State of the District of Columbias Infrastructure Presentation to - - PowerPoint PPT Presentation
District of Columbia State of the District of Columbias Infrastructure Presentation to The Canadian Network of Asset Managers Calgary, Alberta May 17, 2017 Darryl Street David Clark Senior Financial Policy Advisor Director, Capital
District of Columbia
Presentation to The Canadian Network of Asset Managers Calgary, Alberta
May 17, 2017
Darryl Street David Clark
Senior Financial Policy Advisor Director, Capital Improvements Program Office of the Chief Financial Officer Washington, D.C.
District of Columbia
History of the District of Columbia
Functions as a City, County, State and School District
to Virginia
Board of Commissioners
President”
popularly elected Mayor, 13-member Council
Independent CFO created
suspended
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Infrastructure Challenges
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Since 1988 the American Society of Civil Engineers (ASCE) infrastructure report card has scored the nation’s infrastructure a “D” on a scale of “A to F.” Arlington Memorial Bridge that connects D.C. and Virginia is 5 years away from only allowing foot traffic if it’s not replaced. The District has spent billions on schools reconstruction due to long-term lack of adequate maintenance.
District of Columbia
District’s Current Financial Status
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District has to finance and provide the infrastructure needs
The District enjoys a growing population, economy and tax base Fully-funded pension and OPEB trusts Strong bond ratings (AA to AAA category) and strong level
Results in low overall costs of borrowing Relatively low current paygo levels
District of Columbia
Current Capital Planning Process
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6-year capital improvement program 4-year balanced financial plan, which incorporates the six- year capital plan Street condition assessments performed by DDOT to set priorities Capital needs beyond the 6-year CIP, or unfunded current needs, are not addressed
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Long-range capital financial plan was developed as part of
the OCFO Strategic Plan and Council legislation Incorporates the current 6-year CIP and all other infrastructure needs, unconstrained by funding Reflects maintenance needs for all current assets Reflects bond capacity limits and existing pay-as-you-go resources Identified funding gaps and determines optimal funding solutions
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Approach to Develop Long-Range Capital Financial Plan (LRCFP)
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Obtained software to inventory all capital assets, including
condition assessments Developed new capital projects, unconstrained by funding, as well as costs for maintenance of all assets
Developed criteria to score, rank and prioritize all projects
New projects and maintenance of existing assets
Determined funding capacity by year under current fiscal
constraints
Identified Public-Private Partnerships (P3s) where private sector funding could assist
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Asset Tree Approach
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The DC ‘Waterfall’ Analysis
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Reinvestment Rate Comparison
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(Amounts in USD millions)
Canada Asset Type Current Asset Value1 Average Annual Investment2
Rate Current Reinvestment Rate (National Average) 3 Horizontal Infrastructure (i.e. roads, sidewalks, bridges, etc.) $3,523.1 $159.4 4.5% 0.8% ‐ 1.1% Vertical Infrastructure (i.e. facilities, buildings, etc.) $6,425.1 $56.2 0.9% 1.7% Equipment ‐ IT ‐ Fleet $315.3 $112.3 35.6% N/A
Notes:
Washington, D.C.
