This Preliminary Official Statement and the information contained herein are subject to completion or amendment. Under no circumstances shall this Preliminary Official Statement constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, qualification or filing under the securities laws of any such jurisdiction. be availablefordelivery atorthroughDTCinNewYork,on aboutNovember18,2020. Advisor to the Authority in connection with the issuance of the Bonds. It is expected that the Bonds will the UnderwritersbyLockeLordLLP.PublicResources AdvisoryGroup,Inc.isservingasFinancial the AuthoritybyBernstein,Shur,Sawyerand Nelson, P.A.,SpecialCounseltotheAuthority,andfor Cohn, Ferris,GlovskyandPopeo,P.C.,BondCounsel. Certainlegalmatterswillbepasseduponfor yields. July 1,2021.Seetheinsidecoverhereofformaturities, principalamounts,interestratesandpricesor Company. as TrusteeandPayingAgenttoCede&Co.,nomineeforDTC.See & Co. is the registered owner of the Bonds, principal and interest will be payable by Bangor SavingsBank, Cede as long So certificates. bond of delivery physical receive not will and thereof multiple integral any or $5,000 of denominations in Bonds the in interests ownership beneficial acquire will Purchasers (“DTC”). of Cede&Co.,asregisteredownerandnomineeTheDepositoryTrustCompany,NewYork, York AUTHORITY HASNOTAXINGPOWER. OR OF ANYAGENCYOR POLITICAL SUBDIVISION THEREOF OTHER THAN THEAUTHORITY. THE DEBT OFTHESTATEMAINEORAPLEDGEFAITHANDCREDIT MAINE REVENUES OFTHETURNPIKEPLEDGEDTHEREFOR.BONDSSHALLNOTCONSTITUTE A Bonds, asmorefullydescribedherein. herein. TheBondswillbesecuredonaparitybasiswiththeAuthority’soutstandingTurnpikeRevenue Authority (the“Authority”)topayCostsofTurnpikeProjectsandrelatedcosts,allasdescribed individuals. See“ opinion ofBondCounsel,interestontheBondsisexemptfromStateMaineincometaximposed not beincludedinthegrossincomeofholdersBondsforfederaltaxpurposes.In various requirements of the Internal Revenue Code of 1986, as amended, interest on the Bonds will * Preliminary, subject tochange. November __, 2020 FHN FinancialCapital Markets Due: July1,asshownontheinsidecover NEW ISSUE The Bondsareofferedwhen,asandifissued, subjecttotheapprovingopinionofMintz,Levin, The Bondsaresubjecttooptionalandmandatory redemptionpriortomaturityasdescribedherein. The Bondswillbearinterestfromtheirinitialdelivery,payableeachJanuary1andJuly1,commencing The Bondswillbeissuedasfullyregisteredbondsand,whenissued,inthename THE BONDSWILLBEOBLIGATIONSOFAUTHORITYPAYABLESOLELYFROM The TurnpikeRevenueBonds,Series2020(the“Bonds”)arebeingissuedbytheMaine In theopinionofBondCounsel, under existing law, andassumingcontinued compliance with
PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER 26, 2020 BofA Securities T ax E xemption MAINE TURNPIKE AUTHORITY ” herein.
Turnpike RevenueBonds
$130,000,000* Siebert WilliamsShank &Co.,L.L.C.
Series 2020 Ratings (See“RATINGS”herein): Appendix F—TheDepositoryTrust Dated: DateofDelivery Citigroup
Moody’s: Aa3 Fitch: AA- S&P: AA- UBS
$130,000,000* MAINE TURNPIKE AUTHORITY Turnpike Revenue Bonds Series 2020
$58,780,000* Serial Bonds Maturity Principal Interest Price/ (July 1)* Amount* Rate Yield CUSIP† 2026 $2,725,000 2027 2,860,000 2028 3,005,000 2029 3,155,000 2030 3,310,000 2031 3,475,000 2032 3,650,000 2033 3,835,000 2034 4,025,000 2035 4,225,000 2036 4,435,000 2037 4,660,000 2038 4,890,000 2039 5,135,000 2040 5,395,000
$31,290,000* __% Term Bonds Due July 1, 2045*, price/yield __% CUSIP No. †
$39,930,000* __% Term Bonds Due July 1, 2050*, price/yield __% CUSIP No. †
* Preliminary, subject to change.
† CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed on behalf of the American Bankers Association by S&P Global Market Intelligence. The CUSIP numbers are included solely for the convenience of owners of the Bonds, and the Authority is not responsible for the selection or the correctness of the CUSIP numbers printed herein. CUSIP numbers assigned to securities may be changed during the term of such securities based on a number of factors, including, but not limited to, the refunding or defeasance of such securities or the use of secondary market financial products. NO DEALER, BROKER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS OFFICIAL STATEMENT, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE BONDS BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE. THE INFORMATION HEREIN IS SUBJECT TO CHANGE WITHOUT NOTICE AND NEITHER THE DELIVERY OF THIS OFFICIAL STATEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE AUTHORITY SINCE THE DATE HEREOF. THIS OFFICIAL STATEMENT IS SUBMITTED IN CONNECTION WITH THE SALE OF THE BONDS AND MAY NOT BE REPRODUCED OR USED, IN WHOLE OR IN PART, FOR ANY OTHER PURPOSE. INFORMATION IN THIS OFFICIAL STATEMENT, INCLUDING THE APPENDICES, THAT HAVE BEEN PROVIDED BY HNTB CORPORATION, CONSULTING ENGINEERS, AND CDM SMITH INC, TRAFFIC CONSULTANT, HAVE BEEN INCLUDED IN RELIANCE UPON HNTB CORPORATION AND CDM SMITH INC.
THE UNDERWRITERS HAVE PROVIDED THE FOLLOWING SENTENCE FOR INCLUSION IN THIS OFFICIAL STATEMENT. THE UNDERWRITERS HAVE REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND AS PART OF, THEIR RESPECTIVE RESPONSIBILITIES TO INVESTORS UNDER THE FEDERAL SECURITIES LAWS AS APPLIED TO THE FACTS AND CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITERS DO NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE AUTHORITY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE BONDS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. MAINE TURNPIKE AUTHORITY MTA Administration & Public Safety Building 2360 Congress Street Portland, ME 04102 (207) 871-7771 Daniel E. Wathen, Chairman Robert D. Stone, Vice Chairman Michael J. Cianchette, Member Jane L. Lincoln, Member Ann R. Robinson, Member Bruce A. Van Note, Member Ex Officio Thomas J. Zuke, Member ______
EXECUTIVE STAFF Peter Mills, Executive Director Douglas D. Davidson, Chief Financial Officer and Treasurer Peter S. Merfeld, P.E., Chief Operations Officer John P. Sirois, Director of Finance Stephen R. Tartre, P.E., Chief Engineer John W. Cannell, Director of Maintenance Lauren G. Carrier, Director of Human Resources Richard R. Barra, Director of Fare Collection Gregory J. Stone, Director of Public Safety William H. Yates, Director of Information Services and Communications Richard W. Somerville, Director of E-ZPass Operations Matthew W. Elliott, Controller Jonathan A. Arey, Esq., Secretary and Staff Attorney ______
CONSULTANTS AND COUNSEL Bernstein, Shur, Sawyer and Nelson, P.A., Special Counsel CDM Smith Inc., Traffic Consultant HNTB Corporation, Consulting Engineers Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Bond Counsel Wipfli LLP, Independent Auditors Public Resources Advisory Group, Financial Advisor TABLE OF CONTENTS
INTRODUCTION ...... 1 Consulting Engineers’ Report and Traffic Consultant’s Report ...... 33 THE AUTHORITY ...... 2 Certain Matters Relating to Enforceability of General ...... 2 Obligations ...... 33 Members, Officers and Senior Staff of the Authority 2 Forward Looking Statements ...... 34 Cooperation with MaineDOT ...... 6 Legislative Action...... 34 Debt Issuances ...... 7 TAX EXEMPTION ...... 34 Response to the COVID-19 Pandemic ...... 8 LITIGATION ...... 36 ESTIMATED SOURCES AND USES OF FUNDS ...... 10 STATE OF MAINE NOT LIABLE ON THE BONDS ...... 36 THE BONDS ...... 10 CERTAIN LEGAL MATTERS ...... 36 Redemption Provisions ...... 10 INDEPENDENT AUDITORS ...... 36 DEBT SERVICE REQUIREMENTS ...... 12 CONSULTING ENGINEERS ...... 36 SECURITY FOR THE TURNPIKE REVENUE BONDS ...... 13 TRAFFIC CONSULTANT ...... 37 Pledge of Revenues and Funds ...... 13 UNDERWRITING ...... 37 Toll Rate Covenant ...... 14 Operation and Maintenance of the Turnpike ...... 15 FINANCIAL ADVISOR ...... 37 Debt Service Reserve Requirement ...... 15 RATINGS ...... 38 Additional Indebtedness ...... 16 Amendments ...... 17 CONTINUING DISCLOSURE ...... 38 SUMMARY OF HISTORICAL OPERATIONS MISCELLANEOUS ...... 38 ...... 18 Historical Traffic Trends and Toll Revenue ...... 18 Appendix A – Certain Definitions ...... A-1 Historical Operating Results and Deposits ...... 19 Appendix B – Summary of Certain Provisions of the SUMMARY OF PROJECTED OPERATIONS Resolution ...... B-1 ...... 21 Appendix C – Report of Consulting Engineers ...... C-1 Summary of Traffic Consultant’s Report ...... 21 Projected Revenues, Expenses and Debt Service Appendix D – Toll Revenue Study ...... D-1 Coverage ...... 24 Appendix E – Financial Statements of the THE TURNPIKE ...... 25 Authority ...... E-1 History of the Turnpike ...... 25 Appendix F – The Depository Trust Company ...... F-1 Description and Service Area ...... 25 Appendix G – Form of Opinion of Bond Counsel .. G-1 Interstate 295 Alternative ...... 25 Toll Rates and Collections ...... 26 Appendix H – Form of Continuing Disclosure Personnel, Labor Relations, Retirement Plan and Agreement ...... H-1 Other Post-Employment Benefits ...... 27 Budget Procedures ...... 28 Investment Policy ...... 28 Capital Programs ...... 28 Summary of Consulting Engineers’ Report ...... 31 CERTAIN RISK FACTORS ...... 32 Impact of the COVID-19 Pandemic ...... 32 General Factors Affecting Authority Revenues ...... 33
i [THIS PAGE INTENTIONALLY LEFT BLANK] OFFICIAL STATEMENT RELATING TO
MAINE TURNPIKE AUTHORITY
TURNPIKE REVENUE BONDS, SERIES 2020
INTRODUCTION
The Official Statement sets forth certain information concerning the Maine Turnpike Authority (the “Authority”) in connection with the issuance and sale of Maine Turnpike Authority $130,000,000* Turnpike Revenue Bonds, Series 2020 (the “Bonds”) to be dated the date of delivery thereof.
The Bonds will be issued in accordance with Title 23, Part 1, Chapter 24, Sections 1961-1983, inclusive, of the Maine Revised Statutes, as amended (the “Enabling Act”) and pursuant to the General Turnpike Revenue Bond Resolution (“General Resolution”) of the Authority adopted April 18, 1991, as from time to time amended and supplemented, including a Twenty-Second Supplemental Resolution Authorizing the Issuance of Maine Turnpike Authority Turnpike Revenue Bonds, Series 2020 (the “Twenty-Second Supplemental Resolution” and together with the General Resolution, the “Resolution”).
The Bonds are being issued to provide funds which, together with other available moneys of the Authority, will be used (i) to fund the costs of projects in the Authority’s capital plan, (ii) to make a deposit to the Debt Service Reserve Fund, and (ii) to pay certain costs of issuing the Bonds.
The principal of, redemption premium, if any, and interest on the Bonds, together with other bonds issued pursuant to the Resolution (“Turnpike Revenue Bonds”), are payable solely from and are equally and ratably secured by a pledge of all Revenues (hereinafter defined) and certain moneys and securities on deposit from time to time in all Funds, Accounts and Subaccounts established by the Resolution. See “SECURITY FOR TURNPIKE REVENUE BONDS.” The foregoing pledge is subject to certain terms and conditions of the Resolution, including the Trustee’s right to reasonable compensation for services rendered. See Appendix B — Summary of Certain Provisions of the Resolution.
