agency’s (F/ETCA) Board of Directors and the Master Indentures of Trust (Indentures), established in the context of the Agency’s 2013 and 2015 bond issuances, provide the financial parameters for the Agency in the development of the budget. The Indentures provide the scheduled future debt service payments and the required debt service coverage ratios that must be obtained each fiscal year and establish financial constraints, which may impact the Agency’s ability to undertake additional projects. At the beginning of the process, the executive team set the objectives for FY18 while considering both near-term and long-term Agency goals and direction from the Board of Directors. Department managers reviewed the status of projects for the current year and developed project initiatives for the next fiscal year with the Agency’s goals and objectives in mind:

(1) Support the Capital Improvement Plan (CIP) (2) Provide enhancements to Customer Service (3) Increase revenues to demonstrate the Agency’s ability to meet future coverage

and debt service requirements (4) Build cash reserves to protect against economic downturns, allow for future pay-

as-you-go CIP financing, and preserve the flexibility for early debt repayment (5) Support the credit ratings upgrade strategy and meet investor expectations

The finance staff worked jointly with each department to compile budget expenditure requests. The project initiatives and budget requests were then reviewed by executive management. The Agency’s traffic and revenue consultant attended the March Board meeting and presented an overview of the Agency’s toll revenue history, toll rate elasticity, and how current economic trends may affect toll transactions. The proposed annual budget was presented to the F/ETCA Board of Directors at a workshop on April 19, 2017, to obtain direction and feedback. The workshop included a review of toll rates, revenues, and expenditures. Questions received during the workshop were then addressed, and the annual budget is now being presented to the Board of Directors for adoption at the June 8, 2017 Board meeting for the fiscal year starting July 1, 2017. Approval of the budget requires the consent of at least two-thirds of the Board Members. Expenditures during the year must be made in accordance with the Agency’s policies. Expenditures in excess of the total of each budget category, as defined in the budget resolution, cannot be made without the approval of a budget resolution by at least two-thirds of the Board Members. The Agency is required to file copies of the annual budget with the trustee on or before the 20th day of July each fiscal year in accordance with the Indentures. All budgets are developed on a basis consistent with Generally Accepted Accounting Principles. The Chief Executive Officer (CEO) has the authority to make budget transfers within each of the following six categories as long as the total budget amount per category is maintained and the expenditures are made within Board approved policies:

· Administration · SR 241 (excluding related administration) · Capital Improvement Plan · Other Planning, Environmental and Construction

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· Toll Operations · Debt Service

Transfers within each category are subject to the controls in place under the Indentures, the contracts and procurement manual, the investment policy, the staffing and compensation plan, and enabling legislation. Transfers within a category are often made for accounting purposes and given the budget includes estimates, transfers within a category allow department managers to manage within their department thereby reducing the need in many cases to amend the budget if procured costs do not match the original estimates. Transfers within each budget category are reported to the Board of Directors on a quarterly basis. Transfers between categories require the Board of Directors’ approval. These budget categories are presented on page 22 along with detail subcategories. Budget categories and subcategories are discussed in the Expenditures Summary section beginning on page 17. All budget appropriations lapse at year-end and any amounts not accrued at each year-end must be re-appropriated in the next fiscal year. Budget Format The FY18 proposed Expenditures budget for the F/ETCA totals $221.4 million. The Agency has one enterprise fund that records all activity on the accrual basis of accounting. The Agency establishes a budget for this one fund including Planning, Environmental and Construction, Toll Operating Expenses and Equipment (Toll Operations), and Debt Service. Expenses directly related to the F/ETCA are charged entirely to the Agency and those incurred on behalf of both the Agency and the San Joaquin Hills Transportation Corridor Agency (SJHTCA) are allocated between the F/ETCA and SJHTCA (the Agencies) based on the estimated benefit to each. As part of the annual budget process, allocations between the Agencies are reviewed. Within each Agency, for funding purposes and calculation of debt coverage, costs are further allocated between Planning, Environmental and Construction, and Toll Operations, based on the estimated benefit to each activity. The following discussion presents a broad description of the type of activities included in the three budget fund categories. These three fund categories are represented as separate columns on page 22 to illustrate how each budget category and subcategory is allocated between the budget fund categories. A more detailed discussion of the expenditures proposed for FY18 is included in the Sources and Expenditures section of this document beginning on page 7. Planning, Environmental, and Construction Expenses (budget fund category) The proposed FY18 Planning, Environmental, and Construction budget is $83.5 million. The budget for Planning, Environmental and Construction includes capital improvement plan projects, ongoing environmental mitigation and other environmental services, such as demographic and regional transportation studies, and all non-operating administration costs. These expenses are recorded in the Agency’s financial statements as an addition to construction in progress, when appropriate, until the roads are transferred to Caltrans, as required. It is at the point of transfer to Caltrans that the costs of the project are then expensed on the financial statements as a contribution to Caltrans. To date, 36 miles of the F/ETCA toll system have been transferred to Caltrans. The costs associated with such

5

projects are budgeted in the year the disbursement is made, not when the project is transferred to Caltrans. Planning, Environmental and Construction Administration costs are defined as office, personnel, legal, consulting, and other customary and normal expenditures associated with the direct management and administration of the Agency’s planning, environmental and construction related activities, including the development impact fee program, and are allocated as discussed above. The primary sources of funds for Planning, Environmental and Construction Expenses are unrestricted cash on hand from previous years’ development impact fee collections and surplus revenues. Surplus revenues are toll, fee and penalty revenues in excess of amounts needed for operating expenses, debt service payments and funding the indenture required reserves in the year the revenue is collected. The debt service reserve fund requirements totaling $220.8 million have been fully met. Surplus revenues are not under bond Indenture requirements (see description of bonds in the Debt Service section on the following page) and may be spent at the Board of Directors’ discretion for any lawful purpose. Each year, $5.0 million of development impact fees received by the Agency is available to fund expenditures or increase the unrestricted cash fund; the balance of development impact fees collected during the year are also made available for the same purpose if they are not needed to fund debt service payments. In addition, funding for these expenses is available from the restricted construction funds obtained during the bond refunding completed in February 2015. Other sources of funds for these activities include investment earnings and grant funds awarded to the Agency. See tables on page 33 for detail of unrestricted cash and the restricted construction funds. Toll Operations (budget fund category) The Toll Operations budget includes funding for the toll operations activities including operating administration costs. The proposed FY18 Toll Operations budget is $25.1 million. The primary sources of funds available for Toll Operations are toll revenues, penalties, fees, and interest earnings from certain accounts specified within the Indentures. Unrestricted cash as described above is also available for funding operations equipment and capital purchases. Amounts allocated to Toll Operations are costs associated with maintaining and operating the toll equipment, software, and systems as well as the customer service centers, toll collection processing, and all other related operating expenses. The major costs budgeted for Toll Operations’ activities include the contract costs associated with the operation and maintenance of the Agency’s toll systems lane hardware and software; and customer service and toll compliance services which include the operation of the customer service center and toll processing, review and processing of vehicle plate images, and violation collection processing services. Also included in Toll Operations are toll equipment purchases such as transponders, system software, in-lane toll and violation processing equipment, and project development costs. In addition, a portion of Agency administration costs allocated to operation activities such as insurance, salaries and benefits, consulting, legal, office expense and marketing are included in this fund category.

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Debt Service (budget fund category) Debt Service includes annual principal and semi-annual accrued interest payments related to long-term debt. A portion of the outstanding bonds are capital appreciation bonds and convertible capital appreciation bonds, which are structured so that the principal amount accretes (increases) each year at the stated interest rate. Accretion can be simply described as deferred interest that is added to the bonds’ principal balance and is recorded as interest expense and an increase to debt on the financial statements. Debt accretion has been excluded from the budget because it is a non-cash item and is reflected in the budget as part of the principal payments in the years scheduled to be paid. The proposed FY18 budget for Debt Service is $112.8 million. In 1995, the Agency issued long-term toll revenue bonds to finance construction of the Foothill/Eastern Transportation Corridors (State Routes 241, 261 and 133). The bonds were initially refinanced in 1999 and ultimately refinanced in 2013 (with a smaller final portion of the 1995 bonds refinanced in 2015). The 2013 transaction refinanced the debt to 2053, placed the Agency in a solid financial position, significantly improved the Agency’s debt metrics and achieved the following:

· Positioned the Agency for future credit upgrades · Provided for inflationary toll rate increases (small annual adjustments rather than

infrequent larger lump sum adjustments) · Created increased margin to build cash reserves to support the Capital

Improvement Plan, withstand future economic downturns and allow for potential early debt repayment in the future

Debt Service, which is primarily funded from toll revenues, grows at an average of 3.75% per year until it reaches maximum annual debt service of $227 million in FY 2039. Per the Indentures, the Agency’s Adjusted Net Toll Revenue (toll related revenues plus interest income on certain accounts, less operating expenses) must be at least 115% of the current year’s aggregate debt payments (all debt service scheduled for the fiscal year) and at least 130% of the current year’s senior lien debt payments. This is often referred to as 1.15x and 1.30x debt service coverage, respectively. When compiling the operations budget, the Agency staff ensures that the revenues and expenses budgeted provide the necessary coverage ratio as defined in the Indentures. The FY18 Proposed Budget results in an aggregate coverage ratio of 1.43x and a senior lien coverage ratio of 1.62x. A schedule showing the calculation is included on page 32 of this document.

7


Sources

and

Expenditures


8

Sources and Expenditures The Sources and Expenditures of Funds Statement summarizes the Agency’s projected total sources and expenditures for the year ending June 30, 2018. Total sources include revenues budgeted in FY18 as well as cash on hand from development impact fees and surplus revenues collected and available to the Agency from previous years, and amounts in the debt service accounts. Below is a summary of total funds on hand and the amount of these funds available to fund the FY18 budget as well as future budgets (in thousands). Estimated Total Funds on Hand at 6/30/17 592,267$

July Activity Related to FY17 (63,785) Adjusted Estimated Total Funds on Hand at 6/30/17 528,482

Less Operating Reserves (16,936) Less Debt Service Reserves (220,762)

290,784$

Cash Restricted For Debt Service 3,912$ All Other Cash Available to Fund Current and Future Budgets 286,872

Estimated Cash Available to Fund Current and Future Budgets 290,784$

Estimated Cash Available, excluding Reserves, to Fund Current and Future Budgets

Total expenditures include all FY18 budgeted expenses requiring a cash outlay. The Sources and Expenditures of Funds Statement on the following page shows sources less cash expenditures to arrive at cash available to fund subsequent budgets. The following statement includes the approved FY17 budget, as amended, including transfers within the CEO’s authority, staff projected FY17 sources and expenditures based on actuals through March 2017 and the proposed budget for FY18.

9

FY 2017Amended Budget FY 2017 FY 2018

As of 3/31/17 Estimated Actuals Proposed BudgetSources:

Net Toll Revenue 139,664 143,697 149,923 Penalties 19,200 18,109 18,100 Fees 10,387 10,614 10,800 Development Impact Fees 19,000 15,532 15,000 Interest Earnings 3,756 5,713 6,509 Other Revenue 605 620 605 Cash on Hand Restricted For Debt Service 11,146 11,146 3,912 All Other Cash Available to Fund Current and Future Budgets 251,540 251,540 286,872

Total Sources of Funds 455,298 456,971 491,721

Expenditures:Planning, Environmental and Construction 53,720 23,400 73,451 Planning, Environmental and Construction Administration 9,312 8,505 10,079 Toll Operating Administration 8,343 7,771 8,607 Toll Customer Service and Toll Compliance 10,097 9,144 10,271 Toll Systems 2,033 1,920 2,008 Toll Facilities 762 761 879 Operations Equipment 1,992 1,916 3,379 Debt Service 112,770 112,770 112,770

Total Expenditures 199,029 166,187 221,444

Projected Cash Available to Fund Subsequent Budgets 256,269 290,784 270,277 Less Restricted Cash For Future Debt Service 3,912 3,912 561

Projected Available Cash 252,357 286,872 269,716

Foothill/Eastern Transportation Corridor AgencySources and Expenditures of Funds Statement

Fiscal Years 2017 through 2018($000)

Description

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Sources Summary With the growth of Southern California’s economy, FY17 transactions and transactional toll revenue are expected to be up approximately 5.0% and 7.4%, respectively, over FY16. The 2013 bond refinance transaction greatly improved debt service coverage margins and the ability to withstand future economic downturns. Regardless, it will be important to continue to take measures ensuring that revenue growth continues in FY18 to meet the Agency’s goals. The Agency has also used customer incentives and promotions to maintain and build transactions and revenues. Given the purpose of promotions is to increase revenue, tolls used as incentives for promotions will be recorded as an offset to revenue in accordance with accounting principles and the Indentures. In FY18, marketing incentive programs will continue to be implemented to convert customers who pay online with One-Time-Toll to FasTrak or ExpressAccounts. In addition, paid advertising will continue to emphasize increased awareness of the Toll Roads value proposition. Staff works with the Agency’s traffic and revenue consultant, Stantec Consulting Services Incorporated (Stantec) to review the effect of prior year toll rates and prepare an analysis for the upcoming year. During the April 2017 budget workshop, staff discussed the analysis with the Board and recommended toll rates based on the results of prior year increases and toll elasticity, assumptions included in the bond finance documents, building cash reserves, and economic factors. The FY18 budget for sources of funds is based on the traffic and revenue consultant’s toll rate analysis and feedback received from the Board of Directors during the budget workshop (see Net Toll Revenue section below). At the beginning of FY18, the Agency expects to have total cash adjusted for accrual items of $528.5 million. The expected adjusted cash balance includes debt service reserve and operating reserve funds of $237.7 million and $290.8 million of cash on-hand available to fund the current and future years’ budgets. These available funds are primarily from development impact fees, surplus revenues, and interest earnings. During FY18, Net Toll Revenue, Penalties, Fees, Development Impact Fees, Interest Earnings, and Other Revenue are budgeted at $200.9 million. Below are brief explanations of each of these funding sources. Net Toll Revenue The FY18 budget assumes transactional toll revenue of $159.7 million which represents a 4.8% increase over projected FY17 transactional toll revenue. The budget for FY18 Net Toll Revenue of $149.9 million, or 74.6% of total revenue, is a combination of the Agency’s estimate of transactional toll revenue reduced by estimated processable and unprocessable transactions (offset by toll revenue recovered from processed violations), and non-revenue transactions. As a result of the conversion to All Electronic Tolling (AET) and the resulting shift in payment patterns, including some patrons who may have previously paid with cash but are now initially identified instead as processable violation transactions, toll revenue recovered during the violation process is appropriately classified as Net Toll Revenue. The Agency currently waives the penalty for first time violators if the toll is paid within 30 days.

