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ST9904-PS060101REFERENCE ITEM 9.1 --) R 1Z( A JOINT PROPOSAL TO TEXAS DEPARTMENT OF TRANSPORTATION BY NORTH TEXAS TOLLWAY AUTHORITY, COLLIN COUNTY, AND THE CITIES OF ALLEN, FRISCO, MCKINNEY, AND PLANO For Financing, Constructing and Operating State Highway 121 From U.S. `Highway 75 on the East to Dallas North Tollway on the West, Including the Interchanges at U.S. 75 and Dallas North Tollway January_, 2006 Note: To provide for the stakeholders' review a more accurate version of the document to be submitted to TxDOT, this form references its prior approval by the NTTA, the County, the Participating Cities, and the RTC, even though some or all of those approvals may yet to be obtained. SH 121 CC JOINT PROPOSAL 01/30/06 A JOINT PROPOSAL TO TEXAS DEPARTMENT OF TRANSPORTATION BY NORTH TEXAS TOLLWAY AUTHORITY, COLLIN COUNTY, AND THE CITIES OF ALLEN, FRISCO, MCKINNEY, AND PLANO TABLE OF CONTENTS INTRODUCTION............................................................................................ ..............................1 UniqueBenefits to Meet Unique Challenges ........................................... ..............................1 Summaryof Terms .................................................................................... ..............................1 BackgroundInformation and Need ......................................................... ..............................3 ProjectDescription .................................................................................... ..............................3 ImportantClarifications ........................................................................... ..............................4 The General Goals of the Parties Submitting this Joint Proposal ......... ..............................5 Summary of this Joint Proposal's Advantages to TxDOT and the Citizens of Texas ....... 5 Submissionand Nature of this Joint Proposal ........................................ ..............................9 JOINTPROPOSAL ......................................................................................... ..............................9 PART 1 The Requests to TxDOT .......................................................... ..............................9 PART 2 The NTTA's Obligations and Rights, Generally .................. .............................10 PART 3 The Project's Financing ......................................................... .............................11 PART 4 The Project's Construction .................................................... .............................12 PART5 The Project's Operations ....................................................... .............................12 PART 6 Revenue Sharing; The Project Development Payment ....... .............................14 PART7 Effect on Other Projects ......................................................... .............................16 Attachment 1— The NTTA's Assumed Financial Obligations Attachment 2 — Analysis of Project Development Payments Attachment 3 — NTTA's Role Meeting Other Regional Needs DRAFT SH 121 CC JOINT PROPOSAL - TABLE OF CONTENTS A JOINT PROPOSAL TO TEXAS DEPARTMENT OF TRANSPORTATION BY NORTH TEXAS TOLLWAY AUTHORITY, COLLIN COUNTY, AND THE CITIES OF ALLEN, FRISCO, MCKINNEY, AND PLANO INTRODUCTION Unique Benefits to Meet Unique Challenges Utilizing the expertise and credit of the North Texas Tollway Authority (the "NTTA ") to develop State Highway 121 in Collin County ( "SH 121) as a tollway (the "Project ") will substantially improve regional mobility while providing unique benefits to TxDOT, the other project stakeholders and the citizens of North Texas. With the region's $55 billion transportation funding deficit and the ever - increasing inadequacy of gas tax revenues to meet mobility challenges, the Texas Department of Transportation ( "TxDOT ") and the Regional Transportation Council (the "RTC ") have recognized the critical role which tollways can play in funding the development of both tolled and non - tolled facilities. The NTTA, along with the region it serves, acknowledges that role. As one of the most financially feasible tollway projects in the nation, the Project provides an exceptional opportunity to capture an ongoing funding source for the region's future transportation needs while also assuring reasonable levels of toll rates for its citizens. Undertaken in accordance with this Joint Proposal, the Project will provide an additional $3 to 5 billion dollars in funding over the next 50 years (or approximately $1 billion in net present value) for either tolled or non - tolled transportation assets in the region. Further, development of the Project by a regional political subdivision maintains future flexibility to respond to the region's dynamic mobility needs and places this valuable TxDOT asset with a proven project partner, the NTTA. Summary of Terms This Joint Proposal of the NTTA, Collin County (the "County") and the Cities of Allen, Frisco, McKinney, and Plano (the "Participating Cities ") can be summarized as follows: ♦ TxDOT and the NTTA will enter into a project development agreement (the "Project Development Agreement ") obligating the NTTA to (i) design, finance, construct, operate, and maintain the Project for a term of 50 years after opening, (ii) provide for the maintenance of all frontage roads of the DRAFT SH 121 CC JOINT PROPOSAL - PAGE 1 Project, and (iii) pay to TxDOT from Project revenues project development payments (the "Project Development Payments "). The NTTA will issue Dallas North Tollway System Joint Revenue Bonds to fund all of the remaining construction of the Project (see Project Description herein), with a 2010 opening date. The NTTA will assume all construction risk, operating risk, ramp -up and traffic risk, and responsibility for completing environmental clearance. All Project revenues over and above Project Costs (defined to be the costs of designing, financing, constructing, operating and maintaining the mainlanes and the frontage roads, including Project Coverage of 0.15x Project debt service) will be paid to TxDOT in the form of 50 annual Project Development Payments; essentially, the NTTA caps its share of Project revenues at an amount required to cover its costs, thereby maximizing TxDOT's return on this asset. The Project Development Payments will have two components: (i) the "Guaranteed Base Payment" will be a set dollar amount guaranteed to be paid to TxDOT annually and (ii) the "Variable Payment" will be paid based upon audited traffic volume and a per - vehicle charge agreed upon between TxDOT and the NTTA. The effect of these two component payments is that TxDOT has both a fully guaranteed return on the Project and the exclusive right to all of the Project's "upside" — an arrangement unavailable to TxDOT under any other delivery method. The Project Development Payments to TxDOT are expected to aggregate to over $1 billion in today's dollars or more than $5 billion over the 50 -year term of the Project Development Agreement. ♦ The Guaranteed Base Payment will be supported by (i) the obligation of the NTTA to set sufficient tolls on the Project, (ii) the joint revenues of the "DNT System" (the NTTA's system of turnpikes described below), and (iii) a covenant to raise DNT System toll rates to ensure the availability of revenues to pay such Guaranteed Base Payment. Those guaranteed payments total more than $500 million in net present value' or more than $2.7 billion over the 50 -year term. ♦ As further evidence of the region's support for this Joint Proposal, the Participating Cities commit to maintain the Project's frontage roads to TxDOT's standards, including all major repair and rehabilitation, in return for an annual $7,000 per- lane -mile allocation from Project revenues, which adjusts at a set rate; again, this further enhances TxDOT's return on the Project for the reasons described below. • The NTTA will set the initial and future toll and growth rates for the Project at levels sufficient to fully meet its obligations under the Project Development Agreement, including its payment of all Project Costs and the Guaranteed Base Payment to TxDOT, and its bond documents. 