2021 WSTC TOLLING REPORT & TACOMA NARROWS BRIDGE LOAN UPDATE

January 2021

2021 WSTC TOLLING REPORT & TACOMA NARROWS BRIDGE LOAN UPDATE

TABLE OF CONTENTS Introduction 4 SR 16 Tacoma Narrows Bridge 7 2020 Commission Action 7 2021 Anticipated Commission Action 7 SR 99 Tunnel 8 2020 Commission Action 8 2021 Anticipated Commission Action 8 SR 520 Bridge 9 2020 Commission Action 9 2021 Anticipated Commission Action 9 I-405 Express Toll Lanes & SR 167 HOT Lanes 10 2020 Commission Action 10 2021 Anticipated Commission Action 11 I-405 Express Toll Lanes & SR 167 HOT Lanes Low Income Tolling Program Study 11 Toll Policy & Planning 12 Toll Policy Consistency 12 Planning for Future Performance & Operations 12 Looking Forward To Future Tolled Facilities 13 2021 Tolling Recommendations 14 Summary of Current Toll Rates and Revenues by Facility 16 2021 Tacoma Narrows Bridge Loan Update 17 2019-21 Biennium Loan Estimates 17 2021-23 Biennium Loan Estimates 18 Comparison of Total Loan Estimates: FY 2019 – FY 2030 18 TNB Loan Repayment Estimates 19 2021 Loan Update: Details & Assumptions 20 Factors Contributing to Loan Estimate Analysis 20 Financial Model Assumptions 21

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INTRODUCTION As the State Tolling Authority, the Washington State Transportation Commission (Commission) sets toll rates and polices for all tolled facilities statewide, which currently include: the SR 520 Bridge, the SR 16 Tacoma Narrows Bridge, the I-405 express toll lanes (ETLs), the SR 167 HOT lanes, and the SR 99 Tunnel.

Washington State Tolling Roles & Responsibilities Washington State Transportation Department of Office of the Legislature Commission Transportation State Treasurer (OST) Responsibility Establish tolling, designate Set toll rates and related Plan, analyze and construct • Responsible for the toll corridors and use of fees facilities, collect tolls, build issuance of toll debt toll revenues and operate toll collection systems

Roles • Establish legal toll • Set toll rates within • Develop toll collection • Conducts all financings framework funding requirements systems and procedures for the State of • Authorize tolling in • Set toll exemptions • Collect tolls Washington designated corridors • Establish advisory • Finance improvements • Approve financing plans committees • Operate tolled corridors • Enable tolling practices • Assess financial • Appropriate toll feasibility of toll projects operation budget

In determining the need to adjust toll rates, on 2020 Commission Tolling an ongoing basis the Commission monitors the performance of each tolled facility, reviews traffic Activities and revenue data as well as operational cost data, In 2020, the Commission did not increase nor adjust considers projections for future performance, and toll rates on any of the tolled facilities in Washington serves as a public forum in which all this information State. However, the Commission worked closely with can be obtained and which the public can utilize in the Washington State Department of Transportation, offering input for the Commission’s consideration. the Office of the State Treasurer, the Legislature, and As tolling advances and expands in Washington State, the Governor’s Office to monitor changes in traffic the importance of oversight and reporting is critical to and revenue, and to identify options for addressing achieving a transparent and efficient system. To this shortfalls for the current fiscal year (through June 30, end, this report provides an update to the Legislature 2021) and beyond. The Commission also continued to on the Commission’s toll setting activities and findings engage with planning processes for future toll facilities over the past year and sets forth expectations for the and advanced the legislatively directed I-405 Express year ahead. Toll Lanes / SR 167 HOT Lanes Low-Income Toll Study. This report also includes the results of the Commission’s annual assessment of loan amounts necessary to keep Tacoma Narrows Bridge (TNB) toll rates at current levels through the life of the TNB debt service, assuming a 25 cent rate increase in July 2021 or later. The TNB loan program is the result of 2018 legislation establishing the intent to provide loans over the life of the TNB debt, to keep TNB toll rates stable. The Legislation also directed the Commission to report annually on the status of the TNB loans and amounts needed going forward. Tolling gantry

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Washington State has seen a significant decline in traffic remained 15-55% below 2019 levels in the Fall travel across all modes of transportation since mid- of 2020. March 2020, a result of changes to travel behavior Total toll revenue collections for all five tolled facilities from the COVID-19 pandemic and related measures is projected to generate just over $325 million during to reduce further spread of the disease. The length the current biennium (July 1, 2019 – June 30, 2021), of time we will be battling the pandemic remains down by 28% from pre-pandemic projections, or $128 unknown, as do the longevity of changes impacting million less than expected. This decline in revenue travel behavior such as the growth of teleworking, is about 20-80% below forecasted levels between reduction in business travel, and further use of March – October 2020, depending on the facility. delivery services. These impacts have severely stressed the capacity This decline in traffic has greatly reduced toll revenues of toll facilities to meet financial requirements. Initial for each toll facility, with the largest impacts on steps to address these requirements began in 2020 facilities in the urban core of central Puget Sound. and additional steps will be necessary in 2021, and While performance has incrementally improved, possibly beyond. compared to initial declines in March – April 2020,

Average daily trips on all toll facilities. Compared to 2019*

Source: WSDOT

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Anticipated 2021 Tolling Activities Looking ahead to 2021, based on current forecasts, the Commission anticipates changes to toll rates for the SR 520 Bridge, SR 99 Tunnel, and the TNB. This is subject to on-going monitoring of actual traffic and revenue performance throughout the year, and the possibility of legislative action to address financial commitments. The Commission will continue to engage on toll facility planning in 2021. It will also complete the I-405 Express Toll Lanes / SR 167 HOT Lanes Low-Income Toll Study by June 2021 as required in law. 2021 Tolling Recommendations This report includes Commission recommendations intended to inform legislative options that mitigate financial requirement shortfalls resulting from the unforeseen traffic and revenue impacts of COVID-19, and address options to reduce future financial risks made more evident by COVID-19 impacts. The Commission recognizes that implementing these recommended options may not eliminate the need for toll rate increases in 2021 and possibly beyond, and continues to prepare for such possibilities. Washington State Tolling Facilities

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SR 16 TACOMA NARROWS BRIDGE Scheduled increases in debt service payments require the Commission to regularly review traffic volumes and revenue collections on the SR 16 Tacoma Narrows Bridge (TNB). For example, debt service payments in the 2019-21 biennium increased by nearly 2.5% over the prior biennium ($3.5 million increase) and will increase by 7.6% in the 2021-23 biennium ($11 million increase). These reviews ensure TNB tolls generate adequate revenue to make debt service payments, and to maintain and operate the facility as required in law.