THE BONDS WILL BE OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM THE REVENUES OF THE TURNPIKE PLEDGED THEREFOR. THE BONDS SHALL NOT CONSTITUTE A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF MAINE OR A DEBT OF THE STATE OF MAINE OR OF ANY AGENCY OR POLITICAL SUBDIVISION THEREOF. THE AUTHORITY HAS NO TAXING POWER.
For certain information regarding the impact of the COVID-19 pandemic on the Authority, see “THE AUTHORITY – Response to the COVID-19 Pandemic.”
Capitalized terms not defined elsewhere in this Official Statement have the same meanings assigned to such terms in the Resolution and the Special Obligation Resolution. See Appendix A — Certain Definitions and Appendix B – Summary of Certain Provisions of the Resolution.
* Preliminary, subject to change.
1 THE AUTHORITY
General
The Authority is a body politic and corporate whose existence is continued under and by virtue of the Enabling Act. Pursuant to the Enabling Act, the Authority is authorized and empowered to operate and maintain a toll turnpike from a point at or near Kittery in York County to a point at or near Augusta in Kennebec County, together with any connecting tunnels, bridges, overpasses, underpasses, interchanges and toll facilities. See “THE TURNPIKE.”
The Enabling Act permits the Authority to charge and collect fees, fares and tolls for the use of the Turnpike and to use the proceeds of such fees, fares and tolls for the purposes provided in the Enabling Act subject to and in accordance with any agreement with bondholders made in accordance with the terms and conditions of the Enabling Act, including the Resolution.
In addition, the Enabling Act permits the Authority to provide, from revenues to or for the use of MaineDOT, funds for the maintenance, construction or reconstruction of additional interchanges determined by the Authority and MaineDOT to have a sufficient relationship to the public’s use of the Turnpike and the orderly regulation and flow of vehicular traffic using the Turnpike.
Members, Officers and Senior Staff of the Authority
The Authority is governed by a seven Member board. Six members are appointed to staggered six year terms by the Governor, subject to review by the joint standing committee of the Maine State Legislature having jurisdiction over transportation and to confirmation by the Maine State Senate and the seventh Member is Maine’s Commissioner of Transportation, or the Commissioner’s designee, serving as a Member ex-officio. Each Member may serve for six years or until a successor is appointed and has been confirmed. If there is any vacancy prior to the expiration of a Member’s term, the Governor may appoint a new Member for the remainder of the unexpired term. The six appointed Members are compensated to attend meetings and are reimbursed for expenses incurred in the performance of their duties. The Authority may act only upon concurrence of at least four Members.
The Members annually appoint or reappoint the Executive Director who is not a Member and whose appointment is subject to review by the joint standing committee of the Maine State Legislature having jurisdiction over transportation and subject to confirmation by the Maine State Senate. The Executive Director has two chief deputies, the Chief Financial Officer and the Chief Operating Officer. The Chief Financial Officer oversees the following: Finance & Accounting, Information Services, and Fare Collection. The Chief Operating Officer oversees three departments: Engineering and Building Maintenance, Highway and Equipment Maintenance, and Public Safety and Special Services.
The current Members of the Authority and their terms are as follows:
Daniel E. Wathen, Esq., Chair. Mr. Wathen was appointed as an Authority Member on June 8, 2011 and became Chairman on June 10, 2011. He was reappointed as a Member in 2019 and his term runs until March 31, 2024. Presently Mr. Wathen is of counsel with the law firm Pierce Atwood, LLP and engages in an Alternative Dispute Resolution practice throughout the United States. For twenty-five years he was a member of Maine’s judiciary, serving first on the Superior Court and then for twenty years on the Supreme Judicial Court of Maine. For the last ten years of his judicial career he served as Chief Justice of the Supreme Judicial Court. Mr. Wathen serves and has served on a number of public boards.
2 Robert D. Stone, Vice Chairman. Mr. Stone was appointed as an Authority Member on September 27, 2011, and reappointed for a second term in March 2017. His current term expires March 31, 2023. Mr. Stone currently serves as Vice Chairman. Mr. Stone has worked in the financial services industry for over 40 years. Mr. Stone served as Senior Vice President and Manager of the Business & Government Services group at Androscoggin Bank and retired in 2014. Mr. Stone has worked for several banks in his banking career, including the First National Bank of Boston, the Federal Reserve Bank of Boston, Northeast Bankshare, Norstar Bank of Maine, Fleet Norstar and Camden National Bank in senior management positions. Mr. Stone is a graduate of the University of Maine at Orono with a B.S. in Economics in the College of Business Administration. He has considerable government financial experience, serving as a long-time chair of the City of Lewiston’s Finance Committee. Mr. Stone has served on the Auburn City Council, as a Selectman for the Town of Sabattus and was the organizing treasurer of the Sabattus Sanitary District.
Michael J. Cianchette, Member. Mr. Cianchette was appointed as an Authority Member on January 15, 2016. His term runs through March 31, 2021. Mr. Cianchette currently serves as Executive Vice President of a Maine-based management company directing four affiliated businesses in several industries. He previously served as Chief Legal Counsel and Senior Advisor to Maine Governor Paul LePage before resigning his position to deploy to Afghanistan. Mr. Cianchette holds the rank of Lieutenant Commander in the Navy Reserve as an Intelligence Officer, where his military decorations include the Defense Meritorious Service Medal, Military Outstanding Volunteer Service Medal, and Sharpshooter qualification awards. He earned a BA from Boston College in Economics and Political Science and a JD/MBA from Suffolk University. He has served in several volunteer organizations, including founding President of the Cheverus High School Alumni Council and a Corporator of Gorham Savings Bank.
Jane L. Lincoln, Member. Ms. Lincoln was appointed as an Authority Member on February 24, 2020 as the representative from Kennebec County. She served for eight years as chief of staff for Maine Governor John E. Baldacci, where she played an integral role in the development of public policy, political and legislative strategy, and communications. Her responsibilities included coalition building and management, legislative relations and community outreach. Ms. Lincoln’s issue portfolio included a particular focus on transportation, energy, finance and intergovernmental affairs. Before joining the Governor’s Office, she was the Acting Commissioner of the Maine Department of Transportation, where she managed a workforce of 2,300 and a biennial budget of approximately $600 million. She has served in appointed positions for Democratic, Independent and Republican governors during a public service career that has spanned 33 years. Ms. Lincoln currently serves on the Board of Directors of Emerge Maine and is Vice President of the Kennebec Valley Humane Society Board of Directors.
Ann R. Robinson, Member. Ms. Robinson was appointed as an Authority Member on June 21, 2017 and her current term as a Member runs until March 31, 2022. A resident of Portland, Maine, Ms. Robinson is a partner in the law firm Pierce Atwood, LLP where she serves as a member of the Government Relations and Health Care Practice Groups. Prior to her current firm, Ms. Robinson was a partner and former Chair of the Government Affairs Practice Group at another large Maine law firm, where she focused primarily in the areas of health care, insurance, and professional regulation. She most recently served as General Counsel and Director of Government Affairs for Spectrum Medical Group, P.A., a physician- owned multispecialty practice. Ms. Robinson served a term (2003-2005) on the Board of Directors of the Federal Home Loan Bank of Boston as a public interest director appointed by the Bush Administration. She also served as a commissioner on the Maine Human Rights Commission (1992-1995), and as a member of the Board of Directors of Maine Public Broadcasting (2011- 2017).
Thomas J. Zuke, Member. Mr. Zuke was appointed as an Authority Member on June 15, 2017 and his term expired March 31, 2020. Under the Act, a Member of the Authority with an expired term continues to serve until a successor is appointed. Mr. Zuke has been a licensed Certified Public Accountant
3 since 1990 and serves as Executive Vice President and Chief Financial Officer at Kennebunk Savings Bank since June 2016. He is a graduate of Bentley College with a B.S. degree in Accounting. Mr. Zuke began his career in public accounting at KPMG and Baker Newman in Portland, Maine. Mr. Zuke was Director of Finance at Wentworth-Douglas Hospital in Dover, NH for six years and Executive Vice President and Chief Financial Officer for Martin’s Point Healthcare for over two years. In 2009, Mr. Zuke joined Androscoggin Bank in Lewiston, ME as Executive Vice President and Chief Financial Officer and was with that bank for seven years. In addition to serving on the board of the Maine Turnpike Authority, Mr. Zuke is also currently a member of the board of directors of Southern Maine Health Care in Biddeford.
Bruce A. Van Note, Member Ex-Officio. Mr. Van Note is the Commissioner of Maine Department of Transportation (MaineDOT), and in that capacity has served as the Ex-Officio Member since 2019 and previously from 2009 to 2014, as designee of the then MaineDOT Commissioner. From 2014 to 2018, Commissioner Van Note serviced as the Director of Policy and Planning of the Authority. Commissioner Van Note served as Deputy Commissioner of the MaineDOT from 2002 to 2014. He previously held other MaineDOT positions including Legislative Liaison and Principal Attorney for Engineering and Construction. In addition to MaineDOT experience, he has worked as a mediator, attorney and owner of a consulting firm specializing in land use, surveying and engineering services. Mr. Van Note is an engineering graduate, an Attorney at Law, and a Professional Land Surveyor.
The current officers and senior staff of the Authority are as follows:
Peter Mills, Executive Director. Mr. Mills was born in Maine in 1943. After graduating from Harvard University in 1965, Mr. Mills served five years on Navy destroyers during Vietnam. Since graduating from the University of Maine School of Law in 1973, he has practiced law in Portland and Skowhegan and has on many occasions represented design professionals in construction claims. Beginning in 1994, Mr. Mills served 16 years in the Maine Legislature and has written extensively on tax, education and health policy. He ran twice for governor in the Republican primaries of 2006 and 2010. Mr. Mills has served as Executive Director of the Authority since March 2011.
Douglas D. Davidson, Chief Financial Officer and Treasurer. Mr. Davidson is a graduate of Edward Little High School in Auburn, Maine. He received his M.S. in Business Administration, B.S. in Business Administration, and B.S. in Public Accounting from Husson College in Bangor, Maine. Mr. Davidson joined the Authority in 1995 as the Controller and Information Systems Manager, and was promoted to Director of Finance and Information Services in December 2000. He was appointed Treasurer of the Authority in February 2005 and was promoted to Chief Financial Officer in January 2012.
Peter S. Merfeld, P.E., Chief Operations Officer. Mr. Merfeld is a graduate of the University of Maine in Orono, with a Bachelor’s degree in Civil Engineering and Thomas College in Waterville, Maine with a Master of Business Administration. Mr. Merfeld has also attended executive programs at Harvard University’s John F. Kennedy School of Government and at Massachusetts Institute of Technology. Mr. Merfeld joined the Authority in June 1997 as the Assistant Director of Building Maintenance & Engineering, was promoted to Director in June 1999 and subsequently to COO in December 2000. Mr. Merfeld is a licensed Professional Engineer and is a past-president of the Maine Section of the American Society of Civil Engineers (ASCE). Mr. Merfeld is currently the Chair of ASCE’s Committee for Maine’s Infrastructure.
John P. Sirois, Director of Finance. Mr. Sirois is a graduate of South Portland High School in South Portland, Maine. He received his Bachelor of Science degree in Accounting from the University of Southern Maine. Prior to joining the Authority, Mr. Sirois worked as Division Controller for Konica Photo Imaging, an international photo products and processing company; and as Regional Controller for Pleasants
4 Hardware Inc., a national door and hardware distributer. He was hired as the Authority’s Controller in 2004 and promoted to Director of Finance in 2013.
Stephen R. Tartre, P.E., Chief Engineer. Mr. Tartre is a graduate of the University of Maine with a Bachelor of Science in Civil Engineering. Mr. Tartre also completed the State and Local Government Program at Harvard University’s Kennedy School of Government in June 2008. He worked for two civil engineering consulting firms and as a district engineer for a utility company prior to joining the Authority in May 2000 as Civil Engineer/Assistant Department Administrator. In April 2019, Mr. Tartre was promoted to his current position. Mr. Tartre is a registered Professional Engineer in Maine and is a member of the University of Maine, School of Engineering Civil Engineering Department’s advisory committee.
