2010 FINANCIAL PLAN ANNUAL UPDATE

Transcription

1 THE INTERCOUNTY CONNECTOR PROJECT 2010 FINANCIAL PLAN ANNUAL UPDATE AS OF FISCAL YEAR ENDING JUNE 30, 2010 DATE SUBMITTED: JANUARY 6, 2011 SUBMITTED IN PARTNERSHIP BY: MARYLAND STATE HIGHWAY ADMINISTRATION MARYLAND TRANSPORTATION AUTHORITY

2

3

4 MARYLAND STATE HIGHWAY ADMINISTRATION MARYLAND TRANSPORTATION AUTHORITY INTERCOUNTY CONNECTOR PROJECT Between Interstate 270 and U.S. Route 1 FINANCIAL PLAN ANNUAL UPDATE AS OF JUNE 30, 2010 LETTER OF CERTIFICATION The Maryland State Highway Administration and Maryland Transportation Authority have developed a comprehensive annual update for the Intercounty Connector Project in accordance with the requirements outlined in FHWA s January 2007 Major Project and Financial Plan Guidance. 1 This plan provides detailed cost estimates to complete the project and the estimates of financial resources to be utilized to fully finance the Intercounty Connector Project. The cost data in the Financial Plan Annual Update provide an accurate accounting of costs incurred as of June 30, 2010 and include a realistic estimate of future costs based on engineer s estimates and expected construction cost escalation factors. While the estimates of financial resources rely upon assumptions regarding future economic conditions and demographic variables, they represent realistic estimates of available monies to fully fund the project. We believe the Financial Plan Annual Update provides an accurate basis upon which to schedule and fund the Intercounty Connector Project. This document, an update of the Initial Financial Plan dated June 13, 2006 as well as the 2007 through 2009 Financial Plan Annual Updates, will be reviewed and updated on an annual basis. To the best of our knowledge and belief, the Financial Plan Annual Update as of June 30, 2010 as submitted herewith, fairly and accurately presents the financial position and cash flows of the Intercounty Connector Project. The financial forecasts in this document are based on our judgment of the expected project conditions and our expected course of action. We believe that the assumptions underlying the Financial Plan Annual Update are reasonable and appropriate. Further, we have made available all significant information that we believe is relevant to the Financial Plan Annual Update and, to the best of our knowledge and belief, the documents and records supporting the assumptions are appropriate. Respectfully Submitted: Neil J. Pedersen Date Harold M. Bartlett Date Administrator Acting Executive Secretary Maryland State Highway Administration Maryland Transportation Authority 1

5 TABLE OF CONTENTS SUMMARY... I SECTION 1 INTRODUCTION SIGNIFICANT ACTIVITIES SINCE JUNE SECTION 2 PROJECT COST ESTIMATE CURRENT PROJECT ESTIMATE Cost Allocation by Contract Cost Allocation by Project Element and Contract EXPENDITURES TO DATE BY CONTRACT & COST ELEMENT COST TO COMPLETE BASIS OF ESTIMATE & ADJUSTMENTS TO ASSUMPTIONS SECTION 3 PROJECT IMPLEMENTATION PLAN PROJECT SCHEDULE EXPENDITURES TO DATE BY FISCAL YEAR EXPENDITURE FORECAST METHODOLOGY TOTAL EXPENDITURE FORECAST IMPACT OF OTHER FUTURE COST CHANGES SECTION 4 PROJECT FINANCING AND REVENUES OVERALL FINANCIAL PLAN COMMITTED FUNDING SOURCES - $2,462.7 Million GARVEE Bonds - $750.0 Million Authority Supported Toll Revenue Bonds and Cash - $715.6 Million Auhtority Supported TIFIA Loan - $516.0 Million State of Maryland General Fund and General Obligation Bonds- $264.9 Million State of Maryland Transportation Trust Fund - $180.0 Million Special Federal Funds - $19.3 Million Additional Funds from GARVEE Sale - $16.9 Million ANTICIPATED FUNDING SOURCES - $103.2 Million SUMMARY OF COMMITTED & ANTICIPATED FUNDING KEY REVENUE ASSUMPTIONS, RISKS, AND MITIGATION STRATEGIES SECTION 5 - PROJECT CASH FLOW REVENUE TIMING BY SOURCE PROJECT FUNDING VS. PLANNED EXPENDITURES SECTION 6 OTHER FACTORS IMPACTS ON STATE DOT BUDGET SPECIAL COST CONTAINMENT STRATEGIES MAJOR RESPONSIBILITIES OF ALL PARTIES INVOLVED AGREEMENTS & ISSUES RELATED TO ICC FINANCING AND CONSTRUCTION SCHEDULE FOR FUTURE ANNUAL UPDATES

6 SECTION 7 - COST & REVENUE HISTORY COST & SCHEDULE HISTORY Initial Financial Plan ($ Millions) Financial Plan Update ($ Millions) Financial Plan Update ($ Millions) REVENUE & FUNDING HISTORY Initial Financial Plan ($ Millions) Financial Plan Update ($ Millions) Financial Plan Update ($ Millions) CURRENT EXPENDITURE PROJECTIONS VS. INITIAL PROJECTIONS SECTION 8 COST & REVENUE TRENDS COST TRENDS OVER THE PAST YEAR REVENUE TRENDS OVER THE PAST YEAR FUTURE IMPLICATIONS OF TRENDS ADJUSTMENTS IN FINANCIAL PLAN TO ACCOUNT FOR TRENDS SECTION 9 - REVENUE SHORTFALL MITIGATION SECTION 10 SIGNIFICANT COST REDUCTIONS SECTION 11 SIGNIFICANT COST INCREASES APPENDIX APPENDIX A... CURRENT PROJECT SCHEDULE APPENDIX B... INFLATION ASSUMPTIONS APPENDIX C... SUMMARY OF COST ESTIMATE IN STATE FY 2009$ APPENDIX D... YEAR EXPENDITURES COMMENCE BY COST CATEGORY APPENDIX E... CUMULATIVE ESCALATION FACTORS APPENDIX F... SUMMARY OF COST ESTIMATE IN YEAR OF EXPENDITURE $ APPENDIX G... HISTORICAL COMPARISON OF YEAR OF EXPENDITURE $ ESTIMATE APPENDIX H... CURRENT QUARTERLY CASH FLOW FORECAST APPENDIX I... PLAN OF FINANCE APPENDIX J... PROJECT MAP

