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Evolving Debt Finance Practices for Surface Transportation (2017)

Chapter: Appendix C - Detailed State Responses to Qualitative Survey Questions

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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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Suggested Citation:"Appendix C - Detailed State Responses to Qualitative Survey Questions." National Academies of Sciences, Engineering, and Medicine. 2017. Evolving Debt Finance Practices for Surface Transportation. Washington, DC: The National Academies Press. doi: 10.17226/24801.
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60 Appendix C detailed State Responses to Qualitative Survey Questions State-issued debt outstanding for highway/roadway investment purposes (including bridges and tunnels)? State Comments on Outstanding Debt for Highway, Bridge and Tunnel Infrastructure Alabama $899 million Alaska $400 million Arizona $2,567 million Arkansas $995.49 million Colorado The state currently has outstanding debt in the form of TRANS for the I-25 TREX project, approved by voters in the early 2000s. There are also obligations issued by state-owned enterprises such as HPTE and the Bridge Enterprise, but these are not direct obligations of the state. Connecticut $4,700 million Delaware $861 million Florida $4,400 million bonds; $57.9 million SIB; $316.9 million P3 debt Georgia $3,263.7 million Idaho $594.5 million Illinois Data are not yet available. Kentucky $137 million Louisiana $3,384,620,779 Maryland $2,020 million Massachusetts $23,800 million Michigan $1,689.5 million Minnesota $1,703 million Mississippi $1,230 million Missouri $2,509.62 million Nevada $486,140,000 New Hampshire $632,364,242 New Jersey 16,400 million TTF only New Mexico Highway Improvements North Carolina $60 million North Dakota $20.3 million Ohio $1,600 million Pennsylvania $849 million highway and bridge South Carolina $274,590,000 Texas $20,400 million Utah $2,763 million Washington $7,220.6 million West Virginia Turnpike and General Obligation Wisconsin $5,502.7 million

61 Briefly describe what percent of state fiscal year 2015 transportation revenues within the purview of the state DOT were utilized for debt service payments (please exclude refundings and other one-time restructuring payments). In particular, please describe the extent to which this includes toll revenue debt of a toll entity housed within the DOT or other special circumstances: State Comments on transportation revenues within the purview of the state DOT used for debt service payments Alabama All outstanding debt, except an outstanding short term placement of $21,590,000, is GARVEE debt with a parity pledge of state gasoline tax revenues. Alaska The only debt outstanding in 2015 related to DOT projects was either general obligation bonds or Alaska International Airport System Revenue Bonds. The state has the legal authority, but has not yet issued up to $300 million of toll revenue bonds and entered into a TIFIA loan for up to $400 million for a toll bridge project. Arizona Although ADOT has the authority to toll, Arizona does not currently have any toll facilities. Arkansas 4 cents of diesel tax is used for GARVEE debt service and 1/2 cent sales tax is used for other debt. Colorado The debt service payments listed above represent TRANS bonds that are due to mature in the next two years. These bonds do not include toll revenue debt. Debt associated with the High Performance Transportation Enterprise was not included in the above percentage. Connecticut Debt Service is paid by State Treasurer, Percent of Revenues utilized for Debt Service was about 33.8% Florida Percent is approximately 11.6% overall, with 2.9% from toll revenue debt. Georgia 23.3% of state motor fuel funds were used for debt service in 2015. This does not include the federal portion of GARVEE bonds outstanding as well as TIFIA and other toll backed debt which is issued through a separate toll authority. Also, the debt ratio will begin to come down in FY 16 going forward as additional transportation revenue was passed by the legislature which became effective in FY 16. Idaho Idaho is limited to debt service not being more than 30% of federal obligation authority. Currently Idaho has debt service of about 21% of the Federal OA. Federal funds make up about 50% of total funding for the department. Illinois Does not include Toll revenue debt issued by the Toll Highway Authority; There are two categories of General Obligation debt authorized for highways, bridges, and structures—Series A and Series D. The Series A bonds have their debt service provided by the Road Fund, which is a fund administered by the Department. Series D bond proceeds can be used for basically the same purposes as Series A bond proceeds, but the debt service comes from a combination of the Capital Projects Fund and the General Revenue Fund, neither of which are administered by the Department. The percentage cited above is for debt service transfers (pre-funding the annual debt service payment) for Series A bonds as a percent of State source revenue for the Road and State Construction Account Fund (both used for pay as you go highway projects). Debt service on Series D bonds is supported (also pre-funded) by transfers. However, the fund(s) that support those transfers also support the debt service on bonds that have been authorized for other transportation purposes (transit, railroads, and aeronautics) as well as for other non-transportation purposes (State facilities, school construction, etc.). The transfers for these bonds come primarily from the Capital Projects Fund or the General Revenue Fund. (continued on next page)