John W. Cannell, Director of Maintenance. Mr. Cannell is a 1995 graduate of Worcester Polytechnic Institute with a Bachelor of Science in Civil Engineering. He is a registered Professional Engineer in the State of Maine. Prior to joining the Maine Turnpike Authority in August 2015, Mr. Cannell worked for the State of Maine for 18 years. Mr. Cannell served with MaineDOT for 15 years as the Facilities Manager, Fleet Manager, and the Region 1 (Southern Maine) Manager.
Lauren G. Carrier, Director of Human Resources. Ms. Carrier is a graduate of the University of New Hampshire with a Bachelor of Arts degree in Political Science and a Master’s Degree in Public Administration. Prior to joining the Maine Turnpike Authority in February 2006, Ms. Carrier served as the Assistant City Manager and Director of Human Resources for the City of South Portland, Maine, and previous to that as Deputy County Manager in Frederick County, Virginia.
Richard R. Barra, Director of Fare Collections. Mr. Barra began working for the Maine Turnpike Authority in 1975 as a temporary Toll Collector after graduating from Kennebunk High School. Mr. Barra became a full time Toll Collector assigned to Wells toll in 1976 and was promoted to Senior Toll Collector at Exit 10 in 1986, to South End Toll Manager in 1987, to Superintendent of Fares in 1993 and became Director in 2000.
Gregory J. Stone, Director of Public Safety. Mr. Stone attended the University of Maine in Orono and the University of Southern Maine, where he earned a Bachelor’s Degree in Criminology. He holds a Master’s Degree in Public Policy and Management from the Muskie School of Public Service at USM and has also completed executive programs at Babson College, the University of Maryland, and Harvard University’s John F. Kennedy School of Government. Mr. Stone joined the Authority in 2005 and currently sits on the Board of Directors of the Maine Transportation Safety Coalition.
William H. Yates, III, Director of Information Services. Mr. Yates is a graduate of St. Joseph’s College in Standish, Maine with a degree in History and English. Mr. Yates joined the Authority in May 1998, becoming the Network Manager in December 2000. He holds several computer industry certifications, including Microsoft Certified Systems Engineer. Mr. Yates became Director of Information Services in February 2011.
Richard W. Somerville, Director of E-ZPass Operations. Mr. Somerville is a graduate of Suffolk University in Boston, MA, where he earned a B.S.B.A. majoring in Management, and a graduate of Westbrook College, Portland, ME with a Bachelor of Science Degree in Accounting. Mr. Somerville came to the Maine Turnpike Authority in 1998 as the Customer Service Supervisor for Transpass. Mr. Somerville was promoted to ETC Coordinator in 2001, E-ZPass Manager in 2005, and became Director of E-ZPass Operations in 2015. Mr. Somerville represents the Maine Turnpike at the E-ZPass Group on the Executive Management Committee and is also on the Board of ATI, the Alliance for Toll Interoperability.
5 Matthew W. Elliott, Controller. Mr. Elliott is a graduate of Keene High School in Keene, New Hampshire. He received his M.S. in Business Administration from Husson College in Bangor, Maine, and B.S. in Business Administration from the University of New Hampshire in Durham, New Hampshire. Mr. Elliott joined the Authority in 2006 as the Fixed Asset Accountant, was promoted to Accounting Manager in October 2007, and was promoted to Controller in October 2013.
Jonathan A. Arey, Esq., Secretary and Staff Attorney. Mr. Arey is a graduate of the University of Southern Maine. He received his J.D. from the University of Maine School of Law and was admitted to the Maine Bar in 2000. Mr. Arey joined the Authority in September 2000 and was made Secretary in February 2005.
Cooperation with MaineDOT
The Authority has worked with MaineDOT on transportation projects, studies, and programs. For example, the two agencies have built a West Gardiner Service Plaza, constructed several interchanges with improved approach roads, evaluated transportation needs for Central York County, studied an east-west corridor for Gorham, and jointly examined traffic congestion in Saco. They both work with local agencies to provide annual support for an express commuter bus. They manage a ride matching program known as “Go Maine” and they support numerous park and ride lots owned by each agency.
From 1982 until 2011, the Authority provided to MaineDOT portions of its revenue as directed from time to time by the Legislature. The Enabling Act was amended in 2011 to establish a policy defining what the State may expect from the Authority on a year to year basis and requires the Authority to allocate at least five percent of its annual operating revenues (based on a 3-year rolling average) (“Annual MaineDOT Allocation”) to jointly approved “department projects” defined as projects or allocations to:
1. Build or improve an interchange;
2. Maintain, build or improve an access road;
3. Study or plan a future highway corridor and study-related issues;
4. Maintain, build or improve a park and ride lot or other transportation infrastructure for all modes of transportation relating to turnpike use;
5. Purchase, lease or improve highway-related infrastructure; or
6. Pay debt incurred by the Authority for any capital project purpose in (1) – (5).
Authority funds may be devoted to a department project only when both the Authority and the MaineDOT agree that it bears a “sufficient relationship to the public’s use of the Turnpike.” Such projects are referred to in the Official Statement as “Department Projects.” The Authority’s obligation to pay MaineDOT or to pay debt service on the special obligation bonds issued to fund Department Projects is subordinate to the payment of Turnpike Revenue Bonds and Subordinated Bonds and the Authority’s obligation to pay the Annual MaineDOT Allocation is subordinate to the Authority’s obligation to pay operating expenses and to meet the requirements of any resolution authorizing the bonds of the Authority. In the nine years that this statute has been in force, its policies have been strictly followed with an annual accounting.
In April 2014, the Enabling Act was amended to permit the Authority to issue Special Obligation Bonds or Subordinated Bonds in a principal amount not to exceed $35 million to purchase a section of
6 Interstate 95 in Kittery extending approximately 1.9 miles from the current southern end of the Turnpike to the abutment of the bridge over the Piscataqua River at the New Hampshire Border. This Kittery segment of the Interstate has been maintained by the Authority under contract with MaineDOT. The Authority issued its $27,555,000 Special Obligation Bonds, Series 2014 (the “2014 Special Obligation Bonds”) to fund the purchase of the Kittery segment for an agreed price of $30 million and to pay for cost of issuance of the 2014 Special Obligation Bonds. As of October 1, 2020, there were outstanding $25,085,000 principal amount of the 2014 Special Obligation Bonds.
On January 21, 2015, the Authority completed the purchase from MaineDOT of the 1.9 miles described above. In connection with the purchase, (i) payment of principal and interest on Authority’s Special Obligation Bonds, Series 2014 will be credited to the Annual MaineDOT Allocation up to an aggregate limit of $46 million payable over 20 years and, (ii) in consideration for future capital expenditures and repairs to the Kittery segment, the Turnpike also may credit $1 million per year for 30 years toward the Annual MaineDOT Allocation, regardless of the amount actually expended by the Authority.
Debt Issuances
As of October 1, 2020, there are outstanding $438,940,000 principal of Turnpike Revenue Bonds, consisting of the following Turnpike Revenue Bonds and Turnpike Revenue Refunding Bonds:
Turnpike Revenue Bonds Outstanding Principal Amount Series 2004 $3,380,000 Series 2012A 60,170,000 Series 2018 150,000,000
Turnpike Revenue Refunding Bonds Outstanding Principal Amount Series 2012B $76,195,000 Series 2014 6,040,000 Series 2015 143,155,000
Pursuant to the Resolution, the Authority may issue Additional Turnpike Revenue Bonds and additional Subordinated Bonds, including refunding bonds, upon the satisfaction of certain tests set forth therein. See “SECURITY FOR TURNPIKE REVENUE BONDS — Additional Indebtedness.” In particular, the Authority will monitor the potential refunding of the outstanding Series 2012 Bonds prior to the July 1, 2022 optional redemption date.
Under the Enabling Act, there may be at any one time outstanding bonds, notes or other evidences of indebtedness, exclusive of refundings and below-described special obligation bonds, totaling $600,000,000 for General MTA Projects and $150,000,000 for the Gorham Connector Project, $30 million of which are expected to be issued as part of the Bonds.
The Enabling Act also authorizes the issuance of certain special obligation bonds. The Authority was authorized to issue from time to time, prior to June 30, 1997, bonds not exceeding $40,000,000 aggregate principal amount (exclusive of any refunding) to fund for MaineDOT the costs of Department Projects determined by the Authority and MaineDOT to have a sufficient relationship to the public’s use of the Turnpike. In April 2014, the Authority was further authorized to issue special obligation bonds not exceeding $35,000,000 to purchase a section of Interstate 95 in Kittery from MaineDOT.
As of October 1, 2020, there were no outstanding special obligation bonds subject to the $40,000,000 limit, and there were outstanding $25,085,000 special obligation bonds subject to the $35,000,000 limit, consisting of the Authority’s Special Obligation Bonds, Series 2014.
7 As security for payment on the Special Obligation Bonds, the Authority has pledged “Special Obligation Revenues,” including certain toll revenues transferred to the trustee for the Special Obligation Bonds from amounts on deposit in the Department of Transportation Provision Account of the General Reserve Fund under the Resolution. The pledge securing the Special Obligation Bonds is subordinate to the pledge granted to secure the Turnpike Revenue Bonds. Pursuant to the Special Obligation Resolution, the Authority may issue Additional Special Obligation Bonds, including refunding bonds, upon the satisfaction of certain tests set forth therein. The issuance of bonds other than refunding bonds or bonds meeting the applicable tests as described in the Special Obligation Resolution would require amendment of the Enabling Act or authorization under other Maine law.
Response to the COVID-19 Pandemic
The outbreak of the COVID-19 respiratory disease caused by a novel strain of coronavirus, has been declared a pandemic by the World Health Organization. Since its discovery in late 2019, it has spread globally, including throughout the United States. In the United States, there has been a focus on containing COVID-19 by prohibiting non-essential travel and limiting person-to-person contact. Nationwide, states and local governments have issued “stay at home” or “shelter in place” orders, which have and are continuing to severely restrict movement and limit businesses and activities to essential functions. This has dramatically altered the behavior of businesses and people in a manner that has had and is continuing to have negative effects on global and local economies.
In response to the public health crisis created by COVID-19, since early March 2020, the Governor of Maine has issued multiple executive orders and declarations and taken various actions to protect the public health in an effort to reduce community spread of the virus and protect Maine’s citizens. These measures have included, among others, closing or restricting access to certain businesses and activities, issuing a “stay at home” directive for most citizens, restricting non-essential travel, requiring self- quarantining by persons traveling into Maine, suspension of lodging and short-term rental operations, and limiting movement of all persons in Maine to those necessary to obtain or provide essential services or conduct essential activities. In May 2020, as the infection curve began to flatten, the Governor commenced a four-phase plan to gradually reopen the State’s economy. On October 6, 2020 the Governor issued an order authorizing the transition from Phase III to Phase IV as of October 13, 2020, allowing for all businesses and activities to resume with appropriate safety precautions and restrictions contained in current orders.
The financial impact on the Authority, while not fully known at this time, is expected to be significant. Prior to the Governor’s “stay at home” order issued in mid-March, the Authority was again exceeding toll revenue and traffic compared to prior years with toll revenue and traffic through March 14, 2020 exceeding the prior year by approximately 3.7% and 4.3%, respectively. If this trend had continued, 2020 would have been the seventh consecutive year of record revenue and traffic on the Turnpike. See “HISTORICAL FINANCIAL OPERATIONS - Historical Traffic Trends and Toll Revenue” and “SUMMARY OF PROJECTED OPERATIONS - Summary of Traffic Consultant’s Report.”
April traffic and toll revenue were down 53.7% and 43.9%, respectively, from April 2019 and represents the low-point for the year to date. Each subsequent month, as the Governor’s restrictions were eased, demonstrated steady improvement in traffic and toll revenues. Throughout the pandemic, commercial traffic, while still down over the prior year, has outperformed passenger vehicles, as more people worked from home and were under “stay at home” orders. The toll for the average commercial vehicle (a five-axle vehicle) is four-times the amount of the toll for a passenger car. See “SUMMARY OF PROJECTED OPERATIONS - Summary of Traffic Consultant’s Report” and Appendix D —Toll Revenue Study. The Authority currently expects to end the current year approximately 20% below last year’s revenues.