1 For purposes of this Joint Proposal, "net present value" or "NPV" is defined as the value in today's dollars, calculated at 5% per year to January 2006. DRAFT SH 121 CC JOINT PROPOSAL — PAGE 2 Background Information and Need Collin County is the second fastest - growing county in the State of Texas and the thirteenth fastest - growing county in the United States, contains four of the State's fastest growing cities, and includes extensive development of residential and commercial properties within its smaller cities and towns as well as in its unincorporated territory. The increased vehicle traffic resulting from this population explosion already has reached crisis proportions on some highways, streets, and roads. Unaddressed, it will do nothing but get worse; gridlock will occur, and the negative economic impact could be devastating to the County, the Participating Cities, and the State. East and west directional traffic in the County is already at a critical stage. The traffic on the frontage roads on the north and south sides of the undeveloped right -of -way of the Project are severely overburdened. Because of a shortage of state funds, it is simply not realistic to expect that TxDOT will have the capital needed to fully develop SH 121 as a non - tolled facility in the foreseeable future, much less to meet the expanding needs elsewhere caused by the continuing population growth in the County. In the face of this reality, the Board of Directors of the NTTA, the Commissioners Court of the County, and the City Councils of the Participating Cities have jointly [and unanimously] resolved to request TxDOT to permit the NTTA to design, construct, maintain, and operate the Project. Project Description SH 121, between the limits of the Dallas North Tollway (the "DNT') on the west and U.S. 75 on the east, is an existing east -west facility in Collin County that is approximately 12.8 miles in length. This portion of SH 121 is currently under reconstruction by TxDOT, which is updating the existing two -lane facility by constructing continuous three -lane frontage roads in each direction, while preserving a median in which mainlanes later can be built. In addition to the new frontage road construction, TxDOT is advancing the construction of new mainlanes between the DNT to a point east of Ohio Drive. This construction, which includes a new interchange with Preston Road, is scheduled to be completed in 2007. A section of new mainlanes, including a new grade separation bridge, has been built and opened to traffic over Custer Road for traffic control purposes. Also, as part of the DNT /SH 121 interchange construction, the SH 121 mainlane crossing at the DNT was opened to traffic in April 2004 as a joint design/construction effort between the TxDOT and the NTTA. In preparation for future construction, TxDOT also has various sections of the corridor under advanced planning and design development, such as the interchange with DRAFT SH 121 CC JOINT PROPOSAL - PAGE 3 U.S. 75, the mainlanes over Alma Road and Hillcrest Drive, and the Ohio Drive underpass. TxDOT also is accomplishing environmental permitting by (i) pursuing an environmental reevaluation of the facility as a toll road and (ii) obtaining clearance for the eight planned direct connection ramps at the DNT interchange with SH 121. For the purposes of this Joint Proposal, the Project consists of both the mainlanes and frontage roads of this entire 12.8 mile facility, including full interchanges at U.S. 75 and the DNT. Important Clarifications It is important to emphasize that this Joint Proposal does not contemplate the conversion of any existing operating main lanes of a state highway to a tollway. It does, however, contemplate the use of the existing portions of SH 121 that are currently under construction and a portion of undeveloped state -owned right -of -way that could sit unused for some period of time because of lack of funding or other reasons. The delivery of the Project pursuant to this Joint Proposal can commence immediately upon TxDOT's approval of this document, and can be quickly advanced using time - tested methods with a proven project partner, the NTTA. It also must be noted that the NTTA recognizes the need for delivery of certain projects pursuant to comprehensive development agreements authorized under Chapter 223 of the Transportation Code ( "CDAs "). In fact, with the urging of the RTC, the NTTA is successfully formulating with TxDOT a protocol by which the NTTA can support TxDOT's CDA delivery of projects within the NTTA's service area. This Joint Proposal advocates only that its proposed delivery method for this s ecific rp oject offers numerous benefits over the delivery of that project by M other means, including by a CDA. Official traffic projections used in the preparation of this Joint Proposal are based upon the latest demographic forecasts available from the North Texas Council of Governments, the region's metropolitan planning organization ( "NCTCOG "). The parties believe, and regional experience indicates, that the actual levels of traffic will be higher. The final traffic and revenue study produced in connection with the financing of the Project is expected to show those higher levels of traffic and revenue based upon updated and adjusted demographic information.2 Because of the unique structure of this Joint Proposal, these increased revenues will flow entirely to TxDOT in annual Project Development Payments and be available to meet other mobility needs in the County and neighboring areas. 2 Although the ultimate bond financing for the Project will be based on then- official demographics — which will form the basis of the initial toll rate calculation — the Guaranteed Base Payments and expected Variable Payments are based on the higher demographic growth expectation. DRAFT SH 121 CC JOINT PROPOSAL — PAGE 4 The General Goals of the Parties Submitting this Joint Proposal The County and the Participating Cities desire that tolls on the Project be set at levels comparable to those being paid by North Texas toll payers and sufficient to (i) fund, operate, and maintain the Project, (ii) meet all requirements of the Trust Agreement and other documents securing the NTTA's outstanding bonds and other obligations, (iii) cover all Project Costs, and (iv) provide the "Guaranteed Base Payment" to TxDOT. This Joint Proposal is designed to address the region's future transportation needs by providing TxDOT significant financial resources to apply to the development of either tolled or non - tolled transportation facilities within the region. It is expected that the facilities funded through the Project's revenues to increase regional mobility and enhance air quality will be selected jointly by the RTC, TxDOT, the County, and the Participating Cities pursuant to the terms of a separate agreement between those parties. To ensure that the Project will be financed, constructed, and operated at the lowest possible cost, the NTTA will develop the Project as part of its "DNT System" — a system of turnpike projects composed of the DNT, the President George Bush Turnpike, the Addison Airport Toll Tunnel, and the Mountain Creek Lake Bridge. The NTTA's use of DNT System financing and operation provides demonstrably material cost savings and other benefits to assist the delivery of this crucial transportation facility upon terms acceptable to all stakeholders. Summary of this Joint Proposal's Advantages to TxDOT and the Citizens of Texas This Joint Proposal will demonstrate that its proposed delivery method has at least seven (7) substantial advantages over the delivery of the Project by other methods: 1. This Joint Proposal provides a substantial revenue stream and return to TxDOT • TxDOT and the RTC have articulated a two -prong test by which this Joint Proposal will be evaluated. • The first prong is whether this delivery method can be expected to provide a return that is roughly comparable to a CDA delivery. • TxDOT will receive $3 -5 billion in transportation funding from this Project over the next 50 years, with approximately $2.7 billion of that amount guaranteed both by the Project's revenues and, if needed, by the DNT System. • Further, as indicated in Part 1 below, this Joint Proposal relieves TxDOT of over $1.5 billion of construction, operation, maintenance, and major maintenance costs relating to the Project. DRAFT SH 121 CC JOINT PROPOSAL - PAGE 5 • TxDOT's financial return on this valuable asset is comparable to or greater than what it could reasonably expect to receive through delivering the Project as a CDA.3 2. This Joint Proposal does not detract from the NTTA's ability to fully support TxDOT and the RTC in meeting the area's mobility needs, including its delivery of the "Regional Five" • The second prong of TxDOT's and the RTC's test is that the proposed delivery method does not cause the NTTA to be unable to partner with TxDOT to meet other mobility needs. • In fact, the NTTA has never been more ready and willing to help shoulder TxDOT's mobility demands. • The NTTA is committed to aggressively improving regional mobility and has recently reviewed and reiterated its intent to fund the Southwest Parkway (SH 121 Tarrant County), the Trinity Parkway, the Eastern Extension of the President George Bush Turnpike, the Lewisville Lake Bridge, and the Project — sometimes identified as the "Regional Five." • As indicated in Part 7 below, this Joint Proposal does not in any way decrease the DNT System funding available to the remaining four projects included in the Regional Five. • Further, the NTTA fully supports TxDOT's and the RTC's view that toll revenues must play a crucial role in accomplishing transportation solutions throughout North Texas. The NTTA's Board of Directors has just completed a toll -rate study that modifies its historical position regarding toll rates on its facilities. The NTTA's new toll policy is expected to produce an additional net present value of $2 billion in transportation funding for the region, in addition to the anticipated funding needs for the Regional Five. • The cumulative impact of these developments is dramatic. Adding together the NTTA's construction funding for the Project (approximately $370 million), the Project Development Payments to TxDOT (approximately $1 billion in estimated net present value), the NTTA's project revenue bond financing for completion of the Southwest Parkway, the Trinity Parkway, the Eastern Extension, and the Lewisville Lake Bridge (approximately $1.5 billion), and the DNT System funding anticipated and available for additional, yet -to -be identified regional projects (approximately $2 billion), the NTTA is poised to provide approximately $55 billion in new funding for transportation in North Texas. 