Tuesday, February 13, 2024
Council Referral:
SR 125 Toll Road
Overview of SR-125, Including Review of
Operations, Debt Profile and Reserve Balances
October 4, 2023
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PRESENTATIONPARTICIPANTS
Ray Major, Deputy Executive Officer
André Douzdjian, Chief Financial Officer
Lucinda Broussard, Director of Regional Transportation Services | 4
SR-125 PRESENTATION
1. Overview of the SR-125 Corridor
2. Purchase of the Toll Road by SANDAG in 2011 and review of the Caltrans Franchise Agreement
3. Refinance of the TIFIA debt in 2017 and current outstanding debt structure
4. Operating and Financial Performance
5. Cash Balances vs Debt
6. Conclusion
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SR-125 OVERVIEW
Located in southwest San Diego County, SR-125 is a 10-mile toll road that provides fast and convenient access to Chula Vista, Downtown San Diego, East County, Otay Mesa and
Mexico
Strong commuter base from the wealthy areas of Otay
Mesa and Chula Vista to San Diego County
employment centers
Area surrounding SR-125 contains some of the last
development opportunities in San Diego County
75% of traffic enters or exits at SR-54, providing
access to region’s employment market and highway
network
SBX provides time savings of up to 4.6 minutes for
commuters east of the toll road compared to free
alternate routes
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SR-125 BACKGROUNDAND RELATIONSHIPWITH SANDAG
SANDAG purchased the SR-125 franchise from Creditors, including the U.S. Department of Transportation, following bankruptcy in December 2011 at a 35% discount for $341 million The SANDAG Board made the strategic acquisition to improve mobility within the southwest San Diego County region by:
1. Expanding network capacity, reducing traffic congestion on parallel links;
2. Reducing need for infrastructure improvements on parallel links, saving $265M; and
3. The discounted purchase price allowed SANDAG to lower toll rates by 25% to 40% to attract and grow traffic on toll road
As part of the purchase price, SANDAG inherited the outstanding TIFIA loan for the facility, which along with the TransNet loan, which were the only outstanding debt obligations of SR-125. These loans were refinanced in 2017 with a more favorable level debt structure bond series in the capital markets. SR-125’s strength is bolstered by SANDAG’s role as the Regional Transportation Planning Agency, which includes responsibility for managing the transportation network | 7
CALTRANSDEVELOPMENT FRANCHISEAGREEMENT
Development Franchise Agreement between Caltrans and SANDAG (dated 2/1/2013) scheduled to terminate in November 2042
SANDAG operates, maintains, and tolls SR-125 subject to the Development Franchise Agreement Caltrans owns SR-125 and inspects it weekly to determine maintenance needs Key components of the Franchise Agreement:
• Flexible Term: SANDAG has flexibility to terminate anytime and convey rights back to Caltrans Exclusivity: SANDAG has exclusive right to operate in the Franchise Zone with no threat of a competitive facility so long as certain terms, including levels of service, are maintained Maintenance: SANDAG is responsible for maintenance in accordance with Caltrans standards Tolls Rates: SANDAG has full authority to set rates at any levels based on factors such as vehicle type, occupancy, time of day etc.
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Prior Debt Service vs Current Structure of Series 2017
Bonds
Prior Debt Service vs. Refunding Debt Service
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
Millions
Prior Debt Service Refunding Debt Service
$147M in cash flow savings over
Debt service is level to provide future budgetary certainty through 2043 | 9
KEY CREDIT FACTORS
Toll Road has A+ Ratings from both S&P and
FITCH rating agencies based on SR-125’s
uniquely good operating margins,
conservative debt service structure,
healthy debt service coverage,
minimal future borrowing needs and
prudent legal protections for investors
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Recent Historical Revenues and Expenses
• Annual Net Revenues and Interest, Debt Service and DSC Ratio FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 EST FY 2024 Revenue (in thousands)