8 In response to the COVID-19 pandemic and in conjunction with efforts to limit the spread of the virus, on March 19 the Authority implemented a change in business operations to protect the health and safety of Authority employees. All employees were placed on paid administrative leave and not required to report for their regularly scheduled shifts. This change in operations lasted for six weeks. During this time, the Authority only maintained essential functions, including the manual collection of cash tolls. Essential employees called in to work were paid for the hours they worked, in addition to their paid administrative leave. The Authority’s operations are currently back to normal except for the manual collection of cash tolls. Since the beginning of the pandemic, there has been a shift in people moving to E- ZPass from cash, driving the electronic toll collection penetration rate over 80% as of September 30, 2020. As a result, the Authority permanently eliminated numerous toll collector shifts that are expected to save over $1 million annually. Due to efficiencies gained in Fare Collections, Maintenance and other departments, the Authority expects 2020 operating expenses to be approximately 3% lower than 2019 levels.
A long-term service plaza concession lease with HMS Host was entered into in 2006 and currently terminates in 2037. This lease provides, among other benefits to the Authority, an annual minimum rent guarantee of $3.1 million (paid in equal monthly installments) or 21% of sales, whichever is greater. As a result of the COVID-19 pandemic, HMS Host’s business has had a significant short-term decline on the Turnpike, hindering their ability to make the required minimum rent payments since April. HMS Host and the Authority have amended the lease to provide a temporary waiver of the fixed rent for 2020 and accept the percentage of sales. The 2020 percentage rent, less what has already been remitted this year, will be paid in twelve equal installments in 2021. The Authority estimates the aggregate amount deferred to 2021 to be approximately $1.2 million. This deferred balance is secured by a $3.1 million surety bond maintained by HMS Host and can be drawn upon in the event there is a default in payment.
The Authority has several high-profile projects in progress, such as the open-road tolling (ORT) plazas being constructed in York and Gardiner, and the Portland-area mainline widening. The Authority’s board has decided that these projects, among other projects underway, would not be delayed because of the pandemic. This decision was based on the fact that there were ample reserves to complete these projects. Additionally, by continuing with the construction schedule, the reduced traffic on the roads could reduce the construction timeline and make the construction zones safer. Keeping these projects going also helped lessen the pandemic’s economic impact to the region. The Authority maintains the financial flexibility necessary to reduce operating and capital expenses by delaying future projects, if necessary, and could refinance existing debt should further corrective measures be required.
Prior to the pandemic, the Authority had deposited with the Trustee sufficient funds to pay debt service due July 1, 2020. In September 2020, the total deposits for the January 1, 2021 and July 1, 2021 principal and interest payments were made. The Authority expects to complete the required remaining Reserve Maintenance deposits in November 2020.
The Authority has not received, nor has it sought, any federal or State assistance, such as through the federal CARES Act or other sources, as a result of the pandemic.
There is no assurance that the COVID-19 pandemic will not have a material adverse effect on the Authority’s operations and financial condition. The Authority believes, although there is no certainty, that its unrestricted and discretionary cash together with future net toll revenues will be sufficient to pay future debt service and other required deposits. However, the extent to which the COVID-19 pandemic impacts the Authority’s operations and its financial condition will depend on future developments, which are highly uncertain and cannot be fully determined at this time, including the duration and severity of the COVID-19 outbreak, further directives of federal, state and local officials, and national and regional economic conditions resulting from these matters.
9 ESTIMATED SOURCES AND USES OF FUNDS
The proceeds received from the sale of the Bonds are expected to be applied as follows: Sources Par Amount [Net] Original Issue Premium Available Funds under the Resolution Total Sources of Funds
Uses Costs of Turnpike Projects Deposit to Debt Service Reserve Fund Cost of Issuance† Underwriters’ Discount Total Uses of Funds
† Includes legal, printing, trustee, rating agency fees and other miscellaneous expenses.
THE BONDS
The Bonds will be dated, and will bear interest from, the date of delivery of the Bonds, at the rates per annum, payable semiannually on January 1 and July 1 of each year, commencing on July 1, 2021, and will mature on July 1 in the years and principal amounts, all as set forth on the inside cover page of this Official Statement.
The Bonds are issuable only as fully registered bonds, without coupons in the denomination of $5,000 or any integral multiple thereof. Payments of the principal, interest and premium, if any, will be made to purchasers by DTC through its Direct Participants. See Appendix F — The Depository Trust Company.
Redemption Provisions
Optional Redemption
The Bonds maturing on or before July 1, 20__ are not subject to redemption prior to maturity. The Bonds stated to mature after July 1, 20__ are subject to redemption prior to maturity at the Authority’s option on or after July 1, 20__ either as a whole or in part on any date from such maturities as the Authority may select, from any moneys made available for such purpose at a redemption price equal to the principal amount of such Bonds, plus accrued interest to the Redemption Date.
Mandatory Redemption
The Bonds maturing on July 1, 2045* and July 1, 2050* are subject to mandatory redemption prior to maturity from sinking fund installments on July 1 of the years and in the principal amounts show below at a redemption price equal to the principal amount of such Bonds, plus accrued interest to the Redemption Date.
* Preliminary, subject to change.
10 Bonds maturing July 1, 2045* July 1* Amount* July 1* Amount* 2041 $ 5,660,000 2044 $6,555,000 2042 5,945,000 2045 6,885,000 2043 6,245,000
Bonds maturing July 1, 2050* July 1* Amount* July 1* Amount* 2046 $ 7,225,000 2049 $8,365,000 2047 7,590,000 2050 8,785,000 2048 7,965,000 ______*Preliminary, subject to change.
Notice of Redemption
During the period that DTC or DTC’s partnership nominee is the registered owner of the Bonds, the Trustee shall not be responsible for mailing notices of redemption to the Beneficial Owners of the Bonds. See Appendix F — The Depository Trust Company. Notice of redemption will be provided to Holders not less than thirty (30) nor more than forty-five (45) days before any redemption date in accordance with the Resolution. See Appendix B — Summary of Certain Provisions of the Resolution – Notice of Redemption.
Selection of Bonds for Redemption
If fewer than all of the outstanding Bonds of any maturity and similar tenor are to be called for redemption, the Bonds of that maturity (or portions thereof) and tenor to be redeemed will be selected by the Trustee by lot or in any customary manner as determined by the Trustee, provided that for so long as the book-entry-only system remains in effect for the Bonds, the particular Bonds or portions thereof to be redeemed within a maturity shall be selected by lot by DTC, in such manner as DTC may determine.
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11 DEBT SERVICE REQUIREMENTS
The following table sets forth debt service payments to be made in each fiscal year on Outstanding Turnpike Revenue Bonds upon the issuance of the Bonds.
Outstanding Year Ending Turnpike Series 2020 Bonds December 31 Revenue Bonds(1) Principal Interest Total Total Debt Service 2021 $36,077,640 2022 36,331,890 2023 36,339,390 2024 39,798,890 2025 39,947,915 2026 39,953,715 2027 39,946,590 2028 39,943,565 2029 39,945,195 2030 39,790,780 2031 24,819,325 2032 24,816,813 2033 24,811,688 2034 21,038,000 2035 21,038,750 2036 21,031,000 2037 21,033,500 2038 17,409,150 2039 15,023,150 2040 15,021,150 2041 15,023,700 2042 15,024,700 2043 10,523,250 2044 10,526,000 2045 10,523,000 2046 10,523,500 2047 10,526,250 2048 - 2049 - 2050 - Total(2) $676,788,496 (1) See “THE AUTHORITY – Debt Issuances” herein for a list of Outstanding Bonds as of October 1, 2020. (2) Any differences in sums due to rounding.
12 SECURITY FOR TURNPIKE REVENUE BONDS
Pledge of Revenues and Funds
The principal of, redemption premium, if any, and interest on the Turnpike Revenue Bonds, including the Bonds, are payable solely from and are equally and ratably secured by a pledge of (i) all Revenues (hereinafter defined), (ii) all moneys and securities on deposit from time to time in all Funds, Accounts and Subaccounts established by the Resolution (except the Rebate Fund, the Subordinated Debt Service Fund and the Subordinated Debt Service Reserve Fund) together with the investment income therefrom except to the extent such income is required to be deposited in the Rebate Fund pursuant to a Supplemental Resolution, and (iii) all other moneys (except Subordinated Bond proceeds) and securities to be received, held or set aside by the Authority or by any Fiduciary pursuant to the Resolution (including the proceeds of the Bonds) on the terms and in the manner provided in the Resolution. The foregoing pledge is subject to certain terms and conditions of the Resolution including the Trustee’s right to reasonable compensation for services rendered. See Appendix B — Summary of Certain Provisions of the Resolution.
Revenues means all moneys, funds and other income received by the Authority from the operation of the Turnpike, including, without limitation: (a) all concessions, charges, fees, fares, receipts, rents, tolls, proceeds of any use and occupancy insurance relating to the Turnpike and of any other insurance which insures against loss of Revenues and other income received in connection with the use of the Turnpike and other services made available in connection with the Turnpike, (b) the moneys, funds and investment income received from any investment of the Revenues described in (a), and (c) all investment income with respect to the Accounts and Funds established under the Resolution other than the Capital Fund; provided, however, that Revenues shall not include any moneys, funds or investment income in the Rebate Fund. Revenues shall not include any Non-Turnpike Revenues unless specifically pledged in a Supplemental Resolution. No Non-Turnpike Revenues have been pledged as of the date of this Official Statement.
All Turnpike Revenue Bonds issued and outstanding under the Resolution will be secured, equally and ratably without preference of any Turnpike Revenue Bond over any other Turnpike Revenue Bond, by the pledge created by the Resolution and the covenants of the Authority made in the Resolution. The Authority may issue Additional Bonds under the Resolution on parity with the Turnpike Revenue Bonds. See “Additional Indebtedness” below.
THE TURNPIKE REVENUE BONDS ARE OBLIGATIONS OF THE AUTHORITY PAYABLE FROM THE REVENUES OF THE TURNPIKE PLEDGED THEREFOR. THE TURNPIKE REVENUE BONDS DO NOT CONSTITUTE A PLEDGE OF THE FAITH AND CREDIT OF THE STATE OF MAINE OR A DEBT OF THE STATE OF MAINE OR OF ANY AGENCY OR POLITICAL SUBDIVISION THEREOF. THE AUTHORITY HAS NO TAXING POWER.
The enforceability of the Turnpike Revenue Bonds and the Resolution may be limited by the exercise of judicial discretion in accordance with general equitable principles and by bankruptcy, reorganization, insolvency, moratorium and other laws affecting creditors’ rights generally heretofore or hereafter enacted to the extent constitutionally enforceable.
The rights and remedies of Bondholders under the Resolution and other related matters are summarized under Appendix B — Summary of Certain Provisions of the Resolution.
13 Toll Rate Covenant
The Authority has covenanted that it will revise the present schedule of tolls for traffic over the Turnpike as may be necessary or proper, in order that the Revenues will at all times be sufficient: (i) to provide funds for the payment of Operating Expenses; and (ii) to provide Net Revenues that are equal to or greater than the Net Revenue Requirement in any Fiscal Year; provided, however, that nothing shall be deemed to limit the Authority’s right in its discretion to revise such schedule and such tolls in a reasonable manner in order to provide additional Revenues for making deposits to the General Reserve Fund.
Net Revenue Requirement means, for any stated Fiscal Year, the greater of: (a) one hundred twenty percent (120%) of Debt Service; and (b) one hundred percent (100%) of the sum of (i) Debt Service, (ii) the Required Reserve Maintenance Deposit, (iii) the Required Debt Service Reserve Deposit and (iv) any other Required Deposit set forth in any Supplemental Resolution.
In addition, the Authority has covenanted that tolls will be classified in a reasonable way to cover all traffic, so that the tolls may be uniform in application to all traffic falling within any reasonable class regardless of the status or character of any Person included in the traffic, that no reduced rate of toll will be allowed within any such class except through the use of commuter passes or other privileges based upon frequency or volume, and that unless an Authorized Official furnishes the Trustee with a Certificate, based on a Consultant’s Report, stating that it is reasonably expected that the Net Revenue Requirement will be satisfied in the current Fiscal Year and in each of the five Fiscal Years following the rate reduction, reclassification or modification of the toll collection system, (a) no reduction, reclassification of toll rates or modification of the toll collection system will be permitted and (b) no free vehicular passage will be permitted over the Turnpike, or any portion thereof, except to members, officers and employees of the Authority and of MaineDOT and their respective agents, certain independent contractors of the Authority and employees thereof and the state police of the State, each while in the discharge of their official duties, and to emergency vehicles authorized by the Authority while performing emergency services on the Turnpike; provided, however, that the Turnpike may be used at any and all times by the armed forces of the United States, the State and any of their allies for defense purposes or preparations therefor free of all tolls and charges, but any structural damage to the Turnpike created by such free use, ordinary deterioration or depreciation excepted, shall be compensated for at cost of repair or replacement.
