1. Modifying Measure A’s Borrowing Limit July 14, 2010
Good Morning Chairman Buster and members of the Commission. This morning I’m bringing you an item that has been considered and approved by the Western Riverside County Delivery Plan Ad Hoc Committee and last month by the Executive Committee. The topic is on the Measure A debt limit that currently governs our financing plans. Our recommended action today is to seek approval of a process to increase the debt limit and providing the Commission with added flexibility in planning for the financing and construction of projects throughout the county.

2. State law requires a limit
Measure A Legal Details
State law requires a limit
79 Percent Approval
1988 Measure – $300 Million Limit
52 percent Approval
1992 Election Raised Limit to $525 million
69 Percent Approval
2002 Measure A Established $500 million limit
The state law that allows us to have Measure A requires us to have a stated bond limit. This requirement dates back to our original Measure that was approved in 1988 and the limit that was originally set for the first measure was $300 million. Much as the situation as we face today, that limit seemed extremely restrictive and in 1992 the Commission went to the voters and received the approval to raise it to $525 million.
Fast forward to 2002 when we received voter approval to reauthorize Measure A and it included a lower limit of only $500 million. We need to consider that the current Measure A is ten years longer in duration than the first Measure A. Moreover today’s county population is twice what it was in 1988 or On simple numbers, we should probably have a bonding limit that is twice as high than it used to be instead of lower and the next slide speaks to that.
However, as we all know, Measure elections are political actions. You can try to develop a perfect plan and ordinance that covers 30 years into the future but it’s not going to matter if it doesn’t pass. The lower limit was politically more palatable and that’s we have. We have provided you with a handout from our current Measure A ordinance that details the bonding limit along with our expenditure plan.
Of course I just mentioned how political process was so let’s talk about the political process needed to change it.

3. Comparing the Limits 1988 Measure A Revenue Projection:
$870 million
1988 Measure A Revenue Projection:
$300 million –34 percent of total
Later raised to $525 million
1988 Debt Limit:
$4.1 billion
2002 Measure A Revenue Projection:
$500 million percent of total
2002 Debt Limit:
In 1988 with the approval of the first measure, our revenue projection for the 20-year life of the program was $870 million. Due to the growth the county experienced, we eventually exceeded the estimate. Nevertheless, the $870 million revenue projection included a debt limit of $300 million which amounted to 34 percent of the projected total.
For the 2002 Measure we have a revenue forecast that exceeds $4 billion and a debt limit of $500 million that amounts to a percentage of 12.2 percent of the total.

4. $180 million of debt limit utilized Delivery Plan restructured
Current Situation
$180 million of debt limit utilized
Delivery Plan restructured
Numerous projects nearing construction
Favorable interest rates & bids
Opportunity to create jobs
Of course the subject raises the issue of why do we need to do this now and what is our current situation. The idea of advancing projects is certainly not new and is not unique to our area. Many of you have probably seen news items about LA METRO seeking to do 30 years of projects in the first ten years of the program. We have been moving along that path ourselves and have currently utilized $180 million that counts against our debt limit.
Much of that was assumed during a time of record economic growth and expansion which has come to a halt in recent years. In responding to that downturn in the economy, this Commission at our last workshop restructured some of our delivery plan and CVAG has made adjustments as well.
Nevertheless in spite of the economic challenges we have numerous projects that are nearing the time to go to construction. Moreover this is an environment of low interest rates and construction bids. It’s a favorable time to reconsider a change in our debt limit and the ranks of people who have lost their jobs in the downturn deserve the opportunity to see more jobs created locally.

5. $975 million limit – slightly less than 25% of projected revenue total
Proposal
GOAL: Increase limit to provide flexibility without sacrificing prudence or oversight
$975 million limit – slightly less than 25% of projected revenue total
Higher limit does not result in immediate action – Commission approval of all financings are maintained
Essentially what we staff has done is consider a limit that is high enough to provide the Commission with more flexibility but to do so in a way that is financially prudent and doesn’t conflict with the Commission’s long-standing conservative approach to debt.
The number that we arrived at was $975 million which is still less than 25 percent of our total. Ideally there would be a way for their to be a mechanism to increase the limit automatically in case we experience significant inflation or economic changes, but there seems to be a number of legal reasons to have an established limit as well as obvious political reasons.
Moreover it should be noted that merely increasing our limit does not require the Commission to immediately go out and borrow up to the limit. We still are interested in maintaining our strict debt coverage limits and our stellar reputation among the financial community. As always, the Commission will approve and provide guidance on any financing and that will remain true regardless of our debt limit.

6. RCTC must reimburse county 2002 cost was $372,000
Costs
RCTC must reimburse county
2002 cost was $372,000
Election costs are Measure A eligible
Private sector financed campaign still needed
Of course, having an election does come with a price tag. The cost of holding an election has to be borne by the agency that is seeking the election. In 2002, we spent $372,000 on the Measure A election and it was paid for with public dollars. That being said we will still need a campaign committee and outside funding for a limited campaign.
It’s important to note that the $372,000 figure was higher than similar measures. For Measure A we had a multi-page fact sheet and map that detailed the entire expenditure plan and had to foot the cost of all of it. In this case we will have a simple ordinance that seeks to raise our bonding cap and a ballot argument in support.

7. Communicate ballot measure to Supervisors
Next Steps
Communicate ballot measure to Supervisors
Obtain vote from Supervisors - July 27 or at special meeting
Seek voter approval in November
Should you ask us to move forward, our first action will be to ask the Board of Supervisors to take action to place it on the November ballot. By law, this needs to happen prior to August 6. Staff will be barred from campaigning for the measure during public time, but we would be available to provide information and answer questions on the impact of it.
That’s probably good a place to end my presentation and I’ll be happy to provide any additional information or answer any questions you might have at this time.