Cotton BeltInnovative Financing Options

for Regional Rail

Southwestern Rail Conference

January 28, 2011

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Cotton Belt Corridor

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Cotton Belt History

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1983 DART Service Plan Included the Cotton Belt

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1990 DART PurchasesCotton Belt

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2002 DFW Airport Undertakes Rail Access Study

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2005 The T Begins SW2NE Project

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“Natinsky” Plan

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Light Rail New Technology

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DART’s Current System Plan Includes Express Rail On Cotton Belt, But No Funding

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Why Is Additional Funding Needed?DART Sales Tax Trending Down

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Regional Approach

• All Must Be On “Same Page”• Historically Regionalism Resulted in

Major Successes – D/FW Airport • Cotton Belt Potentially Template for

Realization of Broader Rail North Texas Plan

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New Funding Paradigm

• Timely and Necessary• iFi Promises to be New Funding

Paradigm

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So, Additional Sources Needed:Texas Local Option Transportation Act (TLOTA)

• What Was TLOTA?• Local Option Tax to Increase Transit Revenues• County-based Opt In• Funds Raised In a Transit Service Area Stay Were

To Stay In That Area• Includes Equity Benefit Provision to Benefit Cities

Within a County Proportionally• No New Levels of Government

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TLOTA Failed In Legislature, But Its Regional Tone Prevails

• TLOTA Supporters• Legislators• Local Governments• Transit Authorities• Chambers of Commerce• Advocacy Organizations

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DART, The T and PPP

• Issued Joint Request for Information

• Sought Alternative Funding• Coordinated with COG

• 55 Respondents• All Essentially Said, “If DART Finds

More Revenue, We Can Finance or Design System”

• RFI Reinforced Need for Creative Approach

• RFI Underscored Need for Regional Approach

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RFI Process Underscored Need for Regional Approach

• All Must Be On “Same Page”• Historically Regionalism Resulted In

Major Successes Such As DFW Airport • Cotton Belt Potentially Initial Template

For Realization of Broader Rail North Texas Plan

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Filling the funding gap

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iFi Approach

• Phase 1 – Structure Revenue Streams• Assess Potential to Raise Private Capital

• Phase 2a – Construct and Commit• Agreements to Commit Streams to Repay

• Phase 2b – Monetize Revenue Streams• Fund Project Via a Concession• Possible FDBOM

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iFi Process

• Started with 130 Potential Revenue Sources

• Analyzed the Corridor• Interviewed Stakeholders• Interviewed Potential Investors• Considered Policy Implications• Analyzing Viable Set of Sources

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iFi Structure

• Potential Revenue Sources• Non-geographic

• Advertising• Fiber Optic• Enhanced Farebox Recovery/Rapid Card• Parking System

• Geographic • Public Land Development• Value Capture

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Value-Capture

Baseline Property Value

Appr

aise

d Va

lue

Time

Captured Appraised

Value

Creation Termination

Tax Increment

Value After Termination

Development That Sustains Value Capture

Conventional Development

• Buffers Instead of Transitions

• Lack of a Transportation Network

• Not Pedestrian-friendly, Not Transit-friendly

• Narrowly Stratified Market• Value Drops When The

Intended Use No Longer Viable

Sustainable Development

• Transitions Instead of Buffers• A Network of Transportation,

Encouraging Choice• Broad Market (Age, Socio-

economic, Race, Marital Status, etc.)

• Designed To Endure• Value Holds When The

Current Use Is No Longer Viable

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We’ve Ignored Value Capture in Transportation Investment

The long term impact of delinking design of transportation and cities is pulling the current American funding system down onto its last leg.

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Trends Suggest a New Opportunity to Rely Again on Value Capture

40 million housing transactions expected over the next 40 years, providing an opportunity to speak to the new generation who want urban living

Millennials and Boomers

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Recently in the Wall Street Journal –

“Gen Y housing preferences are the subject of at least two panels at this week's [NAHB] convention.

