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R-01-10-25-9F5 - 10/25/2001„ODMA\ WORLDOX\ 03 \WDOX \RESOLDTI \R11025P5.WPD /e0 RESOLUTION NO. R- 01- 10- 25 -9F5 WHEREAS, the City of Round Rock desires to retain professional consulting services for a comprehensive study outlining the advantages and disadvantages of establishing a Regional Mobility Authority, and WHEREAS, PBConsult, Inc. has submitted a letter agreement to provide said services, and WHEREAS, the City Council desires to enter into said agreement with PBConsult, Inc., Now Therefore BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ROUND ROCK, TEXAS, That the Mayor is hereby authorized and directed to execute on behalf of the City an Engineering Services Agreement with PBConsult, Inc., for a comprehensive study outlining the advantages and disadvantages of establishing a Regional Mobility Authority, a copy of said agreement being attached hereto as Exhibit "A” and incorporated herein for all purposes. The City Council hereby finds and declares that written notice of the date, hour, place and subject of the meeting at which this Resolution was adopted was posted and that such meeting was open to the public as required by law at all times during which this Resolution and the subject matter hereof were discussed, considered and formally acted upon, all as required by the Open Meetings Act, Chapter 551, Texas Government Code, as amended. A TEST: RESOLVED this 25th day of October, 2001. CHRISTINE R. MARTINEZ, City Sec ROB: T A. S UKA, ., Mayor 2 City of Round Rock, Texas ary September 4, 2001 Tom Word City of Round Rock 2008 Enterprise Drive Round Rock, Texas 78664 Dear Tom, PBConsult Inc. 316 Lakefront Drive Point Venture, 7X 78465 512.267.1346 This note sets out the basis for PBConsult to provide a comprehensive study of SB 342 for the purpose of outlining all advantages and disadvantages to a County or Counties to establish a Regional Mobility Authority. During the last legislative session SB 342 was passed by the Texas legislature and is to be voted on by the Texas voters in the November election. If this bill receives the voters approval it will give authority to a county or counties to petition the Texas Transportation Commission for a permit to establish a Regional Mobility Authority. Obviously there are many aspects to SB 342 that have not been examined in detail. On the surface it would appear that SB 342 provides an excellent opportunity for counties to have a larger say in the development of highways in their districts while providing a financial incentive. PBConsult's scope of work will include the following: 1. Prepare a clear and concise analysis of SB 342 2. Research and develop a detail document describing the advantages and disadvantages of establishing a Regional Mobility Authority (RMA). 3. Provide a tabulation of the total cost for constructing SH45 North, US 183A, and Loop 1 including the cost to each county and city. 4. Provide a tabulation of the anticipated toll revenue from each of these projects. 5. Provide an estimate of the cost of establishing and operating an RMA 6. Document in summary form suitable for City purposes the financial advantages and disadvantages of establishing an RMA. 7. Be available for meetings and presentations as required. The fee budget required for tasks 1 -7 is $73,000 for professional time and a $2000 allowance for direct out of pocket expenses incurred solely in connection with this engagement, a total of $75,000. PBConsult is prepared to begin work immediately and conclude Task 1 -7 in 8 weeks. I will be the primary consultant assisted by other members of the PBConsult staff. Professional time charges will be accrued and billed at our standard commercial rates. Direct expenses will be billed at our cost. PBConsult's standard contracting terms are attached and incorporated herein by reference. These are similar to those covering our previous contract. If these arrangements are satisfactory, please so indicate by signing in the space provided below and returning one copy to me for our files. Very truly yours, Frank Smith Principal Consultant Accepted for the City of Round Rock By: Title: Date: 'Ayo2 10-,P5-01 Tom Word City of Round Rock Page 2 Attachment 1 Billing Rate Ranges for Professional Consulting Staff (effective for 2001 Fiscal Year) Principal Consultant/Senior Project Manager $250 - $325 Consultant $150 - $225 Associate $80 - $130 Staff $55 - $65 An individual's billing rate is set with reference to experience, tenure and salary level. It may change during the course of an assignment in response to a salary adjustment or promotion. All rate ranges are subject to upward adjustment at the beginning of the firm's fiscal year on November 1st. Generally, such adjustments are in line with inflation. Billing rates are inclusive of all costs and profit. Any client- approved subcontractors together with direct out of pocket expenses for travel, maintenance while in travel status, long distance communication charges, production and reproduction of work products and research materials acquired solely in connection with an engagement will be billed in addition at PBConsult's cost. Attachment 2 PB CONSULT, INC. Commercial Terms 1. Services. PBConsult will designate a Project Officer or Manager responsible for overall supervision of the Services performed on your behalf and invoices related thereto. Unless otherwise stated, our fees are based on the hourly rates, at the time the Services are performed, of the persons who actually perform services for you. Any estimate of the total compensation payable to us that is provided to you is our best estimate at that time of the effort that will be required to complete the services based on the information then available to us. Under no circumstances shall it be deemed a maximum fee or a fixed price unless so noted. Our compensation will be determined as stated above. 2. Invoicing and Payment. We will invoice you monthly for the time spent and expenses (billed at cost) incurred on your behalf. Our invoices are due and payable upon receipt. You agree to pay our invoices in full. Partial payment of a disputed invoice is required to the extent of the undisputed portion. You must specifically notify the Project Officer or Manager, in writing, of any objections to our invoices within 10 days of receipt. Without liability, PBConsult reserves the right to withhold delivery of reports, data or testimony (written or oral) if your account is not current. A late payment charge of 1 and'' V2% per month (or the maximum rate permitted by law, whichever is Less) will be added to any amounts more than 30 days past due. If your account becomes overdue beyond 30 days, PBConsult may suspend all work on your behalf and shall recover from you all reasonable costs of collection including attorney's fees and expenses. If you are retaining us on behalf of a third party, you agree to be responsible for payment of our invoices when due unless the third party confirms to us that it accepts such responsibility and acknowledges, in writing, its agreement to these terms and conditions. Depending on the particulars of the project PBConsult is undertaking on your behalf, you may be asked to pay a retainer in advance of our beginning to perform the Services. We will hold the retainer until we render our final invoice, at which time we will apply the retainer to any outstanding balance due. Any portion of the retainer not so applied will be returned to you. 3. Standard of Care; Independent Relationship. PBConsult will perform the Services in accordance with the standard of care normally exercised by consulting firms performing comparable services under similar conditions, judged as of the time the Services are rendered. In the performance of the Services hereunder, PBConsult shall act solely as an independent private consultant, and nothing contained or implied herein shall at any time be construed as constituting a relationship of employer /employee, master /servant, partnership, or principal and agent. 