If the Net Revenues for any Fiscal Year are less than the Net Revenue Requirement or the Required Reserve Maintenance Deposit in any Fiscal Year shall be less than the amounts recommended by the Consulting Engineers for such Fiscal Year, the Authority has covenanted that it will, before the 15th day of February of the following Fiscal Year, request the Consulting Engineers and the Traffic Consultant to prepare a Consultant’s Report for the purpose of making recommendations as to a revised schedule of tolls in order that the Net Revenues will be reasonably expected to be at least equal to the Net Revenue Requirement for the next following Fiscal Year, and copies of such request and of the recommendations of the Consulting Engineers shall be filed with the Trustee.
The Authority has covenanted that it will adopt and institute the revised schedule of tolls referred to in the preceding paragraph within one hundred eighty (180) days after receipt of the Consultant’s Report referred to therein. The Authority has further covenanted that immediately upon the adoption of any revised schedule of tolls, certified copies thereof will be filed with the Trustee.
If the Authority complies with all recommendations contained in such Consultant’s Report in respect of tolls, it will not constitute an Event of Default under the provisions of the Resolution if the total amounts credited to the Debt Service Fund or the Reserve Maintenance Fund in any Fiscal Year shall be less than the Required Debt Service Deposits or the Required Reserve Maintenance Deposits, respectively, for such Fiscal Year, or if the total amount credited to the Debt Service Reserve Fund at the close of any Fiscal Year shall result in the need to make a Required Debt Service Reserve Deposit in order to eliminate
14 a deficiency therein. In the event of any such deficiency or the need for any such Required Debt Service Reserve Deposit, the Trustee or the Holders of not less than fifty per cent (50%) in principal amount of the Turnpike Revenue Bonds Outstanding, or if no Turnpike Revenue Bonds are Outstanding, Subordinated Bonds Outstanding, may, however, and the Trustee shall, upon the request of the Holders of not less than twenty-five per cent (25%) in principal amount of the Turnpike Revenue Bonds then Outstanding, or if no Turnpike Revenue Bonds are Outstanding, Subordinated Bonds Outstanding, and upon being indemnified to its satisfaction, institute and prosecute in a court of competent jurisdiction an appropriate action to compel the Authority to revise the schedule of tolls. The Authority has covenanted that it will adopt and charge tolls in compliance with any final order, decree or judgment entered in any such proceeding, or any modification thereof.
Operation and Maintenance of the Turnpike
Pursuant to the Resolution, the Authority has covenanted that it shall at all times operate or cause to be operated the Turnpike properly and in a sound and economical manner and shall maintain, preserve, reconstruct and keep the same or cause the same to be so maintained, preserved, reconstructed and kept, with the appurtenances and every part and parcel thereof, in good repair, working order and condition, and shall from time to time make, or cause to be made, all necessary and proper repairs, replacements and renewals so that at all times the operation of the Turnpike may be properly and advantageously conducted. See Appendix B — Summary of Certain Provisions of the Resolution.
Debt Service Reserve Requirement
The Debt Service Reserve Requirement is, for any stated Fiscal Year, with respect to all Outstanding Tax-Exempt Obligations under the Resolution, an amount equal to one-half the maximum annual Debt Service on all Outstanding Turnpike Revenue Bonds for the current Fiscal Year and any future Fiscal Year during which Turnpike Revenue Bonds are Outstanding. This applies as long as the Net Revenues for each of the two consecutive immediately preceding Fiscal Years were at least equal to two hundred percent (200%) of the Debt Service on all Outstanding Turnpike Revenue Bonds in each of such Fiscal Years; otherwise the Debt Service Reserve Fund Requirement is the maximum annual Debt Service on all Outstanding Turnpike Revenue Bonds for the current and any future Fiscal Year such Turnpike Revenue Bonds are Outstanding. In no event, however, shall the Debt Service Reserve Requirement be greater than the Maximum Debt Service Reserve Requirement.
Since the Authority’s Net Revenues for Fiscal Years 2018 and 2019 exceeded two hundred percent (200%) of the Debt Service on all Outstanding Turnpike Revenue Bonds in such years, the Debt Service Reserve Requirement is one-half of the maximum annual Debt Service on all Outstanding Turnpike Revenue Bonds. See “DEBT SERVICE REQUIREMENTS.” The Debt Service Reserve Requirement, following the issuance of the Bonds, will be satisfied by cash currently on deposit in the Debt Service Reserve Fund and a deposit from the proceeds of the Bonds.
In the event that the Debt Service Reserve Requirement has been increased as a result of (A) the total Net Revenues being less than two hundred percent (200%) of the total Debt Service on Outstanding Turnpike Revenue Bonds in either of the two immediately preceding Fiscal Years, the Authority may establish one or more additional separate Accounts within the Debt Service Reserve Fund for the increased amount which may be funded in level monthly payments over a 12 month period beginning with the month of January following such two immediately preceding Fiscal Years (except that any such monthly payments from prior months which have not been funded shall be funded immediately) or (B) the issuance of any Additional Turnpike Revenue Bonds, the Authority may establish one or more additional separate Accounts within the Debt Service Reserve Fund for the increased amount which may be funded in level monthly payments over a 36 month period, beginning with the month next following the issuance of such Additional Turnpike Revenue Bonds.
15 The Resolution requires the Authority to fund the Debt Service Reserve Requirement with cash and investments or with a surety policy or letter of credit meeting the Resolution requirements. See Appendix B — Summary of Certain Provision of the Resolution.
Additional Indebtedness
Additional Turnpike Revenue Bonds
Provided that there are no deficiencies in any Fund or Account, and there is no Event of Default which has occurred and is continuing and the issuance of such Turnpike Revenue Bonds will not exceed any statutory limitation on the issuance of Turnpike Revenue Bonds by the Authority, the Authority may from time to time issue and deliver one or more Series of Additional Turnpike Revenue Bonds for the purpose of (i) refunding any one or more Series, or one or more maturities within any Series, of Outstanding Secured Bonds or Unsecured Bonds (to the extent that Secured Bonds could be issued for the purposes for which such Unsecured Bonds were issued if such Unsecured Bonds had been issued at the time of such refunding) or (ii) paying for all or a portion of the Costs of a Turnpike Project.
Additional Turnpike Revenue Bonds shall be on a parity and shall be secured equally and ratably with the Turnpike Revenue Bonds and any Additional Turnpike Revenue Bonds theretofore or thereafter issued and Outstanding, as to the Bond Pledged Collateral. The incurrence of any Additional Turnpike Revenue Bonds is subject to certain conditions, including satisfaction of tests with respect to Net Revenues. For additional information on the issuance of Additional Turnpike Revenue Bonds see Appendix B — Summary of Certain Provisions of the Resolution – Issuance and Delivery of Additional Bonds.
The supplemental resolution entered into in connection with a Series of Additional Turnpike Revenue Bonds shall establish and provide for those documents and instruments which must be received by the Trustee, and any other conditions which must be fulfilled, before the Trustee may authenticate and deliver such Additional Turnpike Revenue Bonds.
Subordinated Bonds
The Authority may from time to time issue and deliver one or more Series of Subordinated Bonds for the purpose of (i) refunding any one or more Series, or one or more maturities within any Series, of Outstanding Secured Bonds or Unsecured Bonds (to the extent that Secured Bonds could be issued for the purposes for which such Unsecured Bonds were issued if such Unsecured Bonds had been issued at the time of such refunding) or (ii) paying for all or a portion of Costs of Turnpike Projects.
Subordinated Bonds shall not be on a parity with the Turnpike Revenue Bonds or any Additional Turnpike Revenue Bonds theretofore or thereafter issued and Outstanding, as to the Bond Pledged Collateral, but shall be payable solely from and secured by moneys, funds and investment income in the Improvement Account, the Subordinated Debt Service Fund and the Subordinated Debt Service Reserve Fund; provided, however, that the Resolution shall not prevent payment of Debt Service Charges on any Series of Subordinated Bonds from being otherwise secured and/or protected with a Credit Facility or from sources or property or instruments not applicable to any one or more Series of Turnpike Revenue Bonds.
Before any Subordinated Bonds may be issued by the Authority and authenticated by the Trustee for delivery, the Authority shall furnish the Trustee with a Certificate of an Authorized Official, based upon Certified Financial Statements, stating that Net Revenues were at least equal to the Net Revenue Requirement for the Fiscal Year immediately preceding the Fiscal Year in which the Subordinated Bonds will be issued.
16 The Supplemental Resolution entered into in connection with a Series of Subordinated Bonds shall establish and provide for those documents and instruments which must be received by the Trustee, and any other conditions which must be fulfilled, before the Trustee may authenticate and deliver such Subordinated Bonds.
Notes
Whenever the Authority shall authorize the issuance of a Series of Secured Bonds, the Authority may, by resolution, authorize the issuance of notes (and renewals thereof) in anticipation of the issuance of such Secured Bonds. The principal of and interest on such notes and renewals thereof shall be payable from the proceeds of such notes or from the proceeds of the sale of the Series of Secured Bonds in anticipation of which such notes are issued. The proceeds of such Secured Bonds may be pledged for the payment of the principal of and interest on such notes and any such pledge shall have a priority over any other pledge of such proceeds created by the Resolution. Any such notes may be secured by the lien of the Pledge in which event such interest shall be payable from the Debt Service Fund. Any such notes may otherwise be secured by the lien of the Subordinated Pledge in which event such interest shall be payable from the Subordinated Debt Service Fund.
Amendments
The Supplemental Resolutions amend the General Resolution definition of “Defeasance Obligations” which the Holders of the Bonds are deemed to have consented to through the purchase of the Bonds. This amendment will take effect upon receipt of the requisite Bondholder consents under the Resolution. See Appendix A — Certain Definitions for the details of the amendment and Appendix B — Summary of Certain Provisions of the Resolution – Supplemental Resolutions, Amendments and Modifications for a description of the required consents.
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17 SUMMARY OF HISTORICAL OPERATIONS
Historical Traffic Trends and Toll Revenue
The following table summarizes traffic and toll revenue collections for Fiscal Years 2015 through 2019.
Historical Traffic and Toll Revenue 2015-2019 (in thousands) 2015 2016 2017 2018 2019 Vehicles Passenger 71,837 75,702 77,987 80,176 81,782 Commercial 7,386 7,628 7,810 7,982 8,179 Non-Revenue 292 286 313 308 320 (1) Total Vehicles 79,515 83,616 86,110 88,466 90,281
Increase (Decrease) 5.22% 5.16% 2.98% 2.74% 2.05%
Toll Revenue Passenger $96,885 $101,766 $103,761 $105,886 $107,412 Commercial 42,858 44,561 45,551 46,317 46,676 Adjustments, Volume Discounts(2) (11,543) (12,505) (13,246) (13,771) (14,124) Net Toll Revenue(1) $128,200 $133,822 $136,066 $138,432 $139,964
Increase (Decrease) 3.72% 4.39% 1.68% 1.74% 1.11% ______Source: The Authority. (1) Totals may not add due to rounding. (2) Includes cash over/short accounts of individual collectors in the aggregate and volume discounts allowed for charge account customers.
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18 The following schedule summarizes monthly traffic volume and net toll revenue for Fiscal Years 2017 through 2019 and for the nine months ended September 30, 2020.
