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Appendix 4 Transportation Innovative Financing

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Jack Faucett Associates, Inc. Final Report Appendix 4 Transportation Innovative Financing March 1997 Innovative financing options for infrastructure investment have been developed over the past several decades, culminating in recent legislation in ISTEA and the National Highway System that provide for leveraging funds available to states from Federal sources. This innovation has been summarized by Jane F. Garvey, U.S. FHWA Deputy Administrator. Ample background material on these developments are provided in an available package for use in instructive courses now offered by FHWA.2 Principal contacts for further information are reproduced from the package and referenced material in the package are also cited. Additional background material disseminated back in 1 994 by the Director of the Office of Environment and Planning, FHWA, and the Director of the Of lice of Planning, ETA, provides details on innovative financing initiatives (memorandum dated May 3 1, 1 9941. Summaries of financing options are attached to that memorandum. The thrust ofthe gradual evolution of this development is to utilize "credit" leverage in a capitalistic economy which provides mechanisms for states to draw upon private capital enticed by opportunities for investment in infrastructure. This permits the states to evaluate the soundness ofthe investments to guarantee a return to private investors at reasonable interest rates, or to offer participation to private partners with realistic opportunities for returns to capital. The efficiency in promoting investment in infrastructure allows holders of accumulated capital to evaluate decisions by local officials and their electorate to construct new infrastructure to implement Lithe Role of Innovative Finance," Public Roads, Spring 1996. innovative Finance and Statewide Financial Planning". NCHRP Multimodal Transportation A4-1 Transportation Innovatwn Financing Project 8-32~5)

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Jack Faucett Associates, Inc. Final Report March 1997 - economic growth on a faster time schedule. This permits both the public and the investors to pu capital to work which will benefit both. The users of the infrastructure are committed to pay off the costs over a long period of time during which they are reaping the benefits of implementing short and long-term transportation improvement projects. Most of the progress realized so far has involved Me public transportation infrastructure planning arid development. More progress is emanating hom multimodal transportation planning which will involve similar financial planning and cooperation between privately operated modal infrastructure and publicly operated infrastructure. NCHRP Multimodal Transportation A4-2 Project8-32~5) Transportation Innovation Financing

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INNOVATIVE FINANCE COURSE CONTACTS Inky Dwy" - FHWA - Poligy Office (202) 366 8560 (202) 366 1297 (hatch Mix IDman - FI1WA - Office of Fiscal Services (202) 366 2SS3 (202) 366 7493 Match * Wrote OHS Guidance on Advance Construction, Flexible Match, Bonds and Other Debt Pent Financing. David Price - FHWA - Office of Engineering - Federal-aid Program Branch (202) 36~0450 (202) 366 9981 (Fax) * Wrote OHS Guidance on Sec. 129 loans, Toll facilities under Section 129 . Dane Ismart - IOWA - Office of Environment and Planning- Intennodal and Statewide planning (202) 360071 (202) 366 7660 (Faxl 3

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REFERENCFS Innovative Finance Government Finance Group, Inc. Inn onetime Highway France. Paruci- pants Notebook prepared for Federal Highway Admins~aiion, February 1995. State I:nfras~z~cture Banks: A Primer. Washington, D.C.: U.S. Depart- ment of Transportation, November 1995. Rebuilding America: Partnership Or Investment. Washington, D.C.: Federal Highway Admins~ahon, December 1994. Federal, State, and Local Transportation Financial Stahs~acs. Washing- ton, D.C.: Bureau of Transportation Stabsucs. January 1995. Innovative Finance Handbook. Washington, D.C.: Federal Transit Ad- miIi~s~a~aon, 1995. Bond Financing and Transportation Infrastructure: Exploring Roles Concepts and Roles. Searching for Solutions Policy Discussion Services No. 9. Feburary 1994. Summary of IOWA Symposium on Overcoming Barriers to Public- Pr~ate Partnerships. Searching for Solutions Policy Discussion Services No. ~ 1. September 1994. Life Cycle Cost Analysis. Searching for Solutions Policy Discussion Serices No. 12. November 1994. Symposium on Bonding and Innovative Finance. Searching for Solu- ~aons Policy Discussion Services No. 15. June 1995. Financial Sources Federal Transit Adm~s~abon. Cross-Border Leasing Guidelines. Cir- cular UMTA C 7020.1, Urban Mass Transportation Adm~rus~a~aon, 4