3 While the NTTA fully supports TxDOT's efforts to model a CDA delivery of the Project for comparison purposes, the result is still just that — a model. This Joint Proposal constitutes the commitment of the NTTA to deliver the Project on these terms, which should be considered when comparing it to a forecast of what might be available from another party using another method. DRAFT SH 121 CC JOINT PROPOSAL — PAGE 6 3. This Joint Proposal places no cap on TxDOT's financial return • A unique feature of this Joint Proposal is that the return of the party delivering the Project is fully capped, while TxDOT's return is not shared, split, or limited in any manner. • A CDA proposal for the Project is expected to incorporate an upfront payment and establish an acceptable internal rate of return for the developer. Revenues over and above the acceptable return will be shared under a "stepped" schedule; at lower revenue levels, the sharing might be 50150, with TxDOT taking an increased share if revenues are higher. • This Joint Proposal does not request a "shared" approach to revenues. As provided under Part 6 below, it is the NTTA's share — not Tx DOT's — that is capped, so TxDOT fully enjoys 100% of the Project's "upside." 4. This Joint Proposal results in all of the Project revenues being put back into area roadways • Whoever delivers the Project must be compensated for doing so; for example, a CDA developer will be compensated by receiving profit in some amount to be paid to its investors. • Under this Joint Proposal, the only "return" to the NTTA will be any Project Coverage it receives as part of Project Costs (0.15x Project debt service). • Because all of the NTTA's revenues are used to fund regional transportation projects, all Project revenue is put back into area roads, thus maximizing the number of dollars reinvested to advance regional mobility. • Consequently, as indicated in Part 6 below, all of this Project's revenue is either spent on this Project (for its debt service, operating expenses, or reserve maintenance forecasts), other TxDOT /local projects in the region (using the Project Development Payments to TxDOT), and, to a lesser degree, on other projects of the NTTA (through the use of the Project Coverage). 5. This Joint Proposal accomplishes a very significant return to TxDOT at a lower toll rate than can be expected from a CDA delivery — a toll rate that is comparable to the rest of the DNT System • As indicated in Part 6 below, the NTTA's sketch -level traffic and revenue forecasts are expected to use a $0.12 per mile toll rate growing at 1.5% per year, adjusted in 5 -year increments. Applying this toll structure to the region's experience with similar projects results in a very significant return to TxDOT, comparable to that of a CDA delivery. DRAFT SH 121 CC JOINT PROPOSAL - PAGE 7 • This compelling financial return results from (i) the NTTA's ' abilily to use DNT System financing and the operational economies of scale provided by its other connecting projects — which other project providers would be unable to do, (ii) the NTTA's willingness to cap its return on the Project to essentially the reimbursement of its costs — which other project providers would be unwilling to do, and (iii) the assumption by the Participating Cities of frontage road maintenance — which would not be available under a different delivery method. 6. This Joint Proposal reflects the strongly held preferences and desires of the Project stakeholders and has broad regional support • Responsiveness and flexibility to address North Texas' ever - changing mobility needs are enhanced by placing the Project with a public transportation authority strictly focused on and responsible for those challenges; for example, the region's ability to implement critical capacity improvements is unconstrained, unlike other delivery methods in which the developer obtains restrictions against competing facilities over a specified area. • At its January 2006 meeting, the Texas Transportation Commission indicated that the region's preference regarding the Project's delivery method would be given great weight. • This Joint Proposal is presented to TxDOT with the [unanimous] support of the governing bodies of the County, the Participating Cities, and the NTTA [, as well as the endorsement of the RTC]. • The method described in this Joint Proposal is what the region strongly desires for the Project. 7. This Joint Proposal provides significant project streamlining over any alternative delivery method, resulting in an earlier opening of the Project • As provided in Part 4 below, the Joint Proposal's delivery method provides TxDOT more certitude, more speed and less risk because it involves TxDOT working with an established partner — the NTTA — pursuant to an established delivery method that has resulted in millions of dollars of successful projects. • Delivery by the NTTA has none of the attendant risk of bid disputes, litigation, procedural delays, administrative costs and other potential "growing pains" which could accompany the newer CDA approach. • Based upon previous experience negotiating agreements between TxDOT and the NTTA, once this Joint Proposal is approved a complete agreement for the Project can be negotiated in 30 to 60 days; DRAFT SH 121 CC JOINT PROPOSAL - PAGE 8 a significantly longer period of time would be required for negotiations with a CDA developer.4 Submission and Nature of'this Joint Pronosal This Joint Proposal is respectfully submitted to TxDOT pursuant to resolutions [unanimously] adopted by the NTTA Board of Directors, the Commissioners Court of the County, and by each City Council of the Participating Cities [and with the approval of the RTC]. The purpose of this document is to outline the essential and basic terms of the arrangement and to gain TxDOT's preliminary consent, in anticipation of full documentation and TxDOT's final approval. This Joint Proposal is presented in seven Parts, largely in outline form: (i) The Requests to TxDOT, (ii) The NTTA's Obligations and Rights, Generally, (iii) The Project's Financing, (iv) The Project's Construction, (v) The Project's Operations, (vi) Revenue Sharing; The Project Development Payment; and (vii) Effect on Other Projects. JOINT PROPOSAL PART 1 THE REQUESTS TO TxDOT The NTTA, the County, and the Participating Cities request TxDOT to approve the following proposals: (1) That, in accordance with Sections 201.113 and 228.002 of the Texas Transportation Code,s TxDOT shall execute the Project Development Agreement with the NTTA pertaining to that portion of SH 121 from U.S. 75 on the east to the DNT on the west with the following general and minimum terms: There is an additional, related benefit to TxDOT's contracting with a sister agency. In addition to the incentives provided by the contractual provisions of the Project Development Agreement, the NTTA and TxDOT share a statutory purpose and exist for precisely (and solely) the same end; just like TxDOT, the NTTA has no authority for or interest in anything but building roads that serve the public. Further, the NTTA is dependent upon TxDOT's approval and support in virtually all of its activities. These factors constitute a substantial and additional assurance that the NTTA will fully comply with its obligations and fully satisfy TxDOT's expectations. This Joint Proposal assumes TxDOT prefers that the Project remain on the state highway system and is drafted accordingly. Additional authority for that approach may be available in Sections 366.033(a)(13), (g), (k) and (1), 366.169, and 366.302 of the Texas Transportation Code. The Project also could