4. Limitation Liability; Insurance. In many cases, we provide advice and professional recommendations to assist a client to render informed decisions. Our work product is not meant to be a substitute for a client's exercise of its own business judgment and any such judgment is made at your election. When our work product includes estimates or opinions of future events or behaviors, we make no guarantees as to the occurrence of such future events or behaviors. UNDER NO CIRCUMSTANCES SHALL PBCONSULT BE LIABLE FOR INDIRECT, CONSEQUENTIAL, SPECIAL, OR EXEMPLARY DAMAGES, INCLUDING BUT NOT LIMITED TO LOSS OF ESTIMATED PROFITS, LOSS OF USE, LOSS OF REVENUE, COST OF CAPITAL, LOSS OF GOODWILL, OR SIMILAR DAMAGES ARISING OUT OF OUR PERFORMANCES OF SERVICES HEREUNDER. The liability of PBConsult shall not exceed amounts paid to PBConsult under this Agreement and should PBConsult not be provided an opportunity to cure any claimed errors or omissions, it shall have no liability. PBConsult's services are performed exclusively for your benefit. Therefore, you will be solely responsible and agree to indemnify, defend and hold PBConsult, its affiliates and their respective officers, directors, employees and agents, harmless against all third party claims, losses, liabilities or expenses, including attorney fees and expenses, arising out of or in any way related to the performance of our services, other than claims for personal injury (including death) or personal property damage to the extent caused by major errors and omissions, gross negligence or willful misconduct of PBConsult's employees. Your responsibility under this paragraph will survive the termination'of our engagement and this Agreement. PBConsult carries all insurance required by statute and a certificate of insurance will be provided upon request. If you request that we obtain any additional insurance, we will do so and will include such expense on our invoice to you. 5. Retention of Intellectual Property Rights. Any and all original material created by PBConsult as part of the Services or submitted as final or interim work products of the Services, including but not limited to ideas, concepts, processes, techniques, know -how, formulas, inventions, software programs, data, and any sequence or structural and organizational aspects of the Services are and shall remain the exclusive property of PBConsult and the City of Round Rock. Any and all third party proprietary materials including software programs submitted as part of the Services shall remain the property of the third party. PBConsult shall have the right to develop and market products that are similar to the deliverables furnished to you, provided it does not contain any of your furnished proprietary information. 6. Confidentiality. It is PBConsult's policy to treat all client information, received in the course of our performing the Services, as confidential. This obligation will not extend to information that (a) is or becomes part of the public domain, (b) is already known to us at the time of disclosure, (c) is received by us from a third party not known by us to be bound to secrecy to you, or (d) we can demonstrate that we have developed independently without use of the confidential information. In the event we receive a subpoena or other validly issued administrative or judicial process requesting or purportedly compelling the production of confidential information, we will use reasonable efforts to give you notice of such mandate immediately and will not take any action to interfere with any efforts by you to pursue legal remedies preventing or limiting disclosure. 7. Conflict. The value of our Service to you is founded, in part, upon our reputation of professionalism and integrity. Our acceptance of any assignment on your behalf is contingent upon the completion of a review for potential conflicts of interest. It is important that you recognize that we may provide similar services for a broad range of other clients, and will be free to do so without creating a conflict of interest as long as we comply with our confidentiality obligations, as noted above. If we determine that a conflict does exist, we will either decline further work or, where appropriate, discuss with you the steps that we propose to take to mitigate the conflict. 8. Choice of Law; Forum. This Agreement shall be governed by, subject to, and construed in all respects in accordance with the laws of the State of Texas without regard to choice of law principles. In the event of any dispute or claim arising out of this Agreement, the parties hereby agree that any lawsuit or other legal claim or action shall be filed in any Williamson County, Texas court or Federal court sitting in Texas. 9. Complete Agreement. Unless otherwise agreed to in writing, these terms shall govern our relationship under this Agreement. We encourage you to raise any questions you may have about them prior to retaining us. If you issue a purchase order for your own internal purposes, you agree that only the terms and conditions of these Commercial Terms apply and that the terms on your purchase order or similar document are null and void. DATE: October 19, 2001 SUBJECT: City Council Meeting - October 25, 2001 ITEM: 9.F.5. Consider a resolution authorizing the Mayor to execute a letter agreement with PBConsult, Inc. for a comprehensive study outlining the advantages and disadvantages of establishing a Regional Mobility Authority. Resource: Jim Nuse, Public Works Director Tom Word, Chief Traffic Engineer History: During the last legislative session SB 342 was passed by the Texas legislature and a constitutional amendment authorizing the provisions of the bill are to be voted on by Texas voters in the November election. If this bill receives the voters' approval, it will give authority to the local government to petition the Texas Transportation Commission for a permit to establish a Regional Mobility Authority. On the surface it would appear that SB 342 provides an excellent opportunity for cities and counties to have a Larger say in the development of highways in their districts while providing a financial incentive. PBConsult's scope of work will include the following: 1) prepare a clear and concise analysis of SB 342; 2) research and develop a detailed document describing the advantages