Below are the current toll rates. These rates have been TNB Loan Update in effect since July 1, 2015. In 2018, legislation was passed establishing intent to Payment Method Toll Rate provide up to $85 million in loans to keep toll rates Good To Go! pass $5.00 at current levels for the remaining life of the debt service through 2030, with one assumed rate increase Cash at tollbooth $6.00 of 25 cents as soon as July 1, 2021 (FY 2022). To this Pay By Mail $7.0 0 end, in spring 2019 the Legislature provided a loan of For all payment methods, the toll rate increases with each additional axle. $12.543 million which enabled toll rates to remain at current levels for the 2019-21 biennium. Because of COVID-19 impacts TNB toll revenues, from March through October 2020, were 18% below The Commission is required to provide an annual forecasted levels in November 2019. This decline will update on the TNB loan amounts needed to meet require additional revenues for FY 2022 (beginning July the legislative intent. The 2021 TNB loan update is 1, 2021) to ensure financial commitments are met. included on page 17 of this report. At the current loan amount of $12.543 million for 2020 Commission Action the 2019-21 biennium, the TNB Account is projected to have an ending fund balance of $5.1 million at the The Commission did not make any toll rate end of FY 2021 (June 30, 2021). Also, the account’s adjustments for the TNB in 2020. fund balance will not be in compliance with the Commission’s Sufficient Minimum Balance (SMB) 2021 Anticipated Commission policy, from April – June 2021.1 Action The SMB policy requires the Commission to consider The $12.543 million loan provided by the Legislature adjusting toll rates if the TNB Account is projected for the current 2019-21 biennium is expected to to not maintain a retrospective three month rolling remain sufficient for keeping toll rates at their current average fund balance of $10 million. The Commission levels through the end of FY 2021 (June 30, 2021). will work with the Legislature and WSDOT on measures However, for the 2021-23 biennium, to ensure the to address the shortfall in the 2021-23 biennium. facility can cover financial obligations and ensure a TNB toll rate increase does not exceed the planned 25 cents, a legislative loan amount of about $39 million is needed. Further detail is provided on page 17 of this report.

1 Transportation Commission TNB Sufficient Minimum Balance Policy: https://wstc.wa.gov/wp-content/uploads/2019/08/TNB-SNB-Policy. SR 16 Tacoma Narrows Bridge pdf

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SR 99 TUNNEL The SR 99 Tunnel opened for traffic in February 2019 and tolling began in November 2019. Under current law, SR 99 Tunnel toll revenues must be used to fund $200 million of bonded construction costs for the tunnel, as well as fund the facility’s toll collection, operations, maintenance, and repair and replacement costs. The SR 99 Tunnel has “variable tolling” meaning that toll rates vary based on a set schedule by day of week and time of day to maximize revenue and vehicle throughput while minimizing diversion to other routes. The Commission adopted the toll rate schedule and policies for the SR 99 Tunnel in October 2018. Tolling commenced in November 2019, and the Commission has been closely monitoring traffic and revenue performance to ensure all financial requirements can be met.

Below are the current toll rates. These rates have been Through February 2020, traffic and revenue for in effect since November 9, 2019. the tunnel exceeded initial projections. However, the COVID-19 pandemic resulted in significantly Time of Day Good To Go! Pass Rates reduced traffic volumes, and thus reduced revenues Peak period weekday rates $1.50 (a.m.) / $2.25 for March – October 2020, 45% below forecasted (7am - 9am; 3pm - 6pm) (p.m.) levels in November 2019. Because of this revenue disruption and projected on-going impacts, the Office Off-peak weekday rates $1.25 of the State Treasurer (OST) established that the SR 99 Tunnel did not meet financial requirements for FY Weekend rates & specified $1.00 2020 and that options to increase net revenues are holidays necessary to meet financial requirements in FY 2021 Overnight rates and beyond. $1.00 (11pm – 6am) 2020 Commission Action NOTE: Pay By Mail toll rates are $2 higher than the Good To Go! pass toll rates. For vehicles with more than two axles, toll rates increase with each The Commission did not take any rate-setting action additional axle. in 2020, but partnered with OST and the Washington State Department of Transportation (WSDOT) to identify options to meet legal financial requirements. 2021 Anticipated Commission Action The Commission anticipates a rate increase in summer 2021 to meet current legal financial requirements. In addressing current revenue shortfalls, the Commission will also be reassessing the currently planned toll rate increases of 3% every three years beginning in July 2022. These 3% increases are assumed in the current toll rate schedule, subject to annual review by the Commission.

SR 99 Tunnel Toll Rate Sign (WSDOT)

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SR 520 BRIDGE The current SR 520 Bridge opened for traffic in April 2016, replacing the four-lane bridge that opened in 1967. Tolls are required to contribute a total of $1.2 billion to repay construction bonds sold for the SR 520 Floating Bridge Project. The tolls also fully fund the operations, maintenance, preservation, and insurance for the bridge, and manage traffic. The SR 520 Bridge has variable tolling meaning that toll rates vary based on a set schedule by day of week and time of day to maximize revenue and vehicle throughput while minimizing diversion to other routes.