62 Oklahoma There are two types of debt—GARVEE debt which is paid for with future federal revenue and state issued debt paid for with Income Tax revenue. Pennsylvania No toll revenue. All toll roads are at a commission level outside the prevue of PennDOT Tennessee Tennessee has not issued bonds since the 1970s. We authorize but do not issue. There are no debt service payments. Texas TxDOT has three statewide transportation financing programs. Each has a different repayment source including the general revenues of the state. The number above reflects the amount of debt service relative to total state appropriations. Utah Utah does not have toll roads. Virginia Debt Service in the Commonwealth Transportation Fund Budget includes payments for one toll facility within VDOT. This is debt for the Coleman Bridge. The debt service payments for the toll facility totaled $3.2 million in FY 2015 with a total debt service commitment of $339.4 million. Washington Includes $518,775,000 in Triple Pledge bonds issued to toll finance the construction of the SR 520 Floating Bridge project. West Virginia Division of Highways—$1.15B Revenue, $37M Debt. Turnpike—$95M Revenue, $10.6M Debt. Wisconsin WisDOT does not have toll roads. The percentage is total debt service paid by the Transportation Fund (both transportation revenue bonds and general obligation bonds) divided by gross transportation revenue. Wyoming Transportation bonds were issued for initial construction of the state highway system. Though state law and the state constitution allow issuing bonds, this has not been done for many years for statewide use. Airport boards and other infrastructure boards have used bonds on a local basis through the years. State Comments on transportation revenues within the purview of the state DOT used for debt service payments Nevada We have no toll revenue New Hampshire The majority of the outstanding debt is related to toll revenue of a toll entity housed within the DOT (68%) along with GARVEE bonds paid with FHWA obligational authority (25%). The remaining is associated with General Obligation debt. New Jersey Includes TTF only—the state appropriations from dedicated revenue sources covers annual debt service obligations New Mexico NMDOT does not have any toll revenue. The outstanding bonds are supported by State Road Fund Revenue and Federal Highway Revenue. New York NYSDOT does not control revenue. Revenue deposited into special revenue accounts that are managed by the State Division of the Budget. North Carolina In NC there is an annual debt affordability requirement (prepared and administered by the State Treasurer) that limits transportation indebtedness to no more than 6 of annual state transportation revenues. State pledge revenues for toll facilities are included in the calculation. Outstanding state pledge revenues for toll facilities are not included in response to question 7. Louisiana Gas tax Maine This is just for Maine DOT and does not include the bonds for the Maine Turnpike, which are toll revenue debt. Maryland Answer to #9 does not include any toll debt or toll revenue. Michigan The department uses it State Trunkline Fund credit to issue bonds for its Blue Water Bridge toll facility. The bridge doesn’t have its own bonding authority. Minnesota No tolls in Minnesota. Revenues used in calculation do not include federal revenues

63 State-issued debt outstanding for other transportation purposes (including transit, airport, rail infrastructure and rolling stock, etc.)? State Comments on Outstanding Other Outstanding Debt Alabama Don’t know Alaska $500 million Connecticut Within total from Q7 Florida $129.8 million seaport bonds Georgia Don’t know Illinois Data are not yet available Kentucky $26.2 million principal outstanding as of 6/30/15 for aviation projects and IT projects Louisiana Don’t know Massachusetts Amount unknown Michigan $131.5 million Minnesota $236,510,000 Mississippi $4 million New Hampshire Unavailable New Mexico NM Rail Runner Train North Dakota Don’t know Pennsylvania $1.026 billion South Carolina Don’t know Tennessee Don’t know Wisconsin $183,565,330 Please describe the debt capacity forecasting method used for such forecasts and analysis. Please also provide the length of time that the forecast and/or financial plan covers in your response. State Comments on Debt Capacity Forecasting Method Alaska Utilize a % of unrestricted revenue as a limit for annual debt service. Updated based on revenue forecasts of the Tax Division of the Department of Revenue. (Revenue volatility impacts this calculation much more than actual debt levels.) Arizona Since 1986, the Department has annually estimated highway user revenues (HURF) and transportation excise tax revenue (RARF) using comprehensive, regression-based, econometric models. The HURF model produces a 20 year forecast, while the RARF model produces a forecast which runs through 2026, the expiration of the current voter- approved tax. These models utilize estimates of certain “independent variables” to predict future tax revenues. The independent variables currently used in each forecast are shown below: HURF Model Independent Variables RARF Model Independent Variables Arizona nominal personal income Maricopa County nominal personal income growth Arizona population Maricopa County population growth Arizona non-farm employment Maricopa County construction employment growth Arizona fleet fuel efficiency Phoenix consumer price index (CPI) Arizona nominal gas price Phoenix Sky Harbor/Gateway airports passenger traffic growth West Coast No. 2 nominal diesel price Maricopa County total non-farm employment growth 30 year mortgage rate (continued on next page)