and disadvantages of establishing a Regional Mobility Authority (RMA); 3) provide a tabulation of the total cost for constructing SH 45 North, US 183A, and Loop 1 including the cost to each county and city; 4) provide a tabulation of the anticipated toll revenue from each of these projects; 5) provide an estimate of the cost of establishing and operating an RMA; 6) document in summary form suitable for City purposes, the financial advantages and disadvantages of establishing an RMA; and 7) be available for meetings and presentations as required. The fee budget required for tasks 1 -7 is $73,000 for professional time and a $2000 allowance for direct out of pocket expenses incurred solely in connection with this engagement, a total of $75,000. Funding: Cost: $75,000 Source of funds: Transportation Capital Improvements Program Outside Resources: PBConsult, Inc. ImpactBenefit: To be determined by study. Public Comment: N/A Sponsor: N/A 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 R'- 0/ -10 - ,25 9r5 5,.63 U u� > � �t A Review of Regional Mobility Authorities Submitted to: City of Round Rock By PB Consult Inc. 901 South MoPac Bldg. 2, Suite 595 Austin, TX 78746 512.328.1012 February 2002 RIM PIP9 174 Table of Contents INTRODUCTION CHAPTER 1 CHAPTER 2 CHAPTER 3 CHAPTER 4 CHAPTER 5 City of Round Rock Institutional Options for Mobility Improvements THE NEW RMA LEGISLATION RMA MANAGEMENT — ADMINISTRATIVE OPTIONS KEY FINANCIAL FEASIBILITY ISSUES ADVANTAGES AND DISADVANTAGES NEXT STEPS Introduction —A New Infrastructure Delivery Tool for Central Texas? The purpose of this report is to provide a detailed review of Regional Mobility Authorities and the advantages and disadvantages they present to Counties. The focus will be on Central Texas Toll Road projects. Currently four toll road projects are in various stages of development in Central Texas: SH 130, SH 45, Loop 1, US 183, and the SH45 Southern Extension. As it is generally considered likely that TxDOT will retain control of the SH130 project execution, this report will concentrate on SH 45, Loop 1, and US 183. The SH 45 Southern Extension is an unsolicited proposal to the Texas Turnpike Authority and may be considered as a potential RMA project. 80°/ 70% 60% 50% `m 40% d a 30% 20% 10% 0% City of Round Rock Institutional Options for Mobility Improvements Traffic congestion and related quality of life Issues in Central Texas rank among the state's most serious and fastest - growing concerns. New research by the Texas Transportation Institute indicates that according to multiple measures of urban mobility, traffic congestion in the Austin metropolitan area is fast approaching levels in Dallas -Ft. Worth and Houston. As shown in Figure 1, the increase in the percentage of peak hour congested traffic has grown more steeply in Austin over the past decade than any other metropolitan area in the state. Figure 1. Percentage of Peak -Hour Travel in Congestion in Texas Cities 1991 -1999 1991 1992 1993 1994 1995 1 1996 1997 1998 1999 —4— Houston f Dallas m•MAustin —* —Fort Worth - San Antonio — 6— El Paso --I— Corpus Christi — Brownsville — Laredo That Central Texas is experiencing serious growth - related transportation pains will come as no surprise to policy makers in the City of Round Rock or adjacent jurisdictions. The encouraging news is that recent state legislation will make it possible for local metropolitan areas — including those in Central Texas —to address their transportation problems more control and greater resources than in the recent past. In fact, the very characteristics that contribute to this region's critical transportation problems —rapid population and economic growth —are the same ones that make the prospects of applying this new solution approach particularly favorable. Analyzed in this briefing are the implications of this new legislation (SB 342), which enables a county or adjoining counties to establish a Regional Mobility Authority (RMA). RMAs offer local governments many advantages over existing institutional structures in terms of revenue generation, retention, and allocation. Moreover, they do so without losing the ability to access state -level financial resources. 2 City of Round Rock Institutional Options for Mobility Improvements Under this innovative legislation, RMAs will have the ability to develop, build and operate toll roads within their jurisdictions. Unlike existing Regional Toll Authorities (RTAs), RMAs will be able to accept not only TxDOT loans, which must be repaid, but also outright TxDOT grants. In addition, RMAs will be able to retain any excess toll revenues for expenditure on a wide range of transportation improvements, including mass transit and air quality projects. Chapter 1 of this briefing discusses the new legislation itself. While the prospect of establishing an RMA in Central Texas is intriguing, Chapter 2 of this briefing points out that establishing, financing, operating and managing a toll facility is technically and financially complex. As such, it suggests several options for RMA administration and management. Finally, Chapter 3 summarizes the financial considerations that will be key, if not overriding, factors in deciding whether to establish an RMA. A new approach to regional transportation problems has emerged from the 77 Legislative Session. Rapid population growth combined with even faster growth in NAFTA- related truck traffic are among the factors contributing to an estimated $85 billion shortfall in transportation revenues over the next ten years (see Figure 2). Despite critical transportation needs, the public has been decidedly unsupportive of an increase in motor fuels taxes. Another approach, Governor Perry's plan to sell road bonds and pay them off with future federal aid, was rejected in the House because of lawmakers' perception that it amounted to "mortgaging the future." $150 0 5100 m N $50 $0 Figure 2. Estimated Funding Shortfall for TxDOT Projects, 2002 -2012 $200 TxDOT Needs Estimate TxDOT Revenue Estimate What has emerged from the Legislature is neither a major infusion of new state money nor a significantly enhanced ability to leverage federal aid. Rather, it is an innovative approach to creating, funding, and governing regional authorities that develop and oversee the provision of transportation infrastructure. The City of Round Rock Institutional Options for Mobility Improvements Chapter 1. The New RMA Legislation 3 legislature passed and the Governor signed a bill for a constitutional amendment to create a Texas Mobility Fund that allows the Texas Department of Transportation (TxDOT) to issue bonds for the accelerated construction of major highway projects. Senate Bill 342 enables a county or adjoining counties to establish an RMA. New RMAs will have the ability to develop, build and operate toll roads within their jurisdictions. A key factor that distinguishes RMAs from the RTAs already in existence is that RMAs may receive not only loans, but also outright grants from TxDOT. RTAs in contrast, must repay any grant funding with their own proceeds. RMAs would be able to accept state "seed money" with which to kick off a toll project. They are also