Below are the current toll rates, as enacted by the 2020 Commission Action Commission in May 2016. These rates have been in effect since July 1, 2017. The Commission did not make any toll rate adjustments on the SR 520 Bridge in 2020. In early Time of Day Good To Go! Pass Rates 2020, the Commission reviewed traffic and revenue data before the pandemic and determined at that Peak period weekday rates $4.30 time, that current toll rates adequately met revenue (7am - 9am; 3pm - 6pm) requirements and were effectively managing traffic. Off-peak weekday rates $2.00 - $3.40 However, COVID-19 impacts subsequently resulted in revenues from the SR 520 Bridge for March – Weekend rates & specified $1.40 - $2.65 October 2020 being 56% below forecasted levels in holidays November 2019. Overnight rates $1.25 (11pm – 5am) 2021 Anticipated Commission

NOTE: Pay By Mail toll rates $2 higher than the Good To Go! pass toll Action rates. For vehicles with more than two axles, toll rates increase with each While the Office of the State Treasurer (OST) additional axle. determined that the SR 520 Bridge met financial commitments for FY 2020 (through June 30, 2020), it has identified that options to increase net revenues are necessary to avert missing financial requirements in FY 2021 through at least FY 2029. The Commission is actively working with the Legislature, OST and the Washington State Department of Transportation (WSDOT) to identify options to meet these requirements for FY 2021 and beyond. The Commission anticipates a SR 520 Bridge toll rate increase in summer 2021 to address revenue shortfalls and ensure all legal obligations are met, as set forth in state law and per bond covenants for this facility.

SR 520 Bridge

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I-405 EXPRESS TOLL LANES & SR 167 HOT LANES The I-405 express toll lanes (ETLs) and SR 167 HOT lanes are dynamically tolled meaning the price to travel in these lanes varies based upon real-time traffic conditions, and is adjusted automatically utilizing an algorithm. There are overhead electronic signs displaying the toll rate at any given time.

In 2008, the Transportation Commission set a toll the end of October 2020, traffic volumes for the SR rate range with a minimum of 50 cents to a maximum 167 HOT lanes were about 15-20% below 2019 levels, of $9 for the SR 167 HOT lanes, and in 2015, set while traffic volumes for the I-405 ETLs were about the I-405 ETLs toll rate range with a minimum of 75 45-50% below 2019 levels. cents to a maximum of $10. Vehicles with at least ETL / HOT lane toll revenue collections have faced three occupants are always exempt from tolls on the even steeper declines from the COVID-19 pandemic I-405 ETLs, and vehicles with at least 2 occupants as compared to the other tolled facilities because as are always exempt on SR 167 HOT Lanes, and during fewer people use the ETLs / HOT lanes the average non-peak hours on I-405 ETLs. toll rate paid per trip also sharply declines. For The COVID-19 pandemic has sharply decreased example, between October and December 2019, traffic and revenue performance for the I-405 ETLs average toll rates for peak period, peak direction trips and SR 167 HOT lanes. With many large employers in were $4.80 for the I-405 ETLs, and $4.54 for the the region shifting to telework and Washingtonians SR 167 HOT lanes. But as the COVID-19 pandemic responding positively to the Governor directed stay impacts took hold in March 2020, average toll rates at home orders, by early April 2020 traffic dropped to stayed near the minimum rate amounts for most over 80% below the traffic levels on the facilities on portions of both facilities through late summer, with the same date in 2019. Traffic levels slowly improved only minor increases in early fall. As a result, I-405 through the year, particularly for southbound SR 167 ETLs and SR 167 HOT lanes revenues were sharply HOT lanes, but leveled off in late summer and fall. By below expected levels for March-October 2020, with revenues 65% ($2.4 million) below forecasted levels for the SR 167 HOT lanes, and 81% ($17.5 million) below forecasted levels for the I-405 ETLs. The unforeseen impacts of the pandemic illustrate the risk of over-reliance on, and commitment of toll revenues derived from ETL / HOT lane systems, given the use of these facilities is discretionary. This risk needs to be assessed in the context of plans to fund the future expansion of the I-405 ETLs / SR 167 HOT lanes system with ETL / HOT lane toll revenues. 2020 Commission Action In 2020, the Commission took no rate setting actions, but closely monitored traffic and revenue trends. While toll rate changes were not necessary in 2020, WSDOT assessed options for deferring or reducing costs for remaining work on the projects currently planned to connect and expand the existing ETLs / HOT lanes into a 50-mile ETL corridor between Lynnwood and Puyallup. The OST is also assessing

I-405 Express Toll Lanes

P age 10 2021 WSTC TOLLING REPORT & TACOMA NARROWS BRIDGE LOAN UPDATE requirements for proceeding with bonding for the corridor projects, I-405 EXPRESS TOLL LANES & SR given these projects are planned to utilize toll revenues from the 167 HOT LANES LOW INCOME I-405 ETLs and SR 167 HOT lanes TOLLING PROGRAM STUDY to finance their construction. No bonds have yet been sold that rely In 2019, the Legislature directed the Transportation on revenue from these facilities. Commission to lead a study of options for a low-income toll program for the I-405 ETLs and SR 167 HOT lanes. 2021 Anticipated This study began in December 2019 and is on track to be Commission Action completed by the deadline of June 30, 2021. The Commission anticipates no changes in 2021 to current In 2019, the Legislature directed the Transportation Commission to lead minimum or maximum toll rates for a study of options for a low-income toll program for the I-405 ETLs and the ETL / HOT lane facilities, but SR 167 HOT lanes. This study began in December 2019 and is on track will continue to closely monitor to be completed by the deadline of June 30, 2021. traffic and revenue performance. Work on this study in 2020 began with identifying existing low-income Pending possible legislative programs and frameworks that may support developing program options direction in the 2021 session, for the I-405 ETLs and SR 167 HOT lanes. This included a national scan preparations and ongoing work of tolling agencies to identify existing low-income toll program options will continue related to rate- and an assessment of local low-income programs such the ORCA LIFT setting by about 2024 for the transit pass. This was followed by an assessment of state operational future expanded I-405 ETL and capacity to implement possible approaches. Also, research on both how SR 167 HOT lane corridor, in close and why low- income drivers use the ETL / HOT lane facilities, and what cooperation with WSDOT and OST. benefit possible low-income toll program options may provide the most value for low-income drivers of the facilities. By January 2021, the Transportation Commission will select two program options for further assessment. An analysis on the needs and costs for implementing and operating the selected possible low-income toll program options will be conducted, as well as identifying the implications of each option on tolling policies, traffic, revenues, costs, operations, and enforcement. The results of this study will provide analysis and data to the Legislature for initial identification of viable low-income toll program option(s) applicable to one or both of the ETL / HOT lane facilities. While this may provide the foundation for selecting a low-income tolling program for the corridor, implementation of such a program would require the Legislature identify how the reduced toll revenue resulting from possible discounts or exemptions will be addressed , and may require further analysis and community I-405 Express Toll Lanes engagement.

