Open Session Meeting Minutes
August 15, 2017
Page 2
FINANCE COMMITTEE MONTHLY MEETING
TUESDAY, AUGUST 15, 2017
POINT BREEZE HEADQUARTERS BUILDING
BALTIMORE, MARYLAND
OPEN SESSION
MEMBERS ATTENDING: Jack Basso
Katherine Bays Armstrong
John Von Paris
STAFF ATTENDING: Kerry Brandt
Joyce Diepold
Trudy Edwards
Allen Garman
Chantelle Green
Jaclyn Hartman
Meshelle Howard
Cheryl Jordan
Cheryl Lewis-Orr
Kimberly Millender, Esq.
Deb Sharpless
Lora Tracy
Alison Williams
OTHERS ATTENDING: Chuck Gomer, Davenport (via phone)
Greg Warner, First Southwest (via phone)
At 9:01 a.m., Member Jack Basso, Chair of the Finance Committee, called the Finance Committee Meeting to order.
Approval – Meeting Minutes from July 11, 2017 Meeting
Member Basso called for the approval of the meeting minutes of the open session held on July 11, 2017. Member Katherine Bays Armstrong made the motion to approve the minutes, Member John Von Paris seconded the motion, and the motion passed unanimously.
Approval – MDTA Facility Dedication Request MD 200/Intercounty Connector – Dedication to former Governor Robert L. Ehrlich
Ms. Deborah Sharpless requested a recommendation for approval from the Finance Committee to the MDTA Board to dedicate Maryland Route 200, commonly known as the Intercounty Connector (ICC), to former Maryland Governor Robert L. Ehrlich, pursuant to MDTA Board Policy A-MDT-STDR-0101.
MDTA took ownership of the ICC from the Maryland State Highway Administration (SHA) in 2011, creating the first all-electronic toll road in Maryland and providing a vital 18-mile east-west link between US 1 in Prince George’s County and Interstate 270 in Montgomery County.
The ICC was included in transportation planning efforts tracing back to the 1950s. Despite significant financial investment, planning, and engineering work, the ICC project had stalled before Governor Ehrlich directed SHA to begin construction. To accomplish this goal, Governor Ehrlich garnered bi-partisan support between federal and local governments to gain key endorsements from the U.S. Department of Transportation and Montgomery County, despite prior opposition to the project.
Governor Ehrlich’s leadership in making the ICC a reality directly benefits MDTA customers with a shorter, safer, less congested, and more reliable driving option, while generating a five percent net reduction in traffic and related congestion on sections of I-95, I-495, and I-270. Since the opening of the ICC’s final phase, utilization has grown by more than 20%.
Celebrating Governor Ehrlich’s foresight and accomplishments by dedicating the ICC in his honor showcases the importance of providing our customers with superior roadway, bridge, and tunnel facilities by delivering major projects in spite of seemingly insurmountable obstacles.
Member Basso noted that other MDTA facilities have been dedicated to individuals. Ms. Sharpless agreed, citing the dedication of a section of I-395 as Cal Ripken Way, and the recent dedication of the MD 222 bridge over I-95 to Corporal Dale A. Burger, Jr. Member Armstrong questioned the distinction between a dedication and naming. Ms. Sharpless noted this is a dedication and will not change the name of the facility but will include an informational highway sign noting the dedication. Member Von Paris noted that Governor Ehrlich’s ability to move this project forward despite the many obstacles was an exceptional achievement. Member Basso agreed and noted that the simultaneous construction of the ICC and I-95 Express Toll Lanes marked one of the largest growth periods in the MDTA’s history.
Member Basso called for a motion to recommend the approval of this item to the full MDTA Board at its next scheduled meeting. Member Von Paris made the motion, and Member Armstrong seconded the motion, which was unanimously approved.
Approval – Debt Policy
Ms. Alison Williams requested a recommendation for approval from the Finance Committee to the full MDTA Board for recommended changes to the Board Policy on Debt Management. The Board Policy on Debt Management establishes the guidelines for the process by which the MDTA issues and manages debt and provides guidance to the Board and staff to ensure that a sound debt position and strong credit quality is maintained. Annual review of the Debt Management Policy is required.
Policy Statement 14 outlines how MDTA should structure debt and specifically provides a defined term, weighted average maturity (WAM) of debt, rather than a more generic reference to the length of time, or term, that debt is outstanding. By averaging the principal amortizations, the WAM provides an average of how long the entire bond issue is outstanding. This time period can then be compared to the weighted average life of the improvements that are being financed. Debt should not be issued for a period that is longer than the useful life of the projects being financed. MDTA has always followed this practice.