be developed and operated "off- system" pursuant to this Joint Proposal, but the applicable statutory authorization may afford less flexibility see: Sections 288.151 -154 and 222.104 of the Texas Transportation Code). DRAFT SH 121 CC JOINT PROPOSAL — PACE 9 - requested term of Proposed to be 50 years of operation to match the development anticipated term of a CDA. agreement: - TxDOT's asset subject The right -of -way and completed improvements of SH 121 to the development from U.S. 75 on the east to the DNT on the west (see agreement: Project Description herein). - guaranteed benefit and In recognition of TxDOT's ownership of and substantial consideration to investment in the Project, TxDOT will receive annual TxDOT for Project Development Payments, with a Guaranteed Base development Payment, as provided in Part 6 hereof. agreement: The Joint Proposal also relieves TxDOT of, and the NTTA would assume, future financial obligations of approximately $370 million of TxDOT construction costs for SH 121, and over $1.2 billion in operating, maintenance, and major maintenance costs over the 50 -year term (estimated in escalated $'s), as set forth on Attachment 1. - other terms and The Project Development Agreement will include conditions: provisions providing all the same oversight, approval and similar rights to TxDOT regarding the Project as provided in its previous (and successful) project agreements with the NTTA. (2) That TxDOT approve the general terms of Parts 2 through 6 of this Joint Proposal. PART 2 THE NTTA'S OBLIGATIONS AND RIGHTS, GENERALLY The NTTA will be the party fully responsible and obligated for the Project. Accordingly, it will be the party that designs, develops, finances, constructs, maintains, repairs and operates the Project under the Project Development Agreement with TxDOT and pursuant to the statutory authority referenced above. The NTTA will assume all risk related to the Project, including with respect to construction costs, operating and maintenance costs, adequacy of traffic and revenue projections, environmental clearance, and related matters. DRAFT SH 121 CC JOINT PROPOSAL - PAGE 10 PART 3 THE PROJECT'S FINANCING The NTTA shall provide and be responsible for all of the financing required to design, construct, operate, and maintain the Project as part of its DNT System. This approach provides significant and demonstrable benefits. System financing brings the strength of the DNT System to mitigate risks and lower financing costs of the Project, thereby allowing lower tolls and higher flow of funds to TxDOT for local projects.6 All DNT System revenues are pledged to all DNT System bonds and related obligations; revenues, expenses, and debt service are not segregated by facility, and this strong cross - pledge of the System's revenues — not just those of the Project — will secure TxDOT's Guaranteed Base Payments under this Joint Proposal. The NTTA has an incentive to achieve low financing rates and a very successful history of accomplishing that goal. This proven ability will result in measurable benefits for all stakeholders — including TxDOT and the RTC. The NTTA will set tolls on the DNT System as required (i) under its Trust Agreement and other debt instruments, (ii) under this Joint Proposal and (iii) to maintain a high credit quality. Maintaining credit quality not only permits the NTTA to initially finance the Project on favorable terms, but also allows it to finance future improvements that enhance this Project's performance, as well as meet other regional needs (see Part 7 below). Retaining toll - setting authority in a regional entity is fully compatible with the interests of the County, the Participating Cities, and TxDOT. An additional benefit of DNT System financing for the Project is that it supports the County's, the Participating Cities', and TxDOT's shared goal of preserving the maximum amount of Project revenues for needed transportation improvements. All revenues of the DNT System are dedicated to regional transportation mobility; they are either reinvested to improve existing facilities or used to finance new regional facilities. System financing by the NTTA also ensures that critical operational issues — particularly the setting of tolls — is subject to regional and local input, which is consistent with the stated desires of the County, the Participating Cities, and TxDOT. The DNT System is governed by the NTTA's locally appointed Board members who are easily accessible to county and city officials and to the Project's patrons. The NTTA was established by the Texas legislature and the Board is set up to make decisions based upon its particular knowledge of and sensitivity to the needs and challenges of the North Texas region. 6 As an illustration, when compared to financing the Project on a stand -alone basis, the NTTA's unique ability to leverage the DNT System results in an estimated savings of $30 million. DRAFT SH 121 CC JOINT PROPOSAL, — PAGE 11 PART 4 THE PROJECT'S CONSTRUCTION This Joint Proposal offers unmatched benefits in project streamlining. The NTTA and TxDOT have successfully partnered on numerous projects, and this Joint Proposal takes maximum advantage of the speed, efficiency, and certitude that can result by those parties using the same proven and established procedures to deliver the Project. The NTTA will take the existing project infrastructure, including frontage roads, and right -of -way "as is" and will include in the costs of the Project sufficient funds to modify for tollway purposes, if required, the current construction of the Project in the right -of -way between Hillcrest on the east and the DNT on the west. The NTTA also will construct the toll lanes in the undeveloped section of SH 121 right -of -way from Hillcrest to U.S. 75. The NTTA will build the interchange at U.S. 75 and the direct connection ramps at the existing DNT interchange. TxDOT will not be requested to incur any portion of the costs of the Project, except internal costs for staff time for review and administration of the Project. To facilitate the NTTA's performance of those obligations, TxDOT will transfer to the NTTA all design, traffic and revenue, environmental and other materials developed for the Project, as provided under the parties' previous project agreements. Additionally, the NTTA will assume and complete the ongoing environmental permitting work referenced previously (see Project Description). The Project Development Agreement will operate (and provide TxDOT and the NTTA substantially identical rights and obligations with respect to the Project right -of- way and all completed and future improvements) as provided those parties under their previous project agreements. TxDOT would have the same oversight and approval rights over the NTTA's use, operation, maintenance, and modification of the Project as on their other partnered projects, provided the NTTA additionally would agree to deliver the Project in sound condition to TxDOT upon expiration of the Project Development Agreement term. The term of the Project Development Agreement should be the same as that provided the CDA proposers (50 years of operation, minimum). PART 5 THE PROJECT'S OPERATIONS This Joint Proposal offers several significant benefits with respect to the operation of the Project. TxDOT will be contracting with a proven project partner using the same methods by which over a billion dollars of critical infrastructure is successfully operated. The NTTA shall be responsible for the operation of the Project in accordance with substantially identical terms to those contained in its previous project agreements with DRAFT SH 121 CC JOINT PROPOSAL - PAGE 12 TxDOT, except as provided in Part 4 above with respect to the NTTA's return of the Project to TxDOT upon the expiration of the term and in Part 6 below with respect the Project Development Payments. The Project will be operated as part of the DNT System, taking full advantage of the NTTA's existing and nearby facilities, equipment, staff, and extensive customer base. As indicated above, the Participating Cities will be fully responsible for frontage road maintenance to TxDOT's standards, and the NTTA will remit to them from the Project's revenues an annual payment to defray their resulting costs ($7,000 per -lane- mile, adjusted at a predetermined rate). This payment will be considered a maintenance expense for the Project. The Participating Cities are experienced at maintaining such facilities in a manner satisfactory to TxD0T.7 The Project shall be designed, constructed and operated using an all - electronic toll collection protocol, as TxDOT requested. Assuming the Project remains on the state highway system, TxDOT will provide patrolling of the mainlanes by Department of Public Safety forces. An additional operational benefit results from the fact that the NTTA is a governmental entity committed