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
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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.
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Michael Moms, P.E.
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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