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April 26, 1990. General Accounting Office. Transportat 'on Infrastructure: Urban Transportation Planning Can Better Address Modal Trade-offs. GAO/ RCED-92-112. Washington, D.C., GAO, April 1992. Government Finance Research Center. Federal High way Administra- tion Sem~narinnovative High way Financing: Techn~'calMethodolog~es. Student Notebook prepared for the Office of Environment and Planning, FHWA, August 16, 1993. Howard, J.; Rivkin, G.; Brecher, S.; Heder, L. Strategies to Implement Beneft-Sharing for Fixed Transit Facil 'ties. National Cooperative Tran- sit Research & Development Program. Report 12. Washington, D.C.: TRB, July 1985. Public Financial Management, Inc.; KPMG Peat Mar~rick. Introduction to Public Finance and Public Transit. Report No. FTA-VA-26-0002-93-1. Washington, D.C.: Federal Transit Administra- iion, January 1993. Partner, J.; How to Evaluate Opportunities for Cross-Border Leasing and Certification of Participation in Public ':lransportation. Federal Transit Adm~s~a~cion. NovemberI993. Highway Statistics. Washington, D. C.: Federal Highway Adm~stra- hon. Annually. Transportation Financing Intermodal Surface Transportation Efficiency Act Flexible Funding for Transporta- hon Investments. Federal Transit Admins~aiion. March 1995. Howard, T.; Highway Bonds: An Emerging Option for Increasing High way Financing. Public Roads, Spring 1995. Financing Federal-A~'d Highways. Washington, D.C.: Federal Highway Adm~s~a~aon, May 1992. Transportation Guide for Indian GoveI7lment. Seattle, WA: Northwest 5

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Technology Transfer Center, April 1995. Partnership for investment Symposium Summary. Bonds and innova- tive Finanong Washington, D.C.: Federal Highway Adm~ns~aiion, May 1995. Reno, A.T. et al. State Tr~npo~ation Finance Within the Context of Energy Constraints. NCHRP Report 231. April 1981. Cambridge Systematics, Inc. Financial Planning In ISTEA. Oakland, CA: Prepared for Federal Highway Adm~ns~ahon. November 1995. Booz-Allen and Hamilton, Inc. Transit Capital Cost Price Index Study. Washington, D.C.: Federal Transit Adm~ns~abon, July 1995. Rice Center. Transportation Revenue Forecasting Mu de. Final Report. Report No. UMTA-TX-06-0046-8 7-1. Washington, D.C.: Urban Mass Transportation Adm~s~anon, June 1987. Technology Shanug Program. Characteristics of Urban Transportation Systems. Report No. DOT-T-93-07. Washington, D.C.: U.S. Depart- ment of Transportation, September 1992. EBA, Inc. Referenda for Local Option Sales Taxes for Highway Financing Washington, D.C.: Federal Highway Admins~ation, Jan- uary 1995. Markle, T. Financially Constrained Transportation Planning and Pro- gr2mming: Recent Metropolitan Planning Organization E~reience. Washington, D.C.: National Association of Regional Councils. Novem- ber 1995. Legislative 23 U.S.C. section 134. Metropolitan Transportation Planning. 23 U.S.C. section 135. Statewide Transportation Planning. 6

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Air Quality; Transportation Plans, Programs, and Projects; Federal or State Implementation Plan Conformity Rule. Federal Register. Vol. 58, November 24, 1993, pp. 62187-62253. Environmental Protection Agency. Transportation/Air Quality Plan- ning Guidelines. EPA Document No.420/R-92-001. Washington, D.C.: EPA, July 1992. Federal Transit Act. section 8(h)(2)(B). Transportation Improvement Program Financial Plan Requirements. Federal Highway Administration. Intermodal Surface Transportation Eff~ciencyAct of 1991. Summary Brochure. Federal Highway Administration. Financing Federal-Aid Highways. Report No. FHWA-PL-92-016. Washington, D.C.: U.S. Department of Transportation, May 1992. Federal Transit Act. section 8 (g)(2)(B). Long Range Financial Plan Requirements. Federal Highway Administration. Transportation Programs and Provi- sions of the Clear AirActAmendments of 1990. Summary Brochure. Federal Transit Act. section 3(i)(1)(C). New Starts Criteria. Management and Monitoring Systems. Interim Final Rule. Federal Register. Vol 58, December 1, 1993, pp. 63442-63485. Statewide Planning; Metropolitan Planning. Final Rule. Federal Regis- ter. Vol 58, October 28, 1993, pp. 58040-58079. Financial Plann~ng~n ISTEA' Rule' and Preamble. The National Highway System Designation Act of 199~. 7