intended to be able to issue bonds with which to finance construction. The ability to utilize any excess revenues for other transportation purposes is another key distinction between RMAs and RTAs. Any revenues beyond those required to service debt, maintain coverage ratios and operate and maintain the facility could be used by RMAs to fund other regional transportation projects, including road construction, environmental enhancements, or public transportation. Meanwhile, RTAs are limited to using any excess revenues for purposes within the narrowly defined toll system over which they have jurisdiction.' Along with this legislation comes the abolition of the board of directors of the Texas Turnpike Authority (TTA) and the transfer of all its functions, powers and authorities to the Texas Transportation Commission (TxTC). Although creating an RMA will require TxTC approval, the lawmakers who sponsored the legislation and transportation coalitions representing most metropolitan areas in Texas feel that this development is a gain for local and regional control. In short, the underlying premise is that regional boards are often better able to decide local transportation priorities and gain support for their plans than state officials and agencies. RMAs are contrasted with RTAs in Table 1, while Table 2 compares three alternative scenarios under which Central Texas's major mobility improvements could be implemented: (1) by TxTC itself; (2) by TxTC partnered with an RMA; or (3) by TxTC partnered with an RTA. It is notable that a key sentence was omitted from SB 342. That sentence would have provided RMAS with the same authority to issue debt and to contract for design /build services as had been extended to the Texas Turnpike Authonty. TxDOTs General Counsel has stated that TxDOT has discussed the absence of this provision with key legislators, who have assured TxDOT that it was not their intent to leave out the sentence. Moreover, they indicated that a correction will be forthcoming this legislative session. Given this understanding, TxDOT plans to write the rules pertaining to RMAS to Imply that RMAS do have thls authority. ThIs Is Important because RMAS would not be able to function effectively without such powers. 4 City of Round Rock Institutional Options for Mobility Improvements This new legislation has the potential to generate hundreds of millions of new dollars for a wide range of regionally prioritized transportation- related improvements. Members of the TxTC have openly supported this new RMA legislation. TxDOT is in the formative stages of creating the structure to carry out the RMA program and the TxTC intends to adopt rules in early 2002. SB 342's Implications for Central Texas • SB 342 gives local governments the long - awaited ability to exercise more control over regional transportation revenue generation and spending. • SB 342 allows RMAs to retain any excess revenues from toll operations, which they may devote to a wide range of transportation projects, including air quality and mass transit programs. • SB 342 offers local governments an opportunity to recoup the right of way and utilities investments they are required to contribute whenever toll facilities are built in their jurisdictions (i.e., under the aegis of TxDOT or a regional toll authority). Under the RMA option, local governments can be "repaid" for these contributions insofar as they control resulting revenues. No such repayments are possible under the alternatives. ■ RMAs allow local governments to exercise more control over toll facilities in their jurisdictions —from setting toll rates to determining facilities' aesthetic quality. 5 City of Round Rock Institutional Options for Mobility Improvements Although they offer significant advantages, the decision to pursue an RMA also entails a substantial level of commitment and responsibility on the part of local officials. Chapter 2 describes are some of the technical and policy issues involved in RMA establishment, facility development, operations, and management. MN MI MN MO MI O - -- SE - -- NM M MO NM MN Regional Mobility Authority (RMA) Regional Tollway Authority (RTA) Creation An RMA may be created by order of the Texas Transportation Commission (TxTC) "for the purposes of constructing, main- taining, and operating a Turnpike project." However, TxTC may not create an RMA in a county that was part of an RTA as of November 6, 2001 Created by resolution of the commissioners courts of at least one county with a population exceeding 300,000 plus one or more adjoining counties Creation is subject to TxTC approval, which requires the following: • A feasibility study • Resolutions of support from the metropolitan planning organization (MPO) and each municipality in member counties • A finding by TxTC that the RTA can construct the turnpike faster than TxDOT could and that such action will not duplicate or compromise any TxDOT effort Geographic Boundaries Each county in which the proposed turnpike is to be located is automatically included in the RMA At minimum, one county with a population exceeding 300,000 plus one adjoining county An RTA may extend its turnpike into other counties that are not RTA members Board Membership Commissioners court of each member county in which turnpike is proposed appoints one member. In addition, each county containing an operating turnpike appoints additional members, as follows: • If only one county, county appoints two additional members • If two counties, each appoints one additional member • If three or more counties, each appoints two additional members Governor also appoints one member, who serves as chairperson Governor appoints three members, and the commissioners court of each member county appoints one member Functions and Powers • May accept TxTC grants or loans • May issue revenue bonds (subject to Attorney General clarification) • May purchase and contract • Subject to TxTC rules, may spend surplus toll revenue on other transportation- related projects, including toll or toll -free projects of cities, counties, and other governmental entities. May also spend money on environmental enhancements • With TxTC approval, may convert part of the free state highway system into a turnpike • May condemn and using county authority ■ May purchase and contract • Without state supervision, may spend surplus toll revenue on other turnpikes • With TxTC and Governor's approval, may convert part of the free state highway system into a turnpike • May accept TxTC loans • May NOT accept TxTC or TxDOT grants • May issue revenue bonds ■ May condemn land 6 City of Round Rock Institutional Options for Mobility Improvements Table 1. Regional Mobility Authorities vs. Regional Tollway Authorities: A Comparison IIMII 11111 NM MI NB MN ME MI City of Round Rock Institutional Options for Mobility Improvements Table 2. Institutional Scenarios for Mobility Improvement Implementation TxTC Undertakes Improvements Itself TxTC Partners with a newly formed RMA TxTC Partners with an RTA Governance SB 342 abolishes the Texas Turnpike Authority's (TTA) board of directors and transfers TTA's powers, functions and authorities to the TxTC RMA boards are dominated