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Unprocessable violations (primarily vehicles with no license plates) and non-revenue transactions (primarily California Highway Patrol, Caltrans, and Agency vehicles used on the road for operations and maintenance) are expected to occur at a rate of 4.3% of transactional toll revenue or $6.8 million in FY18. Processable transactions offset by toll revenue recovered from processed violations is budgeted at $3.0 million or 1.9% of transactional toll revenue in FY18. The proposed 4.8% transactional toll revenue increase is achieved by implementing a 2.0% non-FasTrak rate increase. The FasTrak rates increase at amounts that maintain the $1.00 discount from the non-FasTrak rates. The proposed toll rates are expected to result in transaction growth of 2.8% based on the Stantec analysis. The growth rate assumes continued economic improvement and an increase in traffic congestion on routes parallel to the toll roads thereby increasing the value of time savings obtained by choosing the toll road option. The table on the following page shows the FY17 current toll rates and the proposed FY18 toll rates by location, split between non-FasTrak and FasTrak, and peak/off-peak if applicable. In summary, FasTrak and non-FasTrak rates increase by $0.03 to $0.08 per tolling location.

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CurrentLocation Time/Type Rates Rate Change

Tomato Springs** Non-FasTrak Off-Peak 3.45$ 3.52$ 0.07$ FasTrak Off-Peak 2.45$ 2.52$ 0.07$ Non-FasTrak Peak* 3.70$ 3.77$ 0.07$ FasTrak Peak 2.70$ 2.77$ 0.07$

Portola North Non-FasTrak Off-Peak 2.49$ 2.54$ 0.05$ FasTrak Off-Peak 1.49$ 1.54$ 0.05$ Non-FasTrak Peak* 2.92$ 2.98$ 0.06$ FasTrak Peak 1.92$ 1.98$ 0.06$

Alton Non-FasTrak* 2.49$ 2.54$ 0.05$ FasTrak 1.49$ 1.54$ 0.05$

Portola South Non-FasTrak* 1.68$ 1.71$ 0.03$ FasTrak 0.68$ 0.71$ 0.03$

Los Alisos Non-FasTrak* 1.58$ 1.61$ 0.03$ FasTrak 0.58$ 0.61$ 0.03$

Antonio Non-FasTrak* 1.68$ 1.71$ 0.03$ FasTrak 0.68$ 0.71$ 0.03$

Oso Non-FasTrak* 2.39$ 2.44$ 0.05$ FasTrak 1.39$ 1.44$ 0.05$

Windy Ridge** Non-FasTrak Off-Peak 3.60$ 3.67$ 0.07$ FasTrak Off-Peak 2.60$ 2.67$ 0.07$ Non-FasTrak Peak* 3.87$ 3.95$ 0.08$ FasTrak Peak 2.87$ 2.95$ 0.08$

Orange Grove** Non-FasTrak Off-Peak 2.80$ 2.86$ 0.06$ FasTrak Off-Peak 1.80$ 1.86$ 0.06$ Non-FasTrak Peak* 3.07$ 3.13$ 0.06$ FasTrak Peak 2.07$ 2.13$ 0.06$

Irvine Ranch** Non-FasTrak Off-Peak 2.49$ 2.54$ 0.05$ FasTrak Off-Peak 1.49$ 1.54$ 0.05$ Non-FasTrak Peak* 2.92$ 2.98$ 0.06$ FasTrak Peak 1.92$ 1.98$ 0.06$

Portola (West) Non-FasTrak* 2.49$ 2.54$ 0.05$ FasTrak 1.49$ 1.54$ 0.05$

Irvine Blvd. (East) Non-FasTrak* 1.96$ 2.00$ 0.04$ FasTrak 0.96$ 1.00$ 0.04$

Irvine Blvd. (West) Non-FasTrak* 1.96$ 2.00$ 0.04$ FasTrak 0.96$ 1.00$ 0.04$

Irvine Blvd. (West) Non-FasTrak* 2.49$ 2.54$ 0.05$ NB On FasTrak 1.49$ 1.54$ 0.05$ Portola (West) Non-FasTrak* 2.49$ 2.54$ 0.05$ SB On FasTrak 1.49$ 1.54$ 0.05$

* One Time Toll (OTT) rate** 3-4 Axle Vehicles 2 Times Rate 5+ Axle Vehicles 4 Times Rate

Proposed 2% Increase

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The Agency estimates that it will receive a total of $143.7 million in Net Toll Revenue in FY17. This consists of $152.4 million of transactional toll revenue reduced by estimated processable and unprocessable transactions of $14.9 million offset by toll revenue collected from processed violations of $6.2 million. Penalties Penalties revenue is budgeted for FY18 at $18.1 million, representing 9.0% of total revenues and consists of violation penalties related to toll violations. The intent of violation penalties is to act as a deterrent and ensure collection of toll revenues. Penalties revenue is recorded as collected. As mentioned in the Net Toll Revenue section above, the toll related to a violation is properly classified in Net Toll Revenue. The Agency continues its efforts in signing patrons up for accounts and informing infrequent users of the available payment options in order to avoid handling through the violation process. The Agency also implemented agreements with major rental car companies in April 2016 which have proved successful in reducing violations. The Agency will continue initiatives in FY18 to attempt to address violations, such as signage, and providing materials to support communication to the community at large and visitors. Penalties revenue for FY17 is estimated to be $18.1 million. The FY18 Penalties budget is conservative with consideration given to the current trends in collections, the estimated transactions for FY18, the current processable transactions rate at 6.0% of traffic, the existing policy of $57.50 on the first notice of violation and $42.50 on delinquency notice, and the Agency’s policy of waiving penalties for first-time violators. Fees Fees are budgeted for FY18 at $10.8 million, representing 5.4% of total revenues. Fees revenue consists of $8.0 million for account maintenance fees from FasTrak accountholders, and $2.8 million of other miscellaneous fees related to operations (i.e., invoice fees, suspended account and returned check fees, lost, stolen or damaged transponder fees, and fees related to programs with San Francisco Airport and rental car agencies). Fees revenue for FY17 is estimated to be $10.6 million. The FY18 budget for account maintenance fees is based on the Agency’s current policy in which a fee of $2.00 per transponder is charged to FasTrak accountholders in each month where monthly tolls incurred on F/ETCA or SJHTCA facilities are less than the threshold of $25 per transponder. When an account has multiple transponders, the aggregate tolls incurred by an account are considered when determining whether any account maintenance fees are charged. During FY18 the Agencies will transition to providing all accountholders with electronic account activity statements versus mailed statements. If an accountholder would like to continue to receive mailed statements, the statements will be provided monthly for a fee of $1.00 per statement. Development Impact Fees The Agency adopted a Development Impact Fee Program in 1986. The fee program is based on the general principle that development within the “area of benefit” of the corridor will benefit from the construction of the corridor. Development Impact Fees

14

(DIF) are assessed on new residential and non-residential (commercial, industrial, etc.) development. Development Impact Fees for FY17 are expected to approximate $15.5 million. The Agency is estimating Development Impact Fees to be $15.0 million for FY18, representing 7.5% of total revenues, based upon recent trends and development. The following chart is provided to illustrate the historical trend of Development Impact Fees collected.

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

09 10 11 12 13 14 15 16 *17 *18

Am

ount

($0

00's

)

Foothill/Eastern Transportation Corridor AgencyDevelopment Impact Fees

Ten Year Trend

Fiscal Year*Estimate

Interest Earnings Interest Earnings represent earnings on funds held in trust for bondholders, funds held for operations and funds held in custody accounts at the trustee for the Agency. Budgeted Interest Earnings are based upon the existing investment portfolio. Total Interest Earnings budgeted for FY18 of $6.5 million represent approximately 3.2% of total revenues. Interest Earnings for FY17 are estimated to be $5.7 million. Other Revenue Other Revenue of $0.6 million represents 0.3% of total revenues and is for rental income of office space leased to SJHTCA in the Pacifica building owned by F/ETCA. Estimated FY17 Other Revenue of $0.6 million includes rental income and miscellaneous receipts.

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Revenue Pie Chart – FY17 Budget as compared to FY18 Budget The pie charts on the following page show a comparison of FY17 budgeted revenues to FY18 proposed budget revenues. Budgeted revenues increased $8.3 million to $200.9 million in FY18 from budgeted revenues of $192.6 million in FY17 due to an increase in Net Toll Revenue, Fees, and Interest Earnings, offset by decreases in Penalties and Development Impact Fees. Net Toll Revenue is expected to increase from $139.7 million budgeted in FY17 to $149.9 million in the FY18 budget as a result of current transaction and revenue trends and toll rate changes. Penalties are projected to be lower in FY18 by $1.1 million compared to the FY17 budget as a result of actual violation collections and current transaction and transactional toll revenue trends. See Penalties discussion on page 13 for more information. Fees are budgeted to increase in FY18 by $0.4 million compared to the FY17 budget. FY18 budgeted Development Impact Fees have decreased by $4.0 million from the FY17 budget to $15.0 million based on recent collection trends and development. Interest Earnings are expected to increase by approximately $2.8 million primarily resulting from working with the Agency’s investment advisor to implement an active management strategy which has allowed the Agency to take advantage of the Federal Open Market Committee increasing the Fed funds interest rate.

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Fees 5.4% $10.4M

DIF 9.9% $19.0M

Interest 2.0% $3.7M

Other 0.3% $0.6M


Total FY17 Budget Revenue $192.6M

FY 2017 Revenue Budget



Fees 5.4% $10.8M

DIF 7.5% $15.0M

Interest 3.2% $6.5M

Other 0.3% $0.6M

FY 2018 RevenueProposed Budget

Total FY18 Budget Revenue $200.9M

17

Expenditures Summary In response to the economic downturn in the recent past, the Agency worked diligently to significantly decrease operating expenses and reduce headcount, while continuing to provide quality customer service and ensuring that equipment, systems, and facilities remained in a good state of repair. This provided for a lower base to absorb inflationary growth. As a result of the improving economy and a steady return of revenues to levels recorded prior to the economic downturn in FY08, the Agency prepared the FY18 expense recommendation considering the cost impact of increasing transactions and revenues. In addition, the budget includes proposed inflationary increases in major operating contracts, operations initiatives, capital projects costs, and staffing to manage the growth in operations and capital project initiatives. Detail of expenditures can be found on pages 21-31. The FY18 proposed budget for expenses was developed with the Agency’s continued commitment to fiscal responsibility and overarching goals. The proposed budget for FY18 includes total expenditures of $221.4 million. The following are brief explanations of the various expenditures. Planning, Environmental and Construction (Excluding Administration) This category mainly consists of costs associated with the Agency’s current Capital Improvement Plan including the 241/91 Express Connector, South County Mobility Improvement, the Oso Bridge and Gap Closure, Los Patrones Parkway Coordination, Toll Booth Removal, and Signage projects. The proposed budget for Planning, Environmental and Construction is $73.4 million for FY18, or approximately 33.1% of the total budget. The funding for these expenses is the cash on hand from previous development impact fee collections and Agency directed surplus revenues. The Planning, Environmental and Construction projected actuals for FY17 total $23.4 million. The increase of $50.0 million in the FY18 budget is primarily related to the progress in the projects listed above. Administration The total proposed budget for Administration expenses is $18.7 million for FY18, or approximately 8.4% of the total proposed budget. The Administration category includes all employee compensation (3.1% of the total budget) as well as overhead-type expenses, such as insurance, legal, office expenses, administrative consulting services, marketing, building services, and travel expenses. These costs are budgeted in total but are allocated between the two primary activities of the Agency: Planning, Environmental and Construction and Toll Operations. The allocation of costs between the two types of activities is necessary in determining the appropriate funding source as well as for the calculation of debt service coverage per the Indentures. The resulting allocation can be seen in the columns for each activity on page 22 of this document. Projected Administration expenses for FY17 total $16.3 million. The increase in the FY18 proposed budget from the FY17 projected actuals is primarily due to financial, legal, and community outreach services related to the 241/91 Express Connector project,

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outreach and legal services related to South County Mobility Improvement, consulting for the Agency’s Business Intelligence project, Customer Service Center Modernization, and the System-Wide Traffic Optimization Study. Toll Operations (Excluding Administration) Toll Operations include toll system costs associated with maintaining the Agency’s system lane hardware and software currently under contract with TransCore LP, customer service center and violation processing management and staff currently under contract with Faneuil, Inc., customer service system maintenance and toll processing under contract with BRiC-TPS LLP, and image based transaction processing currently under contract with Global Agility, Inc. Also included in this category are toll facilities costs for maintaining the Agency’s buildings utilized in the operation of the road, and toll equipment such as transponders and server replacements. The proposed FY18 budget for these expenses is $16.5 million or 7.5% of the total budget. Toll Operations, excluding Administration, is projected to total $13.7 million in FY17. The FY18 budget is $2.8 million higher than projected FY17 actuals primarily due to increases in labor for improved customer service and other customer service and compliance costs directly related to revenues, consultant support for the Customer Service Center Back Office System Replacement Project, scheduled Consumer Price Index adjustments for the system lane hardware and software maintenance contracts, and an increase in transponder purchases. Debt Service The Debt Service category includes the annual principal and semi-annual interest payments to be made on all outstanding bonds. These payments for FY18 are budgeted at $112.8 million, or 50.9% of the total budget. Debt Service for FY17 will total $112.8 million. Future years’ Debt Service, which is primarily funded from toll revenues, grows at an average of 3.75% per year until it reaches maximum annual debt service of $227 million in FY 2039.

19

Expenditures of Funds – FY17 Amended Budget as compared to FY18 Budget The pie charts on the following page show a comparison of the FY17 amended budget and the FY18 proposed budget by type of expense. The FY18 proposed budget of $221.4 million, as compared to the prior year’s amended budget of $199.0 million, shows an increase of $22.4 million or 11.3%. The net increase is primarily due to an increase in the Planning, Environmental and Construction budget for the Oso Bridge and Gap Closure, and Los Patrones Parkway Coordination projects. In addition, there is an increase in the Toll Operations budget for the Customer Service Center Back Office System Replacement Project. The Debt Service category includes the semi-annual interest and annual principal payments on the 2013 and 2015 outstanding bonds. In FY18, only semi-annual interest payments on the 2013 bonds are scheduled to be paid. These payments are budgeted at $112.8 million for FY18 and FY17.

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Plan, Env & Constr 27.0%

$53.7M

Admin 8.9% $17.6M




Operations Equip 1.0% $2.0M



FY2017 ExpendituresAmended Budget

Total FY17 Total Expenditures $199.0M


Admin 8.4% $18.7M




Operations Equip 1.5% $3.4M


FY 2018 ExpendituresProposed Budget

Total FY18 Total Expenditures $221.4M

21

Expenditures Detail The schedule on the following page details the budget as summarized on pages 23-31 into more specific categories (budget subcategories). Many of the Administration subcategories are allocated between Planning, Environmental and Construction and Toll Operations expenses.