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Financial Capacity Analysis Federal Transit Ad~r~s~ai~on. Urban Mass Transportation Financed CapacifyPoIicy. Circular UMTA C 7008.1, Urban Mass Transportation Adrrun~s~anon, March 30, 1987. FIeishman, D.; Connors, M.; Pearson, I.; White, G. Financial Planning Guide for Transit. Washington, D.C.: Urban Mass Transportation Ad- ni~iis~aiion, April 1989. National League of Cities. Transit Financial Planning. Washington, D.C.: National League of Cides, 1989. Federal Transit Adm~n~s~adon. Trar~sitF'n~cing Workshop Course A: Financing for Transit Agencies. Prepared by KMPG Peat Marwick and Public Financial Management, Incorporated, undated. Federal Transit Adm~rus~abon. Transit Financing Workshop Course B: FinancialAnalysis for Major Capital Investments. Prepared by KMPG Peat Marwick and Public Financial Management, Incorporated, un- dated. 8

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Mel U.S. Depoflment of Transportation Fedem' Highway Admin~straffon ~emorondun~ INFORMATION: Financial Planning - Date. MY 3 ~ \994 Technical Ass istance Director, Office of Environment and Reply to Planning, FHWA Ann of HEP-12 Director, Office of Planning, FTA Regional Federal Highway Administrators Federal.Lands Highway Program Administrators Regional Federal Transit Administrators . . . ~ Background . . . The Statewide and Metropolitan planning regulations (23 CFR Part 450 and 49 CFR Part 613), recently promulgated by The Federal Highway Administration (FHWA) and the Federal Transit Administration (FTA)-, contain substantive requirements regarding financial planning. . . Financial planning is, essentially, the determination and balancing of all relevant sources of anticipated revenue and expenses over a set period of time with provision for use of debt to finance certain expenses and for assignment-of revenue to service such debt. When applying the regulations, relevant revenues include both public and private sources, relevant expenses include capital, maintenance and operations. The period of time for this determination is set by the period of the transportation plan and transportation improvement program for the metropolitan areas. The preamble to these regulations indicated that technical assistance in the area of financial planning would be available (Federal Register/ Vol. 58, No. 207 pg 58058, 3rd column). Assistance Available The attached summary provides the status of technical assistance available at the current time. The reports/ software programs J courses, etc., mentioned in the summary can assist the States and Mars in the development of financial plans and information. As the products available for such assistance are further developed, upd~.ted.summaries will be furnished to.you. We encourage the States and MPOs to use this assistance and to take rather actions that will provide timely and appropriate resources to ensure that financial plans for metropolitan areas 9

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and f inancial information for statewide planning are developed in a timed y manner. Po ints of Contac . . ~ P lease note that, in the summary, an FHWA or FTA contact is noted for each report, software program, etc. These contacts should be car-led to obtain specif ic products . General questions concerning technical assistance should be c3 irected to Mr . ~ Martin Weiss (202-366-S010) for FHWA or to Mr. Dwayne Weeks (202-366-0096) for FTA, Office .of Planning or to Mr.. Ed Thomas (202-366-0264) for FTA, Of f ice of Technical Ass istance . . . Financial planning questions of a policy nature related to the appl ication Of the noted j oint regulations should continue to be directed~ to Mr. Dee Spann (202-366-4086) for FHWA, Statewide Planning Division or to Mr. Dean Smeins . (202-366-9227) for FHWA, Metropolitan Planning Division or to Mr. Paul Verchinski, (202-366-6385) for FTA, Office of Planning.' Kevin E. Heanue Attachment /~~,V /Samuel" lit. Zing erman - 10 -