by locally appointed members, but TxTC retains control over key functions. By creating an RTA now, Travis County and one or more adjoining counties would preempt TxTC from pursuing the RMA option later. Degree of TxTC Control Ultimately, TxTC controls which entity or entities participate in mega - project improvements. Should TxTC wish to retain exclusive control, it can simply refuse to allow creation of either an RMA or an RTA An RMA is a vehicle via which TxTC transfers some control to a locally- dominated board, while reserving key functions. If TxTC is amenable to a greater degree of local control over SH 130, it can allow Travis County and an adjoining county to create an RTA —now or in the future. Financing Powers & Resources SB 342 authorizes TxTC to issue bonds; this statute also allows TxTC to grant money for toll projects to RMAs (but not RTAs) without requiring repayment Unlike RTAs, whose operational missions are limited to turnpikes, RMAs ,may sponsor a wide range of "transportation - related" projects Unlike RTAs, which must repay any TxDOT funding support, RMAs may accept grants RMAs may issue bonds (subject to clarification by the Attorney General) for a wide range of transportation- related projects, including but not limited to, turnpikes. RTAs have independent authority with which to issue bonds. As such, they may be able to construct turnpike segments that without TxTC approval would not be built. RTAs may not receive TxDOT grants, though they may accept repayable loans. Control over Construction & Use of Surplus Revenues TxTC would control all aspects of project development and construction if TxTC undertook a toll project on its own Surplus revenues resulting from a TxTC- sponsored and administered toll project revert to general statewide transportation purposes Insofar as SB 342 gives RMAs purchasing and contracting authority, it can be inferred that TxTC would support RMAs in controlling project construction. Further, since as SB 432 allows for an RMA to use surplus toll revenues from one project to finance other projects, it can be inferred that RMAs may retain surplus revenues from the area generated. Any excess revenues resulting from RTA operations must be spent on the turnpike or system in which they were generated 7 Chapter 2. RMA Management— Administrative Options As noted in Chapter 1, creation of an RMA to develop, manage, operate and maintain toll facilities could provide local communities in Central Texas with the revenue and authority needed to address regional transportation problems directly. However, to successfully implement an RMA requires both an understanding of the technical, financial and institutional complexities of toll facility management, as well as specific expertise in this area. While RMAs offer the prospect of greater control, they also require higher levels of responsibility and commitment on the part of local government(s). Issuing debt, managing large and complex design and construction projects, developing electronic toll collection systems, and setting toll rates are all functions likely to draw considerable public interest, along with demands for accountability. The State of Texas offers examples of successful toll operations —the North Texas Tollway Authority (NTTA), in the Dallas -Fort Worth area; and the Harris County Toll Road Authority (HCTRA), in the Houston metropolitan area. Both of these toll authorities have enhanced transportation services for the traveling public by adhering to sound business principles and management practices. The NTTA, for example, reported a strong financial position in 2000, including revenue growth of over 20 percent in 8 City of Round Rock Institutional Options for Mobility Improvements 1999. This performance was fueled by increased use of electronic technologies, the provision of additional lane miles, and increased daily toll transactions. The NTTA is also an excellent example of joint cooperation with TxDOT on a project – the President George Bush Turnpike (GBT) in Dallas. The financing of the GBT is based upon a unique partnership of NTTA, TxDOT and the Federal Highway Administration. The NTTA financed the project costs by a combination of issuing bonds which are payable from the tolls of the entire Dallas North Tollway System, making a contribution from its capital improvement fund and receiving a loan from TxDOT of federal highway funds which will also be repaid from tolls on a subordinate basis. Managing a start-up a toll facility requires management and technical skills in a substantial number of disciplines. In addition to the fundamental planning, engineering and construction issues there are also extensive requirements for expertise in economic and financial analysis; procurement and contracting; toll system technology and operations; and bond and treasury management. The issues associated with funding these projects on a project finance basis cause a substantially different approaches in virtually from all aspects from procurement through operations. For those areas where RMAs are determined to be a desirable solution, an important consideration is RMA organization and staffing. Because a successful RMA has a multitude of requirements it is important to consider how this start-up organization can be implemented. A wide variety of options are available, some of the broad categories are described below. Board of Directors Hires Executive Director and Staff Under this structure, the Board of Directors would hire an executive director and staff to carry out all aspects of toll operations. An advantage of this approach is that it is consistent with how governmental organizations are typically managed. It would also provide the Board with the greatest hands -on involvement in all staff selection. A major drawback of this approach is that it would require intense time commitments on the part of Board members. As described above there are a considerable range of skills that are specific to this type of organization, so this would also initially involve a "learning curve" by the Board to assure they will make informed staff appointments. In order to assure the projects are expedited, it would require substantial effort and cost to locate and hire staff with the necessary skills to guide and execute this type of program. Further, because there are no existing tollroads in the Central Texas area, even with a thorough 9 City of Round Rock Institutional Options for Mobility Improvements recruitment program it would be difficult to find local staff that could quickly and effectively leverage the "lessons learned" of an experienced, well - qualified program manager or consultant team. A start-up organization such as this has unique requirements that even employees who have worked with existing organizations such as NTTA or HCTRA may not have experienced. Most of the large, long -time toll road agencies are organized in this manner. Board of Directors Hires Executive Director, Who in Turn Hires Consultants A second approach would entail the Board hiring an executive director, who acts as the Board liaison and contracts with a consultant(s) to execute much of the work. In this case, the