64 State Comments on Debt Capacity Forecasting Method Any variability between estimated and actual values could lead to variances in the tax forecast. In order to deal with this variability, the Department employs a Risk Analysis Process (RAP), which relies upon probability analysis and the independent evaluation of the model's variables. ADOT annually assembles a panel of economists and financial experts and solicits their individual estimates of the independent variables and comments on the future economic outlook. This information is incorporated into the model to produce a series of forecasts with specified probabilities of occurrence, rather than a single or “best guess” estimate. The forecasts resulting from these models are incorporated into ADOT’s cash flow models, along with other anticipated revenues and expenditures (including existing debt service requirements). Bonding capacity is then determined based on the ability of the cash flow to support additional debt within the coverage limits required by statute and/or board policy. This involves modeling of both the new bond proceeds and debt service in the cash flow models. The cash flows are then updated monthly with actual revenue and expenditure data, and any variances from the forecasts are investigated, to provide an ongoing, real time picture of financial health. Connecticut 5-year comparison of estimated revenues to operating costs of the fund, including Debt service - Balance Budget requirement. Delaware Based on project need, but not more than $25M per year (this number was based on a new revenue package adding $25M per year). Our current plan is to borrow only when new revenue is authorized. Florida The Department, by Statute, prepares a 5-year finance plan and 3-year cash forecast. With the exclusion of P3 debt, we use debt instruments to finance the overall work program based upon cash needs. The overall debt level is limited by statute and available revenues to pay debt service. Illinois Future issuance test. Calculated by the issuing agency (Governor’s Office of Management and Budget). I don’t know about the Toll Highway Authority; that is a separate agency Kentucky The state performs debt capacity analysis for the state’s appropriation-supported debt including General Fund, Road Fund, and Agency Fund debt. The Finance and Administration Cabinet is in charge of doing that analysis and typically forecasts out for at least 2 years but will sometimes forecast out to 4 or 6 years depending on the need. The state has an internal policy of trying to limit their yearly debt service for debt outstanding by not exceeding more than 6% of overall yearly revenues. Maryland A 6-year financial plan is produced that forecasts the annual level of bond sales needed to cover capital cash flow projections. Bonds are increased until they hit the bonds outstanding cap in statute or reach the minimum allowed bond coverage ratio. Minnesota Part of standard budgetary forecast process, required by statute every February and November. Including the current fiscal year plus 6 addition fiscal years Mississippi This forecasting is done at the State Treasurer’s Office; we cannot provide the requested details. Nevada Coverage ratios and cash flow for up to 20 years North Carolina See Debt Affordability Study. Time horizon is 10 years, which is consistent with State Transportation Improvement Program (STIP) time horizon Ohio ODOT forecasts annual program appropriation levels needed for capital bond programs. Then, based on project payout estimates, ODOT estimates when, and for how much, bonds will need to be sold to fund appropriations. Lastly, ODOT forecasts the associated debt service and outstanding principal on existing and planned issuances, in order to monitor compliance with constitutional and statutory limitations, as well as bond covenants. ODOT budgets out approx. 15 years. Pennsylvania Scenarios and debt service payment levels are considered in discussions of how much more Highway/Bridge debt to issue. A four year minimal timeframe is always considered and we have done analysis up to the full 30 years of debt payments.

65 Texas Only one debt program is authorized as a perpetual fund. Capacity is determined as a function of the revenues forecasted by the state comptroller (as the revenue estimator for the revenue sources dedicated for repayment of debt). Debt is limited to 30 years and revenue forecasts are for the same period. Utah A projects-driven method is used based on legislative authorizations. Forecasts typically focus on a five year time horizon. Virginia The Debt Capacity Advisory Committee is required pursuant to Section 2.2-2713 of the Code of Virginia to annually review the Commonwealth’s tax-supported debt that prudently may be authorized and issued for the next two years. In addition, the Committee is required to annually review the Commonwealth’s moral obligation debt and other debt for which the Commonwealth has a contingent or limited liability. Washington The Office of the State Treasurer prepares an annual Debt Affordability Study that includes debt service requirements through 2043. Additional information can be found at: http://www.tre.wa.gov/documents/DAS2016.pdf. Wisconsin Debt is forecast as part of the state's biennial budget process. This provides a two year estimate for future debt service payments. State Comments on Debt Capacity Forecasting Method How does your state decide which state-level sources (e.g., gas taxes, general funds, etc.) to utilize for debt repayment? Please describe the process briefly. State Comments on how states decide which state-level sources to use for debt payment Alabama The sources are pre-determined by statute. Alaska Constitutional and statutory limitation Arizona The repayment source is determined by statute. Arkansas Both amendments approved by the voters contained language regarding state and federal sources of repayment. 4 cents of diesel tax is used for GARVEE debt service and the 1/2 cent voter approved sales tax is used for other debt issued. Colorado First of all, the authorization for state-issued debt requires a vote. There are two ways to get on the ballot: 1) through filing an election question and gathering signatures, or 2) through legislation to refer a ballot question. The sources of repayment could be specified within the ballot language, or could be left up to the legislature to appropriate if the ballot measure is approved. Connecticut Transportation related revenues are deposited into the Special Transportation Fund. The first call on these revenues is Debt Service. Delaware No state level sources are used for repayment Florida Determined by constitutional and statutory authority to issue debt Georgia In recent years, debt issued for roads and bridges had been payed using motor fuel funds as motor fuel funds were constitutional restricted for them. However, with recent transportation legislative changes other fees that are dedicated for transportation were created and will now fund the majority of debt service repayment for GO and GRB debt service and are considered state general funds for reporting purposes. Also, in FY 16 and FY 17 GO bonds backed by state general funds have been or will be issued for bridges. This decision was made to help accelerate bridge projects in the state while not increasing the debt burden on transportation revenues. Idaho State funds are not pledged. Only federal funds are pledged, but state funds can be used as match on the debt service payment. Illinois Prescribed by State statute; debt service payments are also covered by a continuing appropriation statute that allows the Treasurer to tap any available funds to endure the timely and full repayment of principal and interest. Kentucky For transportation related debt that is not federally funded, it has been decided that all Road Funds will be available to pay debt service unless those revenues have been directly appropriated to other entities in a budget bill or the funds are statutorily dedicated. Road Funds are constitutionally dedicated to road and highway-related uses. (continued on next page)