22

Plan, Environ Toll Operations DebtBudget Category and Subcategory & Construction Exp & Equip Service Total

Administration:Regular Salaries 2,296 2,592 - 4,888 Internship Program 29 33 - 62 Board Compensation 44 53 - 97 Benefits 899 996 - 1,895 Employer Taxes 39 46 - 85 Insurance 191 874 - 1,065 Legal Expense 466 552 - 1,018 Telephone/Comm 40 61 - 101 Office Expense 130 249 - 379 Educ, Seminar, Membership, Mtgs 97 161 - 258 Consulting and Other Services 450 958 - 1,408 Marketing - 828 - 828 Publications & Subscriptions 3 4 - 7 Rents & Leases 21 25 - 46 Building Services 240 282 - 522 Transportation & Travel 125 117 - 242 Office Equipment 28 41 - 69 Pacifica Fixed Assets 200 735 - 935

Subtotal Administration 5,298 8,607 - 13,905 241/91 Connector Administration:

Administration 262 - - 262 Legal 170 - - 170 Subtotal 241/91 Connector Admin 432 - - 432

SR 241 Administration:Administration 3,419 - - 3,419 Legal 930 - - 930 Subtotal 241 SR Admin 4,349 - - 4,349

Total Administration 10,079 8,607 - 18,686 Planning, Environmental and Construction:

SR 241:South County Mobility Improvement 28,012 - - 28,012 Oso Bridge & Los Patrones Pkwy Coordination 25,164 - - 25,164 Total SR 241 53,176 - - 53,176

Capital Improvement Plan (CIP):Wildlife Safety Fencing Monitoring 51 - - 51 241/91 Express Connector 12,969 - - 12,969 Toll Booth Removal 1,110 - - 1,110 Signage 2,885 - - 2,885 241 Widening-133 to Chapman (Loma Segment) 3 - - 3 Trabuco Road Interchange Coordination 160 - - 160 Jeffrey Road Interchange Study 690 - - 690 Total Capital Improvement Plan 17,868 - - 17,868

Other Planning, Environmental and Construction:Environmental 591 - - 591 Design Program Mgmt 920 - - 920 Design Special Studies & Other 600 - - 600 ROW Acquisitions, Appraisals & Other 296 - - 296 Total Other Planning, Environ and Constr 2,407 - - 2,407

Total Planning, Environmental and Construction 73,451 - - 73,451 Toll Operations:

Customer Service & Toll Compliance - 10,271 - 10,271 Toll Systems - 2,008 - 2,008 Toll Facilities - 879 - 879

Subtotal Toll Operations - 13,158 - 13,158 Operations Equipment:

Transponder Equipment - 1,938 - 1,938 Toll Equipment and Capital Expenditures - 1,441 - 1,441 Total Equipment - 3,379 - 3,379

Total Toll Operations - 16,537 - 16,537 Debt Service - - 112,770 112,770 Total Expenditures 83,530 25,144 112,770 221,444

Foothill/Eastern Transportation Corridor AgenciesFiscal Year 2018 Proposed Budget

($000)Budget Fund Categories

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Staffing The policies of the Transportation Corridor Agencies (TCA) require approval by the Boards of Directors for all new salary grade classifications, changes to the staffing plan (number of approved positions), and the total compensation budget. Compensation and staffing programs are then administered by the CEO under the approved budget. During the budget process each year, the CEO recommends changes to the existing programs for the upcoming fiscal year. The recommended staffing plan for FY18 is 68 funded positions and is allocated 62% to this Agency and 38% to SJHTCA. The FY18 budget includes one reclassification, five positions eliminated from the customer service walk-in center due to outsourcing, one eliminated Toll Facilities position, and two headcount additions to support human resources and environmental project initiatives:

· Human Resources Generalist · Environmental Analyst

The following chart shows the change in funded headcount from 2007 through 2017 and the projected 2018 headcount on a combined Agency basis (F/ETCA and SJHTCA). The decrease in FY15 was due to the end of cash toll collections.

65

70

75

80

85

90

95

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18Proposed

Combined AgencyFunded Headcount Trend

Headcount Funded

The functional area organization chart on the following page illustrates the duties and responsibilities for each executive’s division and the number of full time equivalent positions. In addition to the regular duties and responsibilities that are required to manage the Agencies, there are a number of project initiatives that staff work on each year to achieve Agency goals and objectives. Some of the longer-term projects have been included on the organization chart.

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TCA Organizational Structure Fiscal Year 2018

Chief Executive Officer 3 FTEs

Communications & Marketing

7.25 FTEs

F/ETCA Board

· Communications Strategy

· Marketing · Media Relations · Special Events · Website · Graphics · Presentations · Publications · E-newsletters · Issue

Management · Social Media · Customer

Communication Consistency

· Tourism & Visitor Outreach

· The Toll Roads Rewards Program

· Environmental Outreach

· 241/91 Express Connector Outreach

· Sponsorships

Finance, Contracts, HR

& Administration

31.5 FTEs

Toll Operations & IT

12 FTEs

Engineering & Facilities 7.5 FTEs

Environmental Planning 3.5 FTEs

· Long-Term Financial Planning & Bond Finance

· Financial Reporting and Cash Flow Management

· Accounting · Toll Operations

Accounting/ Reconciliation/ Auditing

· Annual Audit · Budgeting · Treasury · Finance · Debt Compliance · Investor Relations · Insurance/Risk

Management · Internal Audit · Development Impact

Fee Program · Administration · Human Resources · Recruiting · Benefits &

Compensation · Employee Relations · Training &

Development · Contracts &

Procurement · Legislative Financial

Support

Strategy & Public Affairs

3.5 FTEs

· Customer Interaction Management

· Call Centers · Walk-In Customer

Service Centers · Revenue Collection · Account

Management · Toll Compliance &

CHP Program · Toll System

Implementation & Operations

· Cyber Security & Corporate System Support

· Legislative Support · National Toll

Standards · Interoperability · Data Management

· SR 241/91 Express Connector



· Capital Improvement Plan

· Special Projects · Design · Engineering · Construction

Management · Real Property · Caltrans Interface · Facilities

Maintenance

SJHTCA Board

· SR241/91 Express Connector



· Habitat Stewardship · Environmental

Compliance · Regional

Transportation Plan Coordination

· Project Permitting · Intergovernmental

Project Review · Mitigation Land

Transfer · NCCP/HCP

Compliance · Wildlife Safety

Fencing · Open Space

Acquisition



· Develop, Implement & Execute the Strategic Plan & Initiatives

· Translate Strategic Priorities Into Comprehensive & Actionable Plans

· Build Relationships With Stakeholders & Partners at the Local, State & Federal Levels

· Educate & Garner Active Support for TCA

· Establish Open & Candid Communication With Supporters & Opponents

· Discuss Commonalities While Exploring a Wide Range of Solutions

· Develop Annual State & Federal Legislative Platforms

· Legislative Initiatives

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Administration - Compensation (Regular Salaries and Benefits) The Agency employee compensation budget is $6.9 million. TCA salaries are reviewed each year through the annual performance review process. The Agency does not provide for any type of automatic step or Cost of Living Adjustment (COLA) increases. Benefits include contributions to a cafeteria plan (medical, dental, and vision) and retirement plans. In general, budgeted benefits are determined by applying estimated rates for these plans to estimated headcount. If benefit rates come in lower than expected, the budget is not spent. FY18 benefits are 38.8% of salaries. The FY18 employer contributions to OCERS have been budgeted at 27.23% for legacy employees and 24.36% for employees hired on or after January 1, 2013, under the Public Employees’ Pension Reform Act – PEPRA. Each of these rates includes a component of 13.79% that represents payment of the Agencies’ unfunded actuarial accrued liability (UAAL). The Agency’s UAAL is estimated as of December 31, 2016 at approximately $7.3 million. The UAAL is amortized over 20 years. The Agencies monitor the UAAL and believe that it is manageable as it is paid each year as part of the employer contribution. In FY16, the Agency completed a detailed classification study of salary ranges through a consultant and FY17 salary ranges were adjusted based on the results of the study. For FY18, the staffing plan includes a 3% adjustment to salary ranges based on current public and private sector data. The recommendation to revise the Agency’s salary ranges does not in itself, result in any change to individual employee salaries. Employee salary adjustments are only based on merit increases and/or promotions. A 4.0% merit pool of $172,274 based on the current public and private sector data, with an emphasis on like organizations, has been included in the budget. The recommended merit pool will allow the Agency to remain competitive, reward employees for their performance, and help retain current employees. The annual review process includes: employee input on the employee’s perspective of accomplishments and future goals, supervisor review and evaluation of employee accomplishments and establishment of goals for the next year, executive team member review of all performance reviews for the department, human resources review of all employee performance reviews for consistency, and submittal of performance reviews to the CEO for approval. The performance reviews are rated based on employee performance and include the following rating categories: Exceptional, Exceeds Expectations, Meets Expectations, Needs Development, and Unsatisfactory. The merit increase will be assigned according to ratings category and is expected to range from 2.5% to 5%. A 3.0% non-base building performance incentive pool of $129,206 has been included in the budget and is linked to the FY18 Agency initiatives. This will allow the CEO to reward outstanding achievement on special projects and/or initiatives in accordance with the Agencies’ performance incentive award policy. TCA has contained costs through a net reduction in headcount (81 to 68) since FY11 and reduced benefits by shifting pension and health benefits costs to employees and reduction of accrued leave. Our philosophy and approach to contract out many of our services continues to keep our salaries/benefits lower and manageable.

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Administration - Insurance Insurance expense is budgeted at $1.1 million, approximately 0.5% of the total budget. The major components of insurance include earthquake, property, general and excess liability, cyber, and workers’ compensation coverage as detailed in the annual Current Insurance Coverage Report which was provided at the February 2017 Board of Directors meeting. Policies are marketed and placed by the Agency’s insurance broker, Alliant Insurance Services, Inc., who provides all of the Agencies’ insurance procurement needs. All insurance is maintained in accordance with the requirements of the Indentures and as prudent business activities dictate. Administration - Legal Expenses Legal Expenses, excluding amounts related to the SR 241, are $1.0 million, approximately 0.5% of the total budget. Amounts in this category include, but are not limited to, general counsel representation, legislation, support for ongoing and potential litigation, legal consulting related to contract issues, financing, development impact fees, human resources, and claims litigation. Legal expenses are invoiced separately by individual matter, or type of legal issue, and are managed by the individual department managers who have requested the assistance. Composite rates for general counsel are $247 per hour. Negotiated blended rates related to complex contract issues and certain real estate issues are $300 per hour. In addition, litigation rates are billed at prevailing rates that vary between $325 and $840 per hour depending on the level of experience of the attorney involved, and state lobbyists bill at a rate of $445 per hour. Below is a breakdown of legal expenses by major category:

Contracts $ 276,000 Toll Operations 247,000 Financing 152,000 General/Other 150,000 Human Resources 108,000 Development Impact Fees 50,000 Environmental 30,000 Construction 5,000 Total $ 1,018,000

Administration - Consulting and Other Services The Consulting Services category is $1.4 million, which represents approximately 0.6% of the total budget and, as detailed below, includes service fees, maintenance and third party assistance contracts for both recurring needs and special projects, such as payroll processing, investment and financial advisory services, annual audit services, and the implementation and project management costs associated with the Business Intelligence project. It also includes a state and national interoperability consultant and testing support, printing and distribution of publications, federal and state advocacy, and community/public relations services.

Financial Consulting $ 468,000 Communications & 241/91 Express Connector Outreach 202,000

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System-Wide Traffic Optimization Study 186,000 Strategic Planning 180,000 Business Intelligence Project Consulting 100,000 Other Consulting 83,000 Payroll & Personnel Services 82,000 Audit Services 57,000 Toll Operations Services 50,000 Total $ 1,408,000

Administration - Marketing Total expenditures for marketing and advertising are budgeted at $0.8 million, representing 0.4% of the total budget. This includes amounts paid for the Agency’s marketing consultant for creating and placing radio and digital advertising, designing and printing direct mail and account statement inserts; website design and programming services; and email communication to FasTrak and ExpressAccount holders including The Toll Roads Rewards program. These efforts are geared toward increasing account signups and toll road ridership. The following is the budget associated with these expenses:

Marketing Consultant $ 650,000 Analytics and Research 113,000 Website Development 50,000 Accountholder Email Communications 15,000 Total $ 828,000

Administration - Building Services Building Services is budgeted at $0.5 million, approximately 0.2% of the total budget. This category includes all operating costs associated with the Agency’s operations facility (Pacifica building) and the San Clemente Information Center including utilities, janitorial services, landscaping services, and maintenance and repairs as listed below:

Pacifica Utilities $ 335,000 Pacifica Building Maintenance Services 180,000 San Clemente Utilities & Building Maintenance Services 7,000 Total $ 522,000

Administration - Pacifica Fixed Assets The Pacifica Fixed Assets category is budgeted at $0.9 million, approximately 0.4% of the total budget. This category is related to equipment qualifying for capitalization and includes Customer Service Center Modernization, and Pacifica building carpet and wallcovering replacements.

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Planning, Environmental and Construction - SR 241 South County Mobility Improvement and Oso Bridge The SR 241 Planning, Environmental and Construction costs (including related administrative costs) are budgeted at $57.5 million representing 26.0% of the proposed budget. The primary costs for this category are the outreach and planning efforts for South County Mobility Improvement, initiation of construction for the Oso Bridge and Gap Closure project, coordination with the County of Orange and Rancho Mission Viejo on the development of the Los Patrones Parkway project, pre-financing costs which include mitigation land acquisition, initiation of a new NEPA/CEQA environmental process, engineering work to support outreach efforts, legal, and advocacy consultants. Related administrative expenses consist of legislative services, strategy consultants, advancement of the community outreach and stakeholder process, development of finance plans for various alternatives, community relations, and advertising. These projects are outlined in the Capital Improvement Plan to be presented to the Board of Directors on June 8, 2017 and summarized below:

Construction $ 22,693,000 Engineering/Design Oversight 15,180,000 Environmental 14,483,000 Right of Way 820,000 Subtotal $ 53,176,000 Administrative and Legal Expenses 4,349,000 Total $ 57,525,000

Planning, Environmental and Construction - Capital Improvement Plan The Capital Improvement Plan, excluding South County Mobility Improvement, the Oso Bridge and Gap Closure project, and Los Patrones Parkway Coordination (including related administrative costs), is budgeted at $18.3 million and represents 8.3% of the total budget. This category is comprised of projects for the 133, 241 and 261 Toll Roads and includes annual funding for the projects, including program management, environmental, design, construction management, construction, and all other related costs. The four main CIP projects include the coordinated efforts with the Orange County Transportation Authority (OCTA), Riverside County Transportation Commission (RCTC), and Caltrans on a direct tolled connector from the SR 241 to the 91 Express Lanes, the Signage project, the Toll Booth Removal project, and the 241/Jeffrey Road Interchange Study. Related administrative expenses consist of financial and legal advisory services, community outreach consulting, and community relations. These projects are outlined in the Capital Improvement Plan to be presented to the Board of Directors on June 8, 2017 and summarized below:

241/91 Express Connector $ 12,969,000 Signage 2,885,000 Toll Booth Removal 1,110,000 241/Jeffrey Road Interchange Study 690,000 Trabuco Road Interchange Coordination 160,000 Wildlife Safety Fencing Monitoring 51,000 241 Widening-133 to Chapman (Loma Segment) 3,000 Subtotal $ 17,868,000

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Administrative and Legal Expenses 432,000 Total $ 18,300,000

Planning, Environmental and Construction - Other Planning, Environmental and Construction Other Planning, Environmental and Construction costs are budgeted at $2.4 million, or 1.1% of the total budget. Expenditures budgeted mainly include design program management, traffic trend and capacity analyses, and continued monitoring and habitat management for nearly 1,800 acres of mitigation area required for the 133, 241 and 261 Toll Roads. Monitoring and habitat management includes the Limestone Canyon Mitigation Area, Live Oak Plaza, coordination with the Southern California Association of Governments, San Diego Association of Governments, and OCTA to ensure the Agency’s projects are described accurately in regional transportation plans.