Toll Revenue $ 33,122 $ 34,236 $ 31,434 $ 27,802 $ 31,561 $ 34,872 $ 36,615 Violations Revenues $ 7,295 $ 5,648 $ 5,064 $ 1,302 $ 1,460 $ 2,283 $ 1,000 Other Revenues $ 1,332 $ 1,745 $ 1,385 $ 377 $ 1,321 $ 1,613 $ 1,467 Interest Revenue $ 1,078 $ 1,856 $ 1,311 $ 291 $ 160 $ 2,453 $ 2,000 Total Revenues & Interest $ 42,827 $ 43,485 $ 39,194 $ 29,772 $ 34,502 $ 41,221 $ 41,082 Less: Operating Expenses $ (10,981) $ (12,318) $ (12,536) $ (11,889) $ (11,752) $ (13,649) $ (15,603) Net Revenue & Interest (A) $ 31,846 $ 31,167 $ 26,658 $ 17,883 $ 22,750 $ 27,572 $ 25,479 Debt Service (B) $ 13,869 $ 13,869 $ 13,869 $ 13,869 $ 13,869 $ 13,869 $ 13,869 Debt Service Coverage Ratio (A/B) 2.30 2.25 1.92 1.29 1.64 1.99 1.84 2017 Bond DSCR Requirement 1.50 1.50 1.50 1.50 1.50 1.50 1.50 | 11
Cash Balances vs Outstanding Bond Balance
The bonds are not callable until 2027 and the last payment is in 2043 Reserves and Liquidity vs Outstanding Bond Balance
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 EST FY
2024
EST FY
2025
EST FY
2026 EST FY 2027
Cash Balances (in
thousands)
General $ 2,006 $ 2,022 $ 2,031 $ 2,031 $ 2,332 $ 2,332 $ 2,332 $ 2,332 $ 2,332 $ 2,332 Senior Lien Expense $ 9,050 $ 9,191 $ 9,320 $ 9,437 $ 9,563 $ 9,693 $ 9,693 $ 9,693 $ 9,693 $ 9,693 Debt Service Expense $ 13,803 $ 13,870 $ 13,824 $ 13,761 $ 13,761 $ 13,761 $ 13,871 $ 13,871 $ 13,871 $ 13,871 O&M Expense Fund $ 5,817 $ 6,751 $ 6,181 $ 7,721 $ 11,625 $ 11,578 $ 11,694 $ 11,811 $ 11,929 $ 12,048 O&M Reserves $ 24,173 $ 27,008 $ 30,004 $ 33,571 $ 33,660 $ 35,812 $ 39,811 $ 40,888 $ 42,932 $ 45,079 Capital Fund $ 37,153 $ 47,037 $ 47,197 $ 30,315 $ 24,934 $ 28,957 $ 28,956 $ 24,320 $ 17,093 $ 18,471 State Received Funds $ - $ - $ - $ - $ - $ - $ 20,000 $ 21,000 $ 21,840 $ 22,495 Total Cash Balances $ 92,002 $ 105,879 $ 108,557 $ 96,836 $ 95,875 $ 102,133 $ 126,357 $ 123,915 $ 119,690 $ 123,989 Bond Balance $ 191,070 $ 186,755 $ 182,220 $ 177,455 $ 172,445 $ 167,180 $ 161,645 $ 155,825 $ 149,705 $ 143,270 Cash Needed to Pay Off Bonds $ 19,281 (bonds first call date is 2027)
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Since acquiring SR-125, SANDAG’s management has
greatly enhanced the performance of the asset
SANDAG acquired the SR-125 franchise to improve mobility by better integrating SR-125 into the regional transportation system and by reducing congestion on I-805 and local arterials As a part of the acquisition plan, in June 2012 the Board reduced tolls 25-40%, resulting in 24% increase in annual trips in FY 2013
This performance has greatly outpaced the traffic and revenue study commissioned at the point of acquisition in 2011
While enhancing revenue performance, SANDAG has also focused on prudent management of expenditures and the building of reserves and liquidity While liquidity remains strong, COVID-19 had a material impact on traffic levels and has adversely impacted some of the debt covenant metrics
Traffic levels are almost back to pre COVID-19 levels Stay connected with SANDAG
Explore our website
SANDAG.org
Email: [email protected]
Follow us on social media:
@SANDAGregion @SANDAG
Tolling Impacts
• Undue and disproportionate
burden on South Bay users.
• Hinder the City’s economic
development activity in areas
such as business attraction and
retention.
• Divert more traffic onto local
roadways.
Advocacy Goals
• Eliminate the toll-only operations of the SR 125 Toll Road. • Eliminate acquisition debt by 2027 when bonds will be callable. • Caltrans assume control of the road before end of franchise lease term in 2042.
Progress To-Date
• Chula Vista City Council Resolution 2022-030
• SANDAG Board Resolution 2023-022
• California Budget $20 million for SANDAG to reduce SR-125 debt to support efforts to eliminate bond debt by 2027.
SANDAG Board Resolution 2023-022
1. Declared that elimination of debt and toll-only operations on the SR 125 is a priority.
2. Supported efforts to evaluate alternatives to toll-only operations (including managed lanes) for the SR 125.
3. Supported controlling planned operating and capital expenses in order to increase available reserve cash balances sufficient to retire the outstanding bond debt or minimize the need for additional funds to retire the remaining bond balance.
5. Directed staff to conduct a Comprehensive Multimodal Corridor Plan to analyze future options for the SR 125, develop a plan to pay off outstanding debt as early as 2027, make the SR 125 consistent with the Regional Plan, and develop strategies to revert control of the SBX to Caltrans following debt retirement.
Next Steps
• Continue working with SANDAG on
Board directives.
• Continue working with Caltrans to
understand maintenance and
operational needs.
• Work with state legislators on solutions
toward elimination of toll-only
operations.
Questions?