7 EXHIBITS EXHIBIT 1-1: OVERVIEW OF CONTENTS FOR THE 2010 ANNUAL FINANCIAL PLAN UPDATE EXHIBIT 1-2: CURRENT CONTRACT LIMITS EXHIBIT 1-3: RIGHT OF WAY PARCEL STATISTICS BY ACQUISITION STAGE EXHIBIT 1-4: ACTIVE CONTRACT STATISTICS CONTRACT A EXHIBIT 1-5: ACTIVE CONTRACT STATISTICS CONTRACT B EXHIBIT 1-6: ACTIVE CONTRACT STATISTICS CONTRACT C EXHIBIT 1-7: ES/CM/CS PROJECT STATUS EXHIBIT 2-1: PROJECT COST ESTIMATE BY CONTRACT (YOE$ IN MILLION) EXHIBIT 2-2: TOTAL PROJECT COST ESTIMATE BY COST ELEMENT (YOE$ IN MILLION) EXHIBIT 2-3: EXPENDITURES TO DATE BY CONTRACT (YOE$ IN MILLION) EXHIBIT 2-4: EXPENDITURES TO DATE BY COST ELEMENT (YOE$ IN MILLION) EXHIBIT 3-1: CONTRACT MILESTONES EXHIBIT 3-2: TOTAL ACTUAL EXPENDITURES BY STATE FISCAL YEAR (YOE$ IN MILLION) EXHIBIT 3-3: DESIGN-BUILD EXPENDITURE CURVES BY CONTRACT EXHIBIT 3-4: ACTUAL AND PROJECTED EXPENDITURES BY FISCAL YEAR (YOE$ IN MILLION) EXHIBIT 4-1: FUNDING SOURCES FOR THE ICC PROJECT EXHIBIT 4-2: SUMMARY OF KEY RISKS EXHIBIT 4-3: SUMMARY OF KEY MITIGATION STRATEGIES EXHIBIT 5-1: ICC PROJECT CUMULATIVE SOURCES AND USES FORECAST (YOE$ IN MILLION)

8 SUMMARY This financial plan serves as the fourth annual update to the Intercounty Connector Project s Initial Financial Plan (IFP), which was approved on June 29, Contained in this document are project estimate, expenditure, funding, and schedule data as of June 30, This document serves as an addendum to the IFP as well as the 2007 through 2009 Financial Plan Updates and summarizes the following key updates: Project Schedule Maintains FY2012 Substantial Completion for all Active Contracts Given recent activity for active Contracts A, B and C, the project schedule for completion of the 17.9 mainline miles of the Intercounty Connector from I-270/I-370 to I-95 continues to target a FY2012 substantial completion date. Although Contract D is currently delayed to begin in FY2017 and complete in FY2019, contingent on funding, the delay in completion of the improvements associated with this contract, which are along I-95, will not have a material impact on the access to/from, nor the operations of, the new east-west expressway starting in FY2012. Due to ongoing contract package refinements, the schedule for the start of the 0.9 mainline miles under Contract E has been adjusted such that NTP is now scheduled for late 2011, with an estimated completion date during the spring of Project Cost Estimate Remains on Budget at $2.566 Billion As of June 30, 2010, the total cost to complete the Intercounty Connector Project of $2.566 billion has not changed since Over the next year, the project team will continue to explore opportunities to reduce costs such that Contract D can be accelerated within the six-year program period and the project can return to the original budget of $2.445 billion. Project Expenditures to Date Total $1.448 Billion Through June 30, 2010, or the end of FY2010, the project has expended $1.448 billion since inception (FY2003), or 56% of the current project estimate. This is an increase of $565.7 million over the past year. The current cash flow forecast is below the 2009 Financial Plan Update due to lower than anticipated design-build costs to date for active contracts. All active contracts are expected to be substantially completed and open by FY2012. Project Funding Levels Are Maintained Through the Six-Year Program Period During the past year, the Maryland Transportation Authority successfully issued $549 million in system revenue bonds, of which $240 million has been allocated to support the project. In addition to this, the project received $55 million from the Maryland General Fund and $30 million from the Maryland Transportation Trust Fund in FY2010. With planned contributions from the Maryland General Fund, as well as system revenue bonds and TIFIA funding during FY2011 and future years, sufficient funding is anticipated to be in place to meet project cash flow requirements. In addition, when compared to the IFP, the sources of funding and the contributions from those sources have remained relatively unchanged and will support the overall project schedule during the next six years, which is the duration of the fiscally constrained capital program. Committed funding for the project through FY2016 totals $2.463 billion, which represents 96% of the total project cost estimate of $2.566 billion. 1 Only 17.5 of the 18.8 total mainline miles will be tolled (5.7 miles upon completion of Contract A from the I-370 terminus to MD miles upon completion of Contracts B and C from MD 97 to I miles upon completion of Contract E from I-95 to US 1). i