statutorily and solely to enhancing regional mobility. As indicated in TxDOT's "Comprehensive Development Agreement Programmatic Term Sheet," a crucial deal point for a CDA developer is TxDOT's assurance against competing facilities within a specified proximity to the applicable project. While the purpose and need for such a covenant is fully understandable, it operates as a significant constraint on the implementation of future capacity improvements — particularly in light of the difficulty of trying to predict and contract around those needs over a CDA's 50- year term. The NTTA would neither require nor seek as restrictive a provision. This Joint Proposal does not provide for revenues to be accrued or escrowed for rebuilding the Project at the end of the 50 -year term; instead it provides sufficient Guaranteed Base payments prior to the potential rebuild date to cover the projected cost of that undertaking. The NTTA believes this benefits TxDOT, the RTC, and the region by allowing them the flexibility of postponing the rebuild decision to when it can be made in a fully informed manner, rather than committing to it today and setting aside those significant funds in advance. Based on the NTTA's expectation of the Project's condition late in the 50 -year term, it is very possible TxDOT and the other stakeholders will decide that the Project's revenues can be better utilized to address other mobility needs in the region. 7 This again provides substantial benefits to TxDOT. Other proposals for the Project may assume larger frontage road payments or costs, thereby further reducing revenues available for Project Development Payments to TxDOT. Also, other proposals that presume TxDOT is paid a set amount to maintain frontage roads leave TxDOT at risk if the payment is ever insufficient to fully discharge costs; under this Joint Proposal, TxDOT is fully relieved of that risk. The $7,000 per payment is escalated at a rate of 2.5% annually from 2010 to 2014, 2.75% from 2015 to 2025, and 3.0% from 2026 to the end of the 50 -year term. DRAFT SH 121 CC JOINT PROPOSAL — PAGE 13 PART 6 REVENUE SHARING, THE PROJECT DEVELOPMENT PAYMENT Perhaps the greatest single benefit of this Joint Proposal is that it fully mediates the seemingly incompatible goals of maintaining lower toll rates and maximizing project return to TxDOT. This Joint Proposal uniquely accommodates the goals of all stakeholders. It provides the significant revenue return to TxDOT while both setting an initial toll rate desired by the County and the Participating Cities and maintaining all the Project's revenues within the region. Because of (i) the cost savings resulting from the NTTA's use of DNT System financing, (ii) the operational economies of scale derived from the NTTA's constructing and operating the Project with its other regional projects, (iii) the NTTA's willingness to cap Project Coverage at 0.15x debt service, and (iv) the commitment of the Participating Cities to undertake responsibility for the frontage roads, this Joint Proposal captures the best possible development solution for this Project. The County and the Participating Cities want tolls set at the levels required to pay debt service on bonds and all Project Costs. At the same time, TxDOT views the Project as a critical asset that must be prudently developed and operated to generate revenues for other mobility needs. Both desires are met in this Joint Proposal. This is accomplished by committing all of the Project revenues in excess of Project Costs — all of the "upside" — to TxDOT's return. The Project Development Payment has two components: (1) the Guaranteed Base Payments and (2) the Variable Payments. The Guaranteed Base Payment is a set monetary amount, paid to TxDOT annually, and escalated in five -year increments corresponding to projected growth in traffic and revenues of the Project. The Guaranteed Base Payments begin after the first full year of operation. The Variable Payment is payable at the end of each five -year period and represents all revenues due to TxDOT in excess of the Guaranteed Base Payment. The sum of the Guaranteed Base Payment and the Variable Payment will equal the amount required to be paid to TxDOT based upon the NTTA's commitment to remit to TxDOT all Project revenues remaining after payment of Project Costs. For ease of auditing, the Variable Payment will be derived on the basis of traffic counts or vehicles- per -day multiplied by a per - vehicle amount determined by TxDOT and the NTTA to achieve TxDOT's return.8 The NTTA's obligation to make the Project Development Payments will be backed by the revenues of the entire DNT System and an obligation to set toll rates on the 8 The NTTA confirmed with TxDOT's Office of General Counsel that by utilizing the new statutory tools provided TxDOT in the last Legislative Session, the Project Development Payment could be calculated and remitted in several different ways. The agreed -upon payment could be converted to a per - vehicle charge so that the annual Project Development Payment amount would vary as actual traffic increases or decreases. The payment will be recalculated at the time of the bond issue when final studies are available, but then could be reevaluated every five (5) years based on actual experience. The specific structure of those traffic -based payments can be better accomplished once the NTTA receives the final traffic and revenue study produced for the financing of the Project. DRAFT SH 121 CC JOINT PROPOSAL, — PAGE 14 Project and, if needed, the DNT System at levels sufficient to meet all of the obligations under this Joint Proposal. Such rate covenants are a standard feature in the securitization of toll road revenues, and the DNT System credit incorporates this feature. Binding contractual obligations in the form of toll rate covenants such as proposed here would require the NTTA to raise tolls if needed to fund the Guaranteed Base Payments. The NTTA's "return" is provided as Project Coverage and is fully capped at 0.15x Project debt service, while TxDOT's return is unrestricted. Unlike a traditional project development arrangement, including any foreseeable CDA proposal, TxDOT takes all of the Project "upside" and does not share or forfeit any portion to the Project developer beyond what the NTTA requires to cover Project Costs. Attachment 2 provides a sketch -level analysis of the Project Development Payments resulting under this Joint Proposal utilizing (1) a $0.12 per mile toll, (2) a 1.5% per year compounding growth rate, adjusted every 5 year years, (3) 35 -year bonds and (4) a 50 -year Project Development Agreement term. Regardless of whether the Project meets revenue projections, TxDOT will receive $2.7165 billion over the 50 -year term (over $500 million in net present value) in Guaranteed Base Payments from the NTTA. Assuming the Project performs in a manner indicated by current demographic information, as well as by the recent performance of similar North Texas toll facilities, TxDOT's Project Development Payment is estimated at $5.4 billion over 50 years, with a net present value of over $1 billion in today's dollars. Operating Guaranteed Base Estimated Average Estimated Total Years Payment Variable Payment Average Project (per year) (per year) Development Payment 2 -59 $3,500,000 $3,500,000 (per year) $7,000,000 6 -10 $10,000,000 $10,000,000 $20,000,000 11 -15 $26,500,000 $26,500,000 $53,000,000 16 -20 $40,500,000 $40.500.000 ItRi MUM 21 -25 $44,500,000 $44,500,000 $89,000,000 26 -30 $52,250,000 $52,250,000 $104,500,000 31 -35 $75,000,000 $75,000,000 $150,000,000 36 -40 $91,750,000 $91,750,000 $183,500,000 41 -45 $95,500,000 $95,500,000 $191,000,000 46 -50 $104,500,000 104,500,000 $209,000,000 Total $2,716,500,000 $2,720,000,00010 $5,436,500,000 Consistent with the stated desires of the County, the Participating Cities, and TxDOT, the Project Development Payment would be used for the maintenance, repair, improvement, and upgrade of streets, roads, highways, associated activities and public transportation within the County and neighboring areas. This arrangement will be set out 9 As noted previously, the Guaranteed Base Payment begins after the first full year of the Project's operation and the Variable Payments are computed and remitted every five years. iOThe first two columns yield different totals because no Guaranteed Base Payment is made in the first year, but there could be a Variable Payment at that time. DRAFT SH 121 CC JOINT PROPOSAL — PAGE 15 in a separate agreement among the County, the Participating Cities, the RTC, and TxDOT. PART 7 EFFECT ON OTHER PROJECTS The RTC and TxDOT have inquired as to whether the NTTA's delivery of the Project upon these unique terms" will undermine its ability to partner with TxDOT to meet other critical regional mobility needs — the second portion of their proposed two - prong test. As previously stated, the answer to that question is an unequivocal "No." A financial summary of the Regional Five projects and the NTTA's participation in their delivery is provided on Attachment 3. The NTTA has demonstrated to the TxDOT Dallas District Office and to the RTC that it plans to provide in excess of $1.8 billion in project revenue funding for the development of the Regional Five projects, well in excess of the $350 million programmed for the NTTA's participation in these projects in the UTP. In addition to that $1.8 billion, the NTTA Board is preparing to implement a toll policy which would generate an additional $2 billion in net present value transportation funding for North Texas projects yet to be identified. Thus, in addition to its assuming the costs and risks of developing the Project and its making the Project Development Payments to TxDOT of approximately $1 billion in net present value, the NTTA is bringing a total of roughly $5 billion in project revenue funding for transportation facilities in the near future. The NTTA fully intends, and is fully capable, to partner with TxDOT to meet the region's mobility needs. 