1. Opportunity Knocks Creative Funding Approaches From The San Francisco Bay Area Therese W. McMillan Deputy Director, Policy Metropolitan Transportation Commission University of California, Irvine ITS: Center for Urban Infrastructure March 7, 2003

2. Pursue creative innovation through grants management Maximize region-specific funds sources (in MTC’s case — bridge tolls) Develop long-range financial strategies and companion legislative proposals to deliver them. Three Ways to Create Funding Opportunities

3. San Francisco Bay Area Counties Million People; almost 4 million jobs Municipalities Miles of highway Miles of local streets and roads Public transit operators What is the MTC region? 9 7 101 1,400 19,600 23

4. The Current Crisis The state’s fuel tax has lost one-third of its value since 1964, adjusted for inflation.

5. The Current Crisis State Transportation Improvement Program Also at Risk State Highway Account: Going, Going, Gone? The State Highway Account is projected to be in the red by as early as June 2003. This likely will affect dozens of Bay Area transit, highway and local road projects in the STIP, many of which are now under construction.

6. The Current Crisis Traffic Congestion Relief Program: A Promise Deferred 2000-01 2001-02 March 2002 January 2003 Governor Davis proposes TCRP/AB 2928 signed into law: $6.8 billion total statewide / $4.9 billion in projects $1.7 billion in San Francisco Bay Area Majority of funding for TCRP immediately deferred for two years: From FY 2001-02 until FY 2003-04 Proposition 42 passed by voters; to protect and extend funding for TCRP projects, local streets and roads and transit elements Governor’s proposed budget proposes significant TCRP program reductions: 2002-03: $100 million 2003-04: $1.5 billion TOTAL: $1.6 Billion Statewide Bay Area at Risk $510 million in approved TCRP allocations $29 million local streets and roads $14.4 million transit assistance (FY 2003-04)

7. Key Factors High level of local dollars compared to state/federal dollars Statutory provisions provide additional funding flexibility via delegation to regions High propensity (in Bay Area) to vote for increased transportation including local sales taxes revenue measures Creative Financing through Grants Management

8. The Regional Transportation Plan Funding Distribution: $87.4 billion Maintenance vs. Expansion Commitment State/Federal vs. Local Funding

9. Sales taxes outstrip the STIP In each of the five Bay Area counties with a special transportation sales tax in place, the proceeds from this levy exceed the county’s share of funds from the State Transportation Improvement Program (STIP).

10. 1992 — Suballocation of Federal Dollars (SB 1435) State legislature passes ISTEA implementing bill that not only codifies the federal suballocation of STP funds, but takes extra step of suballocating CMAQ funds to regional agencies in air quality non-attainment and maintenance areas. 1997 — Delegation of State Programming Choices State legislature passes Senate Bill 45 which guarantees that RTPA’s have project selection authority over 75% of a portion of state highway account spending; the remaining 25% of funds are programmed by California Transportation Commission. Statutory Flexibility

11. MTC assisted Santa Clara Sales Tax Authority in delivering State Route 17/85 interchange project by advancing $19.3 million in federal funding capacity. Santa Clara paid MTC back with local sales tax dollars — cash. MTC used new cash account to facilitate future swaps of local monies to projects having difficulty obligating federal dollars (“red tape end-run”). Applying Local Leverage and State Flexibility: Santa Clara/MTC Swap

12. Bonds for Bridge Improvements In its role as the Bay Area Toll Authority (BATA), MTC will issue a total of $900 million in revenue bonds to finance improvements to Bay Area toll bridges. Bond funds will be used for: widening the San Mateo-Hayward Bridge reconfiguring the approaches to Dumbarton Bridge constructing a new Benicia-Martiez Bridge replacing the westbound Carquinez Bridge span upgrading the Richmond-San Rafael Bridge Maximizing Regional Specific Sources

13. 4.18% 5.50% BATA developed a Plan of Finance with a prudent mix of fixed and variable rate debt. While existing assets act as a natural hedge against variable rate debt, BATA has a limited amount of variable rate capacity given its limited ability to increase revenues. Debt mix: 67% Fixed Rate 33% Variable Rate The Original Plan of Finance

14. 4.41% 4.44% 4.86% 3.60% ($200 million to be financed) The Current Plan of Finance BATA approved modifications to financing plan that include two synthetic fixed-rate swaps on a total of $500 million of the issued debt that reduces interest rate cost and risk on the variable rate bonds issued. Debt mix: 67% Fixed Rate 33% Variable Rate 2002 2003

15. BATA has limited variable rate capacity, and the 2002 and 2003 swaps were designed to lock in interest rates at levels below the current market as well as the assumptions for the fixed rate component of the Plan of Finance. 4.18% 5.50% 3.60% Average Borrowing Cost: 5.07% Average Borrowing Cost: 4.19% Original Plan of FinanceCurrent Plan of Finance Adds $200 million in additional project capacity Sum | mary Financing Recommendation 4.48%

16. Establishes updated financing strategy to address over $2.0 billion in cost overruns on the Bay Bridge seismic retrofit project. Extends the “second dollar” seismic surcharge on the Bay Bridges permanently. MTC/BATA negotiated a provision to: recoup any “excess” toll funds generated by the surcharge extension to fund other transportation projects; extend the financing of the second dollar for a maximum 30 year period. These provisions together serve to generate a new revenue source estimated at roughly $500 million: key element in MTC’s Regional Transit Expansion Program. Assembly Bill (AB) 1171: Creating New Funding Potential

17. The cornerstone of the 2001 Regional Transportation Plan (RTP) is MTC Resolution 3434, the Regional Transit Expansion Program. The $10.5 billion program will enable the Bay Area to speak with one voice in Washington to solicit funding for both rail and express/rapid bus transit projects. Includes 9 new rail extensions, significant service expansions and a comprehensive regional bus program. Developing Long-Range Strategies: Resolution 3434 Regional Transit Expansion Program

18. Resolution No. 3434 Regional Transit Expansion Program: Map of Projects

19. Resolution No. 3434 19 projects including bus, rail, and terminal investments > 11 fund sources working in concert to deliver projects State and federal funds total $3.4 billion Leveraging over $6.3 billion in local revenue sources Funding a Game Plan for Regional Transit Expansion — MTC Resolution 3434

20. Resolution No. 3434 SF Muni Received $140 Million in Traffic Congestion Relief Funds from State Used Funds Immediately to Complete Phase 1 of New Central Subway Swap with Local Sales Tax Measure Funds that Will Kick-In to Deliver Phase 2 New Central Subway Inter-regional discussions about Similar Swaps of Local Sales Tax Measures and State Funds for Projects Ready Now versus Later Managing Cash Flow through Swaps Critical to Timely Project Delivery

21. Resolution No. 3434 Commits $360 million of $500 million in new toll revenues to transit expansion projects Funds to Deliver: Extension of Caltrain to Downtown San Francisco Rebuilt Transbay Terminal with ability to accommodate regional transit and future high speed rail Two BART extensions in Contra Costa and Alameda Counties Bond Financing Will Make 30-Year Revenue Stream Available as Early as 2011 AB 1171: Using New Regional Revenues to Deliver Transit Expansion Projects

22. Resolution No. 3434 60% of the region’s transit expansion program funded locally New Starts requests meet an even higher benchmark, with federal funds proposed to leverage 77% in local revenues Argument that “supermatched” projects be prioritized Case for Feds providing a backstop loan guarantee if appropriations are not keeping pace with full funding grant agreement payment schedule Advocating the Region’s Strengths – the Argument for a “Supermatch”