Monthly Traffic and Net Revenues 2017-2020
All Vehicles(1) Net Toll Revenue(2) 2017 2018 2019 2020(3) 2017 2018 2019 2020(3) January 5,873,501 5,873,548 6,086,063 6,371,702 $9,286,632 $9,113,912 $9,269,649 $9,578,162 February 5,167,661 5,657,485 5,770,754 6,045,846 8,321,306 8,813,216 8,862,906 9,238,620 March 6,258,492 6,331,899 6,719,406 5,203,992 9,715,419 9,769,074 10,193,938 8,739,363 April 6,386,894 6,648,203 6,860,480 3,173,403 10,129,573 10,465,710 10,680,467 5,996,602 May 7,417,601 7,728,553 7,880,409 4,503,022 11,783,133 12,144,035 12,258,784 7,892,275 June 7,964,631 8,175,839 8,223,788 5,834,747 12,663,846 12,858,802 12,880,232 9,759,795 July 9,055,505 9,294,716 9,489,904 7,202,500 14,496,103 14,687,246 14,910,778 11,786,342 August 9,411,930 9,711,722 9,813,228 7,686,561 14,928,364 15,369,938 15,478,920 12,509,646 September 7,853,767 7,919,590 8,031,907 6,927,957 12,386,643 12,468,951 12,474,069 11,276,290 October 7,607,062 7,806,793 8,052,515 11,894,351 12,133,382 12,414,397 November 6,774,215 6,622,238 6,806,737 10,618,388 10,336,093 10,483,677 December 6,338,413 6,694,959 6,545,639 9,841,961 10,272,074 10,056,154 Totals(2) 86,109,672 88,465,545 90,280,830 $136,065,720 $138,432,432 $139,963,970 ______Source: The Authority. (1) Includes commuter vehicles and all other non-revenue vehicles. (2) Any differences in sums due to rounding. (3) Unaudited partial year, through September 2020.
Historical Operating Results and Deposits
Since November 2012, when the last toll rate adjustment went into effect, the Authority has averaged annual growth of 3.27% in traffic and 4.85% in toll revenue. A long-term service plaza concession lease with HMS Host was entered into in 2006 and currently terminates in 2037. This lease provides, among other benefits to the Turnpike, an annual minimum rent guarantee of $3.1 million (paid in equal monthly installments) or 21% of sales, whichever is greater. As a result of the COVID-19 pandemic, HMS Host’s business has had a significant short-term decline on the Maine Turnpike, hindering their ability to make the required minimum rent payments since April. HMS Host and the Authority have amended the lease to provide a temporary waiver of the fixed rent for 2020 and accept the percentage of sales. The 2020 percentage rent, less what has already been remitted this year, will be paid in twelve equal installments in 2021. The Authority also entered into a long-term lease with the C.N. Brown Co. to operate five service station concessions along the Turnpike, which provides the Authority with a fixed commission per gallon of gasoline delivered and a percentage of other sales.
Employee wages and related benefits, patrol services from the Maine State Police, and insurance premiums are the primary contributors to increases in total operating expenses of the Authority.
The Authority has increased Reserve Maintenance Fund Deposits (as defined in the Resolution) to replace and rehabilitate bridges, interchanges, highway and maintenance facilities, many of which north of Portland were placed in service 62 years ago.
19 The following table presents historical operating results of the Authority for Fiscal Years 2015 through 2019, as derived from the audited financial statements of the Authority.
Historical Operating Results and Deposits 2015-2019 (in thousands)
2015 2016 2017 2018 2019 Revenue Net Tolls $128,200 $133,822 $136,066 $138,432 $139,964 Concession Rental 4,522 4,548 4,997 4,888 4,753 Investment Income(1) 97 505 1,042 2,821 4,736 Miscellaneous 1,258 1,504 1,947 1,925 2,035 Total Revenues $134,077 $140,379 $144,052 $148,066 $151,488 Total Operating Expenses $36,395 $38,087 $40,676 $41,404 $43,152 Net Operating Revenues $97,682 $102,292 $103,376 $106,662 $108,336 Debt Service(2) $32,047 $33,384 $33,644 $36,466 $35,169 Reserve Maintenance $37,000 $36,500 $37,000 $38,000 $39,000 Fund Deposit $3,600 $3,701 $3,698 $3,702 $2,443 MaineDOT Provision Account Deposit(3) Other General Reserve $25,035 $28,707 $29,034 $28,494 $31,724 Fund Deposits (Transfers) Debt Service Coverage(4) 3.05x 3.06x 3.07x 2.92x 3.08x ______Source: The Authority. (1) Capital Fund and Rebate Fund earnings, consistent with the Resolution, are not included in Investment Income. (2) Represents Debt Service deposits on the outstanding Turnpike Revenue Bonds only. (3) The deposits have been transferred to the Trustee to pay Debt Service on the Special Obligation Bonds. (4) Net Operating Revenues divided by Debt Service on the Turnpike Revenue Bonds.
For certain additional information regarding Fiscal Year 2020 results to date see “THE AUTHORITY – Response to the COVID-19 Pandemic” and Appendix D —Toll Revenue Study.
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20 SUMMARY OF PROJECTED OPERATIONS
Summary of Traffic Consultant’s Report
CDM Smith Inc. (“CDM Smith”), Traffic Consultant, was retained by the Authority to estimate toll revenues in connection with the issuance of the Bonds. The Maine Turnpike 2020 Toll Revenue Study dated October 26, 2020 provided to the Authority in connection with the issuance of the Bonds is referred to herein as the “Toll Revenue Study.”
The Toll Revenue Study concludes as follows, with projections based on actual toll transactions through August 2020:
Annual volume discounts as a share of gross revenue are forecasted based on historical trends (2013-2019) and an estimated logarithmic relationship. An increasing trend in volume discounts has been observed since the introduction of the volume-based discount program in October 2012.
Observed transactions indicate that the peak impact of COVID-19 on the Maine Turnpike was reached in April 2020 with systemwide transactions down by about 54 percent compared to 2019 levels. Since the peak in April, the level of impact on traffic has steadily declined to about -22 percent in August and -13 percent in September as compared to those same months in 2019. Revenue performed better than transactions, down 44 percent in April 2020 versus April 2019 and declining to about a -19 percent impact in August and a -10 percent impact in September as compared to 2019 levels. The smaller impact on revenue is a combination of trucks performing better than passenger vehicles (as they pay a higher toll than cars) and reduced rebates for passenger vehicles, which are tied to trip frequency, and therefore would have reduced considerably during the pandemic. Both factors result in a higher overall effective average toll for the system during 2020 as compared to 2019.
Truck impacts as compared to 2019 levels since the pandemic (other than the severe impact in April 2020) have in general stayed relatively flat at approximately -9 to -12 percent with the latest data showing a -6 percent impact for August 2020 versus 2019. The increase in e-commerce and stay at home activities has been, in general, a strong positive for many of the “legacy” type toll facilities across the country and specifically, the Maine Turnpike has followed this similar pattern with truck revenue providing a backstop when passenger car travel was down three, four, or five times the impact on trucks. Passenger vehicle impacts peaked at approximately -60 percent in April and have steadily decreased to -30 percent through July, with August showing a strong rebound to about -23 percent as the reduction of travel restrictions and increased level of traveler comfort has occurred.
Similar to other tourist and coastal toll roads CDM Smith has been tracking through this pandemic, the Turnpike has experienced a very strong rebound during the summer and into September as Maine “reopened”, regional quarantine requirements were lifted, and considering Maine provides a variety of safe activities that people can enjoy while the weather was favorable. While it is anticipated that October will continue the recent rebound, more conservative impacts for November and December 2020 have been assumed, as well as cautious impacts through the first quarter of 2021. It is expected that the negative impacts on traffic and revenue could slightly increase again in November and December as tourism traffic subsides and the Turnpike relies more on the typical background traffic dependent on national and regional economics and commuting. CDM Smith has assumed that impacts will remain fairly stable at these levels into the spring of 2021, before a more robust recovery begins in the spring of 2021, noting there are still some risks and negative impacts that will persist for some time, some of which include:
• The potential for a second wave of the virus this fall/winter into 2021.
21 • Continued high levels of unemployment and permanent job losses resulting in elevated levels of unemployment that will persist for some time.
• Work from home has increased significantly and will likely remain higher than prior to the COVID-19 pandemic.
• Tempered overall holiday shopping and traffic due to economic impacts and uncertainty, while on-line shopping continues to gain market share.
• No clear catalyst for further additional rebound in traffic during the winter months and during the first quarter of 2021.
• The timeframe for mass distribution of advanced therapeutics and/or possible vaccine production to combat the virus.
By the end of 2021, transactions and net toll revenue are estimated by CDM Smith to be about 5 percent and 3 percent below 2019 levels, respectively. By 2022, estimated toll transactions and revenue are expected to be approximately in line with 2019 levels, followed by slightly higher than average growth in traffic and revenue in 2023 and 2024 as the economy recovers and travel behavior returns to more typical patterns before returning to an average growth pattern correlated to long term regional GDP growth.
Average annual growth in transactions and net toll revenue between 2024 and 2050 is estimated to be 1.7 percent and 1.5 percent, respectively.
The forecast in the Toll Revenue Study are based upon the following assumptions:
• Improvements on the Turnpike system will be completed in accordance with the existing timelines provided in the Authority’s Ten-Year Planning Report (2014-2023) and Four-Year Capital Improvement Plan (2021-2024);
• Roadway widening, plaza reconstruction or movement, and other construction impacts will be minimized to the fullest extent, with no peak period lane closures;
• Any changes in toll collection methodology, including introduction of all-electronic tolling (AET) or open-road tolling (ORT) will be net revenue neutral or positive;
• No toll rate increases are assumed as part of the forecast;
• Toll rates and estimates of toll revenue included in the Toll Revenue Study are calculated in future dollars;
• Economic growth in the study corridor will generally follow the underlying socioeconomic projections prepared by CDM Smith and described in the Toll Revenue Study;
• No other limited-access facilities, tolled or toll-free, will be constructed in the Turnpike corridor;
• The Turnpike will continue to be well-operated and maintained to encourage maximum usage;
• No double dip or new major recession or significant economic restructuring will occur which would substantially reduce traffic in the region;
22 • No natural disasters will occur that could significantly alter travel patterns throughout the area;
• Motor fuel will remain in adequate supply and price increases will be generally in proportion to the overall rate of inflation;
• No local, regional or national emergency will arise which would abnormally restrict the use of motor vehicles; and
• No future pandemic will occur which would substantially reduce traffic in the region.
Any significant departure from the above basic assumptions could materially affect estimated toll revenue.
The Toll Revenue Study further sets forth the factors and uncertainties in making any forecast or projections, noting that “CDM Smith does not specifically guarantee or warrant any estimate or projections contained within this report.” See Page 4-7 of Appendix D —Toll Revenue Study for the full disclaimer.
Estimates of annual toll revenue for the Turnpike were prepared for Fiscal Years 2020 through 2024. See Table 4-1 in Appendix D — Toll Revenue Study attached hereto.
The Toll Revenue Study is attached as Appendix D and should be read in its entirety.
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23 Projected Revenues, Expenses and Debt Service Coverage
The following table presents projected revenues, expenses and debt service coverage ratios for the Authority for Fiscal Years 2020 through 2024. These projections are only estimates and there can be no assurance that the future revenues, expenses, and debt service coverage ratios will not be lower or higher than those shown. Projected Revenues, Expenses and Debt Service Coverage (in thousands) 2020 2021 2022 2023 2024 Revenue Net Tolls(1) $115,552 $135,945 $140,229 $145,692 $149,641 Concession Rental(2) 2,880 4,376 4,442 4,508 4,576 Investment Income 1,056 431 883 2,155 2,738 Miscellaneous(3) 2,014 2,075 2,106 2,138 2,170 Total Revenues $121,502 $142,827 $147,659 $154,493 $159,125 Total Operating Expenses(3) $41,959 $42,648 $44,253 $45,918 $47,646 Net Operating Revenues $79,543 $100,179 $103,407 $108,575 $111,479 Debt Service(4) $35,500 $40,104 $42,832 $42,839 $46,298 Reserve Maintenance Fund Deposit(5) $40,000 $40,000 $40,000 $40,000 $40,000 MaineDOT/ Subordinated Debt Fund Deposits $2,442 $2,444 $2,446 $2,442 $2,444 Other General Reserve Fund Deposits (Transfers)(6) $1,601 $17,631 $18,129 $23,294 $22,737 Projected Debt Service (7) Coverage 2.24 2.50 2.41 2.53 2.41 ______(1) Net Tolls from CDM Smith forecast. See Appendix D — Toll Revenue Study. The projections assume no future toll rate or toll discount adjustments. (2) Projected by the Authority based on unaudited 2020 year to date results, escalated annually based on projected traffic growth. (3) Projected by the Authority and reviewed by the Consulting Engineers. Excludes expected savings from the permanent elimination of certain toll collector positions as described under “THE AUTHORITY – Response to the COVID-19 Pandemic.” (4) Preliminary, subject to change. Represents debt service on Outstanding Turnpike Revenue Bonds including estimated debt service on the Bonds and an additional $50 million of Turnpike Revenue Bonds issued in 2024 at an assumed interest rate of 5.00% per annum. Assumes no refinancing of outstanding debt. (5) Projected amount to be deposited each year for on-going repair and rehabilitation projects, as annually to be reviewed and recommended by the Consulting Engineers. See Appendix C – Report of Consulting Engineers. (6) Available to be used for Turnpike improvements and interchanges, additional transfers to MaineDOT and other lawful corporate purposes. See “THE AUTHORITY – Cooperation with MaineDOT” and “SUMMARY OF HISTORICAL OPERATIONS – Historical Operating Results.” (7) Projected Net Revenues divided by projected Debt Service on Outstanding Turnpike Revenue Bonds. Preliminary, subject to change.