66 Louisiana DOTD Statewide Transportation Plan coordinated through the Legislative Process. Maine The State Legislature decides through the budget process. Maryland Certain tax revenues are pledged in statute, but all revenues can be used. Massachusetts Based on credit assignment (trust agreements and indentures) Michigan Decision factors are project type, average life of project, available bond capacity by funding source. Minnesota Per MN Constitution, Trunk Highway bonds are repaid from Trunk Highway Fund. Percentages of gas taxes (58.9%), registration taxes (58.9%), and motor vehicle sales taxes (35.3%) are dedicated by Constitution and statute to Trunk Highway Fund. If these revenues are insufficient, the Legislature may levy a statewide property tax to cover the shortfall. Mississippi Some sources are specified in statute. All other sources are determined at the State Treasurer’s Office; we are not familiar with this process. Missouri Based on the lien structure described in the debt management policy State Comments on how states decide which state-level sources to use for debt payment Nevada Only gas tax and federal grants per statute New Hampshire The New Hampshire Legislature sets the policy for the State based on the use of the bond or loan proceeds. New Jersey Constitutional and statutory dedication New Mexico All State Road Fund revenues are pledged towards outstanding debt. Restricted state revenue with the exception of the Highway Infrastructure Fund is not pledged. New York Subject to annual budget negotiations w/ State Legislature North Carolina NC General Statute 142-100(d) State Transportation Revenues only Ohio The vast majority of ODOT’s revenues come from motor fuel tax and other state transportation-related sources. Very little of ODOT’s budget comes from the state’s General Revenue Fund, and those funds are not available to pay debt service. Pennsylvania For Highway and Bridge debt the payments are made from Non Restricted revenues which consist of a mix of gas and diesel taxes, vehicle registrations, driver licenses and other miscellaneous revenues. For Transit, Aviation, and Rail Freight debt the payments are made from Non Restricted General Fund revenues which consist of sales tax, income tax, corporate tax and other revenue that is not dedicated for specific expenditures. South Carolina Determined by legislature Tennessee We do not issue bonds. Texas Financing programs are established in law and determined by legislators and policy- makers. No new financing programs have been established in almost 10 years. Utah The legislature adopts a bill authorizing the issuance of bonds for highways. The authorization will include the total amount of bonds that may be issued and either specifies the projects or directs bond proceeds to be used on projects prioritized by the Transportation Commission. Prior to authorizing the bonds, the legislature will have analyzed & identified the constitutionally/statutorily eligible source of funds that will be used for repayment and appropriate those funds annually. Vermont State has a dedicated fund for transportation bond debt service. Fund source is combination of gas and diesel special infrastructure assessments. Virginia Statutory authority indicates the sources committed to debt service and any additional backstop source for repayment. Washington The official statement will pledge the revenue source used for debt repayment. West Virginia For general obligation bonds issues, any sources of revenue in the State Road Fund can be utilized. For GARVEE - this is determined on a case by case basis. Wisconsin Transportation Revenue Bonds are repaid using pledged revenues which are defined in Wisconsin Statute. General Obligation bonds are backed by the full faith and credit of the state. Wyoming When bonds are issued, state law requires that debt repayment come from a special levy of state property tax and “other funds available for the purpose,” which are unspecified.

67 How does your state decide between whether to issue debt backed by federal funding (e.g., GARVEEs) or state funding for transportation purposes? Please describe the process briefly. State Comments on Selecting State of Federal Sources Alabama The decision is based primarily on the level of state funding and if the funding is sufficient to support any debt service pledge. Alaska Garvees are not possible in Alaska as we cannot dedicate the revenues. We have issued GO bonds that we then use federal funding to pay a portion of the debt service on an annual appropriation basis. Arizona We primarily consider cash flow and the ability to service the debt. Secondary factors which may be relevant include the length of time remaining in the most recent federal aid program authorization, rating agency and market outlook regarding Congressional action and the length of time remaining on any voter approved tax which may be the back-up pledge. Arkansas The state General Assembly referred the matter to a vote of the people. They approved both the GARVEE bonds and the Connecting Arkansas Program (CAP) bonds. Colorado There is no formal process. Connecticut Estimated Future Federal funds are part of our 5 year capital plan, and therefore unavailable . . . in the short term. A switch to GARVEES would require a transition period. Delaware Use what best fits the 6-year capital plan. At this time, we do not anticipate any additional GARVEE issuances. Florida Department decision based upon bond program capacity, overall financing needs, and costs of financing. GARVEE is limited to debt service over 12 years and is currently used to finance the program as a last resort. To date, we have not issued any GARVEE bonds. Georgia Due to recent federal uncertainty and the impact of debt service to the federal program, there are no near term plans to issue additional GARVEE debt. However, for larger projects planned in near future, they may be an option on a project by project basis. Idaho Idaho can only issue GARVEEs with pledged federal funds as security. Illinois Illinois does not use GARVEEs because our debt structure does not appear to permit their use. TIFIA and other similar programs are governed by Public–Private Partnership Acts and would be decided on a project-by-project basis. Kentucky GARVEEs are used for federal projects that have been identified in our biennial highway plan and approved by FHWA and the General Assembly. Road Fund bonds are issued for state funded projects that have been identified in our biennial highway plan and approved by the General Assembly. Louisiana N/A Maine The State Legislature decides through the budget process. Maryland Use of GARVEEs requires special legislative authorization. Michigan Decision factors are project type, average life of project, available bond capacity by funding source. Minnesota Minnesota does not utilize GARVEEs. Mississippi This is set in statute for each transportation bond issue. Missouri GARVEES were issued for 3 specific large projects. Otherwise, state funding debt was issued. Nevada We have never issued GARVEEs due to a higher interest cost. New Hampshire The New Hampshire Legislature sets the policy for the State through legislation. The State DOT works with the Legislature to testify on needs of the infrastructure and recommends priorities. The ultimate decision lies with the Legislature. New Jersey GARVEE was used only once in NJ’s history—not relevant New Mexico NMDOT does not have any GARVEE bonds outstanding. NMDOT pledges State Road Fund and backs the pledge with Federal funds. NMDOT has a double barrel pledge system. New York NYS does not leverage federal highway/transit apportionments. They are used as PAYGO. North Carolina It is decided based on the need with the issuance and the timing is decided dependent on need the need as determined in the STIP. Ohio The process is largely driven by project type and funding eligibility. Since funding used on federal (GARVEE) bonds is more restrictive, it limits what those funds can be used for. (continued on next page)