9 Commitment to Successful Project Implementation Through this financial plan update, the Maryland State Highway Administration and the Maryland Transportation Authority believe that the Intercounty Connector Project continues to have the structure, strategies, and commitment to successfully complete the project as approved in the Final Environmental Impact Statement and Record of Decision. A Quality Assurance Oversight program has been developed to provide quality assurance oversight of the various design-build projects that comprise the Intercounty Connector Project. It is designed to ensure that the design-build teams design, and construct the Intercounty Connector in accordance with the contract performance and special provisions. The Quality Assurance database system identifies all pertinent contract requirements organized by Work Breakdown Structure, discipline, and phase. Contract requirements are easily accessible which ensures that quality assurance reviews are thorough and based on objective criteria from the contract. Use of a database system for quality assurance provides the ability to track the Design Build Team's Conformances, monitor Non-Conformances through resolution, perform analysis by discipline, and contract phase. The analysis provides trend information that assists our assessors (quality assurance reviewers) in knowing which areas require less or more focus concerning quality assurance oversight. This ensures continuous improvement in quality resulting in a better quality project. The Quality Assurance Oversight Database's Final Acceptance Module is in development. The Final Acceptance Module for Contract A is completed and covers all current contractual requirements for acceptance in a checklist fashion that will be used for final close-out. The module is integrated with the Quality Acceptance Oversight Database such that nonconformances still open can be assessed and closed within either application. The Contract A Final Acceptance Module, while implemented and in use, will be continually updated as change orders are approved that modify or affect the contractual requirements for project acceptance. It is anticipated that the Final Acceptance Module for Contract C will be ready for trial use and testing in late 2010/early The Contract B Final Acceptance Module is expected to be ready for testing in early All aspects of the design-build teams' efforts are evaluated including the safety programs, design, construction, environmental commitments, and management processes. The safety, design, construction, and environmental efforts are reviewed on an on-going basis and the management processes are reviewed periodically to ensure that the Intercounty Connector meets all quality requirements. ii

10 SECTION 1 INTRODUCTION As the fourth annual update to the 2006 Initial Financial Plan (IFP), this document builds off of the baseline information presented in the IFP and the 2007 through 2009 Financial Plan Updates by presenting a revised cost estimate, schedule, cash flow and funding forecast, as well as specific discussions regarding any significant changes to that data. This annual update is presented as follows: Exhibit 1-1: Overview of Contents for the 2010 Annual Financial Plan Update SECTION Section 1 Introduction Section 2 Project Cost Estimate Section 3 Project Implementation Plan Section 4 Project Financing & Revenues Section 5 Project Cash Flow Section 6 Other Factors Section 7 Cost and Revenue History Section 8 Cost and Revenue Trends Section 9 Revenue Shortfall Mitigation CONTENTS Significant Activities Since the Last Update Current Cost Estimate by Contract & Cost Element Expenditures to Date by Contract & Cost Element Cost to Complete Basis of Estimate & Adjustments to Assumptions Project Schedule Expenditures to Date by Fiscal Year Expenditure Forecast Methodology Total Expenditure Forecast Impact of Future Cost Changes Overall Financial Plan Committed Funding Sources Anticipated Funding Sources Key Revenue Assumptions, Risks & Mitigations Revenue Timing by Source Project Funding Compared to Planned Expenditures Impacts on State DOT Budget Special Cost Containment Strategies Major Responsibilities of All Parties Involved Agreements & Issues Related to ICC Financing & Construction Schedule for Future Annual Updates Cost & Schedule History Revenue & Funding History Cost Trends Over the Past Year Revenue Trends Over the Past Year Future Implications of Trends Adjustments in Financial Plan to Account for Trends Recent Mitigation Strategies to Meet Funding Needs Section 10 Significant Cost Reductions Budget components that decreased in cost more than $10M Section 11 Significant Cost Increases Budget components that increased in cost more than $10M SIGNIFICANT ACTIVITIES SINCE JUNE 2009 Over the past year, the ICC Project has significantly progressed with the continued refinement of contract packaging and procurement plans, the acquisition of right of way parcels necessary to support design-build contract activities, the successful issuance of system revenue bonds for the project, disbursement of Maryland General Funds and Transportation Trust Funds, and the continued construction of the three active design-build contracts. With Contracts A, B and C Page 1-1

11 active, which comprise approximately 95% of the construction value for the ICC Project, a total of 17.9 of the 18.8 mainline facility miles are currently under construction. 2 Contract Packaging Remains Consistent with 2009 Financial Plan Update The current contract limits remain unchanged from those presented in the 2009 Financial Plan Update. A larger version of the current project map and contract limits is in Appendix J. Exhibit 1-2: Current Contract Limits ICC Contracts Right of Way Activity Continues in Preparation of Design-Build Activities Beginning in advance of the design-build procurement process, and consistent with the project s NEPA approvals, right of way acquisitions have been completed beginning with Contracts A and C and more recently with Contracts B, D and E. As of June 30, 2010, 300 out of 313 parcels that are affected have either been acquired or have commenced the condemnation process. All right of way activities continue to meet or exceed overall project schedule requirements. Exhibit 1-3: Right of Way Parcel Statistics by Acquisition Stage RIGHT OF WAY PARCEL STATISTICS Acquisition Stage Contract A B C D E Other Total Settled or Optioned Condemned Appraised Estimated Total Acquisition Stage Definitions: Settled or Optioned: Both SHA and the property owner have come to an agreement. Condemned: Agreement could not be reached and resolution will occur either via continuing negotiations or legal proceedings. Appraised: Independently appraised based on the plats, concept plans and site visits. Estimated: Original district estimates, based on zoning, tax records and knowledge of the area. 2 Only 17.5 of the 18.8 total mainline miles will be tolled (5.7 miles upon completion of Contract A from the I-370 terminus to MD miles upon completion of Contracts B and C from MD 97 to I miles upon completion of Contract E from I-95 to US 1). Page 1-2