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Technical Assistance - Financial Flaring Summary May 1994 Recent or ongoing reports/research/seminars Bond Financing & Credit Enhancement A seminar sponsored by the Secretary of Transportation, the Administrator of the Federal Highway Administration and the Administrator of the Federal Transit Administration was held on September 28' 1993 entitled I' Bond Financing and Transportation Infrastructure: Exploring Concepts and Roles." The seminar specif ically focused on both traditional use of bond f inancing and creative approaches involving credit enhancement, revolving funds, and tax law changes. The seminar highlights were published in report form. The contact point for this report is Tom Howard, 202-366-9208. Flexible Funding Reports entitled, "Flexible Funding Opportunities for Transit" describe the various sources of flexible funding made available by the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA). The report lists the amount of funding available by State and funding category which may be used for public transit, including, Congestion Mitigation and Air Quality (CMAQJ, Surface Transportation Program (STP), and National Highway System (NHS), funding sources. The report has been prepared annually since 1992. The 1994 version details several examples of the use of flexible funding for transit projects. The contact point for these reports is Sean.Libberton, 202-366-00SS. Local Option Taxes 1. A contract and report entitled, "Impact of Local Option Highway Taxes on State Highway Programming and Aid" was also completed in late 1993. The contractor was EBA, Inc. The report contains a twelve page executive summary and detailed documentation on the subject in six States (Arizona, California, Florida, Georgia, Alabama and Missouri). The following statement is contained in the executive summary of the report: tt , . The principal objective of this study is to test the hypothesis that implementing local option taxes for highway improvements leads, directly or indirectly, to a decrease in federal and state aid for highway improYements.~.our general 11

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cone usion is that state ~nd fe p nse to adoptior of l cal p iro1 taid dl~ not change The contact point for this report is Bill Marley in FHWA, 202 In the rirst eaS~ ~t the contrac% over one hundred referenda in referenda. The cont ccess ul or uns 202-366-5009. act point for this contr t i uccessfu Publ ic Private Agreements l. o tr ct n re O-e e " Fe o s eieie ~ ~pert ce 1n overco i g . e e, n Loc sl ive/A4 in :tr t ve ~r iers to e 199 . Y r~jec ~s C e e in e er ceor rice b u he o re ~' 2. A seminar was held Key ssues in Pu t , 991, en ' Develpment .. ThliC~P nerships for tithed EXploring sem ~ an opportunity for partlCipants representing a wide range of iscip ines an public-private variety of O p licy issues re at ips.~ A number of issues about the possibilities raised, showi consequence e The seminar h contact pOint~lon. ~: tnterniationa Bri ge, Tunne1 and Tur pik ' 1 roe an ub - Association, an FHWA p kc private partnership provisions of 12

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the IS1'EA and to discuss the implementation of these provisions from the standpoint of the State Highway Departments and the State toll authorities. The contact point for this booklet is Ralph Erickson, 202-366-9235. 4. A brochure is available entitled, "Building a Better Partnership: Public-Private Cost-Sharing and Toll Financing Provisions of the ISTEA." This brochure was intended to highlight the pubic-private and cost-sharing opportunities provided by ISTEA. It explains the public/private partnership provisions of the ISTEA and urges State and local transportation and budget officials to investigate opportunities for implementing these provisions for their own jurisdictions. The contact point for this brochure is Ralph Erickson, 202-366-9235. 5. A publication is available entitled, "Guidance for State Implementation of ISTEA Boll Provisions in Creating Public- Private Partnerships.' This publication is a handbook on useful features in State legislation or ordinances to facilitate implementation of programs using public-private and public-public- partnerships. FHWA is currently distributing this document to the States, FHWA field offices, and other interested parties (this publication and the previously noted brochure were developed under the contract with Price Waterhouse mentioned . . previously). The contact point for this publication is Ralph Erickson, 202-366-9235. 6. A contract entitled, "Transportation Investments and Economic Competitiveness: The rule of Public-Private Partnerships" is on- going. The contractor is the National Governor's Association. One of the tasks of the contract will result in a workshop of state transportation policymakers and a report on the elements of a proposed policy framework for such.partnerships. The contact point for this contract is Gerry Williams, 202-366-1203. 7. On December 6, 1993, the Federal Highway Administration, under contract with Apogee Research, Inc., held a symposium in Washington, D.C., to discuss ways of overcoming barriers to public-private partnerships in highway.transportation. A report on the symposium, which reviews reasons why the new .fiexibiJity for developing toll facilities with private sector participation provided by the ISTEA remains underutilized, will be made available within the next few months. The contact point for the contract and publication is Ralph Erickson, 202-366-9235. Public Transportation Financing 1. A report entitled, "Introduction to Public Finance and Public Transportations provides a comprehensive description of the elements of public finance, particularly as they relate to public transit issues. The report includes an overview of the public transit finance market, economics of the municipal bond market, various transit financing techniques, and cost reduction 13