District of Columbia
Unfunded Capital Needs
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Total capital needs identified (FY2017–FY2022) as $10.5B
District’s current CIP is approx. $6.3 Billion
Still leaves approx. $4.2 Billion of unfunded capital needs These unfunded capital needs can be reasonably financed
District of Columbia
Annual Funding Shortfall
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Capital maintenance projects shortfall of $1.97 billion
New capital projects shortfall of $2.22 billion
(in $ millions)
Fiscal Year 2017 2018 2019 2020 2021 2022 6 Year Total Unfunded Capital Maintenance Projects 309.5 324.8 345.5 270.2 345.2 371.7 $1,967.0 Unfunded New Capital Projects 439.3 366.2 447.5 494.3 224.4 252.6 $2,224.2 Total Unfunded Capital Needs $748.7 $691.0 $793.0 $764.5 $569.6 $624.4 $4,191.2
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Current 6-Year CIP (FY2017-2022)
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CARSS identifies unfunded capital needs not financed in 6-year CIP
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Approach to Developing Funding Solutions
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Utilized CARSS to identify funding gaps by year for capital
needs Developed a long-range capital financial plan optimization model to determine the lowest cost solution to finance the capital funding gap
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Strong annual revenue growth provides future borrowing
capacity Aggressive program of monitoring existing debt for refinancing opportunities and debt retirement provides additional future borrowing capacity Optimal funding solution is to borrow up to the 12% statutory debt limit (Debt Cap) and fund remaining shortfall with paygo
District of Columbia
A Discussion of Return on Investment (ROI)
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Calculated the value, by asset type, and computed an ROI for each
Change in the value Value of the increased life of the asset Change in future expected O&M expenses
The overall weighted ROI for investment in “capital maintenance” projects is just over 5% annually
District of Columbia
Example of an ROI Calculation for Fleet
Value Measurement
Cost of the Investment $3,000 % Increase in Value 65.0% Old Asset Value $5,000 New Asset Value $6,950 Change in Value $1,950 Extended Life ‐ Years 3 Cost to replace Asset $30,000 % of Interest on Cost Avoidance 4.0% Annual Interest Avoidance $1,200 Total Cost Avoidance over extended life $3,600 Average Annual Operating Expense $600 % Change to operating Expense 60.0% Annual Operating Savings $360 Total Savings $1,080 Investment $3,000 Gain or Loss on Investment $6,630 Years of Return 3 Annual Net Gain from Investment $1,210 Annual ROI 40.3% Total Change to Market Value of Asset Value of the Increased life of the Asset Change in Future Operating Expense Costs
Asset Type: Fleet
In this example we assume there is a need to replace an engine in a vehicle at a cost of $3,000. The vehicle has a current value of $5,000, and replacing the engine will add 3 years to the life of the vehicle.
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District of Columbia
What do we get for the money? ROI
Assumptions Using FY 2017 Data, if we fully funded the gap:
investments - which includes depreciation.
based on 75% of our investment being new
capital expenses (chassis, engines, transmissions etc.) and thus avoid the purchase of new vehicles, which would have a market value of 5 times the current value of the major vehicle parts we're investing in.
use of an average annual fleet maintenance cost of 10% of the original market value during it's final 3 years of useful life.
would have replaced the vehicles and/or major systems on time, and thus maintenance would drop back to 'normal' levels.
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Operating Revenue & Maintenance Funding Gap
(in $millions)
Total is approx. $21 Billion
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Capital Budget Revenue & Funding Gap
(in $millions)
Total is approx. $15.6 Billion
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10-Year Funding Gap Summary
See the full Pro Forma for greater details
CIP Funding Gap 6,157.05 $ Maintenance Budget Gap 1,300.29 $ Total 7,457.34 $ Annual Average (10 Years ‐ FY 2017‐FY 2026) 745.73 $
($ Millions)
District of Columbia
Why do we need $15.6 Billion of capital investment over the next 10 years to reach a state of good repair? How did we get almost $7 Billion behind? The less than satisfactory reinvestment rate!
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Asset Type Current Asset Value Average Annual Investment % Reinvestment Target Public Transit ‐ WMATA 39,640 $ 792 $ 2.0% 3.9%
Mass Transit ‐ Metro
($ millions)
Reinvestment in Mass Transit
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SGR total capital needs are estimated by WMATA at $15.6 Billion
Far exceeds reasonable capacity of the compact jurisdictions
State of Good Repair
A dedicated funding source collecting approx. $650M annually, beginning in January 2019, can cover both the maintenance and capital funding gaps, as well as additional critical capital needs
jurisdictions will not be able to fund WMATA’s capital needs
Summary of Metro Issues
District of Columbia
Impacts of No Additional Funding
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Estimated cost of rush hour (only) trip delays are estimated at
between $153M and $235M annually Passenger safety risks will continue to increase and traffic congestion will continue and worsen Approx. $25 billion of development has occurred near metro stations over the past 8 years
Future development and economic growth could stall
Economic forecast implies regional, state and local government tax revenue growth from 2.5% to 4% annually
Reducing the economic forecast by just 0.25% to 0.50% results in annual losses to compact area taxes, collectively, ranging from $1 billion to $2.3 billion, respectively, after ten years.
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use savings to fund infrastructure needs
FY2019
Represents just 3.7% of the general fund budget or slightly more than just one year of revenue growth
funding and solutions
and/or federal assistance to address Metro’s funding needs
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