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MWAA Answers DTR Questions

MWAA Answers DTR Questions

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Published by wamu885
Andy Rountree, Vice President for Finance and Chief Financial Officer of the Metropolitan Washington Airports Authority, answers questions about the Dulles Toll Road.
Andy Rountree, Vice President for Finance and Chief Financial Officer of the Metropolitan Washington Airports Authority, answers questions about the Dulles Toll Road.

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Published by: wamu885 on Jun 16, 2012
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11/08/2012

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June 15, 2012WAMU 88.5 Questions to MWAAAndy Rountree, Vice President of Finance and CFO of the Metropolitan Washington AirportsAuthority, answered the following questions regarding the Dulles Toll Road.1) What percentage of the total cost of the Silver Line (Phases 1 and 2) will be borne by DTR users?
Theslidebelowdepictstheallocationofcosts.Thetollroadwillfinanceabout$3billionofcosts,whichrepresentsabout54%ofthetotalcostsofphase1and2combined.
M E T R O P O L I T A N W A S H I N G T O N A I R P O R T S A U T H O R I T Y
§
 Allocation based on 100% Preliminary Engineering Estimate for Phase 2. Assumes Fairfax secures $236 million for the Route 28 stationand two parking garages and Loudoun secures $168 million for threeparking garages. If the $2.831 billion Independent Cost Estimatewith higher assumed escalation is used, the Loudoun contribution is $275 million.
*
1
§
 Allocation assumes the $150 million to be provided by the Commonwealth of Virginia for Phase 2 will be used to pay interest onDulles Toll Road revenue bonds,not direct project costs.
Allocation of Dulles Metrorail Project Costs
Excluding Route 28 Station and Phase 2 Parking Garages
SOURCES OF CAPITAL FUNDS
PHASE 1PHASE 2
(Thousands YOE Dollars)
Total Total Total
% ofT otal
 
Federal
$ 900,000 $ -
$ 900,000
16.1%
Commonwealth of Virginia
251,700 23,300
$ 275,000
4.9%
Fairfax County
400,000 500,746 900,746
16.1%
Loudoun County
- 268,545 268,545
4.8%
MWAA (Aviation Funds)
- 229,383 229,383
4.1%
MWAA (Dulles Toll Road)
$ 1,353,995 $ 1,667,026
$ 3,021,021
54.0%
TOTAL SOURCES OF FUNDS
$ 2,905,695 $ 2,689,000
$ 5,594,695
100.0%=
Contribution is fixed amount
=
Contribution is fixed percentage of total cost
=
Contribution is not fixed - amount and percentage of total cost can change.
TOTAL PROJECT
 2) What factors may alter the projected toll increases as outlined on page 11 of the CDM study
 
that show tolls reaching about $18 one-way in 40 years? For instance, will MWAA lobbyRichmond for an increase in Va. state contribution? 
First,itmustbeunderstoodthattheCDMSmithreportdoesnotsetthetollrates.TollratesaresetbytheMWAABoardofDirectors,generallyforarangeof1to3yearsoutintothefuture,tomeettheoperating,maintenance,anddebtservice(principalandinterestpaymentsonborrowedfunds).Thelong-termscheduleisprimarilytoillustratetoinvestors(buyersoftollroadrevenuebonds)thatthetollroadcanproducesufficientrevenuesovertimetopaybackthedebtplustherequiredinterestpayments.Therehasbeenapproximately$1.3billionborrowedtodateviatollroadrevenuebonds,andsotherepaymentscheduleforthisamountofdebtisalreadyknown.However,therearestillseveralunknownsthatcouldimpacttollratesinthefuture.1)Whentheremainingfundsareborrowed,whatwillbetheactualinterestrate?,2)whenwillthefundsactuallyneedtobeborrowedtomeetconstructionrequirements?(i.e.,ifphase2isdelayed,borrowingwouldbepushedback),3)willLoudounoptout?Themannerinwhichtofundtheprojectisapublicpolicydecision.Thecurrentplanhas54%fundedbythetollroad.Ifpublicpolicydecision-makerswanttolessenthepotentialfutureburdenoftollpayers,thenthewaytodothatistoprovideadditionalfunding.Eitheradditionalstatefunding,ortheabilitytoaccessTIFIAfinancing(subsidizedfederalloans),oracombinationofbothcanhavetheimpactofreducingtheburdenonthetollroad.TheAuthorityissimplyimplementingthepublicpolicydecisiononfundingthatwaspreviouslymadebytheCommonwealthandtheProjectpartners.Ifpolicy-makersprovideadditionalfunding,wewilltakethatintoaccountwhensettingrequiredtollincreases.Minimizingrequiredtollrateincreasesiscertainlyagoal.
3) How did the DTR wind up being the main financing engine for the project? For instance, wasthe federal government's decision to fund only Phase a significant factor in placing the burden ontoll road users? 
TheCommonwealthofVirginiahadtargetedtheuseofDullesTollRoadRevenuestopayfortheMetrorailprojectbeforetheAuthoritybecameinvolved.However,in2005,theCommonwealthwasentertainingPrivateProposalstooperatethetollroadandtheAuthoritybecameconcernedthatthesourceofrevenuethatVirginiahadtargetedforrail,mighthavebeenhandedovertoaprivatecompanytorunforaprofit,andtherewouldbenocommitmenttogetrailbuilttoDulles.WiththetollroadsittingonaneasementprovidedbythefederalgovernmentandtheAuthority,theAuthorityfeltcompelledtobecomeengaged.TheAuthorityofferedVirginiaanalternativeproposalwherebytheAuthorityagreedtobuildrailtoDullesandbeyondintoLoudouncounty,iftheCommonwealthofVirginiaturnedoveralloperatingrightstotheTollRoad(includingrighttothetollrevenue)totheAirportsAuthoritysothattheAuthoritycouldleveragetollrevenuestoconstructtheproject.Becausethefederalgovernment’scontributionswerelimitedtophase1,andbecausethefundingpartnerstogetheragreedtoprovideupacombined25%ofthetotalproject,theresidualcostsweretobebornebythetollroad.
 4) Is CDM Smith calculating the result backwards when it comes to revenue forecasts for theDTR? For instance, rather than determining a toll rate based on revenue needs (to pay off bonds,etc.), it seems CDM was given the tolls and told to calculate traffic & revenue.
 