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techniques' including joint development and lease options. The contact point for this report is Ed Thomas, 202-366-0264. 2. A report entitled, "Estimation of Operating and Maintenance Costs for Transit Systems" provides companion document for FTA guidance entitled, "Procedures and Technical Methods for Transit Project Planning". The report includes operating experience of various transit operators that submit Section 15 reporting data and the detailed budgets of several representative transit systems with both bus and rail modes. The report is intended to show best practices which may be referenced for reasonableness checks of operating and maintenance cost estimates of planned transit systems or extensions. The contact point for this report As Ed Thomas, 202-366-0264. Training Courses available to State local and other agencies 1. A course called, "Innovative Highway Financing - Overview", is available through the National Highway Institute. This is a one day course which discusses five types of innovative highway financing: Public/Private agreements, fees, special districts, innovative toll projects and local option taxes. This course is taught by the FHWA. The course became available for presentation in 1991 and has been presented many times. The contact for this course is Martin Weiss, 202-366-5010. 2. A course called, "Innovative Highway Financing and Elements of Financial Planning: Technical Methodologies", is available through the National Highway Institute. This is a two day course which discusses the same types of financing as the previous course, but does so in more detail. In addition, the course incorporates computer workshops which utilize public domain software related to special districts, impact fees, toll rates and revenue and expenditure forecasts. This course is taught by a contractor with assistance from the FHWA. The contractor is the Government Finance Research Center of the Government Finance Officers Association. The course became available for presentation in 1993 and has been presented a number of times The contact for this course is Bill Marley, 202-366-5009. 3. A course called, "Financial Planning for MPOs", will be available through the National Transit Institute. Course development is being carried out under contract to Science Application International Corporation (SAIC). SAIC will also be teaching the course. The pilot for this course is expected to be given by late summer of 1994 or shortly thereafter. The contact point for this course is Ed Thomas, 202-366-0264. 14

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Software (public domain)_available to State local and other agencies 1. A program is available called, "DISTCALC", which is essentially a compiled Lotus spread sheet with pull down menu The program is based on a simplified planning situation and is useful for understanding how to accomplish a sketch plan level computation of assessments (based on value, front footage or leasable space) required to support the expenses of an assessment district (notably the debt service required for issuance of bonds to pay-for highway or transit improvements). The program is taught as a part of the course "Innovative Highway Financing and Elements of Financial Planning: Technical Methodologies". As with the two pieces of software described in the following two paragraphs! persons experienced with pull down menus and having some familiarity with the subject matter will probably be able to use the program without special instruction. A portion of the student manual for the course discussed previously is the equivalent of a user's guide for this program. The contact point for this software is Bill Marley 202 366-5009. 2. A program is available called, "IMPCALC", which is similar to the preceding-program but deals with the computation of impact fees required to fund added capacity on a simplified roadway network. The contact point for this software is Bill Marley 202- 366-5009. 3. A program is available called, "TOLLCALC", which is similar to the preceding program but deals with the computation of toll rates required to support project operation. The contact point for this software is Bill Marley 202-366-5009. 4. A program is available called, "THRIFT (Transit and Highway Revenue and Improvement Forecasting Templates)", which is essentially a DBASE spread sheet with specialized compilation. This program is useful for a sketch plan level of computing future highway and transit revenues and expenses based on the underlying policy variables (taxation rate, population, etc.). This program is more detailed than the preceding three; however, an extensive user's manual is available. Persons with extensive experience on DBASE type application programs and with extensive knowledge of the subject matter will probably be able to use the program without special instruction. The contact point for this software is Bill Marley 202-366-5009. 5. A program is available called, "FINANCE PLAN", is now under development as essentially a LOTUS spreadsheet with specialized compilation. This program may eventually be useful for tracking transit assets, revenues and expenditures. Once development of this software is completed, persons with experience using LOTUS and with extensive knowledge of the subject matter would probably be able to use the program without special instruction. The contact point for this software is Ed Thomas, 202-366-0264. 15

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Other ~ on opinions of State a y, a videotape with , local and private sector officials and other kind is mat products. The cant Stained to sup art t 202~366-500s. for these materials i5hBeipreceding ul i n Add point for this ~11 en 16