Policy Statement 15 says that debt will generally be structured to achieve the lowest possible net financing costs. Staff recommended the addition of “pursuant to MDTA’s policies and objectives” to the Policy Statement. This change provides flexibility in the event that, for other reasons at any point in time, the lowest borrowing cost may not be in MDTA’s best interest. For example, variable rate debt may offer a lower borrowing rate in the short term, but rates could increase over time making this option not worth the risk over the long term. MDTA has always followed this practice.
Member Basso called for a motion to recommend approval of this item to the full MDTA Board at the next scheduled meeting. Member Armstrong made the motion, and Member Von Paris seconded the motion, which was unanimously approved.
Update – Cash Flow and Cash Spending
Mr. Allen Garman reviewed the implications of cash flow projections on future financing needs and reported on capital spending versus projections. Cash spending for the capital program for FY 2017 totaled $198.7 million, or 60%, of the spending projections based on the FY 2017-2022 Final Consolidated Transportation Program (CTP). Capital spending for July of FY 2018 totaled $25.9 million, or 85%, of the Draft FY 2018-2023 CTP projections. Net of spending, investment income, excess operating income, and the $100 million debt defeasance, aggregate unrestricted cash available for capital spending decreased by $106 million in July. Monthly capital spending for FY 2018 is projected at $35.8 million. No new-money financings are likely needed through FY 2021, though refinancing transactions for economic savings are likely in 2018.
Update – Investment Committee Report
Mr. Garman and Mr. Chuck Gomer from Davenport provided an update on the activities of the Investment Committee for period ended June 30, 2017. Mr. Garman and Mr. Gomer reviewed market conditions, portfolio strategies, total return performance, and dealer trade allocations. They also discussed certain market drivers that may influence portfolio performance in the coming months, including the economy, fiscal policy, and Federal Reserve monetary policy. After reviewing the activity for the quarter ending June 30, 2017, no instances of non-compliance with the MDTA’s Investment Policy were identified.
Member Basso questioned if there were any new developments concerning Wells Fargo following the fines levied on Wells Fargo in September 2016 for deceptive practices.
Mr. Garman stated that he is not aware of any new developments. Ms. Hartman noted that Wells Fargo has been working hard to reestablish relationships and has been very competitive in pricing. She noted that Wells Fargo is the MDTA’s leading broker/dealer for the trailing 12 months in terms of dollar value of investment trades and was also the winning bidder on the MDTA’s recent Series 2017 Toll Revenue Refunding bonds and the direct placement for the Series 2007 GARVEE bonds refunding.
Update – Quarterly Traffic and Revenue Performance Report
Ms. Jaclyn Hartman updated the Committee on the quarterly traffic and revenue performance reports prepared by CDM Smith and Jacobs for the legacy facilities, Intercounty Connector, and I-95 Express Toll Lanes. Although staff provides a monthly update on these numbers each month, the numbers are still preliminary at that time, which makes detailed analysis difficult. The detailed quarterly reports provide in-depth analysis of traffic and revenue trends as compared to the previous year and to the forecast.
For the quarter and year ending June 30, 2017, toll revenue on the legacy facilities grew by 3.6 percent and transactions grew 2.3 percent from the previous year. Compared to the December 2016 forecast, revenue growth on the legacy facilities was 2.1 percent above forecast and transaction growth was 0.4 higher. On the ICC, toll revenue increased 10.1 percent and transactions increased 9.9 percent from the previous year. This actual performance was 1.2 percent higher than the forecast for revenue growth and 0.9 percent higher than expected transaction growth. On the I-95 Express Toll Lanes, toll revenue increased 8.9 percent and transactions increased 9.2 percent from the previous year. This actual performance was 5.4 percent higher than the forecast for revenue growth and 5.5 percent higher than expected transaction growth.
Ms. Hartman noted that the annual update to the traffic and revenue forecast is underway and will be presented to the Finance Committee in November.
Update – Traffic and Revenue
Ms. Cheryl Lewis-Orr provided an update on transactions and revenue for July 2017. System-wide toll revenue for the month ending July 31, 2017, and the fiscal year-to-date was
$61.4 million. Fiscal year-to-date revenue exceeds the December 2016 Base Case forecast by $0.2 million, or 0.3%. System-wide toll transactions for the month ending July 31, 2017, and the fiscal year-to-date was 14.5 million. Fiscal year-to-date transactions are below the December 2016 Base Case forecast by 0.4 million, or 2.5%.
There being no further business, the meeting of the Finance Committee adjourned at 10:00 a.m., following a motion by Member Von Paris, and seconded by Member Armstrong.