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Innovative Financing

Mark Foster, Chief Financial Officer

North Carolina Department of Transportation

April 8, 2011

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Innovative Finance“I don’t have any money… do you?”

Agenda:

• Transportation Overview

• Current Use of Innovative Finance

• Tools to Explore

• Transformation - NCDOT Delivers

• Future

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• State Transportation System - Largest Capital Asset

• Invested* - $40 billion +

• Replacement Value - $450 billion

• Economic Value - $$$$$$$ (Commerce/Jobs/Lifestyle)

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System Responsibility

- 100,000 200,000

Florida

Georgia

South Carolina

Virginia

North Carolina

Texas

US Average

Lane-Miles

13

11

2

4

1

3

- 50 100 150 200

Florida

Georgia

South Carolina

Virginia

North Carolina

Texas

US Average

24

50

47

32

4848

State Lane-mile and Ranking Total Disbursements per Lane-mile and Ranking

3

5

Public Road Ownership

- 50 100 150 200 250 300 350

Florida

Georgia

South Carolina

Virginia

North Carolina

Texas

US Average

Miles in Thousands

State

County

Local

Federal

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NC Gross Domestic Product Adjusted for Inflation vs. Transportation Revenues %

GDP has increased but the percent spent on transportation has decreased

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Purchasing Power of NCDOT Highway Construction Dollars (Since 2002)

-43%

-34%

-52%-47%

-44%

-33%

-26%

-8%

0%

-60%

-40%

-20%

0%

2002

2003

2004

2005

2006

2007

2008

2009

2010

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2010 Transportation Texas Institute (TTI)Urban Mobility Report - National Statistics

Congestion Costs1982 - $24 billion2009 - $115 billion

Wasted Fuel2009 - 3.9 billion gallons – equal to 130 days of flow in the Alaska Pipeline.

Commuter Cost (Annual) Commuter Delay

1982 – 14 hours (NC- 5) 1982 - $351 (NC- $78)2009 – 34 hours (NC- 26) 2009 - $808 (NC- $635)

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Age of NCDOT Bridges(not including culverts)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

<1930 1930 1940 1950 1960 1970 1980 1990 2000

BridgesDeficient Bridges

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US Logistics Survey

No NC city ranked in top 50 logistics friendly cities

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NC Ranking & Population Growth

0

2

4

6

8

10

12

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2000 2005 2010 2015 2020 2025 2030

(in

Mill

ion

s)

Rank:11

(VA - 12 SC - 26)

Rank:11 Rank:10

(Surpassing New Jersey)

Rank:10 Rank:9

(Surpassing Michigan)

Rank:8

(Surpassing Georgia)

Rank:7

(Surpassing Ohio)

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Freight Tonnage by Mode, 2005-2035With moderate economic growth at about 2.8% CAGR

Freight tonnage will nearly double by 2035

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Strategic Prioritization Model

Highways

• $9B in available revenue

• Data-driven

• MPO and RPO ranked projects

• $45B in needs

1,100 projects = $38B

Other highway needs = $7B

Non-Hwy Transportation

• $1.5B in available revenue

• Units establish priorities

• Coordinated with MPOs

• $9B in needs

900 Non-Highway Projects

$54 Billion in Total Transportation NeedsApprox. $10.5 Billion in Revenue (Years 2015-2020)

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Finance Strategy

• Prioritization of Existing ResourcesPolicy to Projects – Outcomes BasedValue EngineeringAsset ManagementFunding FlexibilityOutsourcing

• Sustainable LeverageGARVEE BondsToll Financing

• Public/Private Resources (P3)Municipal AgreementsDesign Build/Design Build FinanceP3 (Public & Private)Sponsorships

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NCDOT Transformation

–Outcomes Based Planning–Logistics Planning links infrastructure to commerce

–Network Connectivity & Function

–Linked to Performance Measures–Project Ranking Based on Mobility, Safety, Condition

–Performance Dashboard and Individual PDA

–Enhanced Communications

–Innovative Finance

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How Does it All Fit Together

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NC

NCDOT

North Carolina Comprehensive Plan

N.C. Transportation Plan20 yr

Program & Resource Plan 10 yr

Work Program 5 yr

“NCDOT Financial Planning & Cash Model Fully Integrated”

Biennium Budget

Economic Indicators

Long Range Revenue Projections

Innovative Finance:

• GARVEE• Design Build• DB Finance• Tolling• TIFIA

Strategic PlanningPrioritization

STIP Budget

Cash Model

Annual Maintenance of Effort Spend Plans – 1 yr

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NCDOT Cash Model 10 Year Work ProgramSFY 2011 - SFY 2020