executive director's expertise would continue to be a critical element. However, under this scenario the executive director can rely on the consultant(s) for the specific tollroad and project finance expertise, and can instead focus on the local circumstances and associated issues. This scenario increases the flexibility for the RMA and allows the executive director to tap into the best expertise as needed. Also, this approach would not require the same level of time commitment on the part of the Board members. Management of price and quality of services through negotiated procurement and the ability to easily make changes when needed is another advantage of this approach. Some of the type of functions a consulting firm might assume include: • Oversight of the phases of RMA establishment and operations, including development planning, preconstruction, and construction; • Development of the sophisticated economic and financial analyses that will be required at various stages of RMA establishment and development; • Project feasibility and financing; • Procurement and contract administration; • Operations, including technology deployment and procurement, maintenance programming and provision, and customer service and quality assurance. There are several start-up organizations similar to the RMAs which have very successfully used an outsourcing approach for the majority of their functions. These include the E-470 Public Highway Authority in Colorado, Orlando Orange County Expressway Authority in Florida, and Transportation Corridor Agencies in California. The Northwest Parkway Public Highway Authority in Colorado completed their project financing in June 2001. They are the most recent example that has demonstrated how a public Board combined with an Executive Director can effectively use consultants to both facilitate and accelerate the delivery of a project. 10 City of Round Rock Institutional Options for Mobility Improvements Program Management Consultant A third option would entail hiring a qualified consultant equipped with the full set of skills to manage the overall program cost - effectively. This option would require the least amount of effort and time of the Board. This program management consultant (PMC) would serve at the Board's direction. All of the functions described above could be outsourced to a PMC, even including the board liaison /executive director position. This type of approach has been used at entities like the Southern Connector project in South Carolina. This approach is also reflected in the fully privatized projects such as the SR91 Express Lanes in California and the Dulles Greenway in Virginia and the 407 Tollroads in Toronto, Canada. Consultant Advantages Either scenario that uses a largely consultant staff has these advantages. ■ It enables RMA establishment and operations at the earliest feasible date as expertise can be accessed without delay when needed; • It would provide the newly formed RMA immediate access to expertise in toll facility management and operations; • It would allow meaningful Board input without excessive and onerous demand on members' time; • It provides maximum flexibility for a start-up organization. • As the RMA moved beyond the development These are major categories of approaches; there stages, the Board always has the option to are a variety of hybrid approaches that can be hire its own staff to replace certain of the developed to meet the specific needs of the RMA. consultant functions. That said, the expertise and quality of the consultant will determine the entity's successful establishment and ultimate viability. Therefore, choosing the right consultant, and developing the right contract is essential to obtain these benefits. 11 City of Round Rock Institutional Options for Mobility Improvements Chapter 3. Key Financial Feasibility Issues Financial feasibility of any toll road is of utmost importance. To make a preliminary assessment of the financial feasibility of the projects for this study, PB Consult received cost and revenue information from the TTA. The estimated cost for constructing, maintaining and operating SH 45, Loop 1, and US 183A have been provided by the TTA from their latest published numbers. The TTA is currently working on updating the cost and revenue numbers and those numbers will be incorporated when complete. TTA expects most of the cost estimates as well as the revenue projections to increase. Because the TTA has been developing these projects for an extended period of time, a variety of revenue and project cost estimates have been prepared. In June 2000, the TTA submitted its application for federal credit assistance under the Transportation Infrastructure Finance and Innovation Act of 1998 ( TIFIA). As this was the most comprehensive and recent presentation of most numbers, it was used as the "control totals" for the costs. However, the TIFIA application was prepared as a single project application for the Central Texas Turnpike Project which included four individual components: SH 45, Loop 1, US 183A and SH 130. TTA was not able to provide PB Consult with the individual breakdown of how the cost (except for the hard construction costs) and revenue items were distributed among the City of Round Rock Institutional Options for Mobility Improvements 12 projects. At the suggestion of the TTA, the remaining cost elements were calculated for each of the component projects using a pro -rata assignment based on the length of each component project vis the entire project as defined in the TIFIA application. Although it would have been desirable to have specific estimates of cost for individual items of work for each project, the calculated information is considered adequate for this report. This is particularly true for this interim report, where revised cost and revenue projections are expected from TTA in the near future. The revenue projections and toll rates available for the SH 45 /Loop 1 and US 183A projects are especially dated, based on preliminary reports prepared in July 1999 and August 1998, respectively. At the time of this report a substantial amount of development work has been completed by the TTA on these roads. The Record of Decision (ROD) has been received for the environmental clearances, and most of the preliminary engineering has been completed. The main responsibility for the purchase of right of way for these projects lies with the cities and counties of Williamson and Travis under minute orders which were signed with TxDOT in the early planning stages for these roads and prior to their designation as toll roads. Table 3. Cost Breakdown for SH 45 /Loop 1 and US 183A Cost Element SH 45 /Loop 1 US 183 -A Feasibility Studies $1,408,000 $768,000 Preliminary Engineering 8,870,400 4,838,400 Environmental Assessment 1,584,000 864,000 Construction Engineering /Inspection 28,089,600 15,321,600 Project Management 13,939,200 7,603,200 Construction Costs /Contingencies 643,709,375 205,987,000 TOTAL $697,600,575 $235,382,200 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 CAPITAL, OPERATION AND MAINTENANCE COSTS In this section estimates for capital, operations and maintenance costs are presented. These are rough cost allocations based on guidance from TTA. If a decision is made to move forward with an RMA, a thorough review of the basis for the costs as well as the components and phasing would be required. City of Round Rock Institutional Options for Mobility Improvements Capital Costs Based on the cost information presented in the TIFIA application and conversations with TxDOT officials, a cost breakdown was prepared for SH 45 /Loop 1 and US 183A (presented in Table 3). The total capital cost (excluding right of way and utilities) for SH 45 /Loop 1 and US 183A were $697.6 million and $235.4 million, respectively. These totals do not include the costs related to financing such as cost of issuance, funding capitalized interest and funding of a debt service reserve fund. Table 4 shows the latest cost estimates from TTA for the responsibilities for right of way and utilities by the cities and counties. 