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Why Money Matters 2013 Transit Initiatives and Communities Conference Atlanta, GA June 23, 2013 1.

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Presentation on theme: "Why Money Matters 2013 Transit Initiatives and Communities Conference Atlanta, GA June 23, 2013 1."— Presentation transcript:

1 Why Money Matters 2013 Transit Initiatives and Communities Conference Atlanta, GA June 23, 2013 1

2 A little bit added to what youve already got gives you a little bit more. -P.G. Wodehouse We are zealots at pursuing financial security when what we really want is financial serenity. Financial security means never having to worry about money again because you (and the agencies you represent or operate) have accumulated all you will ever need. But in todays economic climate, just about the only thing we can really expect is the unexpected – so how long do you think it will take to reach serenity? 2

3 Why does money matter? Who would have ever thought people in transit would: Significantly impact the right business climate Be involved in prosperity-in-the making Impact a shift in taxes, regulations, other similar mechanisms Help create the rulebook on economics and incentives 3

4 Why does money matter? Re-examination of dependency on New Starts What resources do we really need Faced with massive system(s) of infrastructure, transportation, development and finance Need for a reassessment of how to effectively manage everything from Medicaid to transportation 4

5 Why does money matter? New and stronger concern for improved performance, economic benefits and results (with cities, states and systems literally shutting down, we have to focus on this) Renewed financial principles Refined best practices Relevance Validity Technology/advancement Organizational efficiency Effectiveness/methodologies Proven track record 5

6 Why does money matter? What factors will produce/drive growth? Who will examine and lead (effectively) Logic and evidence need to sustain us Tax(es) and implications for new sources of revenue Sales tax and special assessments Impacts for long-term growth Sustainable growth plans Policy planning to support the above Entrepreneurship 6

7 Business plan structure = successful project structure Successful Project Structure More Solutions 7

8 Strategic planning less money Vision Goals Understanding Current State Analysis Probing Questions Strategies Decisions Budgets Action Plan Description Schedule Accountability Resources Implementation Monitoring Adjusting More Adjusting 8

9 So, why does money matter? 1.Elected officials are dealing with a louder and more diverse set of communities than ever before Listening and responding and dealing with the financial outcomes is becoming an incredibly complex challenge How to translate constituency concerns into financial policy/results Opportunity to create understanding for a growing list of needs and wants with a broader gap between them And realizing that there is not a magic solution automatically, even in something like P3 – but that it takes a thorough understanding, thinking and leadership to work your way through solutions 9

10 Friday, June 7, 2013 10

11 CATS Advancing the Vision 11

12 So, why does money matter? 2.Leaders have to learn how to adapt and deal with change, using change to their advantage There is the assumption here that change means improvement Need an understanding of outcomes Politics and leadership have become fiery waters What is the learning experience? -- a more pragmatic approach; a return to the realistic look at how to plan, fund and tax whats needed 12

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14 Dallas Area Rapid Transit (DART) Their ability to build as much as they have is wrapped up in: 85 miles of light rail 35 miles of commuter rail 4.5 (more miles) of light rail under construction with another 3- mile segment about to be awarded Back in 1983, made the decision to allocate a full 1% of sales tax to the efforts Insisted on the suburban membership (13-city participants) adopting a 20-year financial plan This plan cannot be changed without 2/3 vote of full board to ensure a redirect of funds Founding board of DART included a number of private sector leaders with significant experience in heavy capital infrastructure The concept of regional cooperation, realistic financial planning and tax structure continue There have been failures with P3, value capture and other attempts 14

15 So, why does money matter? 3.How do we effectively leverage the talent(s) of the business community /private sector into improvements needed for necessary financing options? Speaking the same language becomes an interesting challenge Returns on investment so strongly needed Public-private partnership – an exercise in mutual understanding 15

16 Navy Yards Location issue (walking distance to Capitol Hill) Waterfront appeal True mixed-use project Destination: Nationals stadium and USDOT The only P3 in the US in which GSA is partnering with a private developer (Forest City) Largest economic development project underway in Washington, DC–$1.65 billion Adaptive reuse of historic buildings, new construction and environmental remediation 42 acres, 5.5 million SF The project will take 15 years to develop as a partnership Started in the midst of the 2008 economic downturn Dealing with the third mayor since the project started; 30 federal and District agencies oversight(s) HUD facilitated the financial closure 16

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18 So, why does money matter? 4.We need to understand how to effectively bring together varying factions to work within stated goals that actually yield intended results Comprehensive assessment of multifaceted approach Plan, design, construct, finance, operate and reassess Constant re-evaluation – debt capacity and understanding is ongoing 18

19 Denver Union Station (July 2008) Plan, management and implementation Transportation improvements for light rail, commuter rail, regional bus facilities, intercity rail Intermodal connections/public improvements (public spaces/plazas, open spaces, pedestrian connections) Renovation of Denvers historic, downtown train station Economic development within the CBD 19

20 Growing interest in Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA) Originally authorized under the Transportation Equity Act for the 21 st Century (TEA-21). Provides credit assistance for qualified projects of regional and national significance. Credit program designed to fill market gaps and leverage substantial co-investment through supplemental and subordinate capital. (up to 49% of eligible project costs) Offers attractive borrowing rates with flexible terms. Examples include Treasury interest rate and maximum maturity of 35 years after substantial completion. 20

21 Eagle P3 Highlights/Lessons Learned 21

22 Lessons Learned: Deal Structure ChallengeMitigation Public Private Partnership Transfer risks to those who can best measure them and price them Pass-through of performance obiligations Integrated DBFOM Focus on NPV of the project Evaluation lifecycle costs Rolling Stock Established separate legal entity Parent Company Guarantees Ridership Risk Availability Payments DTP: Availability and Operating Performance RTD: Ridership and Fare Levels FFGA Approval Committed Project – Phase 1 Conditional Project – Phase 2 22

23 Lessons Learned: Financing ChallengeMitigation Timing of Financial Close Cost/Benefit Analysis Availability/Affordability of Financing Draft vs. Final ROW, IGAs, 3 rd Party Agreements 2010 Financial Markets Lending Environment Private Activity Bonds Availability of Bank Debt Debt Security TABOR 2nd lien on 0.4% FasTracks Sales Tax 3rd lien on 0.6% Base Sales Tax Not subject to annual RTD appropriation Legal Entity Structure Interface between D/B and O&M Protection of PAB holders Efficiency in day-to-day operations Affordability $305 million savings 23

24 Lessons Learned: Day-to-Day Operations ChallengeMitigation Change Orders For P3s, minimize the amount of changes and impacts on the project Contract provisions Right of Way Acquisition Priority Parcels Presence in Communities Public Involvement Program DBE/SBE Goals DBE/SBE Outreach 24

25 So, why does money matter ? 5.Communities are no longer hiding behind the excuse that the economy is so terrible that taxes cannot be raised and their tax base cannot be expanded 25

26 Why money matters? We need to tally the real world climate for doing our business today What are the truly significant factors that will qualify us to lead financially We need to determine the appropriate theater for transportation finance – more and more it is growing within a metro area (which means more complexity – more people, more agencies, more everything) We need procedures, protocol, procurement that assures fairness and that we know how to include the small and the disadvantaged We need to constantly re-assess and deal with policies that show an approach that is viable, services that work Looking for improvements in the tax code/economic development/finance and application doesnt seem like our thing – but it needs to be Develop and spend revenues aimed at resilience Maximize innovation planning aimed at opportunity 26

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