Design Program Management $ 920,000 Traffic Trends/Capacity Analysis 600,000 Mitigation & Permits 415,000 ROW, Surveying & Title 296,000 Staff Assistance & Other Environmental 176,000 Total $ 2,407,000

Toll Operations - Toll Customer Service and Toll Compliance The Toll Customer Service and Toll Compliance category totals $10.3 million, approximately 4.6% of the total budget, and primarily includes funding for the service center operations and toll compliance activities comprised of customer service and violation processing staff and management costs for the customer service operator Faneuil, Inc., customer service system maintenance and toll processing costs for BRiC-TPS LLP, and image based transaction processing costs for Global Agility, Inc. Also included in this category are credit card processing fees assessed on all FasTrak, ExpressAccount, and violation credit card transactions, printing, postage, and mailing services, judgment recovery and collection costs, CHP violation enforcement, and telephone system expenses. Fees are included in this category for the Costco, AAA, and Albertsons FasTrak enrollment programs. The budget associated with these expenses is detailed below:

Credit Card Processing Fees $ 3,413,000 Customer Service Contract 3,339,000 Postage & Printing 1,579,000 Customer Service System Maintenance 1,104,000 Enforcement Services & Other 533,000 Other Customer Service 248,000 Projects 55,000 Total $ 10,271,000

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Toll Operations - Toll Systems The Toll Systems category totals $2.0 million, or approximately 0.9% of the total budget and, as detailed below, primarily consists of fees for the software and hardware maintenance and operation contract with TransCore LP. Also included in this category are toll system spare parts and repairs, software licenses, and various computer maintenance contracts.

On-Road Toll System Maintenance $ 1,704,000 Computer/Software Maintenance & Support 171,000 Projects 133,000 Total $ 2,008,000

Toll Operations - Toll Facilities This category is budgeted at $0.9 million representing 0.4% of the total budget, and accounts for all costs associated with maintaining the Agency’s toll plazas such as utilities, janitorial services, and other various supplies and repairs.

On Road Utilities $ 458,000 On Road Building Maintenance Services 421,000 Total $ 879,000

Toll Equipment & Capital Expenditures The Toll Equipment & Capital Expenditures budget is $3.3 million, or 1.5% of the total budget. Toll Equipment & Capital Expenditures primarily consists of FasTrak transponder costs and the Customer Service Center Back Office System Replacement Project. Other items include mobile app enhancements, uninterruptible power supply (UPS) replacements, and servers.

Transponders $ 1,938,000 CSC Back Office System Replacement Project 1,369,000 Other Equipment 72,000 Total $ 3,379,000

Debt Service The Debt Service category totals $ 112.8 million or 50.9% of the total budget and in FY18 includes interest payments on the Agency’s outstanding bonds. The debt service will be paid from net revenues with $56.4 million to be paid on each January 15, 2018 and July 15, 2018. A Revenue Guarantee Fund was established at the time of the 2013 financing. Revenue Guarantee Funds were set aside to pay debt service. When Revenue Guarantee Funds are not needed to make debt service payments, the funds become unrestricted after the debt service is paid. In FY18, the Agency expects that $3.4 million will become unrestricted

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related to FY18 debt service. However, as shown on the following page, the Revenue Guarantee Funds are used in the calculation of debt service coverage ratios as defined in the Indentures. The FY18 budgeted aggregate and senior lien debt service coverage ratios shown on the following page meet the Indenture requirements of 1.15x and 1.30x, respectively. The budgeted coverage is 1.43x and 1.62x, respectively, and does not include the use of reserves or escrow defeasance. Adjusted Net Toll Revenues only includes revenues and interest earnings in certain accounts per the Indentures. Development impact fees are not included in the calculation. While development impact fees are not included in the budget calculation of the debt service coverage ratios, the Indentures allow for development impact fees that are remaining after each debt service payment to be added to the calculation thereby enhancing the debt service coverage calculation. The Indentures refer to this as Enhanced Adjusted Net Toll Revenues and this enhanced calculation will be used for actual debt service coverage covenant reporting. Current expenses include expenditures that are allocated to operations (as shown in the second column of the schedule on page 22.

32

FY18 Budget($000)

Adjusted Net Toll Revenues

Total Toll Revenues Including Fees and Penalties 178,823 Interest Earnings * 3,162 Current Expenses - Funded From Toll Revenue (25,144)

Adjusted Net Toll Revenues 156,841

Aggregate Net Debt Service

Annual Aggregate Debt Service 112,770 Less Revenue Guarantee Funds (3,380)

Net Aggregate Debt Service 109,390

Aggregate Coverage Ratio (1.15x requirement) 1.43

Senior Lien Net Debt Service

Annual Senior Lien Debt Service 100,006 Less Revenue Guarantee Funds (3,380)

Net Senior Lien Debt Service 96,626

Senior Lien Coverage Ratio (1.30x requirement) 1.62

Debt Coverage Calculation Fiscal Year 2018

* Reflects estimated earnings on specific accounts allowed for coverage as defined per the Indentures

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Estimated Unrestricted Cash and Restricted Construction Funds Below is the FY18 budgeted activity and estimated ending balances for unrestricted cash (as described in more detail on page 5) and restricted construction funds. The restricted construction fund was initially funded in 2015 with the $33.5 million net present value savings of the final refunding of the 1995 bonds. The restricted construction funds have been used for construction purposes only as defined in the tax certificate issued during the refunding:

Estimated Available Cash at 6/30/17 272,383 Planning, Environmental and Construction and Related Administration (70,350) Surplus Revenue including release of Revenue Guarantee Funds * 49,618 DIF Revenue and Interest Income 18,065

Estimated Available Cash at 6/30/18 269,716

Estimated Restricted Construction Funds at 6/30/17 12,985 Planning, Environmental and Construction and Related Administration (13,180) Interest 195

Estimated Restricted Construction Funds at 6/30/18 -

($000)

Estimated Unrestricted Cash($000)

* Per the Indentures, when Revenue Guarantee Funds are not needed by the Agency to make debt service payments, the funds become unrestricted after the debt service is paid. In FY18, the Agency expects that $3.4 million will become unrestricted related to FY18 debt service.

Estimated Restricted Construction Funds

RESOLUTION NO. F2017-02

A RESOLUTION OF THE BOARD OF DIRECTORS OF THE FOOTHILL/EASTERN TRANSPORTATION CORRIDOR AGENCY


On motion of Board Member___________________, the following Resolution was adopted. WHEREAS, Section VI, paragraph 6.1 of the Second Amended and Restated Joint Exercise of Powers Agreement creating the Foothill/Eastern Transportation Corridor Agency (the “JPA”), requires the adoption upon the approval of not less than two-thirds (2/3) of the Board Members, an annual budget for the ensuing fiscal year, pursuant to procedures developed by the Board; and WHEREAS, Section VI, paragraph 6.3 of the JPA requires all funds to be placed in object accounts and the receipt, transfer or disbursement of such funds during the term of the JPA shall be accounted for in accordance with Generally Accepted Accounting Principles (GAAP) applicable to governmental entities and all revenues and expenditures must be reported to the Board; and, WHEREAS, Section VI, paragraph 6.4 of the JPA states that all expenditures within the designations and limitations of the approved annual budget shall be made upon the approval of the Chief Executive Officer in accordance with the rules, policies and procedures adopted by the Board; and, WHEREAS, Section VI, paragraph 6.4 of the JPA further states that no expenditures in excess of those budgeted shall be made without the approval of not less than two-thirds (2/3) of the Board Members to a revised and amended budget which may, from time to time, be submitted to the Board; and, WHEREAS, Article VI, paragraph 6.5 of the Administrative Code of the Agency adopted on January 10, 1991, requires that all expenditures for travel, conference and business-related activities, and reimbursement of Board Members and Agency employees for such expenditures be governed by the Board adopted Travel and Expense Policy;

NOW, THEREFORE the Board of the Foothill/Eastern Transportation Corridor Agency does resolve, declare, determine and order as follows:

1. Approves the annual budget for Fiscal Year 2018 (FY18) in the amount of

$221,444,437. The approval includes Administration, Planning, Environmental and Construction, Toll Operations, Debt expenses, the proposed staffing plan as described in the budget, and projected Revenues, including without limitation the adoption of the “proposed” toll rates, fees, and fines, as presented in the FY18 Annual Budget report.

2. Authorizes the Chief Executive Officer to reallocate within budget categories

as long as the budget for the following categories does not exceed the amount stated:

· Administration $18,685,967 · SR 241 (excluding related administration) $53,175,910 · Capital Improvement Plan $17,868,036 · Other Planning, Environmental and Construction $2,407,102 · Toll Operations $16,537,110 · Debt Service $112,770,312

and subject to controls in place under the 2013 and 2015 Indentures of Trust,

the Board approved Contracts and Procurement Manual, Investment Policy, Staffing and Compensation Plan, and finally the Agency’s enabling legislation.

3. Resolves to carry forward the project description from the current 2016

Regional Transportation Improvement Program (RTIP) and 2015 San Diego Forward Regional Transportation Plan/Sustainable Communities Strategy (RTP), and to include the updated schedule and project budget approved by this resolution in subsequent RTIP and RTP updates, for the San Diego Association of Governments (SANDAG) region.

4. Resolves to carry forward the project description from the current 2017 Federal Transportation Improvement Program (FTIP) and 2016 Regional Transportation Plan/Sustainable Communities Strategy, and to include the updated schedule and project budget approved by this resolution in subsequent RTIP and RTP updates, for the Southern California Association of Governments (SCAG) region.

5. Directs staff to forward the approved Annual Budget for FY18 to the trustee.

This Resolution No. F2017-02, shall become effective immediately upon adoption.

Adopted this 8th day of June, 2017, by the Board of Directors of the Foothill/Eastern Transportation Corridor Agency. Ed Sachs, Chair Foothill/Eastern Transportation Corridor Agency

RESOLUTION NO. F2017-02

A RESOLUTION OF THE BOARD OF DIRECTORS OF THE FOOTHILL/EASTERN TRANSPORTATION CORRIDOR AGENCY


ATTEST: I,__________________, Secretary/Clerk of the Board of the Foothill/Eastern Transportation Corridor Agency hereby certify that the foregoing Resolution No. F2017-02 was duly adopted on June 8, 2017, by the Board of Directors of the Foothill/Eastern Transportation Corridor Agency by the following vote: Yes: No: Absent: Abstain:

Martha Ochoa Secretary/Clerk of the Board Foothill/Eastern Transportation Corridor Agency

125 Pacifica, Irvine, CA 92618 949/754-3400 FAX 949/754-3467 DATE: June 8, 2017 TO: San Joaquin Hills Transportation Corridor Agency Board of Directors

Foothill/Eastern Transportation Corridor Agency Board of Directors FROM: Valarie McFall, Chief Environmental Planning Officer SUBJECT: Biological Services Task Orders STAFF RECOMMENDATION: San Joaquin Hills Transportation Corridor Agencies

1) Authorize the chief executive officer (CEO) to execute Task Order-006 with Psomas to provide on-road biological fieldwork services for an amount not-to-exceed $4,500.

2) Authorize the CEO to execute Task Order-002 with Land IQ, LLC. to perform biological

fieldwork for the Agency’s mitigation sites for an amount not-to-exceed $4,500.

3) Authorize the CEO to make additional changes deemed necessary and execute future task order amendments not to exceed an amount of five percent for each above task order ($900) without further Board of Director’s action.

Foothill/Eastern Transportation Corridor Agencies

1) Authorize the chief executive officer (CEO) to execute Task Order-006 with Psomas to provide on-road biological fieldwork services for an amount not-to-exceed $10,500.

2) Authorize the CEO to execute Task Order-003 with Land IQ, LLC. to provide biological services

for access road repairs in the Upper Chiquita Conservation Area for an amount not-to-exceed $40,000.

3) Authorize the CEO to execute Task Order-004 with Land IQ, LLC to perform focused biological

surveys and report preparation consistent with the Resource Management Plan for the Upper Chiquita Conservation Area for an amount not-to-exceed $75,000.

Biological Services Task Order File No. 2017J-034 Page 2 of 3

4) Authorize the CEO to make additional changes deemed necessary and execute future task order amendments not to exceed an amount of five percent for each above task order ($6,275) without further Board of Director’s action.

BACKGROUND: The San Joaquin Hills Transportation Corridor Agency and the Foothill/Eastern Transportation Corridor Agency (TCA) have set aside over 2,000 acres of native habitat, and actively manage these lands to ensure they continue to provide a refuge for the numerous plants and animals that utilize these areas. In addition to setting aside land, many of the slopes along The Toll Roads also contain native habitat. To assist staff with providing the necessary biological oversight and monitoring of these areas, the TCA Board of Directors’ approved a contract with Psomas (K001109) and Land IQ, LLC (K001110) to provide on-call biological support services. DISCUSSION: The Agencies are required to monitor, assess and report on their mitigation sites and uses biological consulting firms to manage these efforts. To continue performing the needed biological services, staff is recommending the issuance of one task order to Psomas and three task orders to Land IQ, LLC. Work to be performed under these tasks by consulting firm include: Psomas · San Joaquin Hills and Foothill/Eastern TCA On-Road Biological Fieldwork - Task-006

Psomas will provide on-road biological fieldwork for various tasks including, but not limited to, habitat assessments, biological analyses, document reviews, construction oversight, surveys and document preparation to support the Agency’s capital improvement initiatives. Work for this task is limited to on-road activities and facilities.