13 Under the current TTA approach, these $455 million in costs would not be reimbursed to the cities and counties. If an RMA is used, these outlays could be reimbursed to the jurisdictions from excess cash flow after other debt obligations are met. City of Round Rock Institutional Options for Mobility Improvements Table 4. TTA Estimates for County Right of Way and Utility Responsibility SH45 Loop 1 US183A TOTAL Right -of -Way 252 million $62 million $55 million $369 million Utilities $53 million $17.5 million $16 million $86 million 14 Operations and Maintenance Costs Figure 3 shows allocated estimates for annual operations and maintenance expenses for SH 45 /Loop 1 and US 183A. These expenses were derived from the estimates for the entire project presented in the TTA TIFIA application using a miles -based pro -rata allocation. The average annual increase in operations and maintenance for SH 45 /Loops and US 183A is two percent. 14,000,000 12,000,000 1 0,000,000 8,000,000 6,000,000 4,000,000 2,000,000 Figure 3. Estimated Operations and Maintenance Costs ® US 183 -A • SH 45 /Loop 1 ry6 pb eG ��� � ryp 'L ryO . � R � 0 \ co � , s 6 20 0 ry0 1 99 99 ryO rt6 20 6 0 ryo 6 ry vO , 66 6 6 60 6 6 0 95) pq. Year 15 City of Round Rock Institutional Options for Mobility Improvements REVENUE ESTIMATES The revenue numbers used in this analysis were based on the estimates provided in the SH 45 /Loop 1 Initial Feasibility Assessment performed in 1999, and the 1998 US 183A Traffic and Revenue Report. These estimates are dated; the new traffic and revenue studies are underway and expected to be completed within the next thirty days. Therefore, the numbers used in the financial analysis for this interim report are intended to be indicative. The revenue estimates in the above - mentioned reports were based upon projected average weekday traffic, the composition of the traffic (trucks, cars, etc.) and the toll structure associated with each vehicle type. The average weekday traffic was converted into average annual daily traffic (AADT) using the assumption that weekend traffic levels would be approximately one -half of weekday traffic. This conversion resulted in approximately 300 equivalent weekdays per year. It was assumed that trucks would, on average, be charged three times the passenger car toll rate and at the outset represent two percent of the traffic, increasing to five percent by 2020. SH 45 /Loop 1 The feasibility assessment report contained revenue estimates for two different proposed alignments, an "L" alignment and a "T" alignment. The analysis in this initial feasibility report suggested that the "T" alignment would generate a much higher revenue stream than City of Round Rock Institutional Options for Mobility Improvements 16 would the "L" alignment; the revenue numbers used for analysis here are those associated with the "T" alignment. According to the report, annual revenues for the "T" alignment is expected to increase from $5.9 million in 2005 to $67.0 million in 2020. These estimates took into account the effect of ramp - up in the early years of operations. Traffic forecasts were extended beyond 2020 using a straight -line annual increase, and from 2020 to 2034 (the end of the analysis period in the 1999 report), gross toll revenue was projected to increase at an average annual rate of six percent. US 183A The 1998 Traffic and Revenue Report for US 183A projected toll revenues assuming a constant toll rate and assuming toll increases in 2010 and 2020. In the increasing toll rate scenario, the annual gross toll revenues would be 45 to 50 percent greater than the constant toll scenario, and 62 to 65 percent greater between 2020 and 2034. In performing this analysis, results from the increasing toll rate scenario were used. Based on the 1998 report, gross toll revenue in 2006 is expected to be $3.2 million, and will increase to $23.0 million by 2020 and $47.7 million by 2034. This is shown in Figure 4. 0 E 0 icinnsuit 225,000,000 200,000,000 175,000,000 150,000,000 125,000,000 100,000,000 75,000,000 50,000,000 25,000,000 Figure 4. Estimated Toll Revenue ❑US 183 -A El SH 45 /Loop 1 City of Round Rock Institutional Options for Mobility Improvements 17 9 95�� a o a ry rt, v� ,55 ry °"a ,p 9 52 ,45 95 0 v 5s' 95 ,0 , 95 9�v Year FINANCIAL ANALYSIS Using the cost and revenue estimates provided by TTA, several financial feasibility scenarios were generated to determine if the projects could be fully financed using toll revenues or what assistance would be required. It is essential to keep in mind two crucial aspects regarding these preliminary financial runs: 1. These models were prepared using the best available information from TTA to give an initial assessment of the financial prospects for these projects. However, it is known that revised revenue and cost estimates will be provided shortly by TTA. 2. Due to the preliminary nature of this report, no review was made as to the reasonableness of the schedules, cost and revenue projections provided by TTA. If the projects as developed as RMAs there may be certain material adjustments necessary to the current assumptions. Assumptions In support of this preliminary study, assumptions regarding revenue, costs, and financing were made. City of Round Rock Institutional Options for Mobility Improvements 18 Revenue As discussed above the revenue estimates used in this analysis were based on prior studies done for the Texas Turnpike Authority. Where necessary, minor adjustments and extrapolations were used to generate estimates in accordance with the current schedules for these projects, which is slightly different from the ones analyzed in these earlier reports. Costs The costs that were used in our analysis derive from information found in the TIFIA application as well as from conversations with officials at the TTA Division of TxDOT. In conducting the analysis, it was necessary to subordinate payment for the right -of -way acquisitions and payments for costs already expended.. Financing In modeling for financial feasibility, certain assumptions regarding, interest rates, cost of issuance, debt service reserve requirements, and other financing - related parameters had to be made. Table 5 below summarizes some of the assumptions that were made. City of Round Rock Institutional Options for Mobility Improvements Table 5. Assumptions in Modeling for Financial Feasibility Interest Rates • 6 - 6.5 percent on 40 -year Senior Bonds depending on maturities. • 6 percent on the 35 -year TIFIA loan. Cost of Issuance • 1 percent on Senior Bonds Debt Service Reserve Requirements • 10 percent of Par or Maximum Annual Debt Service for Senior Bonds SUMMARY OF RESULTS For this preliminary analysis, financial feasibility was defined as the ability to structure financing for the project such that payment —after operations and maintenance expenses —could be met at a minimum of 1.6x coverage on senior debt and 1.0x on the TIFIA loan. Coverage is a measure of net revenue compared to debt service payments due in any year. However, depending on the debt structure and whether operations and maintenance costs were supported by TxDOT or the jurisdictions, it is likely that the required coverages would need to be higher. 