11 The Project's distinctiveness cannot be overstated. While the terms of this Joint Proposal perfectly suit this Project, they would not be feasible for the other projects currently anticipated for the NTTA's service area. DRAFT SH 121 CC JOINT PROPOSAL — PAGE 16 This Joint Proposal is respectfully submitted by: NORTH TEXAS TOLLWAY AUTHORITY C Allan Rutter, Executive Director COLLIN COUNTY i Ron Harris, County Judge CITY OF ALLEN LION Steve Terrell, Mayor CITY OF FRISCO i Mike Simpson, Mayor CITY OF McKINNEY i Bill Whitfield, Mayor CITY OF PLANO C Pat Evans, Mayor DRAFT SH 121 CC JOINT PROPOSAL - PAGE 17 ATTACHMENT 1 THE NTTA'S ASSUMED FINANCIAL OBLIGATIONS The Project Main Lanes: The Project/Direct Connect Ramps at the DNT Interchange: The ProjectfU.S. 75 Interchange: The Project Maintenance and Operating Costs on mainlanes (50 years): The Project Maintenance and Operating Costs on frontage roads (50 years): ** The Project Major Maintenance Costs on mainlanes only (50 Years): TOTAL $141 * million $105 million $123 million $591 million $66 million $517 million $1.543 billion * Project costs are based upon estimates generated by the NTTA and its consultants, and are escalated to 2007 dollars. ** The NTTA will fund to the Participating Cities $7,000 per lane mile, adjusted at a set rate, for their maintaining the frontage roads on the north and south sides of the Project. Additionally, the Participating Cities will police and regulate the frontage roads, excluding any portion of U.S. 75, provide for signalization, and oversee access issues (e.g., driveway permits). DRAFT SH 121 CC JOINT PROPOSAL — ATTACHMENT 1— Solo Page ATTACHMENT 2 ANALYSIS OF PROJECT DEVELOPMENT PAYMENTS ($ in Millions) January 26, 2006 Demographics Capacity Increase ($42 M) / Rebuild ($1.6 B) Rating / Coverage (1.35x Required) Bond Term Frontage Roads (Rate /mile, CAGR(2), Reset Period) Revenues Generated Total Project Cost (') Regional Contribution Net Unfunded Project Cost Project Funding by Revenue Bonds (2) Distribution of Cash Flow (Net of DS, OEM, RMF) NTTA Gross Cash Flow (35- Years) Development Agreement Payment Guaranteed Base Payments Estimated Variable Payments Total Est. Development Agreement Payments NTTA NPV 3) Cash Flow Estimated Development Agreement NPV(3) Payment Toll Rate per Year 50 Year Scenarios Scenario 1 DNT to US75 Official. Demographics (4) No /No A+ / 1.41 35 Years O&M ($7k/mile) 0.12, 1.5 %, 5 yrs. $4,131 $523 154 $369 $369 $144 $2,716 L $2,716 $48 5515 110 -2059) Scenario 1A DNT to US75 Adjusted Demographics Yes / No A+ / 3.47 35 Years O&M ($7k/mile) 0.12,1.5%,5 yrs. $7,773 $523 154 $369 $369 $144 $2,716 R 720 $5,436 $48 $1,032 2010 $1.34 $1.34 2015 $1.44 $1.44 2020 $1.56 $1.56 2025 $1.68 $1.68 2030 $1.81 $1.81 2035 $1.95 $1.95 2040 $2.11 $2.11 (') Based on preliminary estimates by HNTB. (2) Based on preliminary estimates by WSA and HNTB. Utilizes Current Interest Bonds and Capital Appreciation Bonds to fill available revenue stream. (3) Net Present Value calculated at a discount rate of 5% to January 1, 2006. (4) Based on 2025 Mobility Plan, 2004 update. (5) Based on adjusted demographic growth in Collin and Denton Counties. *Subject to refinement. Further study required for bonding purposes. DRAFT SH 121 CC JOINT PROPOSAL — ATTAcHmENT 2 — Solo Page DRAFT SH 121 CC JOINT PROPOSAL - PAGE 20 M z U H t y h N �s co ^ T co 4 ty K5; r r O O r O N co } co OIM N CD r >- Lo N • CDOOOIOi CD0 O 00 O LO o to o t N EA T Lo T k o iii r M � k= y h N co co ^ T co 4 N M� O r O O r O } N r } co OIM N CD N N • CDOOOIOi CD0 O 00 O LO o to N t N EA LO r �r T o iii r o � � r k= y h N co co ^ T co 4 N M� O r O O r O } N r } co OIM N CD N N ja O N o to N N T o LO r �r T iii r o o Ix c cd 0 o y O O 4. U U b P, U O a> w O C1 P. 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" a > cqs 0 U � t0 •b b N -� cd a� to CA U y V �• o w w O O id O cd a> a�>i F UO H 0 H n�'oN0 N z a� o yo O O o U - U O ?; co C y m U U M N cd M > b to M U w � t aui o >� a0i O as a> 0o 'o 0 W w w y 'L" Pr G1. w (�� 9 C7 d � -d c20 to toZ C N N � O •� r, W o o b 0 — . o O , � tog p, a:b v 0"o la Z REFERENCE ITEM 1.1 STTC Handout February 24, 2006 4. "Regional 5" Toll Proiects and the Impact of S.H. 121 in Collin County: Michael Morris provided an overview of Reference Item 4, which contained information regarding the action steps necessary for the additional transportation projects and tolls through the North Texas Tollway Authority (NTTA) in the region. Michael identified the "Regional 5" projects as the Lake Lewisville Bridge, S.H. 121 in Collin County, President George Bush Turnpike (PGBT) Extension from S.H. 78 to I.H. 30, the Trinity Project in Downtown Dallas, and Southwest Parkway from Fort Worth to Cleburne. He stated that the Collin County construction costs are approximately $350 million and that the other four project costs were estimated at $1.7 billion. Michael reviewed the action steps required from each entity involved for successful conclusion. He stated that Collin County and affected cities would have to pass a resolution asking the Regional Transportation Council (RTC) to build the toll roads in S.H. 121; that they would express interest regarding the Comprehensive Development Agreement (CDA) or North Texas Tollway Authority (NTTA) proposals to be toll provider. The cities would have to update their previous position supporting a local government corporation and replace it with a new position. Michael reviewed the action steps of NTTA and noted that they have been working extremely hard to get position through. He stated their responsibility would be to get Q-. M nnr%r.,vg1 t� rhnnnP aYictinn nosition to a new position to share excess revenue, provide LJVGIV GFov, -r— — v...a.. Z,....,.. .....7 r- ---- --- -- — ability to build the remaining four project and as well as pay for the operation and maintenance of S.H. 121 frontage roads. Michael indicated that the rp oject €fie would have the ability to build an electronic toll roads with no cash lanes. He noted that TxDOT is in the position to perform due diligence and inform the RTC on the question, does the NTTA comes close to a CDA we, - offer ? - The assumptions would have to be equalized if the assumptions are not equal when received. He reminded the Gemn}itted Committee that the selection process remains within the region. He stated that in regards to Agenda Item 9 regarding the Regional Mobility Authority, TxDOT would like to get a Memorandum of Understanding (MOU) with the RTC project selection authority of all funds that go to the Commission as excess revenue. He noted that the Regional Mobility Authority issue was resolved in that a MOU would be established with the Commission and the responsibility would be delegated to RTC and extend project selection by representing MOO to each of the corridors. Next, Michael reviewed the RTC role and noted that it was their responsibility to provide the willingness to step in and referee to help resolve questions. He stated that the Texas Transportation Commission requested RTC to take action and that the RTC desires to make sure that all five of the toll roads are built. He noted that the revenues can be used to help to make sure NTTA does not default on bonds. John Polster commented that there was concern because no one had seen a copy of the proposal and it was not being provided. He stated that there was concern in Denton County because the officials do not have any idea on how the proposal impacts the "Regional 5 ". He stated that the Committee does not have enough information to take action. Michael replied that the proposal was in the process of being worked on and being negotiated. If the elements are not met, it does not have a guarantee that it will be accepted. Ruben Delgado stated that the local cities are in full support of NTTA and the steps being taken. Brian Barth stated in regard to the action steps, there is some misinformation and that the excess toll road will stay in the region. He noted that TxDOT is committed to doing what region wants on this project. Cissy Sylo commented that opportunity should be given to NTTA to get counties and cities to agree to the proposal and to trust the process that these were the steps to go through. Mark Bouma stated that NTTA was working feverishly to resolve issues and that it will be finalized and in the hands of all board members. A motion was made to approve the technical elements of the process previously presented to the RTC. Ruben Delgado (M); Cissy Sylo (S). Unanimous. REFERENCE ITEM 9.4 DRAFT: Excess Toll Revenue Policy for S.H. 121 in Collin County Purpose: To transfer the September 9, 2004 Regional Transportation Council (RTC) policy to a North Texas Tollway Authority (NTTA) project. This policy excludes managed lane projects. 