Land IQ, LLC. · San Joaquin Hills TCA Mitigation Site Support - Task-002

Land IQ, LLC will provide biological fieldwork support services for various tasks related to the Agency’s mitigation sites, including performing site and habitat assessments and surveys, document reviews and document preparation, and resource management in support of the Agency’s initiatives. Work under this task order includes activities associated with off-road mitigation sites, including Bonita Creek, the Salt Water Marsh and Coyote Canyon.

· Foothill/Eastern TCA Biological Services for Access Road Repairs - Task-003 The perimeter roads in the Agency’s Upper Chiquita Conservation Area (UCCA) have degraded significantly with deep ruts and some slope failures due to the winter rainstorms. To comply

Biological Services Task Order File No. 2017J-034 Page 3 of 3

with the property’s Resource Management Plan, and to allow safe access for emergency services and patrol personnel, the roads are in need of repairs. The Orange County Fire Authority (OCFA) will provide the needed roadwork repair services. However, due to the sensitive resources within this area, pre-construction biological surveys, resource management and monitoring is required. Land IQ will assist the Agency with the required biological permitting, coordinate with the resource agencies and OCFA, conduct protocol surveys, prepare biological reports, and monitor access road repair activities.

· Foothill/Eastern TCA Upper Chiquita Conservation Area Biological Surveys - Task-004 The Resource Management Plan prepared for the Agency’s UCCA requires the Agency conduct focused surveys for the California gnatcatcher and the coastal cactus wren, as well as perform transect surveys of the vegetation to document the health and quantity of the overall coastal sage scrub habitat. Staff is recommending that a task order with Land IQ be approved to complete the required activities and prepare a monitoring report documenting the results for submittal to the U.S. Fish and Wildlife Service and the California Department of Fish and Wildlife, as required.

BUDGET: Funding for the portion of work to be initiated during the current Fiscal Year (FY) 2017 amounts to $15,000, plus a five percent (5%) contingency of $750, is included in the approved FY 2017 budget. The remaining effort that will be completed in FY 2018 amounts to $125,475, inclusive of the five percent (5%) contingency, is included in the proposed FY 2018 budget. CONCLUSION: The Boards awarded a contract with Psomas (Contract No. K001109) and Land IQ, LLC (Contract No. K001110) to provide on-call biological consulting services for the Agencies. These on-call contracts provide staff support for various tasks, including, but not limited to, mitigation site assessments, habitat assessments, biological analyses, document reviews, construction oversight, surveys and document preparation, restoration and resource management plans. Consistent with the services identified in the contracts, staff recommends the issuance of TO-006 to Psomas to provide on-road biological fieldwork and TO-002, TO-003 and TO-004 to Land IQ, LLC to provide mitigation site and biological support for the Upper Chiquita Conservation Area.

PROCUREMENT SUMMARY REPORT File No. 2017J-034 Contract #: K001109 Task Order #: TO-006 Contract Title: On-Call Biological Support Services Task Order: On-Road Biological Fieldwork Services Consultant: Psomas (Santa Ana, CA) Subcontractor: Michael Baker International, Inc. Leatherman BioConsulting, Inc. Procurement Process Type: Negotiated Task Order Award Criteria: Qualifications Price: Not-to-Exceed $15,000 Contingency: Not-to-Exceed $750 Notes: This action authorizes Consultant to provide on-road biological fieldwork for various tasks including, but not limited to, habitat assessments, biological analyses, document reviews, construction oversight, surveys, and document preparation to support the Agency’s capital improvement initiatives. Work for this task is limited to on-road activities and facilities. Consultant was pre-qualified for On-Call Biological Support Services Consulting Services through a competitive Request for Proposal previously approved by the Boards of Directors on May 12, 2016. All-inclusive labor rates remain unchanged.

Contract No. K001109 Compensation:

DATE SJHTCA F/ETCA TOTAL DESCRIPTION

Task Order TO-001 5/12/16 $40,000 $40,000 Mitigation Site Assessment

Task Order TO-002 6/9/16 $42,990 $42,990 Resource Management Plan

Task Order TO-003 9/8/16 $8,940 $8,940 Property Analysis Record - UCCA

Task Order TO-004 12/8/16 $1,136,472 $1,136,472 S. County Mobility

Task Order TO-005 12/8/16 $13,392 $20,088 $33,480 Phase 1 Toll Booth Removal Support

Current NTE Amount $13,392 $1,248,490 $1,261,882

Proposed Task Order TO-006 6/8/17 $4,500 $10,500 $15,000 On-Road Field Services

Revised NTE Amount $17,892 $1,258,990 $1,276,882

PROCUREMENT SUMMARY REPORT File No. 2017J-034 Contract #: K001110 Task Order #: TO-002 Contract Title: On-Call Biological Support Services Task Order: Biological Fieldwork - Mitigation sites Consultant: Land IQ (Los Angeles, CA) Subcontractor: Hamilton Biological, Inc. Natural History Museum of Los Angeles County Procurement Process Type: Negotiated Task Order Award Criteria: Qualifications Price: Not-to-Exceed $4,500 Contingency: Not-to-Exceed $225 Notes: This action authorizes Consultant to provide biological fieldwork support services for various tasks related to the Agency’s mitigation sites, including performing site and habitat assessments and surveys, document reviews and document preparation, and resource management in support of the Agency’s initiatives. Work under this task order includes activities associated with off-road mitigation sites, including Bonita Creek, the Salt Water Marsh and Coyote Canyon. Consultant was pre-qualified for On-Call Biological Support Services Consulting Services through a competitive Request for Proposal previously approved by the Boards of Directors on May 12, 2016. All-inclusive labor rates remain unchanged. Contract No. K001110 Compensation:


Task Order TO-001 5/12/16 $0 $60,000 $60,000 On-Call Biological Services

Current NTE Amount $0 $60,000 $60,000

Proposed Task Order TO-002 6/8/2017 $4,500 $0 $4,500 Biological Fieldwork

Revised NTE Amount $4,500 $60,000 $64,500

PROCUREMENT SUMMARY REPORT File No. 2017J-034 Contract #: K001110 Task Order #: TO-003 Contract Title: On-Call Biological Support Services Task Order: Biological Services Access Road Repairs – Upper Chiquita Conservation Area Consultant: Land IQ (Los Angeles, CA) Subcontractor: Hamilton Biological, Inc. Natural History Museum of Los Angeles County Procurement Process Type: Negotiated Task Order Award Criteria: Qualifications Price: Not-to-Exceed $40,000 Contingency: Not-to-Exceed $2,000 Notes: This action authorizes Consultant to assist the Agency with the required biological permitting, coordinate with the resource agencies and Orange County Fire Authority (OCFA), conduct protocol surveys, prepare biological reports, and monitor access road repair activities. Due to the sensitive resources within this area, pre-construction biological surveys, resource management and monitoring is required. The perimeter roads in the Upper Chiquita Conservation Authority (UCCA) have degraded significantly with deep ruts and some slope failures due to the winter rainstorms. To comply with the property’s Resource Management Plan, and to allow safe access for emergency services and patrol personnel, the roads are in need of repairs. The OCFA will provide the needed roadwork repair services. Consultant was pre-qualified for On-Call Biological Support Services Consulting Services through a competitive Request for Proposal previously approved by the Boards of Directors on May 12, 2016. All-inclusive labor rates remain unchanged.



Task Order TO-001 5/12/16

$0 $60,000 $60,000 On-Call Biological Services

Task Order TO-002 6/8/17 $4,500 $0 $4,500 Biological Fieldwork

Current NTE Amount $4,500 $60,000 $64,500

Proposed Task Order TO-003 6/8/17 $0 $40,000 $40,000 UCCA access road repairs


PROCUREMENT SUMMARY REPORT File No. 2017J-034 Contract #: K001110 Task Order #: TO-004 Contract Title: On-Call Biological Support Services Task Order: Resource Management Plan – Upper Chiquita Conservation Area Consultant: Land IQ (Los Angeles, CA) Subcontractor: Hamilton Biological, Inc. Natural History Museum of Los Angeles County Procurement Process Type: Negotiated Task Order Award Criteria: Qualifications Price: Not-to-Exceed $75,000 Contingency: Not-to-Exceed $3,750 Notes: This action authorizes Consultant to complete the required activities and prepare a monitoring report documenting the results for submittal to the U.S. Fish and Wildlife Service and the California Department of Fish and Wildlife, as required. The Resource Management Plan prepared for the Agency’s Upper Chiquita Conservation Area (UCCA) requires the Agency conduct focused surveys for the California gnatcatcher and the coastal cactus wren, as well as perform transect surveys of the vegetation to document the health and quantity of the overall coastal sage scrub habitat. Consultant was pre-qualified for On-Call Biological Support Services Consulting Services through a competitive Request for Proposal previously approved by the Boards of Directors on May 12, 2016. All-inclusive labor rates remain unchanged.



Task Order TO-001 5/12/16 $0 $60,000 $60,000 On-Call Biological Services

Task Order TO-002 6/8/17 $4,500 $0 $4,500 Biological Fieldwork

Task Order TO-003 6/8/17 $0 $40,000 $40,000 UCCA access road repairs

Current NTE Amount $4,500 $100,000 $104,500

Proposed Task Order TO-004 6/8/17 $0 $75,000 $75,000 Resource Management Plan - UCCA


125 Pacifica, Irvine, CA 92618 949/754-3400 FAX 949/754-3467

DATE: June 8, 2017 TO: San Joaquin Hills Transportation Corridor Agency Board of Directors Foothill/Eastern Transportation Corridor Agency Board of Directors FROM: Barbie Daly, Director of Government and Legislative Affairs SUBJECT: State and Federal Legislative Advocacy Services STAFF RECOMMENDATION:

San Joaquin Hills Transportation Corridor Agency Recommendation:

Authorize the CEO to execute Amendment No. 5 to Contract No. K000872 with Robert W. Naylor Advocacy in an amount not-to-exceed $32,640 for services through June 30, 2017. Authorize the CEO to execute Amendment No. 6 to Contract No. K000655 with Akin Gump Strauss Hauer and Feld, LLP in an amount not-to-exceed $24,000 for services through June 30, 2017. Foothill/Eastern Transportation Corridor Agency Recommendation:

Authorize the CEO to execute Amendment No. 5 to Contract No. K000872 with Robert W. Naylor Advocacy in an amount not-to-exceed $48,960 for services through June 30, 2017. Authorize the CEO to execute Amendment No. 6 to Contract No. K000655 with Akin Gump Strauss Hauer and Feld, LLP in an amount not-to-exceed $396,000 for services and $25,000 for expenses through June 30, 2017.

State/Federal Legislative Advocacy Services File No. 2017J-027 June 8, 2017 Page 2 of 4

BACKGROUND:

State and federal legislative advocacy and consulting services are necessary due to the many legislative and regulatory issues associated with planning, financing and building infrastructure and the continued operation of the existing toll roads. The Transportation Corridor Agency’s (TCA) primary legislative objective is to build relationships and monitor legislation and regulations that could impact the Agencies’ ability to operate The Toll Roads efficiently or advance its projects. On February 9, 2017, the San Joaquin Hills and Foothill/Eastern Transportation Corridor Agencies Boards of Directors adopted the 2017/2018 State Legislative Platform, which provides guidelines and serves as the basis for TCA staff and legislative consultants to advocate on behalf of the Agencies and outlines the high priority areas for concentration throughout the year. This session, a record number of nearly 2,500 bills were introduced. Of that number, TCA staff and legislative advocates have identified 33 bills for the 2017 State Legislative Watch List, two of which are of significant interest to TCA and represent a large focus of the advocacy efforts. In order to achieve the mission of the Agencies, TCA has contracted with firms for legislative advocacy services since 1987. Currently, Robert W. Naylor Advocacy represents the Agencies in Sacramento while Akin Gump Strauss Hauer and Feld, LLP (Akin Gump) provides legislative advocacy services in Washington D.C.

DISCUSSION:

The legislative and regulatory processes are complicated and oftentimes political requiring unique expertise to navigate the system. As such, staff is recommending the approval of these firms to continue their work on behalf of the Agencies in Sacramento and Washington, D.C. Robert W. Naylor Advocacy Robert Naylor is a veteran and respected Sacramento lobbyist with exceptional relationships with both Republicans and Democrats. Mr. Naylor has been working with California lawmakers and gubernatorial administrations for more than 30 years and has served as a legislative advocate for 22 of those years. Mr. Naylor also served in the California Assembly for eight years. He has represented transportation clients in both the public and private sectors for more than 20 years, focusing on the California Transportation Commission, the Department of Transportation (Caltrans), and a number of regional transportation agencies. He has a thorough understanding of transportation issues and recent reform efforts.


