Why Money Matters2013 Transit Initiatives and Communities ConferenceAtlanta, GAJune 23, 2013 1

“A little bit added to what you’ve 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 today’s 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

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 incentives3

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

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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

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

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Business plan structure = successful project structure

Successful Project Structure

More Solutions7

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• More Adjusting• More Adjusting

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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

Friday, June 7, 2013

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CATS “Advancing the Vision”

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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 what’s needed

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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

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

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Navy YardsLocation 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

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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

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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 Denver’s historic, downtown train station

• Economic development within the CBD

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Growing interest in Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA)• Originally authorized under the Transportation

Equity Act for the 21st 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

Eagle P3 Highlights/Lessons Learned

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Lessons Learned: Deal StructureChallenge MitigationPublic 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

Lessons Learned: FinancingChallenge MitigationTiming of Financial Close

Cost/Benefit Analysis• Availability/Affordability of Financing• Draft vs. Final ROW, IGAs, 3rd Party

Agreements2010 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 appropriationLegal Entity Structure Interface between D/B and O&M

• Protection of PAB holders• Efficiency in day-to-day operations

Affordability $305 million savings23

Lessons Learned: Day-to-Day OperationsChallenge MitigationChange 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

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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

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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” doesn’t seem like our “thing” – but it needs to be

• Develop and spend revenues aimed at resilience• Maximize innovation planning aimed at opportunity 26