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TOLL POLICY & PLANNING Toll Policy Consistency The Commission did not make any changes in 2020 to current tolling exemption policies. In July 2018, after input from the public and stakeholders, the Transportation Commission adopted changes to non-HOV tolling exemptions to be consistent across all state toll facilities. Changes took effect on Aug. 1, 2019. These changes have not resulted in the need for a toll rate increase in 2020, and are not expected to do so in the future.

Toll Exemptions by Facility

Adopted: Private Incident Tow Trucks July 17, 2018 Transit/ Buses/ Emergency Response/ Carpools Motorcycles (WSP Rideshare School Vehicles O&M Took effect: Authorized) August 1, 2019 Buses Vehicles Non-HOV exemptions BRIDGES AND TUNNELS SR 16 Tacoma No No At all times At all times On-Duty In-Service On-Duty Narrows Bridge

SR 520 Bridge No No At all times At all times On-Duty In-Service On-Duty

SR 99 Tunnel No No At all times At all times On-Duty In-Service On-Duty

PRICED MANAGED LANES

SR 167 HOT lanes 2+ At all times At all times At all times On-Duty In-Service On-Duty

I-405 Express 3+ peak/ At all times At all times At all times On-Duty In-Service On-Duty Toll Lanes 2+ off peak

On-Duty = Vehicle operating in an official capacity In-Service = On-duty and responding to an incident. Includes private tow trucks directed by WSP to clear vehicles from SR 520 bridge

The impacts of COVID-19 reduced the volume Planning for Future of exempt vehicle traffic on all facilities in 2020, particularly for transit. While bus service levels Performance & Operations began to return to near normal levels by the end of The COVID-19 pandemic emphasized the importance 2020, vanpool use remained severely reduced with of partnerships between the Commission, WSDOT, a reduction in demand. For some transit agencies, and the Office of the State Treasurer (OST) to budget cuts may extend or expand reduced service frequently review revenue, traffic volumes, and levels in 2021 as they seek to address revenue overall financial performance indicators for all of the shortfalls. State’s tolled facilities. This collaboration supports the

P age 12 2021 WSTC TOLLING REPORT & TACOMA NARROWS BRIDGE LOAN UPDATE ability to identify and prepare for potential solutions address budget constraints resulting from COVID-19 proactively. The Commission also provided a public may shift timelines for project completion and the forum for public information and input, as regular related tolling start dates. updates were provided throughout the year from The Commission is also monitoring current processes WSDOT, OST, and Commission staff on the traffic, and on-going analysis of two potential projects that revenue, and financial status for each facility. may include tolls, dependent on Legislative action, for: the replacement of the I-5 Bridge over the Columbia Looking Forward To Future River, and the replacement of the US 2 Westbound Tolled Facilities Trestle in Snohomish County. The Transportation Commission engages with WSDOT Engagement during the planning phases of these on its planning efforts for projects that assume toll authorized and potential tolling projects informs the revenues, many years before tolling is scheduled to Transportation Commission’s eventual rate-setting begin. Currently, this planning work includes three processes should tolling be utilized, by increasing facilities authorized by the Legislature for tolling: the its understanding of the project and stakeholder SR 509 and SR 167 Expressway projects (Gateway interests. It also helps inform stakeholders about the Program), and the extension of the I-405 ETLs from role and impacts of tolling on a project, and enables Bellevue to Renton. While construction has begun on early Transportation Commission input directly into these projects, Legislative action in 2021 or later to financial planning assumptions for the project.

Summary of Authorized Toll Projects in Progress

2020/21 Commission Expected Tolling Project Toll Expectation Engagement Start Date*

I-405/SR 167 Interagency • Traffic management I-405 Renton to Bellevue Working & Executive About 2024 Widening and ETLs • Help fund future corridor Advisory Groups improvements

• Generate $180m for SR 167 Expressway** SR 167 Steering & Gateway Program Phase 1: (Gateway Program) Executive Committees construction costs About 2026

• On-going operations and Full Project: SR 509 Expressway** SR 509 Steering & maintenance costs About 2028 (Gateway Program) Executive Committees • Traffic management

* Expected Tolling Start Dates are based on pre-COVID project timelines. Legislative action to address related budget shortfalls in 2021 or beyond may shift these timelines. ** In October 2020, the WSTC designated the SR 509/ SR 167 Gateway Program, as the “SR 167 Expressway” and the SR 509 Expressway.

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2021 TOLLING RECOMMENDATIONS The following recommendations are intended to inform legislative options that mitigate current toll revenue shortfalls resulting from the unforeseen impacts of COVID-19, as well as mitigate future financial risks made more evident by the COVID-19 impacts. The Commission recognizes that implementing these recommended options may not eliminate the need for toll rate increases in 2021 and possibly beyond, and continues to prepare for such possibilities.