Mr. Naylor was hired in August 2013 to specifically deal with legislation that could potentially harm the Agencies. Since that threat subsided, Mr. Naylor has been supplementing TCA’s legislative efforts in Sacramento. In addition, he is part of the strategic team working to address mobility in South Orange County. In FY 17, Mr. Naylor, in conjunction with Richard Harris of Nossaman, was able to secure the passage of AB 516, the temporary license plate bill that will go into effect in January of 2019. This was a multi-year effort that, when implemented, will address the annual loss of revenue due to individuals using toll facilities without a license plate. The Agencies’ combined lost revenue in calendar year 2016 was $10.5 million. Mr. Naylor was also the Agency’s key legislative advocate in Sacramento for the South Orange County Mobility Improvement Program. In FY18, Mr. Naylor will maintain his lead role in the Agency’s Sacramento strategy regarding the TCA’s efforts to provide mobility relief in South Orange County. He will also continue to focus on legislative issues pertaining to both Agencies. Staff recommends approval of a one-year contract amendment with Robert W. Naylor Advocacy in a not-to-exceed amount of $81,600 through June 30, 2017. Akin Gump Strauss Hauer and Feld, LLP Akin Gump was selected through a competitive bid process to represent TCA in Washington, D.C. in 2011. Susan Lent, a lawyer and partner within the firm, leads Akin Gumps’ transportation practice and is TCA’s primary contact. Ms. Lent served as counsel to the Subcommittee on Surface Transportation and as counsel for investigations and oversight to the House Committee on Transportation and Infrastructure. She is our daily contact on the Akin Gump team and attends monthly consultant and Board Ad Hoc Committee meetings at TCA. Ms. Lent is supported by former Congressmen Vic Fazio and Bill Paxon; former California State Assembly Member and California Transportation Commissioner Dario Frommer; Ian Shavitz, Senior Counsel representing clients on environmental and regulatory issues; Geoff Verhoff, Senior Advisor and regional Vice Chair to the Republican National Committee and Hunter Bates, Partner and former Chief of Staff to former Majority Leader Mitch McConnell. Since its passage in late 2015, Ms. Lent has been closely monitoring the implementation of the Fixing America’s Surface Transportation (FAST) Act that included several environmental streamlining provisions that were the direct result of her efforts working with the House and Senate Transportation Committee staff. Although TCA does not operate with federal funds, the Agencies are required to follow federal laws to include the National Environmental Policy Act (NEPA) among others. Since Caltrans maintains The Toll Roads, policies impacting federal


funding for infrastructure projects in California also have implications for the Agencies, which Ms. Lent continues to monitor. During the first half of FY 17, Ms. Lent and her colleagues, Dario Frommer and Ian Shavitz, worked with the strategic consulting team and Nossaman on the landmark settlement agreement signed by the Foothill/Eastern Board of Directors in November 2016 providing legal counseling services. In FY18, Akin Gump will continue their federal legislative advocacy and legal services on behalf of the Agencies. Mr. Shavitz will provide legal assistance with the NEPA process; Mr. Frommer will assist with the Office of Governor Brown and state agencies; and Ms. Lent, with the support of the team listed above, will continue to lead the federal efforts of the strategic consulting team pertaining to the South Orange County Mobility Improvement Program. Staff recommends approval of a one-year contract amendment with Akin Gump Strauss Hauer and Feld, in a not-to-exceed amount of $445,000 through June 30, 2017. BUDGET:

These contract amendments provide staff with continued legislative support in both Sacramento and Washington, D. C. Funding for the Foothill/Eastern Transportation Corridor Agency is higher due to the Agencies’ capital improvement program. Funding for these contracts is included in the proposed FY 18 budget. CONCLUSION:

Staff recommends the Boards authorize Amendment No. 5 to Contract No. K000872 with Robert W. Naylor Advocacy in an amount not-to-exceed $32,640 for the San Joaquin Hills Transportation Corridor Agency and $48,960 for the Foothill/Eastern Transportation Corridor Agency for state legislative advocacy and strategic counseling services through June 30, 2017. Staff recommends the Boards authorize Amendment No. 6 to Contract No. K000655 with Akin Gump Strauss Hauer and Feld, LLP in an amount not-to-exceed $24,000 for the San Joaquin Hills Transportation Corridor Agency and $396,000 for services and $25,000 for expenses for the Foothill/Eastern Transportation Corridor Agency for federal advocacy and legal services through June 30, 2017.


DATE: June 8, 2017 TO: San Joaquin Hills Transportation Corridor Agency Board of Directors Foothill/Eastern Transportation Corridor Agency Board of Directors FROM: Barbie Daly, Director of Government and Legislative Affairs SUBJECT: State/Federal Legislative Advocacy Services STAFF RECOMMENDATION: San Joaquin Hills Transportation Corridor Agency Recommendation: Authorize the CEO to execute Amendment No. 5 to Contract No. K000872 with Robert W. Naylor Advocacy in an amount not-to-exceed $32,640 for services through June 30, 2017. Authorize the CEO to execute Amendment No. 6 to Contract No. K000655 with Akin Gump Strauss Hauer and Feld, LLP in an amount not-to-exceed $24,000 for services through June 30, 2017. Foothill/Eastern Transportation Corridor Agency Recommendation: Authorize the CEO to execute Amendment No. 5 to Contract No. K000872 with Robert W. Naylor Advocacy in an amount not-to-exceed $48,960 for services through June 30, 2017. Authorize the CEO to execute Amendment No. 6 to Contract No. K000655 with Akin Gump Strauss Hauer and Feld, LLP in an amount not-to-exceed $396,000 for services and $25,000 for expenses through June 30, 2017. BACKGROUND: State and federal legislative advocacy and consulting services are necessary due to the many legislative and regulatory issues associated with planning, financing and building infrastructure and the continued operation of the existing toll roads. The Transportation Corridor Agency’s (TCA) primary legislative objective is to build relationships and monitor legislation and


regulations that could impact the Agencies’ ability to operate The Toll Roads efficiently or advance its projects. On February 9, 2017, the San Joaquin Hills and Foothill/Eastern Transportation Corridor Agencies Boards of Directors adopted the 2017/2018 State Legislative Platform, which provides guidelines and serves as the basis for TCA staff and legislative consultants to advocate on behalf of the Agencies and outlines the high priority areas for concentration throughout the year. This session, a record number of nearly 2,500 bills were introduced. Of that number, TCA staff and legislative advocates have identified 33 bills for the 2017 State Legislative Watch List, two of which are of significant interest to TCA and represent a large focus of the advocacy efforts. In order to achieve the mission of the Agencies, TCA has contracted with firms for legislative advocacy services since 1987. Currently, Robert W. Naylor Advocacy represents the Agencies in Sacramento while Akin Gump Strauss Hauer and Feld, LLP (Akin Gump) provides legislative advocacy services in Washington D.C. DISCUSSION: The legislative and regulatory processes are complicated and oftentimes political requiring unique expertise to navigate the system. As such, staff is recommending the approval of these firms to continue their work on behalf of the Agencies in Sacramento and Washington, D.C. Robert W. Naylor Advocacy Robert Naylor is a veteran and respected Sacramento lobbyist with exceptional relationships with both Republicans and Democrats. Mr. Naylor has been working with California lawmakers and gubernatorial administrations for more than 30 years and has served as a legislative advocate for 22 of those years. Mr. Naylor also served in the California Assembly for eight years. He has represented transportation clients in both the public and private sectors for more than 20 years, focusing on the California Transportation Commission, the Department of Transportation (Caltrans), and a number of regional transportation agencies. He has a thorough understanding of transportation issues and recent reform efforts. Mr. Naylor was hired in August 2013 to specifically deal with legislation that could potentially harm the Agencies. Since that threat subsided, Mr. Naylor has been supplementing TCA’s legislative efforts in Sacramento. In addition, he is part of the strategic team working to address mobility in South Orange County. In FY 17, Mr. Naylor, in conjunction with Richard Harris of Nossaman, was able to secure the passage of AB 516, the temporary license plate bill that will go into effect in January of 2019.


This was a multi-year effort that, when implemented, will address the annual loss of revenue due to individuals using toll facilities without a license plate. The Agencies’ combined lost revenue in calendar year 2016 was $10.5 million. Mr. Naylor was also the Agency’s key legislative advocate in Sacramento for the South Orange County Mobility Improvement Program. In FY18, Mr. Naylor will maintain his lead role in the Agency’s Sacramento strategy regarding the TCA’s efforts to provide mobility relief in South Orange County. He will also continue to focus on legislative issues pertaining to both Agencies. Staff recommends approval of a one-year contract amendment with Robert W. Naylor Advocacy in a not-to-exceed amount of $81,600 through June 30, 2017. Akin Gump Strauss Hauer and Feld, LLP Akin Gump was selected through a competitive bid process to represent TCA in Washington, D.C. in 2011. Susan Lent, a lawyer and partner within the firm, leads Akin Gumps’ transportation practice and is TCA’s primary contact. Ms. Lent served as counsel to the Subcommittee on Surface Transportation and as counsel for investigations and oversight to the House Committee on Transportation and Infrastructure. She is our daily contact on the Akin Gump team and attends monthly consultant and Board Ad Hoc Committee meetings at TCA. Ms. Lent is supported by former Congressmen Vic Fazio and Bill Paxon; former California State Assembly Member and California Transportation Commissioner Dario Frommer; Ian Shavitz, Senior Counsel representing clients on environmental and regulatory issues; Geoff Verhoff, Senior Advisor and regional Vice Chair to the Republican National Committee and Hunter Bates, Partner and former Chief of Staff to former Majority Leader Mitch McConnell. Since its passage in late 2015, Ms. Lent has been closely monitoring the implementation of the Fixing America’s Surface Transportation (FAST) Act that included several environmental streamlining provisions that were the direct result of her efforts working with the House and Senate Transportation Committee staff. Although TCA does not operate with federal funds, the Agencies are required to follow federal laws to include the National Environmental Policy Act (NEPA) among others. Since Caltrans maintains The Toll Roads, policies impacting federal funding for infrastructure projects in California also have implications for the Agencies, which Ms. Lent continues to monitor. During the first half of FY 17, Ms. Lent and her colleagues, Dario Frommer and Ian Shavitz, worked with the strategic consulting team and Nossaman on the landmark settlement agreement signed by the Foothill/Eastern Board of Directors in November 2016 providing legal counseling services.


In FY18, Akin Gump will continue their federal legislative advocacy and legal services on behalf of the Agencies. Mr. Shavitz will provide legal assistance with the NEPA process; Mr. Frommer will assist with the Office of Governor Brown and state agencies; and Ms. Lent, with the support of the team listed above, will continue to lead the federal efforts of the strategic consulting team pertaining to the South Orange County Mobility Improvement Program. Staff recommends approval of a one-year contract amendment with Akin Gump Strauss Hauer and Feld, in a not-to-exceed amount of $445,000 through June 30, 2017. BUDGET: These contract amendments provide staff with continued legislative support in both Sacramento and Washington, D. C. Funding for the Foothill/Eastern Transportation Corridor Agency is higher due to the Agencies’ capital improvement program. Funding for these contracts is included in the proposed FY 18 budget. CONCLUSION: Staff recommends the Boards authorize Amendment No. 5 to Contract No. K000872 with Robert W. Naylor Advocacy in an amount not-to-exceed $32,640 for the San Joaquin Hills Transportation Corridor Agency and $48,960 for the Foothill/Eastern Transportation Corridor Agency for state legislative advocacy and strategic counseling services through June 30, 2017. Staff recommends the Boards authorize Amendment No. 6 to Contract No. K000655 with Akin Gump Strauss Hauer and Feld, LLP in an amount not-to-exceed $24,000 for the San Joaquin Hills Transportation Corridor Agency and $396,000 for services and $25,000 for expenses for the Foothill/Eastern Transportation Corridor Agency for federal advocacy and legal services through June 30, 2017.

PROCUREMENT SUMMARY REPORT File No. 2017J-027 Contract #: K000872 Amendment #: A5 Title: Professional Services Consultant: Robert W. Naylor Advocacy (Sacramento, CA) Subconsultant: None Procurement Process Type: Negotiated Amendment Award Criteria: Continuity of Service Price: Not-to-Exceed $81,600 Contingency: $0.00 Notes: Amendment No. 5 will authorize Consultant to maintain his lead role in the Agency’s Sacramento strategy regarding the TCA’s efforts to provide mobility relief in South Orange County. He will also continue to focus on legislative issues pertaining to both Agencies. The current retainer for services will be increased from $5,000 a month to $6,500 a month and not-to-exceed expenses of $ 300 per month remain unchanged. Contract No. K000872 Compensation:

F/ETCA SJHTCA TOTAL DESCRIPTION Original NTE Amount $ 25,000 $0 $ 25,000 Consulting Services Previous Amendments $ 200,800 $15,000 $ 215,800 Continuation of services Current NTE Amount $225,800 $15,000 $240,800 Proposed Amendment No. 5 $48,960 $32,640 $81,600 Continuation of services Revised NTE Amount $274,760 $47,640 $322,400

PROCUREMENT SUMMARY REPORT File No. 2017J-027 Contract #: K000655 Amendment #: 6 Title: Federal Legislative Advocacy and Consulting Services Consultant: Akin Gump Strauss Hauer & Feld LLP (Washington, DC) Subconsultant: None Procurement Process Type: Negotiated Amendment Award Criteria: Continuity of Service Negotiated Price: Not-to-Exceed $445,000 Contingency: $0.00 Notes: Amendment No. 6 will authorize Consultant to continue their federal legislative advocacy and legal services on behalf of the Agencies. Consultant will provide legal assistance with the NEPA process, assist with the Office of Governor Brown and state agencies; and continue to lead the federal efforts of the strategic consulting team pertaining to the South Orange County Mobility Improvement Program. The current monthly retainer of $35,000 and expenses NTE $25,000 annually remain unchanged. Contract No. K000655 Compensation:

F/ETCA SJHTCA TOTAL DESCRIPTION Original NTE Amount $ 270,713.30 $ 15,286.70 $ 286,000.00 Consulting Services Previous Amendments $ 1,635,000.00 $120,000.00 $1,755,000.00 Continuation of services Current NTE Amount $1,905,713.30 $135,286.70 $2,041,000.00 Proposed Amendment No. 6 $ 421,000.00 $ 24,000.00 $ 445,000.00 Continuation of services Revised NTE Amount $2,326,713.30 $159,286.70 $2,486,000.00


DATE: June 8, 2017 TO: Foothill/Eastern Transportation Corridor Agency Board of Directors FROM: Mike Chesney, Chief Strategy Officer SUBJECT: Strategic Planning Consulting Services STAFF RECOMMENDATION:

1. Authorize the CEO to execute Task Order No. 3 for Contract No. K000983 with Venture Strategic, Inc. (Irvine, CA) for a not-to-exceed amount of $1,800,000 for services through June 30, 2018.

2. Authorize the CEO to execute Amendment No. 06 for Contract No. K000859 with Richard Katz Consulting, Inc. (Studio City, CA) for a not-to-exceed amount of $93,600 for services through June 30, 2018.

3. Authorize the CEO to execute Amendment No. 07 for Contract No. K000775 with Latimer

Partners, LLC (Santa Monica, CA) for a not-to-exceed amount of $63,600 for services through June 30, 2018.

4. Authorize the CEO to execute Amendment No. 14 for Contract No. K000062 with Packard

Government Affairs (Carlsbad, CA) for a not-to-exceed amount of $60,000 for services through June 30, 2018.

5. Authorize the CEO to execute Amendment No. 21 for Contract No. K000057 with Barrios

and Associates, LLC/Communications Lab (Orange, CA) for a not-to-exceed amount of $360,000 for services through June 30, 2018.

6. Authorize the CEO to execute Task Order No. 03 for Contract No. K001009 with Sharon

Browning and Associates (Pacific Palisades, CA) for a not-to-exceed amount of $36,000 for services through June 30, 2018.

7. Authorize the CEO to execute Amendment No. 02 for Contract No. K001090 with Kit Cole Consulting (Glendale, CA) for a not-to-exceed amount of $72,000 for services through June 30, 2018.

8. Authorize the CEO to execute Contract No. K001162 with Curt Pringle and Associates (Anaheim, CA) for a not-to-exceed amount of $72,000 for services through June 30, 2018.