12 Contract A Nears Opening Construction activities have continued to advance over the past year along the first 7.2 mainline miles of the ICC. Earthwork operations are ongoing from Redland Road to the eastern terminus of Contract A, paving is occurring at the Metro Access Road Interchange ramps, the MD 97 ramps, and along the ICC mainline. Electronic toll collection equipment is being installed and overhead sign structures are being erected project wide. Intercounty Constructors (IC) also continues to make significant progress on the ICC bridges and structures throughout the contract. Mainline Paving West of Redland Road Ongoing activities include additional earthwork operations, paving the remainder of the ICC mainline and interchanges, sound barrier construction, installation of tolling and ITS equipment, and bridge work. In 2009/early 2010, the project experienced significant weather impacts. There was an extremely rainy spring and fall and early winter, which impacted earthwork operations. Efforts are underway to have Contract A open to traffic by early The following summary provides the key budget and schedule statistics for Contract A. Exhibit 1-4: Active Contract Statistics Contract A ACTIVE CONTRACT STATISTICS - CONTRACT A ($ Millions) Budget Schedule Base Contract Amount* $478.7 Limited Notice to Proceed Jun-2007 Change Order Budget / Contingency $28.4 Full Notice to Proceed Nov-2007 Change Orders to Date ($) $2.0 Projected Completion Dec-2010 Change Orders to Date (% of Base) 0.4% Change Orders to Date (% of Contingency) 7.0% Current % Expended 74.1% Current % Time Expended 85.9% * - includes budget for environmental incentives * - does not include design-build stipends that were paid to the bidders not selected Salt Dome Construction at WOF The Western Operations Facility (WOF) is nearing completion in preparation of the opening of Contract A. Masonry wall and brick installation is complete and work on the interior finishes of the building has begun. Site utility installations continue and construction of the salt dome is nearing completion. The facility will serve as the temporary headquarters for the Authority Police on the ICC until the Eastern Operations Center is completed. Substantial completion of the WOF is scheduled for fall Page 1-3

13 Contract B Construction Continues MD 200 Constructors (MD 200) has completed design work and continues its efforts with construction of the middle 7.0 mainline miles of the project. Recent work includes installation of sound barriers between Norbeck Road and Layhill Road, placing reinforcing steel for the Layhill Road Bridge deck, and setting of girders and concrete bridge decks for the New Hampshire Avenue Bridge and structures in the Northwest Branch area. Additional ongoing and future activities includes earthwork operations, bike path installation, Northwest Branch Bridge landscaping, mainline paving, installation of drainage pipes, and associated maintenance of traffic and quality control activities related to construction. Substantial completion of Contract B is expected in late 2011/early The following summary provides the key budget and schedule statistics for Contract B. Exhibit 1-5: Active Contract Statistics Contract B ACTIVE CONTRACT STATISTICS - CONTRACT B ($ Millions) Budget Schedule Base Contract Amount* $559.7 Limited Notice to Proceed Oct-2008 Change Order Budget / Contingency $34.6 Full Notice to Proceed Jan-2009 Change Orders to Date ($) $1.7 Projected Completion Dec-2011 Change Orders to Date (% of Base) 0.3% Change Orders to Date (% of Contingency) 4.9% Current % Expended 39.5% Current % Time Expended 52.7% * - includes budget for environmental incentives * - does not include design-build stipends that were paid to the bidders not selected Contract C Construction Continues ICC Constructors (IC3) continues with construction activities for the 3.7 mainline miles extending from west of US 29 to I-95, as well as 4.5 miles along US 29 and I-95 within proximity to the ICC. IC3 has recently completed paving the mainline between Old Columbia Pike and US 29 and placing concrete for bridge decks on the eastbound ICC bridges over US 29 and I-95. Ongoing work includes foundation and substructure work for ramp bridges around the US 29 Interchange, setting concrete girders for the mainline bridges over Construction of ICC Flyover Ramp at I-95 Page 1-4

14 Little Paint Branch, excavation and embankment work project wide, and installation of drainage, sign structures, lighting and ITS/electronic toll collection conduits. Substantial completion of Contract C is on schedule for late 2011/early The following summary provides the key budget and schedule statistics for Contract C. Exhibit 1-6: Active Contract Statistics Contract C ACTIVE CONTRACT STATISTICS - CONTRACT C ($ Millions) Budget Schedule Base Contract Amount* $514.0 Limited Notice to Proceed Jan-2008 Change Order Budget / Contingency $30.8 Full Notice to Proceed Apr-2008 Change Orders to Date ($) $1.6 Projected Completion Dec-2011 Change Orders to Date (% of Base) 0.3% Change Orders to Date (% of Contingency) 5.2% Current % Expended 62.7% Current % Time Expended 63.4% * - includes budget for environmental incentives * - does not include design-build stipends that were paid to the bidders not selected Contract D Delayed until FY2017 In consultation with sponsor agencies and contingent on funding, SHA has deferred Contract D such that construction should commence in FY2017. However, construction of Contract D will be moved forward if determined necessary at a later date. Since this contract is the I-95 collector/distributor system located to the north of the ICC, it does not impact toll revenues or system capacity for the ICC Project. Thus, this delay will not impact the opening of the 18.8 mainline miles of the facility. Contract D Limits As a result of this delay, SHA will maintain the cumulative funding level through the end of the six-year capital program, which is FY2016. The costs associated with Contract D are deferred to beyond the six-year capital program and the requisite funding sources to support the additional cost outside the program will be discussed further in Section 4. In addition, the project sponsors will continue to seek cost saving opportunities via value engineering and/or scope adjustments wherever possible such that this contract can be completed as soon as financially possible. Contract E RFP Work Continues Work on the Request for Proposal (RFP) continues, including review of advertisement schedules and industry notifications. Due to ongoing contract package refinements, the schedule for the start of Contract E has been adjusted such that NTP is now scheduled for late 2011, with an estimated completion date during the spring of Page 1-5