1. The focus of this policy is NTTA sponsored toll project.' 2. Excess Toll Revenue (ETR) is defined as revenue received by the Texas Department of Transportation (TxDOT) from NTTA. This will be done through mutual agreement by both agencies. 2 3. ETR from individual projects may be used to help pay down the bonds on other NTTA toll projects. 3 4. All ETR generated from individual projects shall remain in the TxDOT district in which that revenue generating project is located. 4 5. All (or a portion of) the excess revenue generated from individual toll projects shall remain in the counties in which that revenue generating project is located. These projects can be either on or off the state system. In addition, these funds are restricted to transportation purposes that include engineering, construction, preventative maintenance, reconstruction or upgrade of thoroughfare projects. 5 6. Projects funded with excess toll revenue should be selected by the impacted local governments and recommended to TxDOT and the Regional Transportation Council for approval. This cooperative process intends to fund projects that meet city, county and TxDOT needs. 6 7. This project or policy shall not impact local government allocation of future transportation funds through the RTC or TxDOT. Footnotes: This policy only applies to S.H. 121 in Collin County. 2 This will include payments to TxDOT for maintenance of the frontage roads. If NTTA wishes to use local funds to assist in meeting Frontage road maintenance needs, TxDOT is agreeable but NTTA will have to meet TxDOT's performance requirement of frontage road maintenance. A separate Memorandum Of Understanding between TxDOT, Texas Transportation Commission and the Regional Transportation Council will assure project selection authority remains within the region. 3 It is not anticipated that this provision would be necessary, however, it is in the best interest of the region that NTTA not default on any bond obligation. Local governments in Collin County would have to approve specific funding uses. 4 This provision is necessary to cap revenue sharing for #3 above to NTTA toll projects from the eastern side of the region. Western side NTTA toll projects needing assistance on bond obligations will come from the west. This provision is also necessary to potentially share excess revenue outside the county. If necessary, the Regional Transportation Council would want funds to go to projects in close proximity to Collin County (i.e., "near neighbor"). Transit projects are excluded at this time but could be included through mutual agreement of local governments in Collin County, the Collin County Commissioners' Court, TOOT and Regional Transportation Council. Local Governments in Collin County would have to app rove specific funding uses. In Collin County for the S.H. 121 toll project, impacted Local Governments include Collin County, Allen, Frisco, McKinney, and Plano. Project shares will be equal between the five (5) parties. REFERENCE ITEM 9.3 North Central Texas Council Of Governments TO: Selected Mayors Along the S.H. 121 Corridor DATE: February 15, 2005 in Denton County Selected County Officials Along the S.H. 121 Corridor in Denton County Selected Mayors Along the S.H. 121 Corridor in Collin County Selected County Officials Along the S.H. 121 Corridor in Collin County Selected City Managers Along the S.H. 121 Corridor in Denton County Selected City Managers Along the S.H. 121 Corridor in Collin County Bill Hale, P.E., District Engineer Texas Department of Transportation — Dallas District FROM: Michael Morris, P.E. Director of Transportation SUBJECT: Comprehensive Development Agreement for the State Highway 121 Corridor A Comprehensive Development Agreement has been submitted to the Texas Department of Transportation (TxDOT) for the State Highway (S.H.) 121 Corridor in Collin and Denton Counties. The Texas Transportation Commission may be asked to move forward on this request. Several of 6.,.,o . nllpft Wirtz, rPnard to the implications of this initiative. The following is a quick summary to you 11ovc -- - hopefully ease any potential anxiety. For Denton County, the draft Memorandum of Understanding will stand as our minimum position. it is possible a Comprehensive Development Agreement can generate additional revenue; however, this initiative will not move forward if there are any implications of undoing our current commitments to you. For Collin County, there is no change to the transportation options being reviewed for State Highway 121. The policy officials along the corridor and the Regional Transportation Council will determine the appropriate option for the future. If an option is selected that coincides with the interest of the Comprehensive Development Agreement, then it will be possible to get firmer revenue estimates of partnership opportunities. If not, proje Agreement submitted. ft the Comprehensive Development Agreement would new need to be revised or a 616 Six Flags Drive, Centerpoint Two P. O. Box 5888, Arlington, Texas 76005 -c 8 a (817) 640 -3300 FAX: 817 - 640 -7806 ® recycled paper http:/ /www.nCte0g.org February 15, 2005 Page Two Therefore, the region omdor. The exas Departm nt of Tran pfo'rtation is re pond ng to lone of those State Highway 121 C potential options. Please call me at (214) 695 -9241 if I can be of any assistance. i i� _ Michael Moms, P.E. MM:baw F" V W O o. d LCD a z 0 (D w W I— O H Z H Q F- Z W W�y w ICL W W I— F— O u J Q V Z V W I— Z O H Q OA (L W Z 9 lo- W V Q LL V♦ REFERENCE ITEM 9.2 E L O C� O _ O V 0 lo- it i G1 V O Z 0 to w� ._ °- o O N 0• .N L N O i �H m o Lm t L llool LL L 1.. 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O i 0 m 0 0 = o '� E V tQ = O E ° LY > _ to O ♦-+ V a X >1 LLJ-� O v m ° 0 ° m E O .� 0 CL I- I- W a a oza� � = ca tn� �2 r a U) 0 O I�m Z _ U) W F— _ V a LL • Lri Z O H J 0 CO W ftftftft Z O I-= V a Q F- N z O V O V r r vi ,O U Q ,O O V V H a J c m OQ LO M ~ to T. 0 `i 0 M O EV •L to � p V F— Q 0 V H 0 0 O 0 a r C6 ,O E .L V H ce Q D V H 0 0 O L) 4 k4 i a ,O c� E ,L V N LM L. ct D o O 4- coo TM cri N LO 00 M :e U-1 a O Q V �E ;ate p CO 05 o� H x W c� O o Q C O J � O V V � qqt ci E L 0 A a� oC V W N,TTA-We" NORTH TEXAS TOLLWAYAuTHORtTY February 24, 2006 Mr. Michael Morris, P.E. Director of Transportation North Central Texas Council of Governments P.O. Box 5888 Arlington, TX 76005 -5888 Dear Mr, Morris: REFERENCE ITEM 8.1 STTC Handout February 24, 2006 5900 W. Plano Parkway, Suite 100, Piano, TX 75093 P.O, Box 260729, Plano, TX 75026 214.461.2000 Fax 214.528.4826 www.ntta.org As you consider setting regional parameters for procurement of Comprehensive Development Agreements in North Texas (as invited by the Dallas and Fort Worth District Engineers of the Texas Department of Transportation), I thank you for asking for information about the tolling philosophy recently adopted by the North Texas Tollway Authority Board of Directors, This past December, the NTTA Board adopted an overall tolling philosophy for current and new projects. That philosophy will be reflected in a tolling policy to be approved by the Board in a few months. As that policy is drafted and adopted, it is likely to build upon the following provisions for you to keep in mind in setting CDA parameters: The current average weighted toll rate on the current DNT System (President George Bush Turnpikc-PGBT and Dallas North Tollway -DNT) is approximately 10 cents per mile for electronic toll collection. Cash rates tend to be 25% higher. In 2007, when the Dallas North Tollway Phase 111 extension opens to traffic, the entire system rate is expected to grow to 11 cents per mile for Tol]Tag transactions, and this per mile rate will be applied to Phase Ill. o This rate adjustment will cause rates at toll plazas on the current DNT System to grow by approximately 10% from 2006 rates (these playas will