68 State Comments on Selecting State of Federal Sources Pennsylvania This is done through discussions with the Governor’s Office of Budget. The considerations are how much debt service payments will be and for how long and is it more beneficial than using current revenues for projects. Tennessee We do not issue bonds. Texas Texas has not utilized GARVEEs. Utah The State has not utilized GARVEE bonds. Previous consideration of GARVEE bonds determined the state can secure more favorable terms by issuing General Obligation bonds. Vermont To date debt has only been issued for non-federal share of project match. Virginia Currently, state supported debt is dedicated to specific highway corridors or types of projects. These programs have authorization limits on the total value that can be issued. The GARVEE bonds have a revolving authorization, must be used on federally-eligible projects, and are generally, larger projects. To date, they have been used as the public contribution to construction of P3 projects and other high-priority projects. Washington The State Finance Committee has issued a policy limiting GARVEE financing to a single project. All other projects are state financed, using cash or bond authorizations authorized by a 2/3 vote of the State Legislature. West Virginia On a case by case basis and by available funds Wisconsin We do not have the authority to issue debt backed by federal funding for transportation purposes. Wyoming Since the state has not used its bonding authority for many years, it is unknown what factors would be used to determine whether to use federal or state funding. Please provide any additional information about how your agency treats GARVEE debt in debt capacity measures. State Comments on How Agencies Treat GARVEE Debt in Debt Capacity Measures Arkansas The AHTD cannot issue debt on its own without approval by either the General Assembly or vote of the people. The two current issues were set by the vote with caps on the amount of debt that could be issued. Florida We currently do not have any GARVEE issuances for FLDOT but would anticipate inclusion in the debt calculations for the State. Georgia In the debt management plan, debt is looked both including and excluding GARVEE debt in many cases. However, it is not guaranteed by the state and not included in the debt capacity measures. See pages 20–21 of the debt management plan. Idaho Annual debt service cannot exceed 30% of federal apportionment. Michigan Federal funding available for GARVEE bonds is calculated separately from other credits. Minnesota Minnesota does not utilize GARVEEs. Mississippi GARVEE debt is included in the DOT’s debt capacitymeasures (e.g., debt coverage ratio). New Hampshire Additional Bonds Test: must demonstrate eligible Obligation Authority during most recently completed FFY was equal to at least 3x MADS in current and any future FFY on all Outstanding Bonds and on Additional Bonds proposed. New Mexico NMDOT does not utilize GARVEEs. North Carolina GARVEE Info (see section 12b on page 5) http://www.ncleg.net/enactedlegislation/statutes/pdf/bysection/chapter_136/gs_136-18.pdf. Ohio ODOT is restricted by coverage ratios used on debt covenants of past bond issuances. ODOT also has an informal internal policy to limit GARVEE debt service to 20% of federal revenues. Pennsylvania No GARVEE debt Virginia The legislation that established the GARVEE program limited the maturity of GARVEEs to 20 years but current plan contemplates 15 year terms for each issuance. The GARVEEs are subject to the provisions of Commonwealth Transportation Board's 2003 debt management policy: Annual debt service will not exceed 25 percent of six- year average of prior federal highway reimbursements. Washington The State Finance Committee has issued a policy limiting GARVEE debt to a single project with a 3.75x coverage ratio. Wisconsin We do not issue GARVEE bonds. Wyoming To date, Wyoming has not used GARVEE debt.

69 (continued on next page) Please provide any additional explanation to how availability payments are treated for debt capacity measures, including whether treatment is determined by formal (e.g., constitutional, statutory, formal written policy) requirements or informal guidelines: State Comments about Treatment of availability payments with Regard to Debt Capacity Alaska Never implemented Colorado The capital component of an availability payment would be included to calculate coverage ratios, and would be considered no different than a bond obligation as it relates to debt limitations with respect to other parity financial obligations. Florida The State includes availability payments for the capital costs associated with construction of P3 projects as debt. P3 debt is subject to a statutory limitation that no more than 15% of the total available federal and state funding in the Transportation Trust Fund in any given year can be obligated to required debt payments. (statutory requirement) Illinois The Department has begun looking into this and related issues but no formal determination has been made. Maryland One P3 with APs has been utilized. The debt service portion of the AP is to be paid with non-tax revenues, which will exclude it from the State’s Debt Affordability calculation caps. Nevada If we had any, we would consider availability payments in our analysis, similar to a subordinate lien. Ohio Informal guidelines. Only construction portion of P3 availability payment is considered in debt capacity measurements. Pennsylvania Pennsylvania has a $1.8 billion P3 project to replace 558 bridges. The private entity is holding the debt, therefore our availability payments are considered to be capital and operating payments for the Department. Washington None Wyoming It is uncertain whether P3s are allowed under state law since they are not specifically authorized. This uncertainty has been an impediment in proceeding, but, to date, no specific P3 concepts have been forward within the state to test their legality. Do associated contractor payments count as debt in debt capacity measures? Include whether this is by statute/constitutional provisions, written policy, or informal policy/practice: State Comments on Treatment of Contractor Payments in Debt Capacity Measures Alabama The Alabama Legislature just recently passed a statute to allow ALDOT to consider various project delivery methods so there are no current policies or practices to describe. Alaska Have not utilized this method of accomplishing projects. The State can always finance less expensively than private sector. Colorado The only entities that may enter into financial obligations such as P3 or DBF agreements are through an enterprise such as the High Performance Transportation Enterprise. HPTE has developed a P3 manual that gives formal guidance to these procedures. Florida The State includes contractor financing arrangements associated with construction of P3 projects as debt but does not include the amount in the overall state’s benchmark debt ratio calculation. P3 debt is subject to a statutory limitation that no more than 15% of the total available federal and state funding in the Transportation Trust Fund in any given year can be obligated to required debt payments. (statutory requirement)