15 The Eastern Operation Center (EOC) will serve as the maintenance facility on the eastern end of the project as well as be the permanent headquarters for the ICC Authority Police. The EOC is scheduled for a fall 2010 NTP, with completion anticipated in late 2011/early Stewardship & Mitigation Throughout the past year, stewardship and mitigation projects have continued to advance in concept and design. These projects are categorized by one of the following three classifications: Compensatory Mitigation (CM) Replacement of affected aquatic resource functions in addition to the acreage affected. Environmental Stewardship (ES) Restoration efforts and enhancements to improve and restore the natural resources and water quality of the watersheds that the project is located within. Community Stewardship (CS) Enhancement or replacement of community resources within the affected area, including renovating a historic structure or constructing bike trails. Exhibit 1-7: ES/CM/CS Project Status Total Under Under Contracts Design Construction Completed Through the end of June, all 48 of the stewardship and mitigation projects had at least reached the design phase. Of these 48 projects, one is under active construction and seven have been completed. As the ICC project progresses, ES/CM/CS activities will continue to advance through design, construction, and then ultimately the monitoring phase to support project schedule requirements. Over the next two fiscal years, the NTP will be issued for the majority of remaining projects. All ES/CM/CS projects are currently on schedule. Funding and Financing NW-170 Stream Restoration Site During the past year, the Authority successfully issued $549 million in system revenue bonds, of which $240 million was made available to the ICC project for design, right of way and construction activities. In addition to this successful issuance, $55 million in Maryland General Funds and $30 million in Maryland Transportation Trust Funds were received to support project cash flow requirements in FY2010. The Authority anticipates beginning to draw on the $516 million TIFIA loan this fall to fund construction activities. There have been no draws against the TIFIA vehicle as of June 30, Legal Actions Related to the Intercounty Connector Project There are currently no outstanding legal issues. Page 1-6

16 SECTION 2 PROJECT COST ESTIMATE As of June 30, 2010, the total cost to complete the Intercounty Connector Project is estimated at $2.566 billion, which is consistent with the 2009 Financial Plan Update. As detailed below, there have been budget reallocations between costs elements or amongst individual contracts and projectwide costs, however the overall project cost remains unchanged relative to last year. CURRENT PROJECT ESTIMATE The project cost estimate is summarized using two different methods based on the year of expenditure dollar (YOE$) summary provided in Appendix F and the comparison with the IFP and 2009 Financial Plan Update in Appendix G. The first summary allocates the project costs by contract. The second method apportions the cost estimate by the major cost elements. Cost Allocation by Contract The following table and chart summarizes the current cost estimate by contract in YOE$ and compares it with the IFP and 2009 Financial Plan Update. The majority of changes amongst individual contracts and non-contract costs were due the reallocation of engineering & program management and right of way costs. Exhibit 2-1: Project Cost Estimate by Contract (YOE$ in million) Contract Project Component IFP Estimate 2009 Estimate 2010 Estimate Change from 2009 Estimate A I-270 to MD-97 $ $ $ $ 7.0 B MD-97 interchange to US-29 $ $ $ $ 2.7 C US-29 to I-95 $ $ $ $ (4.0) D I-95 C-D Roads $ $ $ $ - E I-95 to US-1 $ $ $ $ (0.3) Other Non-Contract Costs* $ $ $ $ (5.4) TOTALS $ 2,445.9 $ 2,566.0 $ 2,566.0 $ - * - SHA Projectwide Planning, Preliminary Engineering & Right of Way Costs, as well as Transit, Park & Ride, and Mitigation Costs $800 $700 $600 IFP Estimate 2009 Estimate 2010 Estimate Cost Estimate (millions) $500 $400 $300 $200 $100 $0 A B C D E Other Total Cost by Contract Page 2-1

17 Based on the exhibit above, the detailed comparison provided in Appendix G, and the expenditure detail provided in Appendix F for FY2010, the primary causes for the changes in the contract costs relative to the 2009 Financial Plan Update estimate are briefly described below. Contract A: Increase of $7.0 million This increase was the net of the following: 1. Engineering and program management increase of $6.0 million due to reallocation of overall project costs amongst individual contracts and projectwide expenditures. 2. Right of way and administration increase of $1.8 million due to refined appraisals. 3. Neat construction and additives associated with MdTA tolling and facilities decrease of $0.8 million. Contract B: Increase of $2.7 million This increase was the net of the following: 1. Right of way and administration increase of $2.0 million due to refined appraisals. 2. Engineering and program management increase of $0.4 million due to reallocation of overall project costs amongst individual contracts and projectwide expenditures. 3. Neat construction and additives associated with MdTA tolling and facilities increase of $0.4 million. 4. Neat construction and additives associated with utilities decrease of $0.1 million. Contract C: Decrease of $4.0 million This decrease was the net of the following: 1. Right of way and administration decrease of $3.7 million due to refined appraisals. 2. Engineering and program management decrease of $0.4 million due to reallocation of overall project costs amongst individual contracts and projectwide expenditures. 3. Neat construction and additives associated with MdTA tolling and facilities increase of $0.2 million. 4. Neat construction and additives associated with utilities decrease of $0.1 million. Contract D: No Change Contract E: Decrease of $0.3 million This decrease was the net of the following: 1. Right of way and administration decrease of $0.6 million due to refined appraisals. 2. Neat construction and additives associated with MdTA tolling and facilities increase of $0.3 million. Other Non-Contract Costs: Decrease of $5.4 million This decrease was the net of the following: 1. Engineering and program management decrease of $6.0 million due to the reallocation of overall project costs amongst individual contracts and projectwide expenditures. 2. Right of way and administration increase of $0.6 million due to refined appraisals. Page 2-2