Recommendations: • This plan would build upon recent WSDOT and WSTC efforts to establish system-wide All Tolled Facilities coordination of tolling policies and operations, Use alternative funding sources to supplement including the Transportation Commission’s toll revenues adoption of consistent toll exemption policies across all facilities in 2019, and a strategic • As toll facilities continue to struggle with meeting operations plan for tolling completed by WSDOT financial requirements caused by the on-going in recent years. COVID-19 related impacts on traffic volumes, consider options to supplement toll revenues Recommendations: with other state funds to pay toll facility costs such as for facility operations, maintenance, or SR 520 Bridge preservation, consistent with non-tolled facilities. Reducing Near-Term Financial Obligations: • Such support would also enable a quicker • To support meeting financial requirements for FY replenishment of currently depleted facility 2021, and per recommendations from the Office reserve funds, such as the revenue stabilization of the State Treasurer (OST), the Commission accounts for SR 520 and SR 99, than relying on toll recommends the Legislature appropriate the revenues alone. excess fund balance in the SR 520 Civil Penalties Account to support activities related to SR 520 Establish a strategic tolling policy plan: Bridge operations and maintenance. • The Transportation Commission recommends that ê Based on the 2020 transportation revenue the Legislature direct development of a strategic forecast, OST estimates a projected $14.3 tolling policy plan setting a systemic path forward million revenue gap for meeting FY 2021 on tolling into the future. financial requirements. Not meeting these • A strategic tolling policy plan would be forward requirements may result in potential default looking, and at a minimum would: on TIFIA debt service payments ($9.8 million), and a requirement to raise toll rates by July 1, ê establish a high-level roadmap for 2021. development of future toll facilities; ê The OST identified $11.7 million in excess fund ê identify policies to integrate current and balance in the SR 520 Civil Penalties Account. future toll facilities and enhance overall ê transportation system performance; and Appropriating funds from the SR 520 Civil Penalties Account for SR 520 bridge operations ê evaluate the cumulative impacts of tolling on and maintenance has the benefit of not specific regions and populations. reducing funding capacity for transportation priorities outside of the SR 520 corridor.

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• To support meeting financial requirements in FY Recommendations: 2022 and beyond, consider options to further defer or extend sales tax repayment. Repayment Express Toll Lanes / HOT Lanes of sales tax on SR 520 construction is scheduled Current uncertainty in traffic and revenue for FY 2022 – FY 2032. Further deferring or performance raises many questions around relying on extending all or a portion of these payments would ETL / HOT lane revenues, and how future financial contribute to meeting financial requirements in the risks caused by external events (i.e.: pandemic, near term as traffic levels continue to recover. recession, etc.) can be addressed. The following are two considerations to support more stable funding for Recommendations: the ETL / HOT lane facilities:

SR 99 Tunnel • Pooling ETL Toll Revenues: Reducing Near-Term Financial Obligations: ê Consider extending the current policy of pooling existing ETL / HOT lane revenues • Reduce the burden on toll rates payers by to include future ETL facilities in different deferring repayment of a $9.992 million loan from locations. Doing so allows for a system the Motor Vehicle Account to the Alaskan Way approach to ensuring all ETLs are able to fully Viaduct Replacement Account, currently due support their collective ability to meet financial by the end of fiscal year 2021 (June 30, 2020). requirements and also provide toll revenues This loan was first provided by the Legislature in necessary for financing future projects within 2017 to help meet financial commitments for the the ETL corridors. project. • Early Tolling, Expanding the ETL System: Recommendations: ê Explore the possibility of tolling existing HOV Tacoma Narrows Bridge lanes on additional freeways to provide an infusion of revenues to support planned ETL Maintaining TNB Loan Commitments & Sufficient expansion projects, and to create a more Minimum Balance Policy reliable trip today on our freeways for transit, HOV’s, and single occupant vehicles. While an • Continue to meet the legislative intent to maintain initial capital investment would be needed to toll rates at current levels (assuming one 25 cent convert existing HOV lanes to ETLs, funding rate increase in FY 2022) while meeting financial derived from tolling the lanes could both requirements. contribute to construction costs, and reduce ê The loan amount should support compliance long-term financing costs of ETL projects. with the Commission’s sufficient minimum balance (SMB) policy by at least the end of the 2021-23 biennium, paired with the 25 cent rate increase assumed for July 1, 2021. This policy requires that a rolling three-month average fund balance of $10 million be maintained in the TNB Account to address unanticipated revenue loss not covered by insurance. Additional details about the TNB loan and the estimated need for the 2021-23 biennium are available on page 17 of this report.

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SUMMARY OF CURRENT TOLL RATES AND REVENUES BY FACILITY

Toll Rates Policies by Facility (FY 2021)

Toll Facility Rate Structure Hours of Operation HOV Policy 24 hrs., SR 16 Tacoma Narrows Bridge Single Flat Rate 2+ HOV lane w/toll 7 days/wk. Variable Rates by Time 24 hrs., SR 520 Floating Bridge 3+ HOV lane w/toll of Day & Weekends 7 days/wk. Variable Rates by Time 24 hrs., No HOV lane; SR 99 Tunnel of Day & Weekends 7 days/wk. not exempt from tolls 3+ HOVs always exempt Dynamic Pricing Based 5am – 7pm, I-405 Express Toll Lanes from tolls; on Speeds & Volumes Weekdays 2+ HOVs exempt 9am – 3pm* Dynamic Pricing Based 5am – 7pm, SR 167 HOT Lanes 2+ HOVs exempt from tolls on Speeds & Volumes 7 days/wk. *Requires use of Good To Go! Flex Pass

Toll Rates by Facility (FY 2021)

Toll Facility Good To Go!* Pay By Mail Other SR 16 Tacoma Narrows Bridge $5.00 $7.0 0 $6.00 (Toll Booth) SR 520 Floating Bridge Weekdays $1.25 - $4.30 $3.25 - $6.30 None Weekends & Holidays $1.25 - $2.65 $3.25 - $4.65 None SR 99 Tunnel Weekdays $1.00 - $2.25 $3.00 - $4.25 None Weekends & Holidays $1.00 $3.00 None I-405 Express Toll Lanes $0.75 - $10.00 $2.75 - $12.00 None SR 167 HOT Lanes $0.50 - $9.00 n/a None Note: All rates are for 2 axle vehicles. Rates increase per additional axle. *25 cent fee added to Good To Go! pass rates if a pass is not detected

Toll Traffic & Revenue by Facility (FY 2020)