70 State Comments on Treatment of Contractor Payments in Debt Capacity Measures Minnesota Have not utilized contractor financing arrangements Mississippi We do not currently have these types of arrangements. Nevada If we had any we would consider DBF payments in our analysis similar to a subordinate lien. North Carolina See Debt Affordability Study for details Ohio Informal Policy Have Private Activity Bonds (PABs) been issued for transportation purposes in your state? If yes, please provide additional explanation, including the role of the DOT with respect to PAB issuance and oversight (e.g., securing PAB allocation, etc.). State Comments on the Treatment of Private Activity Bonds and the Role for DOT Issuance or Oversight Alaska Certain airport improvements require funding with POBs. Colorado There is no formal policy as to how PAB issuance and oversight is conducted. It is more of a case-by-case basis based on whether PABs are an efficient method for any particular capital financing. Florida Utilized by two of our DBF firms, but no longer allowed. DOT was not involved with the issuance of the PABs. Maryland PABs were issued by a conduit issuer. The DOT role was to provide historical information and data. Texas The DOT issues PABs through a conduit issuer and is responsible for securing allocations in coordinate with the state bond authority and USDOT. The DOT is also responsible for reporting to state authorities as the issuer of the debt. What are the major transportation-related debt financing issues faced by your state? State Comments on Major Transportation Related Debt Issues Within State Alaska Not sure Arizona Declining revenues to support new borrowing Colorado Not necessarily large issues—simply put, debt financing options through the form of enterprises like HPTE are necessary to find innovative ways to fund much needed infrastructure improvements in an environment [of] incredibly constrained revenues and resources. Connecticut Maintaining a revenue stream that provides 2x coverage, coupled with need for additional high priced projects. Florida Acceptance of debt by the leadership of the state Georgia Prior to FY16, the department’s debt range was 25%–30% of the state motor fuel revenues collected. Also, the GARVEE program basically falls into two categories of the federal program which further limited the department’s abilities not only in terms of project types but also the level of program we are able to deliver each year with reduced available funding. Illinois State Constitution requires a 3/5ths majority vote in the Legislature or a simple majority vote of electors to authorize “State debt,” however. The definition of what does and does not constitute State debt is a matter that has been controlled by the presiding officers of the Illinois House and Senate. In the past, the ‘opinion of the chair’ is that General Obligation debt is considered State debt as defined in the Constitution (and subject to 3/5th’s majority votes in the both chambers to authorize it) while all other types of debt (such as sales tax-supported revenue bonds or certificates of participation) are not considered State debt and therefore can be authorized with only a simple majority vote. This contrasts with rating agencies’ policies which view State debt in its totality.

71 State Comments on Major Transportation Related Debt Issues Within State Idaho Once legislative authorization is approved for a specific project(s), Idaho has not had issues. Illinois Recently enacted bond programs have either not come with specific designated revenue sources or the designated revenue sources have not been sufficient to cover the debt service on outstanding debt, let alone debt that would still need to be issued to liquidate existing obligations or liquidate future obligations from the unobligated balance of existing appropriations. This has resulted in aggravating already significant cash flow issues with the state’s main operating fund (the General Revenue Fund). Kentucky There are always more needs than funding available. With declining motor fuels tax revenues which make up the largest part of our revenues, it has been challenging to continue to meet our ongoing transportation needs. Louisiana Availability of funding Maryland No issues besides living within the legislative caps Massachusetts Major capital investment requirements with limited financial resources Michigan Having sufficient funding for debt service and future capital programs Minnesota Internal policy is for debt payments not to exceed 20% of state revenues. Very close to that limit in current forecast period (~17%). Missouri Debt service limits funds available for operations and the capital program. Nevada Affordability New Hampshire Limited funding at both the state and federal level for debt service payments. New Jersey Re-authorization of the New Jersey Transportation Trust Fund New Mexico NMDOT is faced with two balloon payments in FY25 and FY26, which exceeds the amount of debt allowed to be repaid from the NM State Road Revenue by upwards of $70 million in each year. New York Level of annual debt service; stagnant revenues. North Carolina Low debt ratio threshold (6% of state revenues) Ohio 1. Keeping within constitutional limits/debt covenants. 2. Keeping ODOT pro forma (budget) balanced. Pennsylvania Pricing due to declining bond ratings South Carolina Having sufficient funds to pay debt service without sacrificing operational needs Tennessee We do not issue bonds. Texas Focus by legislature on toll roads and debt used to finance them. Legislation passed requiring analysis of decreasing debt on all toll roads in the state Vermont Trade-off between pay as you go and debt service costs. Capacity to develop projects. Washington Potential for a Road User Charge (VMT fee) replacing the MVFT as the pledge on transportation debt and how the transition would occur. West Virginia Lack of opportunity for tolling, increased revenues. Economy. How debt should be accounted for. Wisconsin There is significant attention on how much debt is issued and the increase in debt service over the last 10 years. Traditional transportation revenues are statistically flat and bonding has been relied on more and more to fund larger projects. Wyoming Wyoming prides itself on being a “pay as you go” state and is reluctant to enter into any transportation debt financing. Local airport boards are something of an exception to this general rule, but they generally avoid debt financing as well.