not be priced on a per mile basis as not all plazas are spaced evenly). o The cash rate differential in 2007 would be consistent with the differential concept of being 25% higher than the To11Tag rate. In 2008, when the Lewisville Luke Toll Bridge may open to traffic, the toil rate for the bridge would be set at $1.00 for To11Tag transactions (as bridges are not typically priced on a per mile basis), with cash rates at least 25% higher. After opening, the toll rate would grow at an annually compounded rate of 1.5% per year, reset every five years to reflect five years of growth. David D. Blair, Jr„ Chairman ► Jack Miller. trice Chairman P. David R. Denison ►William W. MOadows ►Alan L Sims . Paul N. Wageman . Kay Walls Allan Rutter, Executive Director Matt Dominy, Doputy Executiva Director. Ruby Franklin, Sacrstary ► Susan A. 8we, 7reasurcr In 2010, when the Eastern Extension of the President George Bush Turnpike (PG BT- EE) and the Southwest Parkway (SWP) are expected to open, the systemwide toll rate (including these new projects) is expected to grow to 12 cents per mile for TollTag transactions. • At 12 cents per mile, rates at toll playas on the current DNT System will have grown by 20% from 2006 rates. • Toll rates for Southwest Parkway may be higher than general system rates, as the NTTA Toll Philosophy will account for non - standard features of this project through an additional non- standard feature toll rate. This non - standard feature toll rate will apply to any new projects with non - standard features, • After 2010, toll rates on the DNT System (which will by then include the PGBT -EE and SWP) will grow at an annually compounded rate of 1.5% -per year, and toll rates will be reset on the system every five years to reflect five years of growth. • Non - standard feature toll rates will be reassessed at the five year reset period to account for deviations from expected revenues for that project. Changes is revenue may lead to changes in the overall growth rate or to the non - standard feature toll rate, as the costs of additional features are amortized more quickly than expected. • New projects opening after 2010 will open with toll rates which would be in effect in that opening year given the system growth rates. For example, the toll rate for ToIlTag transactions fora project opening to traffic in 2015 would be approximately 13 cents per mile. Once again, the above information will be part of a toll policy that we expect will be adopted by the NTTA Board in the coming months. Given that this Board policy has not been adopted, the information in this letter should not be considered as final policy of the NTTA. I will be certain to keep you informed of the toll policy deliberations. The NTTA has tried to establish a balance between keeping the toll rates at reasonable levels while creating significant financial leverage to assist in meeting the transportation needs of the region. In addition to our commitment to build projects such as PGBT -EE, SWP, Lewisville Lake Toll Bridge, and Trinity Parkway, this toll structure creates an additional $2 billion in future funding capacity. At historical levels of NTTA project feasibility, this $2 billion could leverage up to $8 billion in additional transportation projects in the region. We look forward to continuing working with you on these important projects. I will close by offering two uninvited observations. First, as you consider how to factor in NTTA system toll rates and rates of growth into CDA procurements, please keep in mind the different effects of these two pricing elements. If the overall rate of growth is held constant in the region, then even if an opening toll rate on a CDA facility were higher than that of the NTTA system, the overall gap between the toll rates in our region would .remain constant over time. However, if the opening toll rate and rate of growth are different (particularly if the growth rate is tied to an economic growth rate like the Consumer Price Jndex or Gross Domestic State Product), then the gap between toll rates will become more pronounced over time. Second, when considering the rate of growth for toll rates (CPI or GDP), keep in mind that the historical national wage rate growth has been lower than the rate of price inflation. You may also want to consider benchmarks that measure regional wage rate growth, so that purchasing power of North Texas households is not diminished. Thank you for the chance of contributing information for the region to consider. Sincerely, At Allan Rutter Executive Director CC: NTTA Board Af Texas REFERENCE ITEM 8 Department of Transportation P. O. Box 133067, Dallas, Texas 75313 -3067 (214) 320 -6100 P. O. Box 6868, Fort Worth, Texas 76115 (817) 370 -6500 February 16, 2006 Michael Morris, P.E. Director of Transportation North Central Texas Council of Governments P.O. Box 5888 Arlington, TX 76005 -5888 Dear Mr. Morris. With the Regional Transportation Council's (RTC) postponing action on the SH 121 /Collin County project delivery, the RTC and the Texas Department of Transportation (TxDOT) have an opportunity to educate the region on the benefits of using a Comprehensive Development Agreement (CDA) to plan, design, construct, operate, maintain and finance transportation corridor projects. TxDOT has a new approach - TxDOT has a plan that calls for faster completion of transportation projects. The TxDOT plan is focused on five goals: 1) Reduce congestion; 2) Enhance safety; 3) Expand economic opportunity; 4) Improve Air Quality; and 5) Increase the value of our transportation assets. The TxDOT plan is based on four strategies: 1) We will use new financial options to build transportation projects; 2) We will empower local and regional leaders to solve local and regional transportation problems; 3) We will increase competitive pressure to drive down the cost of transportation projects; and 4) We will demand consumer - driven decisions that respond to traditional market forces. You will find that TxDOT will use all four strategies to achieve our plan. Decision - making on transportation project prioritization, funding allocation and use of new financial options has been delegated by the Texas Transportation Commission to the RTC. It must be noted that additional discretionary funding to the region from TxDOT will be very unlikely if all resources and financial options available to the RTC are not utilized. An Equal Opportunity Employer Mr. Michael Morris -2- February 16, 2006 To support the TOOT Comprehensive Development Agreement program, formal action is needed from the RTC by April 15, 2006 on the following: 1. Programmatic business terms for all TxDOT /CDA toll projects in the Dallas -Fort Worth region. The following terms are required: a. Initial toll rates; b. Toll rate escalation methodology; c. Timing of concession payments and /or revenue sharing. This should not be applicable to TxDOTICDA Managed -Lane projects as these will require a separate set of business terms. 2. Proceed with an update of the Metropolitan Transportation Plan with SH 121 /Collin County as a tolled facility. Months of debate clearly indicate the only funding source to complete this crucial project in the near term is via toll revenue. We believe that completion of the main lanes for this project is imperative for the region's air quality to continue to improve. 3. Affirmation of the following process on the SH 121 /Collin County segment: a. Support inclusion of SH 121 /Collin County in the ongoing CDA procurement; b. Provide a level playing field to maximize competitive options by requiring any NTTA proposal to conform to the same business terms as CDA proposals; c. Based on objective criteria, RTC may decide between the best value CDA proposal and any NTTA proposal at the end of the procurement, prior to Commission award of a CDA. To develop Item 1 above, the following are recommended: • A Subcommittee of RTC members and Surface Transportation Technical Committee (STTC) members from across the region; • A number of workshops are required with the subcommittees in order to become educated about the total transportation needs, the benefits of new financial options, terms, conditions, etc. in order to make informed decisions to maximize the benefits to the region. These workshops should be scheduled immediately so that we can meet the schedule goals for the SH 121 project. Mr. Michael Morris -3- February 16, 2006 TxDOT and the RTC have a long history of working together toward the mutual goal of maximizing transportation mobility to promote safety, economic development and the quality of life for our citizens and we look forward to this great relationship continuing. Sincerely, t William L. Hale, P.E. Dallas District Engineer 1` L. Maribel Chavez, P.E. Fort Worth District Engineer cc: Saenz, Bass, Russell, J. Ingram, Brown, Barth, Garza, Elsom, Selman, Compton, Ball, Conrad