18 Cost Allocation by Project Cost Element and Contract The following cost estimate is organized by the eight standard project cost elements for each contract. Details are presented in Appendix F, with a comparison with the IFP and 2009 Financial Plan Update estimate in Appendix G. Exhibit 2-2: Total Project Cost Estimate by Cost Element (YOE$ in million) Cost Element IFP Estimate Fin Plan Estimate 2010 UPDATE Cont. A Cont. B Cont. C Cont. D Cont. E Other Costs 2010 Total Estimate Change from 2009 Estimate Engineering & Prog. Mgmt. $ $ $ 25.6 $ 12.7 $ 16.8 $ 11.1 $ 11.4 $ $ $ 6.0 Right of Way $ $ $ 81.7 $ 45.7 $ 62.7 $ 3.9 $ 29.3 $ 40.5 $ $ - Right of Way Administration $ 50.8 $ 34.3 $ 10.6 $ 5.9 $ 8.1 $ 0.5 $ 3.8 $ 5.3 $ 34.3 $ - Active D/B Base Contract $ - $ 1,555.6 $ $ $ $ - $ - $ - $ 1,555.6 $ - Neat Construction $ 1,322.3 $ $ 27.1 $ 7.6 $ 7.6 $ 80.3 $ 86.0 $ 2.0 $ $ (2.2) Construction Overhead $ $ 15.9 $ 2.4 $ 1.5 $ 1.5 $ 6.2 $ 8.3 $ 0.3 $ 20.3 $ 4.4 Neat Construction Contingency $ 92.6 $ $ 29.4 $ 34.9 $ 31.2 $ 5.6 $ 6.1 $ 0.1 $ $ (2.6) Mitigation/Transit/Park & Ride $ $ $ - $ - $ - $ - $ - $ $ $ (5.6) TOTALS $ 2,445.9 $ 2,566.0 $ $ $ $107.6 $ $ $ 2,566.0 $ - Engineering & Prog. Mgmt. Right of Way IFP Estimate 2008 Estimate 2009 Estimate Right of Way Administration Cost Element Active D/B Base Contract Neat Construction Construction Overhead Neat Construction Contingency Mitigation/Transit/Park & Ride $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 Cost Estimate (millions) The primary cost estimate changes between the 2009 and the 2010 Financial Plan Update are due to the reallocation of engineering and program management costs and estimate refinements associated with MdTA tolling and facilities costs. EXPENDITURES TO DATE BY CONTRACT & COST ELEMENT As noted in the following exhibit, the ICC Project has expended $1.448 billion from FY2003 through June 30, 2010, out of a total estimated project cost of $2.556 billion, or 56.4% of the total budget. Expenditures have been primarily focused on Contracts A, B and C and the engineering, program management and right of way activities associated with the other noncontract costs category. Page 2-3

19 Exhibit 2-3: Expenditures to Date by Contract (YOE$ in million) Contract 2010 UPDATE 2010 Estimate Expended to Date % Expended A $ $ % B $ $ % C $ $ % D $ $ % E $ $ % Other* $ $ % TOTALS $ 2,566.0 $ 1, % * - SHA Planning, PE & ROW Costs, as well as Transit, Mitigation, and Park & Ride Costs $800 $ Estimate Expended to Date $600 Cost Estimate (millions) $500 $400 $300 $200 $100 $0 A B C D E Other* Contract Page 2-4

20 When examining the expenditures by cost element, engineering and program management, right of way and administration, and active design-build contracts are furthest along, with approximately 56%, 90%, and 62% budget completion, respectively. Neat construction expenditures are progressing due to the construction activities associated with the Western Operations Facility and Eastern Operations Center. Exhibit 2-4: Expenditures to Date by Cost Element (YOE$ in million) Cost Element 2010 UPDATE 2010 Estimate Expended to Date % Expended Engineering & Prog. Mgmt. $ $ % Right of Way & Admin $ $ % Active D/B Base Contract $ 1,555.6 $ 1, % Neat Construction $ $ % Construction Overhead $ 20.3 $ - 0.0% Construction Contingency $ $ - 0.0% Mitigation/Transit/Park & Ride $ $ % TOTALS $ 2,566.0 $ 1, % Engineering & Prog. Mgmt Estimate Expended to Date Right of Way & Admin Active D/B Base Contract Cost Element Neat Construction Construction Overhead Construction Contingency Mitigation/Transit/Park & Ride $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 Cost Estimate (millions) COST TO COMPLETE The remaining cost to complete the ICC project is $1.118 billion. The forecast of remaining annual expenditures through project completion will be summarized within the following section. Page 2-5

21 BASIS OF ESTIMATE & ADJUSTMENTS TO ASSUMPTIONS The method for preparing the current cost estimate is similar to the method described in the IFP and 2007 through 2009 Financial Plan Updates. In summary, the following steps were completed to arrive at the current cost estimate: 1. FY2009$ Cost Estimate: see Appendix C a. Based on detailed cost estimates for each of the design-build contracts, right of way, engineering and program management, and MdTA tolling and facilities costs, plus the multipliers as noted to determine preliminary engineering, right of way administration, construction overhead, and construction contingency. b. Given that there are 48 sub-projects, Environmental Stewardship (ES), Compensatory Mitigation (CM), and Community Stewardship (CS) budgets are provided in year of expenditure dollars as calculated within the detailed estimates and as noted on Table 1-A in Appendix C. These summarized estimates roll up in Table 1 in Appendix C accordingly. c. Transit Capital Costs are budgeted for a $20 million year of expenditure estimate based on project commitments. d. Relative to the 2009 Financial Plan Update methodology, the multipliers for preliminary engineering, right of way administration, construction overhead, and construction contingency have remained unchanged. 2. Year of Expenditure $ Cost Estimate: see Appendix F a. This process follows the Basis for Escalation process as described in the IFP. b. Escalation forecasts were updated per the Maryland Department of Transportation s forecast and as summarized in Appendix B. These escalation factors are consistent with MDOT guidelines issued annually for all capital planning projects. The last update was in May c. For each cost element contained in the FY2009$ cost estimate (per Appendix C, Table 1), identify the year expenditures will commence (see Appendix D). d. Identify the cumulative escalation rates (per Appendix B) from the fiscal year expenditures commence (per Appendix D) and derive cumulative escalation factors (presented in Appendix E). e. For each cost element contained in the FY2009$ cost estimate (per Appendix C, Table 1), multiply the cost estimate by the appropriate cumulative escalation factor (per Appendix E) to calculate the year of expenditure cost estimate (see Appendix F). In summary, based on the above methodology and assumptions, Appendix F contains the total year of expenditure dollar cost estimate for the ICC Project. Page 2-6