Toll Facility Traffic Toll Revenue* SR 16 Tacoma Narrows Bridge 14.2million $75.5 million SR 520 Floating Bridge 20.9 million $66.6 million SR 99 Tunnel (tolling began Nov 2019) 7.4 million $11.9 million I-405 Express Toll Lanes 7.7 million $21.3 million SR 167 HOT Lanes 1.5 million $3.5 million Total 51.7 million $178.7 million Source: TRFC, November 2020 * Adjusted Gross Toll Revenue

P age 16 2021 WSTC TOLLING REPORT & TACOMA NARROWS BRIDGE LOAN UPDATE

2021 TACOMA NARROWS BRIDGE LOAN UPDATE As enacted 2018, RCW 47.46.190 establishes legislative intent to provide up to $85 million in loans from non-toll transportation revenue sources between FY 2020 – FY 2030. It further establishes the Legislature’s intent that the Commission maintain toll rates at FY 2018 levels until debt service, deferred sales tax, and loans are repaid except for no more than a 25 cent toll rate increase beginning on July 1, 2021 (FY 2022) or later.2

estimated. Beginning to address this full funding need in the 2021-23 biennium will increase the likelihood that toll rates can be maintained at the intended level of no more than 25 cents higher than FY 2018 levels, for FY 2022 and beyond. 2019-2021 Biennium Loan Estimates In 2019 the Legislature approved a loan to the TNB SR 16 Tacoma Narrows Bridge Account of $12.54 million for the 2019-21 biennium based on the 2019 TNB loan assessment and updated In support of this intent, RCW 47.46.20 0 requires cost assumptions for the share of system-wide tolling the Commission to submit a status report to the costs the TNB would carry during the 2019-21 Transportation Committees of the Legislature each biennium. January through the end of debt service payments in FY 2030. This report is intended to inform the Pre-COVID, the 2020 TNB loan assessment affirmed Legislature as to how much of a loan is necessary each that this loan amount continued to meet funding biennium from non-toll sources, assuming no more requirements for the biennium, and maintained the than one 25 cent toll rate increase over the life of the fund balance near the target amount, as established debt. by the Commission’s Sufficient Minimum Balance (SMB) policy. The SMB policy requires the Commission The total loan amount needed over the life of the TNB to consider adjusting toll rates if the TNB Account debt has grown beyond the originally intended $85 is projected to not maintain a retrospective three million maximum loan amount due to the impacts of month rolling average fund balance of $10 million. The COVID-19 on TNB traffic and revenues. The revised 2020 TNB loan assessment estimated that the fund total loan amount has grown to about $115 million balance would intermittently not be in compliance over the full term of the debt service (through 2030), with the SMB policy in FY 2021, but with a 25 cent with the assumed toll rate increase of 25 cents in rate increase assumed for FY 2022 (July 1, 2021), as FY 2022. This includes the projected loan funding well as the intended loan for the 2021-23 biennium, needs for the 2021-23 biennium increasing to about the Commission decided no rate adjustments were $39 million, nearly $26 million more than previously necessary. 2019-21 Biennium Loan Estimates & Distribution* FY 2020 FY 2021 2019-21 Biennium 2019 TNB Loan Update Estimates $ 6,511,000 $ 8,392,000 $ 14,903,000 Enacted Loan Amounts^ (2019 Legislature) $6,271,500 $6,271,500 $12,543,000 * Estimates rounded to nearest thousand. ^ 2019-21 biennium budget provided for $12.543m from the Nickel Account. Distribution between fiscal years based on current fund transfer schedule. Equal amounts are transferred at the end of each quarter (source: WSDOT).

2 RCW 47.46.190: https://app.leg.wa.gov/RCW/default.aspx?cite=47.46.190

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Based upon the current loan amount for the 2019-21 increase in funding needs is most concentrated in biennium, the TNB Account fund balance is projected the 2021-23 biennium. Compared to the 2020 loan to have an ending fund balance of about $4.1 million estimate of $13 million, projected loan funding needs at the end of FY 2021. This is $8.9 million less than for the 2021-23 biennium have increased by nearly the pre-COVID projected ending fund balance of $26 million, to about $39 million. Consistent with past about $13 million. This projected decreased fund loan updates, this assessment assumes a 25 cent rate balance was fueled both by COVID-19 impacts increase beginning in FY 2022 (July 1, 2021). on traffic and revenue, and an increased share of Factors that drove this projected increase include: systemwide tolling costs for TNB since it experienced relatively smaller declines in traffic and revenue • An increase in total costs for the 2021-23 compared to other facilities during the pandemic. biennium of about $6 million, driven by a doubling However, impacts on the fund balance would have of projected facility repair and replacement costs been even greater if not for WSDOT’s decision to for the biennium from a deferral of these costs in defer $8.5 million in facility repair and replacement the 2019-21 biennium. costs to future biennia to reduce financial costs during • A decline in projected revenues for the 2021-23 the current biennium. biennium by about $10 million driven by continued While the projected FY 2021 fund balance will enable impacts of the COVID-19 pandemic. the TNB Account to meet funding requirements, the • Funding of $9.4 million necessary to bring the TNB fund balance is projected to not be in compliance with fund balance into compliance with the SMB policy the Commission’s Sufficient Minimum Balance (SMB) by the end of the 2021-23 biennium. policy between April – June 2021.3 The Commission will work continue to monitor TNB traffic and revenue Comparison of Total Loan and work with the Legislature and WSDOT on options Estimates: FY 2019 – FY 2030 to address the shortfall. Looking at the full picture and based upon this most 2021-23 Biennium Loan recent financial update, loan estimates for FY 2019 – FY 2030 total about $115 million, approximately $42 Estimates million more than was estimated in last year’s TNB loan While the impacts of the COVID-19 pandemic on traffic update, and $30 million more than the intended $85 and revenue levels are projected to most severely million maximum total loan amount, as cited in RCW impact the current 2019-21 biennium, the resulting 47.46.190. Considering the $12.543 million loan that

Ending Fund Balance Estimates with Current Loan by Fiscal Year (2019-21 Biennium)* FY 2020 FY 2021 2020 TNB Loan Update $13,777,000 $13,032,000 2021 TNB Loan Update $14,059,000 $4,093,000 Difference $282,000 -$8,939,000 *Estimates rounded to nearest thousand.