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Innovative Financing Provides Capital for State and Local GovernmentsProvides Capital for State and Local Governments

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GovernmentOwns - Operates

Design - Build

Design - BuildFinance - Operate - Maintain

(“concession Model”)

Design -BuildOperate - Maintain

Private SectorOwns and Operates

Build, Own, Operate

Build, Own, Operate- Transfer

Traditional 100%Government Owned Model

Key difference: Private SectorFinancing in “P3” approach

Current “P3”Model

100% Privatized

Private Sector Involvement

Pri

vate

Sec

tor

Ris

ks

Government owns asset;private sector designs

and builds to meet public specifications often for a fixed

price. Cost risk transferred to private sector

Government owns asset;private sector designs, builds

and operates. Cost and operational risk transferred to

private sector

Government owns asset;Grants private sector the right to

develop asset and receive revenues generated. Private

sector takes cost and operational risk. Performance standards and

rates defined in concession agreement.

Private sectorInitially owns asset: finances, designs, builds and operates asset for defined period and

receives revenues for defined period. At end of period, ownership transferred to

government.

Private sector owns and operatesasset to provide governmental

service. Performance standards are defined initially and

regulated/monitored on an ongoing basis.

Public/Private Sector Innovation & Financing

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US Market PPP Observations• Almost all activity sponsored at State, Regional, City or

other local level

• 23 States with enabling legislations

• Federal Government support:

– Private Activity Bonds

– TIFIA direct loans, loan guarantees, and lines of credit

– SEP 15

– State Infrastructure Banks (SIBs)

– GARVEE Bonds and Transit GANS

• Markets

– Active - Texas, Virginia and Florida

– Moderate – Georgia, Oregon, Missouri and California

– Promising – North Carolina

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P3s Are Happening & Adding Capacity in the U.S.

List of projects in various stages of procurement, may not be exhaustive

States:

Texas - TC-35, I-69/TTC, I-635 North Tarrant Express, DFW Connector

Georgia - Northwest Corridor, I-285 Northwest TOT Lanes

Virginia - Capital Beltway HOT Lanes Corridor

Florida - Port of Miami Tunnel, I-595 Improvements, Coast Outer Beltway

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Active P3’s within NCDOT

• Design Build / Design Build Finance– 55 Design Build projects active/complete to date– 14 Projects Advertised for future award– Yadkin River Bridge savings $95M– Monroe Connect/Bypass bid savings $100M– Charlotte projects accelerated up to 7 years with cost savings $130M

• Contractual Agreements – Authorize public/private sector role in delivery and financing of transportation

projects (30 - 50 per month)

• Interstate Maintenance – Contractor maintains 135 miles (I-77, I-85, I-485 & I-277) Mecklenburg & Cabarrus counties

• Randolph County Rest Area – Operated by Safe-T-Concierge

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Turnpike Authority - Mid-Currituck BridgePublic Private Partnership

Financial analysis including evaluation of private financing versus traditional toll financing underway

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NCDOT Delivery Innovative Finance Techniques

• Value Engineering & Project Clustering– Replacement of 7 Bridges on Ocracoke Island in 75 days

• Public Public Partnerships– Charlotte New starts Light Rail Project

• NCDOT (25%) / City of Charlotte (25%) / FTA (50%)

• Public Private Partnership– Gateway Project (downtown Charlotte)

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Toll Technology

Contracts are in place for full toll operations & collection on the Triangle

Expressway

The systems being put into place (including software systems and other infrastructure) are easily expandable to meet the needs of all toll projects under development as well as additional projects statewide

North Carolina’s Toll Roads are being

construction with the latest technology

available

They will have “open road tolling” with no toll collection booths

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Future Initiatives – Value Pricing

I-77 HOT Lanes

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GARVEE Program Plan

• Nationally Showcased as one of the Best Garvee Programs

• “Evergreen Structure” Ability to continually issue bonds subject to legislative authorization

• Flexible Program allows Project Additions/Deletions

• Geographic distribution of Projects on Strategic Highway Corridors

2007 & 2009 Series Accelerated Projects Average of 3.5 years

Two issuances ($530M) to date covering 42 projects

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Key Issues and Opportunities• Sustainability of Gas Tax Revenues

– Address Changing Technology– Transition Strategy

• Impact of Federal Rescissions and Budget Cutbacks

• Funding Flexibility to Achieve Performance Outcomes– Both Federal and State Dollars

• Protect and Enhance NC’s Largest Economic Asset – Continued Focus on Resource Prioritization, Internal Efficiencies, &

Outsourcing Opportunities– Broaden Strategic Use of Innovative Finance and Partnerships– Expand Ability to Recover Inflationary Costs as World Economy Recovers