24 THE TURNPIKE
History of the Turnpike
The Turnpike first opened for traffic on December 13, 1947. Originally developed at a cost of $20,462,000, it began as a 45-mile, four lane divided highway running from Kittery to Portland. Movement for an extension to Augusta began in the late 1940s, shortly after the original Turnpike opened. In 1955, spurred by a determination that an extension of the toll road to cities north of Portland would accelerate economic development, the Turnpike opened a 66-mile extension to Augusta, including a four mile spur to U.S. Route 1 in Falmouth. Through the years, the Turnpike has strived to relieve traffic congestion in the State’s southern tier and catalyze development for inland regions.
Description and Service Area
The Turnpike currently extends 109 miles from the Piscataqua River Bridge at the New Hampshire border north to Augusta. The Turnpike is incorporated into the Interstate Highway System as part of Interstate 95 although it receives no financial support from state or federal sources. Major communities served include Kittery, Biddeford, Saco, Portland, Westbrook, Auburn, Lewiston and Augusta.
The Turnpike is a controlled access divided highway with barrier guardrail placed within a 26-foot median that runs for the entire length of the highway. The median consists of an 18-foot wide grass center and two 4-foot paved shoulders. The northern section of the Turnpike through Portland to Augusta consists of two 12-foot travel lanes and an 8-foot outer shoulder on both roadways. The southern section from Kittery to Portland consists of three 12-foot travel lanes and a widened 12-foot outer shoulder on each roadway.
The Turnpike owns and maintains 201 bridges or culverts at least 10 feet in length and many other significant structures. The Turnpike operates 19 toll plazas, five service areas, seven highway maintenance facilities, three mechanic garages, a body shop, a sign shop, and a headquarters building that also houses E-ZPass customer service, a radio room and Troop G of the Maine State Police. The Maine Turnpike directly employs its own staff of customer service representatives, violation enforcement personnel, finance managers, and information technicians including systems analysts and code writers.
Interstate 295 Alternative
Interstate 295 is a state operated freeway that begins at Turnpike Exit 44 in Scarborough and ends by rejoining the Turnpike at Exit 103 in West Gardiner, eight miles south of Augusta. I-295 was opened in 1973 to provide a more easterly route from Portland to West Gardiner with improved service to the coast. It is also a competitive non-tolled alternative for through traffic between Portland and West Gardiner although a toll is charged from the point where the two Interstates are conjoined in West Gardiner for the remaining distance to Augusta.
Although the Turnpike route to Augusta is about four miles longer than I-295, the speed limit on the Turnpike is higher through some of its length and the Turnpike collects tolls on this section with open road tolls that allow vehicles to pay electronically at highway speed. The Turnpike has higher maintenance standards and less traffic congestion than the I-295 alternative and it provides the primary access to major inland communities such as Lewiston and Auburn, Maine’s second and seventh largest cities, respectively.
25 Toll Rates and Collections
The Authority’s toll rates are adequate to pay operating expenses, debt service, reserve maintenance deposits, and the costs of Turnpike improvements and Department Projects in partnership with Maine DOT. In August 2012, the Authority approved a 25% toll rate increase that took effect November 1, 2012.
Currently, vehicles may enter and exit the southern seven-mile section of the Turnpike from the Piscataqua River Bridge to the York Toll Plaza (the “Kittery Section”) without paying a toll. Federal transportation policies prohibit the placement of any toll barrier on the Kittery Section. Free passage on the Turnpike is limited by the Resolution and the Special Obligation Resolution to only the Maine State Police, employees of the Authority, MaineDOT and their respective agents, certain independent contractors of the Authority while in the discharge of their official duties, emergency vehicles authorized by the Authority and members of the armed forces of the United States for defense purposes.
The Turnpike operates as a closed barrier system from the York toll plaza to New Gloucester and as an open barrier system north of New Gloucester. At each of 19 collection sites, tolls may be paid either electronically through E-ZPass or in cash through on-site toll collectors. See Appendix D —Toll Revenue Study – Figure 1-3 for a configuration of the tolls and cash toll rates. Each toll on the Turnpike has dedicated lanes for E-ZPass transactions. The Authority has also implemented new open road tolling (“ORT”) plazas on the mainline at New Gloucester, West Gardiner and Scarborough I-295 and on the Falmouth spur. These permit E-ZPass drivers to pass through the center of the tolling facility at highway speed. ORT plazas are currently under construction at York and Gardiner I-295.
Electronic Tolling Collection
Since February 1, 2005, the Maine Turnpike has been a member of the E-ZPass Interagency Group (IAG), a regional consortium of 33 authorities in 18 states who share a common system for electronic tolling. E-ZPass extends from Maine west to Minnesota and south to Florida. E-ZPass is the largest interoperable toll network in the world with 41 million transponders processing over 3.8 billion transactions per year. All member agencies reciprocate by promptly crediting tolls for one another under their bi-lateral agreements. The system accounts for 70% of all toll revenue collected in the United States.
In 2012, the IAG switched to a new E-ZPass transponder that allowed the Maine Turnpike to drop its transponder price on February 1, 2012, from $25 to $10 and still cover costs. When tolls were increased on November 1, 2012, the Maine Turnpike replaced a cumbersome commuter discount program with automatic volume discounts that made it possible to sell transponders on-line for the first time. As a result, the Authority’s E-ZPass sales have since doubled and online sales now account for more than half of all transponder sales.
The percentage of tolls collected by E-ZPass on the Turnpike rose from 40% of toll revenue in 2006 to 80% in 2019. See Appendix D —Toll Revenue Study. This trend will likely continue but at a slower pace due to the difficulty of selling E-ZPass to out-of-state visitors, to Maine travelers who use the Turnpike infrequently, and to drivers with limited access to banking institutions.
To enforce tolls against violators is a persistent challenge even within the IAG. While home address information for a look-up fee is available from many states and some provinces, enforcement reciprocity is not. In August of 2011, Maine, New Hampshire, and Massachusetts became the first three independent state agencies in the U.S. to enforce collection against each other’s citizens by suspending or holding vehicle registrations. While collections under the program have been modest, it is assumed that many motorists from the tri-state area who once avoided tolls are now paying. A cash survey in 2013 revealed that 23% of traffic in Maine’s cash lanes comes from New Hampshire and Massachusetts. In
26 2012, state law was changed to permit the Turnpike to send notices of liability by ordinary mail rather than by certified mail, thus saving over $50,000 per year within the Turnpike’s violation enforcement system.
Cash Tolling Collection
Each toll plaza on the Turnpike retains traditional cash collection booths. While the significant increase in E-ZPass users has caused the percentage of cash collections to decline from 39.5% in 2011 to 20% in 2019, the amount of cash collected annually has declined by 27% from $40.15 million in 2011 to $29.2 million in 2019. Personnel in the Fare Collections Department are responsible for collecting, sorting, and reporting all toll receipts in preparation for daily pickup by a security service and immediate deposit with the Turnpike’s banking institution.
Personnel, Labor Relations, Retirement Plan and Other Post-Employment Benefits
As of September 2020, the Authority had approximately 345 permanent employees, 22 on-call toll collectors, 15 highway maintenance personnel who work only during the winter, and several temporary agency workers.
Most of the Authority’s employees are represented by the Maine State Employees Association (MSEA) in two bargaining units, one for employees (approximately 259 members) and one for supervisors (approximately 23 members). Those who are not union members include 23 in management, 40 professional and technical personnel, 37 seasonal and on-call workers, and a few intermittent contract workers through temp agencies.
MSEA is affiliated with Service Employees International Union (SEIU) as Local 1989, AFL CIO, CLC (Canadian Labor Council). The current contracts governing each bargaining unit remain in effect through December 31, 2020. The Authority and MSEA have reached an agreement on a new three-year contract that commences January 1, 2021. This agreement reorganizes the existing Employee and Supervisory Units into three new units: Fare Collection, Office, and Maintenance.
All full-time, permanent employees of the Authority are required to participate in Regular Plan A of the Consolidated Plan for Participating Local Districts (the Plan) administered by the Maine Public Employees Retirement System (MainePERS), a multiple-employer defined benefits pension plan that substitutes for participation in Social Security. MainePERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to plan members and beneficiaries. MainePERS issues a comprehensive audited financial report which includes additional information regarding the Plan and is available at www.mainepers.org. A deferred compensation plan under IRC 457(c) is also available. Additional benefits include an employee life insurance plan, a health plan and a dental plan, with coverage available for dependents at a shared cost.
Pension Liability
The Authority contributes to MainePERS, as part of the Participating Local District (PLD) Consolidated Plan, which is a cost sharing multiple employer defined benefit pension plan. In accordance with Maine law, participants are required to contribute 7.35% or 8.10% of their annual compensation, depending on the date they were hired. The Authority is required to contribute at an actuarially determined percentage of employee earned compensation that, when combined with the contributions of other reporting entities, will adequately fund the Plan. The Authority’s contributions were $2,545,495 in Fiscal Year 2019 with a 10.0% contribution rate and $2,391,982 in Fiscal Year 2018 with an 10.0% contribution rate. The contribution rate for Fiscal Year 2020 is 10.1%. The Authority has fully funded its share of the pension fund. As of July 2019, the Plan as a whole was funded at 91% of its actuarial accrued liability. For more
27 information on the Authority’s pension liability, see footnote #8 of the Financial Statements in Appendix E – Financial Statements of the Authority.
Other Post-Employment Benefit (OPEB)
The Authority’s unfunded actuarial accrued liability for OPEB was $57,027,569 as of December 31, 2019. The Authority funds its post-employment benefit liabilities on a pay-as-you go basis. The Authority continues to partially fund the annual required contribution. The Authority’s OPEB expense for Fiscal Year 2019 was $4,405,263, of which the Authority funded $1,756,589 and the OPEB expense for Fiscal Year 2018 was $2,272,217, of which the Authority funded $1,876,608. For more information on the Authority’s OPEB liability, see footnote #10 of the Financial Statements in Appendix E – Financial Statements of the Authority.
Budget Procedures
By October 20 of each year, the Authority adopts a preliminary budget of Operating Expenses for the ensuing Fiscal Year (which begins January 1). The budget includes: (i) the Required Debt Service Deposit for the year in an amount not less than the Debt Service Charges on all Secured Bonds reasonably expected to be outstanding during the Fiscal Year; (ii) the Required Reserve Maintenance Deposit for the Fiscal Year in an amount not less than what is recommended by the Consulting Engineers to be deposited into the Reserve Maintenance Fund, (iii) any anticipated Debt Service Reserve Deposit required by the end of the current Fiscal Year, and (iv) the required deposits to the MaineDOT Provision Account for Special Obligation Bonds. The final budget of Operating Expenses is adopted by December 20 of each year.
See Appendix B – Summary of Certain Provision of the Resolution – Annual Budgets and Certification of Required Deposits.
The Authority’s annual revenue fund budget is subject to review and approval by the Maine Legislature. Generally, the Legislative approval is expected by June in odd-numbered years and by April in even-numbered years. Members of the Authority then approve the budget by December 20.
Investment Policy
All investments of the Authority’s funds are made in accordance with the provisions of the Resolution and the Authority’s Investment Policy adopted in April 2012. The goals of the Investment Policy are to preserve the public/private trust and to provide: (1) preservation of principal; (2) sufficient liquidity to meet the Authority’s projected cash flow demands; and (3) maximization of investment return consistent with the other objectives. The Investment Policy also contains internal controls and guidelines for diversification.