Strategic Consultant Contracts File No. 2017F-019 June 8, 2017 Page 2 of 8

BACKGROUND: Providing traffic relief in South Orange County is a high priority for the Foothill/Eastern Transportation Corridor Agency Board of Directors (TCA). This priority reflects the need for additional mobility, especially with the forecasted growth in employment and population of 290,000 additional jobs and 400,000 more residents countywide by 2035. The goal of solving the mobility issues in the South Orange County area, particularly the congestion problem on the Interstate 5 (I-5) Freeway, is a regional issue requiring a countywide and Southern California partnership approach. It involves a diverse set of stakeholders including: the business community; regional transportation agencies; regulatory and resource agencies; local, state, and federal elected representatives; environmental groups; goods movement advocates; landowners and developers; cities and county; neighborhoods and residents. TCA’s work in FY17 toward this goal has been productive as evidenced by the settlement of five longstanding lawsuits with the Save San Onofre Coalition and the California Attorney General, creation and execution of seven Elected Officials Mobility Workshops, and the planning, coordination, and implementation of two (2) public forums. This continued effort in implementing the long-term strategic plan provides the foundation for moving forward with sustained discussions among the community, stakeholders, resource agencies, environmental organizations and elected officials as we move into the formal environmental phase on the South County Mobility Improvement Program. DISCUSSION: The next step in the process of addressing the mobility issues in the South Orange County region involves implementing the findings from the community ascertainment study, the elected official’s workshops, and the community forums to develop media content, refine traditional and digital media protocols, and continue to broaden the Agency’s strategic outreach to key stakeholders and entities as we move into the formal environmental phase on the South County Mobility Improvements. Additionally, moving forward with a comprehensive dialogue that ensures that regional mobility is addressed in South Orange County will require specific consulting and outreach to specific interest groups, decision makers, elected officials, and key community leaders. The important next steps in this outreach effort are to further engage the stakeholders and to communicate the ongoing process and the next phases of the project initiation and formal environmental process on the South County Mobility Improvements. Staff is recommending the approval of amendments and/or task orders to the contracts of the following firms to support the long-term strategy initiative: Venture Strategic, Inc. Venture Strategic, Inc. (VSI) and their subconsultants Curt Pringle and Associates, Smith Johnson Research, and DMI Direct have been providing the Agency with strategic planning services directly addressing the regional mobility issues associated within the South Orange County area. In FY18, VSI will continue to work with the Agency on this effort focusing on communication, outreach, and engagement. Additionally, a large part of VSI’s efforts will include coordination


and outreach support required for the formal environmental process. This will also include direct coordination with the Environmental Planning Department to engage stakeholders and coordinate with resource agency representatives. VSI’s scope of work for Task Order No. 03 includes:

1. Strategy Leadership and Planning

Conduct regular strategy meetings with Agency and team leadership to continue to develop and refine strategy, conduct scenario planning for identifying and addressing community issues and concerns, and real-time planning of tactical activities for specific stakeholder outreach. Continue to develop base support and coalition broadening and engagement.

2. Project Management and Compliance

Direct and execute strategic communications plan, tasks, deliverables and administration. Supervise all aspects of stakeholder outreach and communications, public and media communications, and digital communications. Provide progress reports tracking progress of strategies and tactics and submit complete and accurate compliance documents.

3. Research

The research in this phase of work may include:

· Tracking and reporting on public perceptions · Analyzing differences along demographic variables of interest · Focus group testing and messaging

4. Stakeholder Communications & Outreach

Work efforts will include ongoing outreach to targeted stakeholders and local communities, gathering additional qualitative information, and conducting additional mobility workshops and forums including:

· Manage, coordinate, and conduct additional Cities and Elected Officials Mobility Workshops. Anticipate two (2) additional workshops.

· Manage, coordinate, and conduct additional Public Engagement Forums. Anticipate two (2) additional forums.

Conduct broader regional outreach including briefings and updates to San Diego, Los Angeles, and Inland Empire organizations. These include the San Diego Association of Governments (SANDAG), Los Angeles County Chamber of Commerce, and West Riverside Council of Governments (WRCOG).


5. Public and Media Communications

Proactively develop messaging in the transportation and media market, highlight Agency leaders on local radio regarding not only transportation innovation, but also driver awareness to our tolling infrastructure. Develop opportunities in traditional print media such as magazines and local newspapers to communicate the Agency’s efforts in partnering and reaching out to stakeholders to help solve the mobility issues in the South Orange County region.

6. Digital Communications

Grow the Agency’s digital footprint through a multi-layered strategy that incorporates proactive micro-targeting to local and regional demographics. The digital component will also serve as a tool in stakeholder and public communications.

Continue to develop, manage, and maintain two (2) digital microsites to expand the Agency’s digital footprint and to change the online conversation. Each website will have a specific purpose and audience-base with messaging geared to attract a specified demographic.

· The first website will be the dominant median for online engagement. With social

media pages tied to messaging and the website, it will predominantly be a tool for the public to voice their concerns regarding transportation mobility problems, particularly throughout South Orange County.

· The second website will be a tool utilized for the public forums. The two (2) anticipated public forums that will be held in FY18 will provide opportunities for the public to voice their concerns about transportation mobility. The website will be a reflection of that conversation, with avenues to view the forum agenda, RSVP to attend, and complete information surveys. The website will also host live-streaming capabilities, facilitate text reminders, and hold the forum’s presentations.

7. Global Communications – Agency Strategy

Develop and implement strategies to help the Agency ensure a seamless and effective communication effort on other projects such as the 241/91 Express Connector Project that is consistent with the long-term strategy of the South County Mobility Improvements.

8. Environmental Process Outreach Support

Coordinate and manage the outreach process required for the formal environmental process. Coordinate with the Environmental Planning Department to engage stakeholders, coordinate with resource agency representatives, and reach out to local and state elected officials to inform and update on the formal environmental process.


9. Paid Communications and Advertising

Implement design, development and production of paid public communications for effectively and meaningfully promoting public engagement and participation in public programs including but not limited to public forums, surveys, and coalition outreach. Additionally, the formal environmental scoping meeting advertising will be a part of this effort.

10. Phase 4 Work Plan and Task Order Development

Clarify and refine project objectives for the next phase of work. Develop strategic planning milestones for the implementation of the solutions for mobility in the South Orange County region.

Staff recommends approval of Task Order No. 3 with Venture Strategic, Inc. for a not-to-exceed amount of $1,800,000 on an hourly basis. This fee includes costs of subconsultants and strategic paid media purchases. Richard Katz Consulting, Inc. During this past year, Richard Katz has provided comprehensive advice and recommendations as a key participant and advocate within the environmental coalition working group. Much progress has been made over the past 12 months to address the challenges, concerns and needs of the region to develop a multi-modal transportation solution with minimal environmental impacts as well as the approval of the settlement agreement. In FY 18, Mr. Katz will continue in his lead role as Agency advisor in the ongoing stakeholder meetings and workshops as we develop and refine a mutually beneficial mobility solution through the formal environmental process. Mr. Katz will continue to assist the Agency by arranging meetings with key state legislative members and advise staff on how to facilitate support and communication. Staff recommends approval of a one-year contract amendment with Richard Katz Consulting, Inc. for a not-to-exceed amount of $93,600 on a retainer basis. This fee includes expenses. Latimer Partners, LLC/Tom Soto (formerly Canyon Strategies) During this past year, Tom Soto has assisted the Agency in building its relationships with the Latino community, labor organizations and the environmental community at the state level. Mr. Soto has helped the Agency engage members of the Latino Caucus in Sacramento and has advised on communicating with key interest groups outside of Orange County. This past year, Mr. Soto specifically assisted staff on Transportation Control Measure (TCM) issues, arranging meetings with a member of the California Air Resources Board (CARB) and the Executive Officer of the South Coast Air Quality Management District (SCAQMD). He also arranged and participated in meetings with the Natural Resources Director to provide the Director with a historical perspective on TCA’s projects and substantial mitigation efforts, and he is interested in the opportunity to tour some of the Agency’s environmental mitigation sites. In


addition, Mr. Soto facilitated staff access to several members of the state legislature including the Senate President pro tempore and Assembly Speaker. In FY18, Latimer Partners, LLC will continue to provide consulting services to support these constituencies and work on long range planning efforts and outreach to key stakeholders, particularly as TCA continues the process of the formal environmental phase on the South County Mobility Improvements. Staff recommends approval of a one-year contract amendment with Latimer Partners, LLC for a not-to-exceed amount of $63,600 on a retainer basis. This fee includes expenses. Packard Government Affairs Packard Government Affairs provides support for legislative strategies, education and outreach to San Diego County local, state and federal elected officials. Packard Government Affairs is highly regarded in the region and provides TCA with continuity and credibility among key stakeholders in San Diego. They have a keen understanding of San Diego government agencies and monitors issues of importance and relevance for the Agency. In FY18, Packard Government Affairs will continue to provide strategic counsel in TCA’s outreach efforts to San Diego congressional, state and local leaders as it relates to long-term strategic planning efforts as well as build ongoing relationships with members of the San Diego Association of Governments. Packard Government Affairs will coordinate meetings and briefings with key San Diego regional elected state and federal officials and SANDAG Board Members. This outreach is critical as TCA continues the process of the formal environmental phase on the South County Mobility Improvements. Staff recommends approval of a one-year contract amendment with Packard Government Affairs – A Law Corporation, for a not-to-exceed amount of $60,000 on a retainer basis. This fee includes expenses. Barrios & Associates, LLC/Communications LAB Barrios & Associates, LLC/Communications LAB and their subconsultants, Thomas Communications and The Nicholson Group, Inc. provide a wide range of local community relations, public affairs and public relations services acting as an extension of staff to support communication and outreach efforts regarding the long range strategic planning in South Orange County. Brian Lochrie, president of Communications LAB, serves as strategic advisor and project manager for all of the firm’s top clients. With more than 20 years of experience, he brings local and relevant expertise in the areas of community engagement, public education, strategic planning, media relations and crisis communications. Barbara Thomas, principal of Thomas Communications, provides a dynamic mix of community outreach and business experience to the team. She has more than 30 years of experience developing highly effective public education and outreach campaigns and understands how to


identify and engage key stakeholders on local and regional issues. Barbara will be key to helping the Agency build strategic alliances with local businesses and community leaders. Todd Nicholson, principal of The Nicholson Group, has extensive public relations, public affairs and association management experience focused on issues management, government relations, community relations, education and school district relations, crisis management, and media relations and strategies. Barrios & Associates, LLC/Communications LAB and their subconsultants will also coordinate with the Communications Department to provide support and assistance related to local community outreach and stakeholder engagement with the Agency’s broader initiatives. For FY18, their scope will include work with Venture Strategic and Sharon Browning and Associates to continue implementing a community outreach plan based on the results of the community ascertainment study and communications activities related to strategic long range planning advocacy, particularly as it relates to TCA initiating and continuing the process of the formal environmental phase on the South County Mobility Improvements. Additionally, Barrios & Associates, LLC/Communications Lab will support construction outreach efforts with the Oso Bridge project. Staff recommends approval of a one-year contract amendment with Barrios & Associates for a not-to-exceed amount of $360,000 on an hourly basis. This fee includes expenses. Sharon Browning and Associates Sharon Browning and Associates will continue to provide support and consulting services as it relates to the implementation of various aspects and recommendations of the community ascertainment study which was conducted in 2015/2016. Sharon will also support critical outreach as TCA continues the process of the formal environmental phase on the South County Mobility Improvements. Staff recommends approval of a one-year contract task order with Sharon Browning and Associates for a not-to-exceed amount of $36,000 on a retainer basis. This fee includes expenses. Kit Cole Consulting Kit Cole Consulting will be providing support and consulting services on finalizing and implementing the Agency’s risk management strategy related to engaging with strategic community stakeholders and facilitating public forums. Kit Cole will also provide consulting services with outreach and risk management efforts on other milestone projects as it relates to consistency with the long-term strategy of the South County Mobility Improvements. Staff recommends approval of a one-year contract amendment with Kit Cole Consulting for a not-to-exceed amount of $72,000 on a retainer basis. This fee includes expenses.


Curt Pringle and Associates Curt Pringle and Associates will provide strategic counsel to the CEO and Executive Staff relative to Agency initiatives. Utilizing a wide range of strategic relationships, from all levels of government, CP&A will work collaboratively with the agency to coalesce key constituencies that further the TCA’s goals. CP&A will facilitate meetings for the CEO and Executive Staff with strategic partners and key stakeholders to help build relationships and support for the Agency. Staff recommends approval of a one-year contract task order with Curt Pringle and Associates for a not-to-exceed amount of $72,000 on a retainer basis. This fee includes expenses. BUDGET: Funding for the amendments and task orders to the various contracts is included in the proposed Fiscal Year 2018 budget. CONCLUSION: Engagement of experienced strategic planning support services in FY18 with strong regional and local knowledge is recommended to support the Agency’s initiative to improve mobility in South Orange County to support overall regional mobility. Staff recommends the approval of:

· Two (2) task orders with:

1. Venture Strategic Inc. 2. Sharon Browning and Associates

· Five (5) amendments with:

1. Richard Katz Consulting, Inc. 2. Latimer Partners, LLC. 3. Packard Government Affairs 4. Barrios and Associates, LLC/Communications Lab 5. Kit Cole Consulting

· One (1) contract with:

1. Curt Pringle and Associates

These contracts, amendments, and task orders will provide staff with continued strategic consulting and outreach services for the long-range strategic planning efforts that benefit mobility in the South Orange County area and the broader Southern California region. The next steps in this outreach effort are to further engage the stakeholders and to educate and communicate the process and next steps of the formal environmental phase on the South County Mobility Improvements. Attachment: Procurement Summary Reports

PROCUREMENT SUMMARY REPORT File No. 2017F-019 Contract #: K000983 Task Order #: TO-003 Title: Strategic Research and Stakeholder Outreach Consultant Services Consultant: Venture Strategic, Inc. (Irvine, CA) SubConsultants: Curt Pringle and Associates Smith Johnson Research DMI Direct Procurement Process

Type: Negotiated Task Order Award Criteria: Continuity of Services Negotiated Price: Not-to-exceed $ 1,800,000 Contingency: $0.00 Notes: Consultant has been providing the Agency with strategic planning services directly addressing the regional mobility issues associated within the South Orange County area. Consultant will continue to work with the Agency in ongoing efforts to develop a solution to address the goal of solving the mobility issues in the South Orange County area. All inclusive labor rates remain unchanged. Contract No. K000983 Compensation:

Date F/ETCA DESCRIPTION Task Order TO-001 10/8/2015 $472,250.00 Consulting Services Task Order TO-002 7/1/2016 $1,800,000.00 Continued Consulting Services Current NTE Amount: $2,272,250.00 Proposed Task Order TO-003 6/8/2017 $1,800,000.00 Continued Consulting Services Revised NTE Amount $4,072,250.00