2021-23 Biennium Loan Estimates & Distribution FY 2022 FY 2023 2021-23 Biennium 2020 TNB Loan Update $6,138,000 $7, 114,000 $13,252,000 2021 TNB Loan Update $25,546,000 $13,327,000 $38,873,000 Difference $19,408,000 $6,213,000 $25,621,000

3 Transportation Commission TNB Sufficient Minimum Balance Policy https://wstc.wa.gov/wp-content/uploads/2019/08/TNB-SNB-Policy.pdf

P age 18 2021 WSTC TOLLING REPORT & TACOMA NARROWS BRIDGE LOAN UPDATE was provided for in the 2019-21 biennium, this leaves COVID-19 related declines in TNB traffic and revenue $102.5 million in unfunded revenue needs over the have been less than the state’s other toll facilities. remaining term of the debt service through 2030. If the Legislature seeks to maintain the intended $85 million TNB Loan Repayment Estimates loan cap, a higher rate increase than the intended cap As established in current law, repayment of the TNB of 25 cents in FY 2022 or later may be necessary to loans is scheduled to begin in FY 2031, following the meet projected revenue needs through FY 2030. completion of debt service payments in FY 2030. In The current estimated increase in funding needs is FY 2031, loan repayment is limited by the requirement largely the result of traffic and revenue declines from to first repay the $57.6 million in deferred sales tax. the effects of COVID-19 impacts during the 2019- Repayment of the deferred sales tax and the TNB loans 21 biennium, and the with continued reductions in would complete existing financial obligations, therefore projected traffic and revenue levels through future requiring the end of TNB tolling, per RCW 47.46.110. biennium. Overall, projected total costs through the Loan repayment is now estimated to stretch into FY term of the debt service remain very close to prior 2033, with the increase in the estimated loan need. estimates, despite shifts in costs between biennia. With an estimated $17.3 million in TNB loans to Though projected declines in transactions and repay in FY 2033, repayment of all existing financial revenues do result in associated cost savings, this is in obligations could be complete by early fall 2032, part countered by an increase in the projected share roughly through the first quarter of the fiscal year. of state toll system costs due to the fact that the

TNB Loan Estimates for FY 2019 – FY 2030 by Biennium*

Loan 2019-21 2021-23 2023-25 2025-27 2027-29 2029-31 FY 2019 – Scenarios Biennium^ Biennium Biennium Biennium Biennium Biennium FY 2030

2020 TNB $12,543,000 $13,252,000 $14,722,000 $13,463,000 $15,958,000 $2,669,000 $72,607,000 Loan Update

2021 TNB $12,543,000 $38,873,000 $22,225,000 $17,668,000 $19,437,000 $4,275,000 $115,021,000 Loan Update

Difference $0 $25,621,000 $7,503,000 $4,205,000 $3,479,000 $1,606,000 $42,414,000

* Loan estimates rounded to nearest thousand. ^ Actuals, as funded in the 2019-21 transportation budget.

TNB Loan Repayment Estimates & Distribution

FY 2031 FY 2032 FY 2033 Total

2020 TNB Loan Update $20,579,000 $52,027,000 $0 $72,607,000

2021 TNB Loan Update $19,261,000 $78,461,000 $17,299,000 $115,021,000

Difference -$1,318,000 $26,434,000 $17,299,000 $42,414,000

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2021 LOAN UPDATE: DETAILS & ASSUMPTIONS

Factors Contributing to 2021 REVENUES Loan Update Analysis Adj Gross Toll Revenues: 2020 vs. 2021 TNB Loan Update The information below is a comparison of TNB traffic, revenues, and costs informing this loan assessment 2021-23 Biennium FY 2020 FY 2021 with those used for the loan assessment in the 2020 w25 cent increase Loan Update. È -8.1% È -9.7% È -5.7% TOLL TRANSACTIONS Toll Transactions: As a result of the COVID-19 pandemic, adjusted gross 2020 vs 2021 TNB Loan Update revenues were sharply below forecasted amounts in FY 2020 by $6.6 million (-8.1%). This trend has continued 2021-23 Biennium FY 2020 FY 2021 in the first half of FY 2021, and the November 2020 w25 cent increase forecast projects this trend to continue through the È -9.9% È -10.4% È -5.5% end of the fiscal year with adjusted gross revenues forecasted to be about $8.1 million (-9.7%) below the November 2019 forecasts. This primarily results from As a result of the COVID-19 pandemic, toll transaction the on-going impacts of the COVID-19 pandemic. volumes on the TNB were significantly lower than expected in FY 2020 (through June 30, 2020), missing Revenue declines were slightly less than transaction pre-COVID projections by about 1.56 million vehicle declines attributed primarily to a greater decline in trips (-9.9%). This negative trend continued into FY passenger vehicle traffic than large truck traffic that 2021 (beginning July 1, 2020), though transaction pay a higher toll rate with three or more axles. levels slightly increased in late summer and early fall Looking ahead to the 2021-23 biennium, revenues 2020. The November 2020 forecast projects that toll are projected to continue to recover, but remain transactions will continue to be lower than pre-COVID below pre-COVID projections. Assuming the 25 cent in FY 2021, with a total of 1.66 million (-10.4%) fewer rate increase for July 1, 2021 (FY 2022), revenues vehicle trips projected compared to the November are projected to be down $6.4 million (-7.2%) in FY 2019 forecast.4 2022 and down about $3.7 million (-4.1%) in FY 2023, Looking ahead to the 2021-23 biennium, transactions compared to pre-COVID projections, with revenue are projected to begin a recovery, but remain below down about -5.7% for the full biennium. pre-COVID projections (November 2019 forecast) by The adjusted gross revenue estimates include the about 1.15 million vehicle trips (-7.1%) in FY 2022 and projected impacts of the system-wide exemptions by about 650,000 vehicle trips in FY 2023 (-4.0%), policy that took effect on Aug. 1, 2019, as adopted by with transactions down by -5.5% for the full biennium. the Commission in July 2018. This policy established Consistent with the 2020 TNB loan assessment, consistent tolling exemptions on toll facilities across the adjusted loan estimates for FY 2022 – FY 2030 the state. This had the effect of expanding some incorporate projected impacts on toll transaction exemptions to the TNB, with the transit exemptions growth rates from a potential 25 cent rate increase for buses and vanpools most consequential. on July 1, 2021 (FY 2022). As used for the 2020 TNB loan assessment, this analysis uses a 0.5% lower assumed toll transaction growth rate for FY 2022 than assumed with no toll rate increase (2021 TNB financial plan), or about 72,000 fewer vehicle trips. Annual growth rates then return to levels assumed without 4 WA State Transportation Revenue Forecasts https://www.ofm.wa.gov/ the rate increase. budget/budget-instructions/transportation-revenue-information