72 Does your state or DOT employ specific debt management practices that you believe would be of potential interest to other DOTs (i.e., practices that you consider to be a “best practice” or that has helped you address a specific challenge)? If yes, please briefly explain. State Comments on Practices to Share with Other States Alaska Not sure Arizona • Because post issuance compliance must be conducted for every outstanding issue every year, a calendar system is critical. Numerous tasks must be completed for each bond, depending on its stage in the debt life cycle, such as tracking temporary periods, spending exception requirements, final allocation deadlines, private business use, arbitrage rebate calculations/payments, continuing disclosure filings and numerous other requirements arising in bond documents and federal, and perhaps state, law. Unfortunately, there does not appear to be an off-the-shelf compliance program on the market so ADOT had to create its own. • After filing annual continuing disclosure information on EMMA (the Electronic Municipal Marketplace Access website maintained by the Municipal Securities Rulemaking Board), request an opinion of bond counsel to ensure the filing satisfies the requirements in the relevant Continuing Disclosure Undertaking. Although there may be fees associated with the opinion, it provides great peace of mind and is well worth the cost. • Conduct a “post-closing” meeting with bond counsel and the DOT financial advisor to identify key deadline dates and compliance steps associated with the new bond issue. Get them entered and assigned in a tracking system. • Create at least one periodic performance measure to track the progress of compliance against the scheduled deadlines (ADOT uses monthly measures). Require this measure to be reported up to the CFO so senior management can be made aware of any problems. • “Personalize” the issuer’s page on EMMA. This will place it near the top of the list of issuers in the state when a state level search is conducted. • Make sure the IT department understands the record retention requirements of information associated with bonds. After each issuance, ADOT updates and shares the record retention report with the IT director to ensure provisions are in place to electronically archive and secure data for the required period. In addition, a central folder containing all bond files has been established with secure access and is routinely backed up. Colorado On a more global sense, the Office of Major Project Development is creating a governance structure for “best practices” relating to the process of innovative financing and contracting for major projects as a whole. This would help provide guidance from start to finish, including financing considerations, to provide a more standardized process of delivering these projects. Florida 1. DOT debt obligations and plans are accounted for and projected by the Department’s 5 year finance plan and 3 year cash forecast, both of which are statutorily required. 2. Statutory provisions also require Executive Office of the Governor approval prior to entering into any P3 contract. 3. Section 334.30, Florida Statutes, outlines the State’s P3 laws. Georgia As a result of the recommendations by a Joint Study Committee, the state passed the Transportation Funding Act of 2015 which increased the revenues while also giving flexibility in . . . how fees generated can be used to offset debt. This allows the department a more manageable debt level while delivering a bigger program as well.

73 State Comments on Practices to Share with Other States Illinois Illinois uses a level principal, as opposed to level debt service, repayment structure, which saves interest expense over the life of the bonds by repaying principal faster. Illinois has also tended to stay away from “gimmicky” financing like GARVEE bonds, which were recently downgraded en masse over the problems with the federal Highway Trust Fund. When they were used 30 years ago, Illinois had good luck with zero coupon College Savings Bonds, which raised money for the standard General Obligation bond purposes (including transportation), but were also intended to give smaller savers the opportunity to purchase deeply discounted State debt. (For example, a $5,000 bond that paid zero periodic interest could be purchased for as little as $1,000, with the bond paying the full $5,000 face value at maturity, representing a return of the original purchase price—principal—plus the accrued interest—face value minus purchase price; these bonds were available for all investors, and actually carried an exemption from State income tax as well as provided an interest rate ‘sweetener’ of an additional ¼% yield if the investor could show college expenses during the year the bond matured). The State’s interest cost (when combined with “wrap-around” sales, which were structured to make annual issuance and maturities represent a ‘standard’ issuance structure for the entire fiscal year) was not materially different than with the issuance of standard $5,000 face value coupon bonds, and all of the issues were over- subscribed. Illinois uses a “plain vanilla” General Obligation bond structure and has tended to avoid gimmicky financing options like GARVEEs. Instead of using a specific pledge of federal funds, Illinois Series A General Obligation bonds for highways, bridges, and structures are repaid via transfers from the Road Fund, which commingles federal funds with State source revenue, thereby insulating the potential debt service stream from the federal Highway Trust Fund’s cash flow problems. Minnesota It appears fewer than ten states have transportation debt policies and/or have limits on transportation debt service payments. Minnesota is one of them. Missouri Any of interest are in the linked debt management policy. New Hampshire The State is preparing to enter into a direct TIFIA loan to complete a major infrastructure project. The DOT is taking advantage of the available deferment period to use the funds that would otherwise go toward principal repayment to fund paving and bridge projects that would have been delayed significantly out into the future. The low interest rate is favorable to the projected inflation that would have increased costs on the projects. North Carolina 10 year cash management practice Ohio 1. For state bond debt service, 1/6 of annual debt service is deposited directly into the Bond Service Fund each month from September–February. This ensures debt service principal and interest is available months in advance of due dates. 2. Entire GARVEE debt service for the fiscal year is paid at beginning of fiscal year. Tennessee We are a “pay as you go” state. Vermont VT has a dedicated fund for transportation bond issuance debt service. Washington Having multiple bond sales in a given year and managing the bond sale amount to the cash flow needs. This limits the amount of unnecessary interest paid. Wisconsin The Wisconsin’s Transportation Finance and Policy Commission made a recommendation in 2012 to maintain a debt service/revenue ration below 20%. That recommendation has not officially been adopted.