PROCUREMENT SUMMARY REPORT File No. 2017F-019 Contract #: K000859 Amendment #: A6 Title: Professional Services Consultant: Richard Katz Consulting Inc. Studio City, CA Subconsultant: None Procurement Process Type: Negotiated Amendment Award Criteria: Continuity of Service Price: Not-to-Exceed $93,600 Contingency: $0.00 Notes: Amendment No. 6 will authorize Consultant to continue in his lead role as Agency counselor in the ongoing stakeholder meetings and workshops as the Agency develops and refines mutually beneficial mobility solutions through the formal environmental process. Consultant will also to assist the Agency in efforts to move forward to improve mobility in South Orange County that will enhance the region’s economic vitality and address environmental interests The monthly retainer of $ 7,500 for services and expenses compensable up to $300 per month remain unchanged. Contract No. K000859 Compensation:

F/ETCA DESCRIPTION Original NTE Amount $22,500 Previous Amendments $307,800 Continued consulting services Current NTE Amount $330,300 Proposed Amendment No. 6 $93,600 Continued consulting services Revised NTE Amount $423,900

PROCUREMENT SUMMARY REPORT File No. 2017F-019 Contract #: K000775 Amendment #: A7 Title: Professional Services Consultant: Latimer Partners, LLC (Santa Monica, CA) Subcontractor: None Procurement Process Type: Negotiated Amendment Award Criteria: Continuity of Service Price: Not-to-Exceed $63,600 Contingency: $0.00 Notes: Amendment No. 7 authorizes Consultant to provide continued consulting services to support constituencies, work on long range planning efforts and outreach to key stakeholders, particularly as TCA continues the process of the formal environmental phase on the South County Mobility Improvements. The monthly retainer of $5,000 for services and expenses compensable up to $300 per month remain unchanged. Contract No. K000775 Compensation:

F/ETCA DESCRIPTION Original NTE Amount $27,000 Consulting Services Previous Amendments $406,800 Continued Consulting Services Current NTE Amount $433,800 Proposed Amendment No. 7 $63,600 Continued Consulting Services Revised NTE Amount $497,400

PROCUREMENT SUMMARY REPORT File No. 2017F-019 Contract #: K000062 Amendment #: A14 Title: Legislative Advocacy Consultant: Packard Government Affairs (Carlsbad, CA) SubConsultant: None Procurement Process Type: Negotiated Amendment Award Criteria: Continuity of Service Price: Not-to-Exceed $60,000 Contingency: $0.00 Notes: Amendment No. 14 authorizes Consultant to continue to provide strategic counsel as staff continues its outreach to San Diego congressional, state and local leaders as it relates to long-term strategic planning efforts as well as build ongoing relationships with members of the San Diego Association of Governments. The monthly retainer of $5,000 for services, inclusive of expenses, remains unchanged. Contract No. K000872 Compensation:

F/ETCA DESCRIPTION Original NTE Amount $130,000 Consulting Services Previous Amendments $594,600 Continued Consulting Services Current NTE Amount $724,600 Proposed Amendment No. 14 $60,000 Continued Consulting Services Revised NTE Amount $784,600

PROCUREMENT SUMMARY REPORT File No. 2017F-019 Contract #: K0000057 Amendment #: A23 Title: Community Outreach Consultant: Barrios and Associates (Orange, CA) Subconsultant: The Nicholson Group Thomas Communications Group Procurement Process Type: Negotiated Amendment Award Criteria: Continuity of Service Price: Not-to-Exceed $360,000 Contingency: $0.00 Notes: Barrios & Associates, LLC/Communications LAB and their subconsultants, Thomas Communications and The Nicholson Group, Inc. provide a wide range of local community relations, public affairs and public relations services acting as an extension of staff to support communication and outreach efforts regarding the long range strategic planning in South Orange County. For FY18, their scope will include work with Venture Strategic and Sharon Browning and Associates to continue implementing a community outreach plan based on the results of the community ascertainment study and communications activities related to strategic long range planning advocacy, particularly as it relates to TCA initiating and continuing the process of the formal environmental phase on the South County Mobility Improvements. Hourly labor rates will remain unchanged. Contract No. K000057 Compensation: Original NTE Value $ 450,000.00 Previous Amendments $ 3,077,159,52 Current NTE Value $ 3,527,159.52 Proposed Amendment No. 23 $ 360,000.00 Revised NTE Value $ 3,887,159.52

PROCUREMENT SUMMARY REPORT File No. 2017F-019 Contract #: K001009 Amendment #: A3 Title: Issues Management and Consensus Planning

Consultant Services Consultant: Sharon Browning (Pacific Palisades, CA) Subconsultant: None Procurement Process Type: Negotiated Task Order Revision Award Criteria: Continuity of Service Price: Not-to-Exceed $36,000 Contingency: $0.00 Notes: Sharon Browning and Associates will continue to provide support and consulting services as it relates to the implementation of various aspects and recommendations of the community ascertainment study which was conducted by Sharon Browning. Sharon will also support critical outreach as TCA continues the process of the formal environmental phase on the South County Mobility Improvements. The monthly retainer fee will change from $2,000 to $3,000 (inclusive of expenses). Contract No. K001009 Compensation: Task Order No. 1 $ 61,705 Community Ascertainment Study Task Order No. 1 Rev. 1 $ 6,170 Continued Consulting Services Task Order No. 2 $ 24,000 Community Ascertainment Study Implementation Current NTE Value $ 91,875

Proposed Task Order No. 2 Rev. 1 $ 36,000 Continued Community Ascertainment Study Implementation

Revised NTE Value $ 127,875

PROCUREMENT SUMMARY REPORT File No. 2017F-019 Contract #: K001090 Amendment #: A2 Title: Strategic Planning Support Services Recommend Award To: Kit Cole Consulting (Glendale, CA) SubConsultant: None Procurement Process

Type: Negotiated Amendment Award Criteria: Continuity of Service Negotiated Price: Not-to-Exceed $72,000 Contingency: $0.00 Notes: Amendment No. 2 will authorize Consultant to continue providing support and consulting services on finalizing and implementing the Agency’s risk management strategy related to engaging with strategic community stakeholders. The monthly retainer of $6,000 for services, inclusive of expenses, remains unchanged. Contract No. K001090 Compensation:

F/ETCA DESCRIPTION Original NTE Amount $36,000 Previous Amendment $72,000 Continued Consulting Services Current NTE Amount $108,000 Proposed Amendment No. 2 $72,000 Continued Consulting Services Revised NTE Amount $180,000

PROCUREMENT SUMMARY REPORT File No. 2017F-019 Contract #: K001162 Title: Overall Strategic Planning Recommend Award To: Curt Pringle and Associates (CP&A) Anaheim, CA Subconsultant: None Procurement Process

Type: Sole Source Award Criteria: Qualifications Negotiated Price: Not-to-Exceed $72,000 Contingency: $0.00 Vendor Sourcing: CP&A will provide strategic counsel relative to global agency initiatives based on their historic knowledge of TCA’s forming and function within the regional transportation arena within Orange County and the State of California. CP&A will also provide unique partnering opportunities with a wide range of public agency and private sector strategic allies. Additionally, CP&A will be able to offer expert advice and experienced strategic planning based on their deep understanding of the stakeholder landscape and constituent concerns within the Orange County region. Contract Notes:

· Consultant will be compensated at a rate of $6,000 per month, inclusive of all expenses. · The contract contains standard indemnification language previously approved by legal

counsel.


DATE: June 8, 2017 TO: San Joaquin Hills Transportation Corridor Agency Board of Directors Foothill/Eastern Transportation Corridor Agency Board of Directors FROM: Alphan Turkeli, Customer Service Program Manager SUBJECT: Mailhouse Services – Contract Award STAFF RECOMMENDATION: San Joaquin Hills Transportation Corridor Agency Recommendation: 1. Authorize the Chief Executive Officer (CEO) to execute a three-year contract, plus two one-

year extensions, with QuestMark Information Management Inc (QuestMark) for printing and mailing services. The combined cost for the Agencies on a not-to-exceed basis is $1,200,000 with the actual cost allocable to each Agency being determined annually based on reasonable assumptions and methodology.

2. Authorize the CEO to make additional changes deemed necessary and execute future contract amendments not to exceed an amount within ten percent ($120,000) of the contract value as allocated to each Agency without further Board of Director’s action.

Foothill/Eastern Transportation Corridor Agency Recommendation:

1. Authorize the Chief Executive Officer (CEO) to execute a three-year contract, plus two one-year extensions, with QuestMark for printing and mailing services. The combined cost for the Agencies on a not-to-exceed basis is $1,200,000 with the actual cost allocable to each Agency being determined annually based on reasonable assumptions and methodology.

2. Authorize the CEO to make additional changes deemed necessary and execute future contract amendments not to exceed an amount within ten percent ($120,000) of the contract value as allocated to each Agency without further Board of Director’s action.

Mailhouse Services – Contract Award File No. 2017J-020 Page 2 of 3 June 8, 2017

BACKGROUND: The Agencies distribute approximately 4.5 million statements, letters and notices to customers and violators annually in support of daily customer service operations. Currently QuestMark provides bulk printing and mailing services for the San Joaquin Hills and Foothill/Eastern Transportation Corridor Agencies (TCA). The pricing model has provided an effective way for staff to manage expenditures as costs associated with the contract are based on actual printed and mailed pieces, which vary based on the document type, number of pages, etc. The current contract term with QuestMark is expiring on June 30, 2017, requiring re-procurement of the services. Staff recently completed an Invitation For Bid (IFB) to identify the lowest responsive and qualified bidder to provide the requested services. DISCUSSION: Staff foresees an ongoing need and benefit in using a contracted mailhouse to provide bulk printing and mailing services for the millions of statements, notices and letters sent to customers each year either in the form of required account communication or notices of toll evasion. Staff plans to end its process of mailing statements in Fiscal Year 2018, which will reduce the costs associated with that portion of the services. As part of the Agencies’ continuous efforts to contain costs and streamline processes, staff is shifting the in-house production and mailing of infrequent customer correspondences to the mailhouse contractor. To date, the mailhouse service has only been used for large batch submittals that occur on a fairly consistent schedule. Staff identified that labor efficiencies and cost savings could be attained by also using the mailhouse for smaller batches that occur on an infrequent basis as this could be automated instead of the current manual in-house processes. As daily batches of correspondences are triggered along with the scheduled productions of letters and violation notices, the data is sent to the mailhouse for processing. Upon receipt of data from the Agency’s backoffice system, the new mailhouse contractor handles the printing and mailing of items using TCA approved formats. TCA will pay the contractor for the cost of paper, printing, envelopes and mailing of the associated items at the contracted rates. The printing and mailing services also include the as-needed insertion of Agency specified inserts, mounting strips and postage-paid envelopes for certain correspondences.. Postage for the mailings is processed through the contractor as a pass-through cost. Selection Process & Results In April 2017, TCA issued an Invitation for Bids (IFB) for firms to provide bulk printing and mailing services. Eight responsive bids were submitted as noted in the table below and the attached Procurement Summary Report. The lowest responsive and responsible bid was provided by QuestMark based on the estimated item volumes provided by TCA in the IFB for 16 different document packages with various quantities of printed pages and envelopes. Payments to the selected provider will be based on the actual volumes of printings and mailings requested by TCA as is provided for under the current contract.

Mailhouse Services – Contract Award File No. 2017J-020 Page 3 of 3 June 8, 2017

Proposer Pricing (Annual)

CONTRACTOR NAME SUBCONTRACTORS RANKING PRICE QuestMark Information Management, Inc. Houston, TX

None 1 $ 396,919.70

InfoSend, Inc. Anaheim, CA None 2 $ 484,359.65

Electronic Output Solutions Vista, CA None 3 $ 501,168.85

Datamatx, Inc. Atlanta, GA None 4 $ 577,504.16

The Data Center, LLC Salt Lake City, UT None 5 $ 692,078.00

Power Direct Marketing Mission Viejo, CA None 6 $ 702,170.85

Ricoh USA, Inc. Irvine, CA None 7 $ 858,335.20

L & D Mail Masters, Inc. New Albany, IN None 8 $ 1,113,504.60

QuestMark Information Management, Inc QuestMark Inc. located in Houston, TX, is qualified to perform the services and has agreed to meet all performance and general contract requirements specified in the IFB. They have 23 years of previous experience performing bulk printing and mailhouse services and are currently providing services to TCA as well as other tolling authorities such as North Texas Tollway Authority, Oklahoma Turnpike Authority, and Harris County Toll Road Authority who have similar scope,volumes and requirements. QuestMark has met all performance requirements to date and staff is confident they will continue to do so. BUDGET: Funding of $1,200,000 for the three years of services will be included in the proposed FY 2018 through FY 2020 budgets based on projected volumes. SUMMARY: Printing and mailing of customer correspondences, invoices, statements and violation notices is a significant task for the Agencies. Utilization of a mailhouse provider with full service printing and mailing experience provides the Agencies the most efficient means of completing this task. The contract with the current provider is expiring and staff conducted a competitive procurement to contract for ongoing services. QuestMark Inc is the lowest responsive and responsible bidder and is experienced in providing the requested services for clients with similar needs and volumes. Staff recommends awarding QuestMark Inc a three-year contract with a combined not-to-exceed value of $1,200,000 plus two one-year extension options for printing and mailhouse services. Attachment: Procurement Summary Report

PROCUREMENT SUMMARY REPORT File No. 2017J-020 Contract #: K001168 Title: Printing and Mail House Services Recommend Award To: QuestMark Information Management, Inc. (Houston, TX) Procurement Process Type: Invitation for Bid Award Criteria: Lowest Responsive Bid Price: Not-to-Exceed $1,200,000 Contingency: Not-to-Exceed $120,000 Vendor Sourcing: The Agencies’ Contracts Department posted IFB No. K001168 on the Agencies’ PlanetBids e-procurement system. Thirty-eight firms expressed interest in this procurement and eight firms submitted bids. IFB No. K001168 required bidders to meet minimum qualifications. Bid Results:

CONTRACTOR NAME SUBCONTRACTORS RANKING PRICE QuestMark Information Management, Inc. Houston, TX None 1 $ 396,919.70

InfoSend, Inc. Anaheim, CA None 2 $ 484,359.65

Electronic Output Solutions Vista, CA None 3 $ 501,168.85

Datamatx, Inc. Atlanta, GA None 4 $ 577,504.16

The Data Center, LLC Salt Lake City, UT None 5 $ 692,078.00

Power Direct Marketing Mission Viejo, CA None 6 $ 702,170.85

Ricoh USA, Inc. Irvine, CA None 7 $ 858,335.20

L & D Mail Masters, Inc. New Albany, IN None 8 $ 1,113,504.60

Contract Notes:

· The contract utilizes unit pricing for both printing materials and mailing services. · The contract contains indemnification language previously approved by legal counsel.

Documents

JOINT OPERATIONS & FINANCE COMMITTEE MEETING · JOINT OPERATIONS & FINANCE COMMITTEE MEETING ... continued strategic consulting and outreach services for the long-range ... the Capital