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Before the COVID-19 pandemic (2020 TNB loan Changes in long-term cost trends over the term of the assessment), these exemptions were expected to debt service (through FY 2030) include a decrease in reduce annual projected TNB revenues by about 0.3%, costs associated with lower than projected transactions equating to a reduced revenue potential of about and revenues resulting from the impact of the $206,000 in FY 2020, $235,000 in FY 2021, and COVID-19 pandemic, and an increase in the projected about $245,000 annually thereafter, with the possible share of state toll system costs for TNB. The increased 25 cent rate increase beginning in FY 2022. The share of system costs is the result of relatively lower impacts of COVID-19 reduced the volume of exempt declines in traffic and revenue during the COVID-19 vehicle traffic on all facilities in 2020, particularly for pandemic compared to the state’s other tolled facilities. transit services, reducing the revenue impact of the However, over the full term of the debt service (through exemptions. For the TNB, bus service levels began FY 2030) these factors roughly balance out resulting in to return to near normal levels by the end of 2020, projected costs that are nearly the same as pre-COVID but vanpool use remained severely reduced with a assumptions for FY 2022 - FY 2030. reduction in service demand. Looking ahead, service levels remain uncertain as transit riders transition Financial Model Assumptions to a new travel behaviors and as transit agencies The current loan estimates incorporate costs and potentially address revenue shortfalls. For purposes of inflation factors assumed in WSDOT’s preliminary this loan update, exemption impacts are not projected 2021 TNB financial plan, as prepared after the to return to pre-COVID projection levels until the November 2020 transportation revenue forecast and 2023-25 biennium. the Governor’s 2021 transportation budget proposals COSTS issued in December 2020. Distinctions in assumptions from these documents include: TNB Costs: 2020 vs. 2021 TNB Loan Update • TNB financial plan and this analysis assumes interest revenues distributed to the TNB Account 2021-23 Biennium FY 2020 FY 2021 from the Statewide Tolling Account that are not w25 cent increase assumed in the November 2020 forecast, about $100,000 annually. È -6.5% Ç 0.5% Ç 3.1% • TNB financial plan and this analysis do not assume Analysis of the current loan included lower projected the $25 million loan for the 2021-23 biennium costs than previously assumed for the 2019-21 included in the Governor’s 2021-23 Transportation biennium, consistent with WSDOT’s 2021 TNB Budget proposal. financial plan (December 2020). The overall decrease Calculations for the proposed loan adjustments in costs largely resulted from a shift in about $8.5 maintain some distinctions from the TNB financial million of repair and replacement costs from the 2019- plan, consistent with the loan estimates for the 2020 21 biennium to the 2021-23 and 2023-25 biennia. TNB Update. As noted below, these distinctions result This resulted in a 6.5% decrease in costs in FY 2020 from updates to information in the WSDOT financial compared to the 2020 loan update projections, and plan, alignment with the 25 cent rate increase for FY kept FY 2021 costs to an increase of 0.5% compared 2022 assumed by the loan legislation, and alignment to the prior projections, despite an increase in with the Commission’s SMB policy. These distinctions projected FY 2021 toll vendor costs of $3 million. include: Looking ahead to the 2021-23 biennium, the shift of • WSDOT Financial Plan Update: repair and replacement costs increases total costs for the biennium by 3.1% compared with pre-COVID ê Assumes larger annual impact on potential projections in the 2020 loan update. revenue from toll exemptions than the 2021 TNB Financial Plan by about $30,000

P age 21 2021 WSTC TOLLING REPORT & TACOMA NARROWS BRIDGE LOAN UPDATE

– $49,000 per year, beginning in FY 2024. ê Assumptions about a potential FY 2022 rate These estimated impacts are consistent increase are for purposes of this assessment the 2020 TNB loan assessment, except for only. If and when it becomes necessary, the removing this additional amount for FY 2021 Commission will conduct a formal rate setting – FY 2023 because of the decline in exempt process to assess and enact a toll rate increase. transit trips resulting from the COVID-19 • Commission’s SMB Policy: pandemic, particularly for vanpools, and the uncertainty about the rate of recovery for ê An assumed annual ending fund balance these transactions. of $13.5 million to ensure compliance with the $10 million retrospective three month • FY 2022 Rate Increase: rolling average requirement established by ê Assumes annual increased revenue and about the Commission’s sufficient minimum balance $97,000 in annual credit card costs resulting policy. from an assumed 25 cent rate increase on July 1, 2021 (FY 2022), in alignment with the intent of the legislation. This is $2,000 more per year than the 2019 TNB loan assessment asserted, based on the assumption of higher credit card costs with the new tolling back office system. ê Revenue projections beginning with the 2021- 23 biennium in this report assume the 25 cent rate increase anticipated for FY 2022 will be applied uniformly across all current toll rates, including per axle toll rates for vehicles with 3+ axles, based on WSDOT’s interpretation of the related statute (RCW 47.46.190). Capping the increase to per axle rates at 25 cents is an adjustment from prior reports, resulting in a slight reduction in assumed annual revenue capacity from the 25 cent rate increase (about $100,000 per year).

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