22 SECTION 3 PROJECT IMPLEMENTATION PLAN PROJECT SCHEDULE The summary schedule for the Intercounty Connector Project illustrates the project s tasks by overarching project activities as well as by contract. Please refer to Appendix A for the latest project summary schedule. Construction activities are ongoing for Contracts A, B and C. For the project as a whole, Exhibit 3-1 summarizes the actual or forecast NTP for each contract as well as the estimated completion dates. Relative to the 2009 Financial Plan Update, the scheduled start dates for Contracts D and E have been deferred by approximately one year. Contract D has been deferred to remain outside the current six-year capital program period. The schedule for Contract E has been adjusted due to ongoing contract package refinements. The completion date for Contract A has been extended by three months due to severe weather delays experienced in FY2010. Exhibit 3-1: Contract Milestones Contract 2009 UPDATE 2010 UPDATE Change by # of IFP SCHEDULE SCHEDULE SCHEDULE Months* Estimated NTP Completion NTP Estimated Completion NTP Estimated Completion NTP Estimated Completion A Dec-06 Dec-09 Jun-07 Sep-10 Jun-07 Dec B Aug-07 Mar-12 Dec-08 Dec-11 Dec-08 Dec C Mar-07 Dec-12 Jan-08 Dec-11 Jan-08 Dec D Jun-09 Dec-11 Jul-15 Dec-17 Jul-16 Dec E Jun-09 Dec-11 Oct-10 Apr-13 Dec-11 Jun * Relative to 2009 Update Schedule Page 3-1

23 EXPENDITURES TO DATE BY FISCAL YEAR As noted in Section 2, the project has expended $1.448 billion from the start of project planning in FY2003 through the end of FY2010. These expenditures are summarized by fiscal year in the following exhibit. Exhibit 3-2: Total Actual Expenditures by State Fiscal Year (YOE$ in million) State FY Engineering & Prog. Mgmt UPDATE Right of Way Construction Total 2003 $ 1.4 $ - $ - $ $ 17.0 $ 3.2 $ - $ $ 20.1 $ 3.1 $ - $ $ 23.3 $ 6.4 $ 0.1 $ $ 21.1 $ $ 13.5 $ $ 21.1 $ 94.0 $ $ $ 16.7 $ 33.7 $ $ $ 17.4 $ 17.1 $ $ TOTALS $ $ $ 1,041.4 $ 1,448.1 $600 $500 Engineering & Prog. Mgmt. Right of Way Construction Expenditures (millions) $400 $300 $200 $100 $ State Fiscal Year Page 3-2

24 EXPENDITURE FORECAST METHODOLOGY Given the unique aspects of implementing a major design-build contract, where engineering and construction tasks occur in parallel and typically start simultaneously with the NTP, this financial plan incorporates the design-build expenditure profiles as summarized in the following exhibit. These curves are based on detailed Contract A, B and C cash flow data with minor adjustments to account for technical or incremental timing adjustments. Exhibit 3-3: Design-Build Expenditure Curves by Contract 100% D E B A C 90% 80% 70% Cumulative % Expended 60% 50% 40% 30% 20% 10% 0% A B C D E Months from NTP Based on these contract expenditure profiles and the schedule shown in Appendix A, monthly and quarterly expenditure forecasts were developed for each major design-build contract. Right of way and engineering and program management expenditure forecasts were developed based on estimated schedules developed by SHA. Expenditures related to utility, park and ride, transit and MdTA tolling and facility costs were estimated on a straight-line basis by fiscal year using the start and end dates identified in the project schedule. Cash flows for mitigation activities are based on individual cash flow schedules for each of the sub-projects. The resulting quarterly cash flow summary is provided in Appendix H. Page 3-3

25 TOTAL EXPENDITURE FORECAST The following exhibit summarizes the combined actual and forecast expenditures for the ICC through project completion (as detailed on a quarterly basis in Appendix H). Exhibit 3-4: Actual and Projected Expenditures by Fiscal Year (YOE$ in million) IFP 2009 UPDATE 2010 UPDATE CHANGE FROM 2009 State FY Annual Forecast Cumulative Forecast Annual Forecast Cumulative Forecast Actual Expended 2003 $ 1.4 $ 1.4 $ 1.4 $ 1.4 $ 1.4 $ 1.4 $ $ 20.2 $ 21.6 $ 20.2 $ 21.6 $ 20.2 $ 20.2 $ $ 23.3 $ 44.9 $ 23.3 $ 44.9 $ 23.3 $ 23.3 $ $ 55.3 $ $ 29.8 $ 74.7 $ 29.8 $ 29.8 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1,483.7 $ $ $ $ $ $ $ 2,065.1 $ $ 1,580.4 $ $ $ 1,448.1 $ (132.3) $ (132.3) 2011 $ $ 2,275.5 $ $ 2,178.3 $ $ $ 2,092.7 $ 46.7 $ (85.6) 2012 $ $ 2,429.7 $ $ 2,409.8 $ $ $ 2,383.5 $ 59.4 $ (26.2) 2013 $ 16.3 $ 2,445.9 $ 42.4 $ 2,452.2 $ 42.7 $ 42.7 $ 2,426.2 $ 0.2 $ (26.0) 2014 $ - $ 2,445.9 $ 10.5 $ 2,462.7 $ 36.6 $ 36.6 $ 2,462.7 $ 26.0 $ $ - $ 2,445.9 $ - $ 2,462.7 $ - $ - $ 2,462.7 $ - $ $ - $ 2,445.9 $ - $ 2,462.7 $ - $ - $ 2,462.7 $ - $ - Subtotal $ 2,445.9 $ 2,462.7 $1,448.1 $ 1,014.7 $ 2,462.7 $ - Out Years $ - $ 2,445.9 $ $ 2,566.0 $ $ $ 2,566.0 $ - $ - Total $ 2,445.9 $ 2,566.0 $1,448.1 $ 1,117.9 $ 2,566.0 $ - Note: shaded cells represent actuals at the time forecast was developed. Expenditure Forecast Annual Forecast Cumulative Forecast Annual Cumulative $3,000 $2,500 Expenditures (millions) $2,000 $1,500 $1,000 $500 IFP Forecast 2009 Forecast 2010 Forecast Expended to Date $ Out State FY Years Relative to the 2009 Financial Plan Update, forecast expenditures are approximately $132 million below forecast through FY2010, primarily due to design-build construction costs being less than anticipated. Going forward, the ICC project team has developed implementation plans for each of the design-build contracts that will enable the project to be completed on schedule. Page 3-4