A key finding: They want to walk everywhere. Melina Duggal, a principal with adviser RCLCO, [said a] whopping 88% want to be in an urban setting; but since cities themselves can be so expensive, places with shopping, dining and transit such as Bethesda and Arlington in the DC suburbs will do just fine.”

Market CommonClarendon, Arlington VA

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Sustainable Development

• Structuring Greater Value Aggregation

Arlington, VA

31% of taxbase

In 7% Land Area

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Is iFi Realistic?

• Potential Investors Confirm Value Capture Approach Is Sound and Viable

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Value Capture Applied to Corridor

• Typology Examples• 12th Street (redevelopment)• Bush Central (infill greenfield)• UTD (public lands development)• Cypress Waters (existing TIF, MMD)• North Richland Hills (redevelopment)• Summer Creek (new greenfield)

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12th Street

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Bush Central

Courtesy of GFF and Gateway Planning

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View to Bush Central Station Plaza

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UTD

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Cypress Waters

NRH - Smithfield

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Summer Creek

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Other Key Revenue Sources

• Fair Fare Structure

• Rapid Card Opportunity

• Railcar Manufacturing Facility

• Coordinated Multimodal Leveraging

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Fair Fare

• What is a Fair Fare and Where Are Your Partners?

Partnership Payment Lower Fare

Average Fare

Higher Fare Partnership Payments

Student Low Income Peak User Non-Member City User

Elderly Frequent User Special Destination

Special Functions

Unemployed Off-Peak Parking Space Use

Ozone Alert Response

Medical Longer Distance

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Rapid Card Opportunity

• Enhanced Farebox Recovery• Evolving Technology• Multimodal Possibilities• Competition for Franchise• Implications for Partnerships

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Rapid Card Elements

• Distance• Destination• Time of Day• Class of Fare (i.e. Student, Disabled,

Economically Disadvantaged, etc)• Regional Equity (In-system Resident or

Out-of-system Resident)

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Rapid Card – a Systematic Approach

• Transit• Toll Systems• Parking Concessions

• Cities• D/FW Airport• DART station areas

• Retail Vendors (station areas, card “recharge” locations, rental vehicle concessions, etc.)

• Taxis• Limousines

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Manufacturing Facility

• National Opportunity for Local Economic Development

• DFW as National Rail Development Leader

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Multimodal Operations and Leveraging of Funding

• Transportation and Land Use Can No Longer Be Viewed In Separate Silos

• Mobility 2035 Plan Relies On More Balance of Rail and Roads, Embracing North Texas 2050 Growth Scenario

• Sustainable Economy

When Will We See the Results?(Special Sauce)

INGREDIENTS: NAMING RIGHTS,

TOLL REVENUE, FEDERAL

FUNDING, LOCAL OPTION GAS TAX,

LOANS & GRANTS, ADVERTISING,

FAREBOX RECOVERY, SMART CARD,

VALUE CAPTURE, PUBLIC LAND

DEVELOPMENT, FIBER OPTIC,

PARKING, TAX REVENUE SHARING,

VEHICLE REGISTRATION FEE,

IMPACT FEES, TIF, OTHER NATURAL

FLAVORS

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Private Delivery of Public Functions: A New Model?

• What Are The Implications for Attracting Private Investment?

• What Efficiencies of Cost Optimization Can Be Achieved?

• Can This Business Model Translate Beyond the Cotton Belt?

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How Do We Get There?

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www.nctcog.org/ifi

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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Perryman Spring 2009 FP10 as AmendedClower Moderate Mar 2010 Perryman March 2010

Mil

lion

s

Finance Department

But DART Sales Taxes were Projected Up

$0

$250

$500

$750

$1,000

$1,250

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Millions

FY09 FP As Amended / FY10 FP

As Approved

FY09 FP As

Approved

March 2010

Projections

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Additional Downward Revision: $2.7 Billion

Finance Department

Therefore, in 2010 Sales Taxes were Reset Downward, leaving the Cotton Belt unfunded