Asyouobserved,tollratesettingisacomplexprocess.Developmentofpotentialtollratescanbestbedescribedasaniterativeprocessbetweenourfinancingexpertsandthetrafficandrevenueconsultant.Theknownvariablesaretheamountthatneedstobefinanced,andweknowthatweneedtorepaythedebtoveralimitednumberofyears.Sotheobjectiveistominimizeincreasestotollsinanygivenyear,buttogeneratesufficientrevenuetopayoperatingcostsandrepaythedebt.Thedebthastobestructuredsothatthetollroadcanaffordtogrowintothedebtpaymentinanygivenyear.Ifthedebtwassetuplikeamortgagepaymentforexample,therewouldbeonlyonetollincreaseandthetollscollectedinanygivenyearwouldmakethedebtpayment.Becausethedebtissolarge,itisnotfeasibletohaveonlyonetollincreaseasitwouldbecometooexpensiveimmediately.So,thedebtstructureissuchthatinanygivenyear,theamountthatisdueandpayablewillgoup,andaccordinglytollswillhavetogouptocoverthedebtpayment.Thishasalwaysbeentheplanandisverytypicalofthewaylargeprojectsarefinanced.Sotheiterativeprocessallowsourfinancingexpertstoposegraduallevelsoftollincreases,andtheworkofthetrafficandrevenueconsultantproducestheresultanttransactionandrevenuethatshouldbeexpectedasaresult.Withtheresultantrevenuestream,thefinancingexpertscandetermineiftheunderlyingdebtcanbestructuredandrepaidwithinthegivenamountoftime.Ifthepotentialtollschematicproducestoolittlerevenue,ormorerevenuethanrequired,thenthepotentialtollschematiccanbemodifiedandthetrafficandrevenueconsultantagaingeneratestheexpectedtransactionsandrevenue.Accordingly,youarecorrectinthatthetrafficandrevenueconsultantdoesnotgenerateatollsolutiontosolveforrevenues.Firstthefinancingneedsareidentified,thentollsareconsideredthatpotentiallysolveforrevenuesneededtorepaythestructureddebtpayments.
 5) How does MWAA account for the possibility that high tolls on the toll road may force thosedrivers onto other roads, depleting revenues? 
Thetrafficandrevenueforecastaccountsfortheimpactontransactions,aswellastheresultantrevenueexpectedasaresultofanygiventollincrease.Accordingly,wedon’tfullyunderstandwhatyoumeanby“depletingrevenues.”Asnotedearlier,theAuthority’sgoalistominimizethetollincreaseinanygivenyear,therebyminimizingtotheextentpossibleanydriversdivertingoffoftheroadwayinanygivenyear.
 6) Does MWAA or WMATA have ridership projections for the Silver Line?
PleaserefertoWMATA.Also,therewereprojectionsintheEnvironmentalImpactStatement.ToviewtheEISvisithttp://www.dullesmetro.com/community/impact_report.cfm
 7) How will Loudoun's decision to opt in or out of the project affect toll rates?
IfoneassumesthattheMetrorailstopsatWiehleavenueasaresultoftheoptout,tollswillstillneedtobeincreasedovertimetorepaythe$1.3billionalreadyborrowed,andtheremaindertobeborrowedtocompletephase1.Itissafetoassumethatthetolllevelstofinance$1.3billion(thetollroadshareofphase1alone)wouldbelessthanatollburdentofinance$3billion(thetollroadshareforbothphases).IfoneassumesthattheremainingfundingpartnerscontinuetobuildtheprojecttoDulles,thentherewillobviouslybeadelayandaneedtorenegotiatetheagreements,butitislikelythatthetollrates

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