74 Has your DOT implemented any noteworthy changes in your debt management practices in the last 3–5 years? If Yes, please describe the change(s) and the reasons for implementing. State Comments on Noteworthy Changes Arizona Due to increased regulatory scrutiny from the SEC and IRS regarding municipal debt issuers and practices, ADOT has significantly ramped up its compliance activities: • A full-time position—the Debt Management and Compliance Administrator—was created in 2014 and charged with tax and securities compliance (in addition to debt issuance). This is a senior staff position reporting to the Chief Financial Officer. • A debt management database has been created to calculate and track key deadlines and compliance activities, provide the ability to analyze data and produce management reports not previously available. A user’s guide has also been developed to provide for continuity of operations when a new Administrator takes over. • Monthly performance measures were developed to provide insight into areas of concern regarding compliance progress. • In conjunction with the implementation of a new State accounting system, an extensive overhaul of debt management policies and procedures is currently underway. • A debt management peer exchange with other state DOTs was requested and will take place in June 2016. Colorado Not necessarily a change of debt management in general; but the idea of more short term gap financing through construction loans is a new method used to accelerate smaller segments of a larger project has been implemented on several instances. The idea is to accelerate projects to show their toll revenue performance as opposed to leaning exclusively on toll and revenue projections. Florida In an effort to ensure the fiscal integrity of the State Transportation Trust Fund, Section 339.139, Florida Statutes, was created in 2012 which requires the department to submit a debt and debt-like contractual obligations report to the Executive Office of the Governor, the President of the Senate, the Speaker of the House of Representatives, and the legislative appropriations committees. The report is submitted in conjunction with the tentative work program. This debt load report shall ensure that by the beginning of FY 2018, not more than twenty percent of total projected available state and federal revenues from the State Transportation Trust Fund, together with any local funds committed to department projects, are committed to debt and debt-like contractual obligations. The statute also requires the department to prepare a separate report on debt obligations that are secured by and payable solely from pledged revenues. During this 2016 Session, pending Governor approval, the State’s Division of Bond Finance was given an approval role in the P3 process. During the 2016 Session, pending Governor approval, is legislation creating the Florida Department of Transportation Financing Corporation for the purpose of financing or refinancing projects for the department. (House Bill 7027) Georgia The Transportation Funding Act of 2015 increased revenues, provided greater flexibility in the use of fees, and the recommendation of the Joint Study Committee recommended the department start reducing its debt to a more manageable level. Illinois Post issuance compliance tracking and reporting on the use of tax-exempt bond proceeds for complying with IRS regulations. This has also resulted in the issuance of taxable bond proceeds to be used where tax-exempt proceeds would not be appropriate. Louisiana Recover revenues from unclaimed property. Maryland Transportation tax rates were increased in 2013 to provide more revenue. At the same time, the legislative cap on debt outstanding was increased. Nevada We changed the law to allow for debt terms up to 30 years (was 20 years previously). The reason we wanted the change was to have the ability to have lower annual payments.

75 New Hampshire The Department needs to resist the urge to issue longer term debt (30 years plus) to make up for a lack of revenue. New York Currently, bond averages are 10 and 20 years. Would prefer to issue separate longer-term debt for bridges/other structures w/ long service lives (50/75 years +) Texas Like other DOT, we are always reviewing our debt practices to be more efficient and enhance our debt management functions. Vermont Identifying the optimal projects from a cost savings perspective to use debt financing. To date bonds have been issued for state match requirements only without regard to identifying optimal projects. West Virginia Standardization of what is classified and reported as debt. Are there cooperative research efforts that you think should be undertaken that would benefit state DOTs in improving their debt management practices? If yes, please briefly explain. State Comments on Cooperative Research Efforts Arizona I would like to see an analysis of the revenue generating business opportunities which may exist for DOT right of way. It should be forward looking and informed by population, technology and business trends. Florida Understanding each of the rating agencies treatment of P3s. Michigan Identifying debt management benchmarks for DOTs; for example, debt service coverage ratios, mix between variable and fixed debt, cash on hand Wisconsin We often are asked how transportation-related debt service/revenue percentage compares to other states. Because of how debt is structured in other states we have not been able to provide this comparison. We’d very much like to have an “apples to apples” comparison of transportation-related debt service. Are there areas of debt management that you believe your DOT needs to improve upon? If yes, please brief ly explain. State Comments on Areas for Improvement Alaska Not sure Arizona Tracking private business use as more revenue opportunities involving DOT right-of- way are implemented Florida Post Compliance, Eligibility of Expenditures, Recognition of P3s in the state’s Debt Affordability Report Illinois Yes, the types of projects and purposes that are paid for with bond proceeds. In the past, the Department was very conservative on the use of bond proceeds. However subsequent administrations (e.g., Governor’s Office and staff) expanded the use of bond proceeds to include the payment of salaries, cash grants, and other operating type expenses that probably should not have been paid for with bond proceeds. The Department is currently working with the most recent administration in an effort to reform those policies (including the issuance of new bondability guidelines, which have not been updated for at least 30 years). Iowa No, Iowa DOT does not utilize or manage debt regularly in its operations. Kentucky Not that I am aware of. Michigan Better coordination being cash flow financing and debt financing fund our capital program.

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TRB's National Cooperative Highway Research Program (NCHRP) Synthesis 513: Evolving Debt Finance Practices for Surface Transportation explores a variety of debt mechanisms and tools to finance transportation infrastructure investment. The amount of debt and frequency of issuance vary substantially across states. In most states, provisions included in constitutions or statutes (or combinations of the two) govern the level and form of debt issuance. As well, many states have formal policies that govern debt issuance and management. The study documents new developments in flexible finance tools, including those offered by the federal government.

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