19 In cases where the toll revenue stream could not support `feasible' financing, the amount of supplemental funds (TxDOT loan not repaid from toll revenue) that would be required to meet the test of financial feasibility was calculated. When the revised numbers are received from TxDOT for the cost and revenue additional financial analysis will be conducted. 5H45 /Loop 1 The total capital cost for SH 45 /Loop 1 to be financed with the issue of debt was $649.6 million. This excludes $384.7 million in right of way and utility costs and $48.0 million in costs already expended on the project. For this preliminary analysis, in order to achieve the target coverages stated above, it was necessary to also supplement the senior bonds and TIFIA loan with a $203.0 million TxDOT loan (not repaid from toll revenues). US 183A Sources Minimum Coverages The total capital cost for US 183 -A to be financed with the issue of debt was $227.4 million. This excludes $70.4 million in right of way and utility costs and $8.0 million in costs already expended on the project. Sources Minimum Coverages City of Round Rock Institutional Options for Mobility Improvements Senior Bonds TIFIA Loan DSR Earnings Earnings from Investments TxDOT Loan Required TOTAL $255,577,594 150,000,000 8,068,569 32,927,155 203,027,258 649,600,575 Minimum Coverage on Senior Debt Minimum Coverage on TIFIA Loan Minimum Coverage on Combined Debt 1.60x 1.03x 1.02x 20 Using the 1998 toll revenue projections, in order to finance the project costs and meet the criteria for feasibility, financing had to be supplemented by a TxDOT loan of $84.7 million for construction. Senior Bonds TIFIA Loan DSR Earnings Earnings from Investments TxDOT Loan Required TOTAL 81,237,686 50,000,000 1,538,256 9,956,258 84,650,000 227,382,200 Minimum Coverage on Senior Debt Minimum Coverage on TIFIA Loan Minimum Coverage on Combined Debt 1.60x 1.04x 1.03x Chapter 4. Advantages and Disadvantages One specific issue relates to the City of Round Rock perspective on an RMA. The commissioners courts of the counties appoint the members of the RMA Board, except that the governor appoints the chair of the RMA Board. However, particularly for the Central Texas projects, the cities within the jurisdiction of the RMAs will be a major partner and may be requested to provide right of way and utility financing for the designated transportation corridors. Repayment of the investment made by the cities will be a negotiated matter between the counties and the cities. Since the legislation designates the counties that encompass the toll projects as the owners and operators of the RMA, there is no liability on the part of the cities for the debt incurred by the RMA. Another item to consider is the nature of the financing for these projects. Other similar tollroad entities across the country handle these financings on a "standalone" basis that would not obligate the full credit and faith of the county for the issuance of the tollroad bonds. Under this approach, RMA bonds to finance toll roads would be financed with toll revenues, loans from TxDOT, and /or TxDOT grants along with the ROW and utility contributions from the cities and counties. With the toll revenues as the full commitment for repayment of the bonds, there is no recourse to the general tax City of Round Rock Institutional Options for Mobility Improvements 21 revenues of the participating counties and no requirement for voter approval. The advantages and disadvantages that follow reflect our current assessment of the intent of SB342. The rules which are promulgated by TxDOT could materially alter the impact of the legislation. ADVANTAGES • The counties and cities involved in an RMA would have more direct control over the transportation network in their area. • RMAs will increase the level of coordination among the transportation plans of the Cities and Counties that are within the RMA jurisdiction. • An RMA has an advantage over the similar Regional Toll Authority because RMAs are allowed to receive grants from TxDOT which do not require repayment. • The cities and counties have estimated right of way and utility contributions of $455 million. Under the current TTA plan, these obligations would not be repaid. By using the RMA approach, excess cash flows could be used for repayments to the jurisdictions. • RMAs could use any excess toll proceeds for any related transportation items which could extend to transit or air quality. • RMAs would be in control of setting toll rates. • RMAs could enhance the long range transportation plans to meet the needs in their area. DISADVANTAGES • RMAs would be directly responsible for the development of toll roads in their jurisdiction. The introduction of tollroads into an area not familiar with the practice of tolling requires an investment in public education and involvement. City of Round Rock Institutional Options for Mobility Improvements 22 • The RMA would be responsible for issuance of debt to finance road. It has been stated by the originators of the legislation that it is intended that an RMA have the same type of powers afforded the TTA, such as ability of issue debt. As a standalone entity, even with support from TxDOT, it will be incumbent upon the organization to convince the capital markets of the capability and stability of the RMA organization. • RMA would be directly responsible to the citizens in their jurisdiction. In order to finance a start -up tollroad requires the ability to balance the appropriate level of initial capital costs, investment in right -of- way and ongoing toll rates. Chapter 5. Next Steps As this is an interim report awaiting further information from TxDOT, it will be necessary to receive the information pending from TxDOT to complete this document. Some of the significant remaining activities include: • Assess the rules issued by TxDOT and determine how they impact implementation issues. City of Round Rock Institutional Options for Mobility Improvements 23 • Review the updated traffic and revenue information provided by TTA and incorporate all new assumptions into financial analysis. • Finalize the report including an outline of necessary next step activities required for implementation of an RMA.