26 IMPACT OF OTHER FUTURE COST CHANGES The project sponsors acknowledge that potential unforeseen events may result in cost increases. Potential unforeseen events that typically occur throughout the life of a project of this magnitude may include: Changed environmental and subsurface/site conditions, including utility relocations Contractor or owner requested changes Removal of hazardous materials Schedule delays Unanticipated overtime costs and accelerations Changes in government rules and regulations Unanticipated federal or state transportation budget changes Third party concerns Disputes or litigation If unforeseen events occur, they will be addressed in the weekly Project Management Team meeting/teleconference, which includes FHWA, SHA, MdTA and GEC project managers. In addition, the corresponding adjustments will be incorporated into the annual updates to the financial plan. Section 4 presents various mitigation strategies that can be implemented to reduce or eliminate the impact of the above changes and other risks. Page 3-5

27 SECTION 4 PROJECT FINANCING AND REVENUES OVERALL FINANCIAL PLAN The total funding package for the Intercounty Connector Project over the six-year program (through State FY2016) period is $2,462.7 million. This is consistent with the six-year program period amount shown in the 2009 Financial Plan Update. The current funding package is comprised of a combination of the following state and federal sources: $750.0 million in Grant Anticipation Revenue Vehicle (GARVEE) bonds $715.6 million in Authority supported toll revenue bonds and cash $516.0 million in Authority supported TIFIA loan $264.9 million in state General Funds and General Obligation (GO) bonds $180.0 million in state Transportation Trust Funds $19.3 million in special federal funds $16.9 million in additional funds from GARVEE sale Details regarding the timing of these funding sources can be found in the Plan of Finance in Appendix I. COMMITTED FUNDING SOURCES - $2,462.7 Million GARVEE Bonds - $750.0 Million In June 2007, the Authority issued the first of two series of GARVEE bonds with investment grade ratings (AAA S&P, AA Fitch, Aa2 Moody s). A total of $341.9 million was successfully deposited into the project fund with favorable financial terms ($16.9 million of which was the additional funds discussed below). In December 2008, the second series of GARVEE bonds were issued (AAA S&P, AA Fitch, Aa2 Moody s), resulting in an additional $425 million in funding. Funding requirements to support the GARVEE debt service have been incorporated into SHA financial forecasts as required. In addition, the 2005 legislation created a subordinate pledge of the Maryland Transportation Trust Fund revenues to be used for GARVEE debt service if future federal aid is insufficient to pay such debt service. Pledged taxes are levied under Section of the Transportation Article, Title 3, Subtitle 2. Debt service for the GARVEE Bonds is projected to peak at approximately $86 million per federal fiscal year beginning in FY2010. Given that the federal aid program at this time will be approximately $600 million per year, GARVEE debt service of $86 million per year would use 15% of the total annual federal aid funds authorized for Maryland. This low percentage will not impact federal aid that is designated to support system preservation requirements. Authority Supported Toll Revenue Bonds and Cash - $715.6 Million The Authority (MdTA) will contribute $715.6 million toward the project cost in the form of toll revenue bonds and cash that will be secured by a system-wide pledge of Authority facility revenues, i.e. toll revenues from the seven existing toll facilities and from the ICC. The collective revenues from all of these facilities support this debt and cash contribution. As planned in the Authority s current six-year Consolidated Transportation Plan, the $715.6 million in funding will be provided to the ICC by State FY2016. Given that the six-year capital plan represents a commitment from the Authority from a budgetary and capital planning perspective, the $715.6 million is considered as committed to the project. In March 2008, the first system bond issue with funds available for the ICC was successfully issued such that $176.3 million in proceeds were provided to the project. In December 2009, a second system bond issuance was completed, Page 4-1

28 which provided an additional $240.0 million to fund project expenditures. Authority Supported TIFIA Loan - $516.0 Million In December 2008, Maryland concluded its agreement with FHWA for a $516.0 million federal loan for the project under the Transportation Infrastructure Finance and Innovation Act (TIFIA). The TIFIA loan rate is 2.56% and the timing of future TIFIA loan draws will depend primarily upon the comparison of the TIFIA loan rate versus that of Authority toll revenue bonds, but are currently assumed to occur in FY2011 and FY2012 in this Financial Plan Update, as shown in Appendix I. There have been no draws against the TIFIA vehicle as of June 30, State of Maryland General Funds and General Obligation Bonds - $264.9 Million The State of Maryland has committed $264.9 million to the ICC Project to be paid out of the General Fund of the State Treasury and General Obligation (GO) bonds. In FY2007, $53 million was transferred to the Authority to pay for project expenditures, and an additional $55 million was transferred in FY2010. Going forward, the balance of these funds is scheduled to be provided in FY2011 through FY2013. State of Maryland Transportation Trust Fund - $180.0 Million The State of Maryland has committed $180.0 million to the ICC Project within its current sixyear Consolidated Transportation Program to be paid from the Transportation Trust Fund. In FY2010, $30 million was transferred to the Authority to pay for project expenditures. Given that $150 million was transferred prior to FY2010, all Transportation Trust Funds have now been transferred to the ICC project. Special Federal Funds - $19.3 Million Currently, a total of $19.3 million of special federal funding has been authorized or appropriated by Congress for planning, preliminary engineering and design, final engineering, right of way acquisition, and construction on the ICC project. This is an increase of $0.8 million from the Initial Financial Plan resulting primarily from the addition of STP Discretionary Funds (Section 117). As noted in the Initial Financial Plan, the balance of funding is comprised of: $0.5 million from the FY2004 US Department of Transportation and Related Agencies Appropriations Bill National Corridor Planning and Border Infrastructure program $18.0 million from the Safe, Accountable, Flexible and Efficient Transportation Equity Act A Legacy for Users (SAFETEA-LU) in earmarked funds under Section 1302 (National Corridor Improvement Program - $10 million) and Section 1702 (High Priority Earmarks - $8 million) The funding presented above is provided via Highway Trust Fund contract authority and is to remain available until fully expended. Page 4-2