Measure M2 Performance Assessment March 31, 2011

The End of One Era – M1 Sunsets Measure M1 - approved November 1990 Collection of tax sunsets March 31, 2011 More than $4 Billion in improvements Widened almost all freeways, improved many streets and roads, and brought Metrolink to OC

The Beginning of a New Era – M2 Built on success of M1 30-year plan approved November 2006 Collection begins April 1, 2011 Revenue forecast - $ 15 billion Five-year Action Plan jump-started many projects Plan of Finance to advance projects M2 was approved by an overwhelming 70% of voters in Nov 2006 mainly because it built on the successful delivery of M1. Collection of the sales tax begin on April 1, 2011 for 30 years. Current revenue forecasts show that $15 B will be collected during the next 30 years. This is lower than what we were anticipating back in 2005 when we develop the M2 investment plan was originally based. But, additional funding sources and favorable market conditions have closed the gap. An Action Plan was created in 2007 with nine key objectives to jump-start the M2 program, five-years ahead of the start of M2 revenues. As part of the funding the AP, OCTA also approved a plan of finance for advancing the projects and programs before the start of sales tax revenue. The $400 million identified for TECP listed a number of freeway, street and transit projects and programs that would benefit from the infusion of advanced sales tax funds.

M2 – Action Plan Progress Report Freeways SR-91, SR-57 and I-5 Streets & Signals Call For Projects Transit Quiet Zones, ARTIC and Community Circulators Environmental Property Acquisition; Water Quality Grants Riverside Freeway (SR-91) EB auxiliary lane complete 9/09 – 11/10 Segment between SR-55 and SR-241 advertised for bid (5/11 – 9/13) Orange Freeway (SR-57) 2 segments under construction 11/10 - 2014 3rd advertised by end of year 2011 - 2013 San Diego Freeway (I-5 in south county) 5/74 IC – 9/12 – 11/14 Design on Pico to PCH segment has begun 6/15 – 6/18

2006 - 09 Performance Assessment Included in M2 Ordinance No. 3 as a safeguard Must be conducted every three years Evaluates: efficiency , effectiveness, economy, & program results of OCTA in satisfying requirements OCBC/Oftelie Company conducted first assessment covering 2006 to 2009 Completed in December 2010 A Performance Assessment is required as part of the Renewed Measure M Ordinance NO. 3 and must be conducted every three years. The assessment evaluates the efficiency, effectiveness, economy and program results of OCTA in satisfying the provisions and requirements of the Investment Summary of the Plan, the Plan and the Ordinance. The OCBC was selected through OCTA’s procurement process to conduct the initial assessment which covered the time period from the day after M2 was passed in Nov 2006 until June 2009. It is important to recognize that this report is not a performance audit, but is instead a performance assessment. The scope of OCBC’s effort was focused on OCTA organizational performance and should not be considered an audit or evaluation/assessment of OCTA accounting controls. This assessment was specifically for the Renewed Measure M program (M2), and the scope of work is focused strictly and solely on OCTA’s performance and appropriateness in delivery of M2 programs.

Assessment Parameters Progress of OCTA against nine objectives Changed economic conditions since 2007 Action Plan adoption Management & oversight OCTA’s ability to deliver promises made in Action Plan through 2011 As part of the evaluation of the Action Plan for this assessment effort, the consultant team evaluated: progress of OCTA against the nine objectives; changed economic conditions since the Action Plan adoption in 2007; management and oversight issues that arose since the adoption of the Action Plan to today; and OCTA’s ability to deliver the promises made in the Action Plan for the remaining period (through 2011).

Key Findings OCTA’s aggressive early steps have been successful Substantial progress made in achieving the Action Plan’s 9 objectives Navigated constantly shifting economy 18 comments on appropriateness of actions or recommendations OCTA has made significant progress in fulfilling all nine objectives included in the EAP.  This has occurred in spite of a significant reduction in actual sales tax receipts as well as forecasts by three universities, the largest recession in recent history, and volatile changes in construction costs in the five-year Action Plan period.  OCTA is on target to complete the Action Plan objectives in 2011 as a result of aggressive project delivery methods and infusion of state Proposition 1B and federal Recovery Act funds that helped “soften the blow” of reduced sales tax funds and financial capacity. As part of the report, OCBC had 18 comments related to the execution outlined in the scope of work. The findings either commented on appropriateness of actions to date or provided recommendations for improvements.

Comments Financing Transparency Project Controls Consider other financing sources if appropriate Focus of necessary size of borrowing Transparency Regular reporting Measure M web portal Project Controls Dashboard There were no major recommendations which would change the direction of OCTA’s actions. Comments were made: Regarding the financing of M2 projects – going forward the overall M2 funding program should continue to consider other sources such as Build America Bonds as appropriate. And, special focus should be placed on both the necessary size of a borrowing and the costs of fees and charges. Enhancing the transparency of M2 implementation by ensuring regular quarterly and annual reports are made available to the public and by improving the Measure M web portal so that navigation is more intuitive. For project controls, the consultant recommended to fully utilize the Prima Vera system to use a dashboard-type reporting system to track and highlight schedule and budget for each project

Comments Delivery of major projects Improved Internal Controls I-405, Orangethorpe Grade Separations Improved Internal Controls M Program Management Office Project Cost accounting Timing of future Triennial Performance Assessments OCTA faces major challenges ahead on major projects including: I-405 between SR-55 and I-605 and the seven Orangethorpe corridor grade separation projects. These projects are challenging for different reasons, and issues include project complexity, funding shortfalls, and community issues. Recommendations to address these issues will be presented through specific project development activities currently under way. OCTA should bolster the M2 program management office (PMO) due to complex decisions and trade-offs related to M2 projects and programs. These improvements include PMO review of project management plans, reports on progress against baseline schedules and costs, and regular involvement in M2-related funding decisions including, including but not limited to, change orders and cooperative agreements.  OCBC recommends releasing the RF for the M2 Triennial Performance Assessment immediately at the end of the fiscal year to allow timely award of contract and a prompt review of M2 activities.

Next Steps Incorporating comments into M2 implementation Tracking progress with OCTA’s Transportation 2020 Committee Releasing RFP for 2009-12 assessment by spring 2012