Capital Programs
The Authority’s capital programs are designed to improve traffic flow and add capacity to, and to improve, modernize and make safer, the mainline of the Turnpike, as well as interchanges and support facilities. The Authority maintains and continually reviews and modifies, as necessary, a thirty-year capital investment plan to track the Turnpike’s long-term needs. From this, a more detailed four-year plan is derived to schedule near term infrastructure projects.
The Authority currently estimates its capital program costs for the six-year period from 2020 through 2025 at approximately $529 million to be funded by a combination of Revenues and Additional Bonds. As described under “THE AUTHORITY – Response to the COVID-19 Pandemic,” the Authority
28 has not modified its capital program as a result of the pandemic. The Authority’s priorities in the capital program include the following:
The Modernization and Widening Program
Portland Area Widening and Modernization. The Turnpike is experiencing significant traffic growth with increasing constraints on the mainline around greater Portland from mile 44 northward. The project to widen the Turnpike to six lanes south of mile 44 was completed in 2004 while the highway north of mile 44 remains at four lanes. The present plan is to widen at least the first five miles north of mile 44 by adding a third lane in each direction with full shoulders and safety slopes where practicable. The Turnpike owns the right of way necessary to build the additional lanes.
In April, work commenced on Phase 1 (between miles 44 and 46) of the widening and is expected to be completed by the summer of 2022. Phase 2, between miles 46 and 49, is expected to start in early 2021 and be completed by the fall of 2022. Work to accommodate the third lane on three significant bridges started in the fall of 2018 and is expected to be completed by the end of 2020.
Connector Roads and MaineDOT Initiatives
Gorham Connector Project. At the request of the Legislature, the Authority and Maine DOT completed in 2012 a Phase I study on how to relieve pressure on certain state roads west of Portland that are regarded as the most congested daily commuter routes in the state. One apparent solution is to construct a five-mile toll road to connect the town of Gorham to the mainline of the Turnpike in South Portland. In 2017, the Legislature amended the Turnpike’s Enabling Act to authorize the Authority to evaluate the proposed connector and to build it if the connector is determined to be the appropriate solution after further study and public engagement. The Authority also was authorized to issue bonds up to $150 million to pay for planning, design and construction of the connector.
Present plans to widen the Turnpike around Portland and to rebuild the tolled interchange at Exit 45 will consider the need to accommodate the Gorham Connector Project, but planning for the connector itself is still in preliminary stages. Approximately $30 million of the proceeds of the Bonds are expected to be used to fund a portion of the Gorham Connector Project.
Bridges
The Maine Turnpike owns 201 bridges or culverts at least 10 feet in length and many other significant structures. Bridge structures require constant attention, frequent maintenance, periodic repairs, and eventual replacement. It is the policy of the Maine Turnpike to have each of its bridges independently inspected at least once annually as a guide to scheduling maintenance and repairs.
There are three common categories for bridge repair projects. “Bridge rehabilitation” involves the complete removal and replacement of the reinforced concrete deck often with new parapets and guardrails and reconstruction of joints and drainage systems. During rehabilitation, repairs are made as necessary to the substructure and bridge bearings.
“Bridge reconstruction” requires removal of the entire bridge, including the concrete deck, piers, abutments, and foundations. Bridge reconstruction is proposed in locations where the existing structure is either functionally obsolete for that location or is so deteriorated that it is not cost effective to attempt rehabilitation.
29 Simpler “bridge repair” projects may include removing and filling spalled areas from structural piers and abutments, spot repairs to reinforced decks, and replacement of bridge rail systems but it does not include full replacement of the deck or its structural supports.
The anticipated service life for a reinforced bridge deck under intense use in Maine is 30 to 50 years. Girders and abutments may last up to twice as long unless sooner rendered obsolete by changes in load standards or highway capacity needs.
Most of the bridges south of Portland were initially placed in service when the highway first opened in 1947. The underpass structures were substantially replaced in preparation for the widening of that section from four lanes to six, a process that was completed through mile 44 in 2004.
116 of the Turnpike’s bridges were built for the newer section north of Portland that was placed in service in 1955. Within recent years, most of these northern bridges have come due for rehabilitation or reconstruction. Much of this work has been completed under capital programs funded by a combination of bond proceeds and current revenue. Projects funded between 2013 and 2017 were paid for entirely from revenue. In 2018 and 2019, projects were funded by a combination of bond proceeds (Series 2018) and revenue.
Interchanges
The Authority has been in the process of updating and modernizing its electronic and toll facilities. This includes converting the six barrier plazas to accommodate Open Road Tolling (ORT). To date, four plazas have been converted to ORT and the remaining two, York (Exit 7) and Gardiner I-295 (Exit 103), are under construction and are anticipated to be completed in 2021. All of the side tolls, except for the Maine Mall (Exit 45), have been completed. Work has begun on Exit 45 and construction is expected to be completed by 2022.
Approximately $100 million of the proceeds of the Bonds will be used for interchange improvements, toll plaza replacements and the Portland Area Widening and Modernization.
Technology
Digital Video Audit System: A digital video audit system records real time toll transactions and matches inputs from lane equipment and toll collectors to a video image of each toll transaction. This system has been installed in 15 of the 19 locations where tolls are collected to improve toll auditing. The video audit system captures lane and vehicle information and synchronizes the video to the transaction detail.
Roadway Sensors: The Authority has installed two Roadway Weather Information Systems along the Turnpike mainline at Eagles Nest Bridge in Gray and Saco River Bridge in Saco. The stations measure the surface temperature, moisture type and “grip” of the road. These sensors send out email alerts during off-hours to the communications center and help supervisors make cost effective decisions for winter maintenance measures. Additional RWIS stations are planned.
Variable Message Signs: Variable message signs provide “real-time” roadway information to motorists relating to accidents, weather conditions, congestion, and construction and maintenance activities. The Authority currently maintains a network of 22 variable message signs at different locations. The Authority has also deployed 28 portable changeable message signs throughout the Turnpike for incident management purposes.
30 Toll Facilities
Electronic systems installed in 2005 to support Maine’s E-ZPass toll plazas are still functioning but several component parts are no longer manufactured or available from market sources and certain sensors are expensive to maintain. The Authority has stockpiled spare parts necessary to sustain the system for years to come and has now nearly completed a program to upgrade to the new “Infinity” system made by UTS Transcore. Of the 19 toll collection points on the Turnpike, 16 of them have been converted, and two (Exits 7 and 103) are under construction. Construction on the last plaza (Exit 45) is expected to begin in 2021.
The new system produces tangible improvements for both cash and E-ZPass collections by:
• providing full violation and video audit capability in all lanes, • replacing pressure sensitive treadles and in-lane laser light curtains with sensors that are more reliable, less susceptible to damage and cheaper to repair, • employing video monitors to eliminate auditor contracts, and • reducing the cost of outside maintenance contracts.
These annual savings and enhanced revenue from the new system are offsetting much of the capital cost of its purchase. The new sensory systems function to a degree of reliability approaching 100% - even at highway speeds. At New Gloucester, the Turnpike’s second largest toll plaza, electronic tolls are now collected at 70 mph by employing Open Road Tolling (ORT) which enables motorists with transponders to travel at highway speed under an overhead gantry of antennas that record the toll electronically. Motorists who need to pay cash, move to the right into separated lanes where they stop to pay an attendant.
The Option for All Electronic Tolling
The Turnpike has carefully studied whether to adopt All Electronic Tolling (AET) at two of the plazas (York and West Gardiner/I-295) to avoid some of the capital costs of new civil construction. With AET, cash collection is abandoned, and all traffic passes under antennas and cameras at highway speed. For each motorist without a transponder, the license plate is photographed, and collection is attempted by mail. To make up for lost revenue and the back-office costs of license plate lookups, mailing and processing, it is necessary to impose a surcharge on the toll-by-plate motorists, oftentimes doubling the cash toll. AET is not considered a viable option for the Authority and will not be further pursued.
Consulting Engineers’ Report
The Turnpike is inspected annually by HNTB Corporation (“HNTB” or the “Consulting Engineers”). HNTB was retained by the Authority to perform certain specific functions in connection with the issuance of the Bonds. The specific functions of HNTB included:
• Evaluating the condition of the existing facilities based on the findings in the Operation and Maintenance Annual Report prepared in September 2020 (the “2020 Annual Report”); and • Providing an opinion as to the adequacy of the proposed 2020-2024 Capital Improvement Program (the “Capital Improvement Program”).
HNTB’s findings and conclusions are presented in the Consulting Engineers’ Report attached hereto as Appendix C – Report of Consulting Engineers which should be read in its entirety. The Report (1) provides an opinion of the current condition of the Turnpike; (2) provides an opinion of the
31 reasonableness of the projected Operation and Maintenance Expenditures and projected Reserve Maintenance Fund Expenditures; (3) identifies the projects in the Capital Improvement Program; and (4) provides an opinion regarding the costs and implementation of the Capital Improvement Program.
In the opinion of HNTB, the Turnpike has been and continues to be operated in an efficient and effective manner and has been maintained in generally good repair, working order and condition; the costs projected for the operations and maintenance for Fiscal Years 2020 through 2024 are a reasonable estimate of future costs assuming that the Turnpike is operated under the anticipated procedures and practices, and considering the current age and condition of the facilities. Sound management practices have kept the Authority's budget in balance and an outstanding program of maintenance has kept the highway in generally good repair. However, the traffic demands on an aging highway facility require the projects in the Capital Improvement Program to maintain a safe and efficient highway that meets the State’s transportation needs for the future. Furthermore, in HNTB’s opinion, the projected costs for the Capital Improvement Program are reasonable and the projected schedule is achievable.
The Capital Improvement Program includes items that are essential to improve the safety, structural integrity and efficient operation of the Turnpike. In the opinion of HNTB, the Capital Improvement Program is prudent and it is vital to protect the Authority’s investment.
In the opinion of HNTB the current management and operating procedures of the Authority provide for the efficient operation of the Turnpike facilities in accordance with the Resolution and support the effective implementation of the Capital Improvement Program. HNTB anticipates that current policies and procedures will be maintained and modified, as required, to accommodate the particular requirements imposed by the Resolution.
CERTAIN RISK FACTORS
The following is a discussion of certain risk factors that should be considered in evaluating an investment in the Bonds. The discussion does not purport to be either comprehensive or exhaustive. In order for potential investors to make an informed investment decision, potential investors should be thoroughly familiar with the entire Official Statement. The order in which risks are presented is not intended to reflect either the likelihood that a particular event will occur or the relative significance of such an event. Moreover, there may be other risks or considerations associated with an investment in the Bonds in addition to those set forth in this Official Statement.
Impact of the COVID-19 Pandemic
The full extent to which the coronavirus impacts the Authority’s operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence. The ultimate use of the Maine Turnpike by motorists and the level of toll revenues to be generated through such use are influenced by many factors. The COVID-19 pandemic has had, and is likely to continue to have, an adverse impact on toll revenues, but the degree of the impact is extremely difficult to predict at this time.
For certain information regarding the Authority’s response the pandemic, see “THE AUTHORITY – Response to the COVID-19 Pandemic.”
32 General Factors Affecting Authority Revenues
The actual amount of future toll revenues collected by the Authority depends on a number of factors, including but not limited to the toll rates charged by the Authority and level and composition of the traffic on the Turnpike. The Authority has covenanted that it will revise the present schedule of tolls for traffic over the Turnpike as may be necessary or proper, in order that the Revenues will at all times be sufficient: (i) to provide funds for the payment of Operating Expenses; and (ii) to provide Net Revenues that are equal to or greater than the Net Revenue Requirement in any Fiscal Year. However, the amount and composition of traffic on the Turnpike cannot be predicted with certainty and may underperform Authority expectations due to general economic conditions, diversion of some traffic to alternative non-toll routes to avoid tolls, increased fuel costs, increased mileage standards or other factors. There is insufficient data to assess these risk factors fully. However, the Authority reasonably expects to have sufficient revenues to meet its payment obligations, including payments with respect to the Bonds.
The Authority is dependent on technology to conduct general business operations, including toll collection and customer account services which are dependent on the ability to process, record and monitor a large number of electronic transactions generated by equipment located throughout the Turnpike which record transponder and license plate information on vehicles. If the Authority’s financial, accounting, or other data processing systems fail or have other significant shortcomings, the Authority could be materially adversely affected.
Consulting Engineers’ Report and Traffic Consultant’s Report
The Consulting Engineers’ Report, and the forecasts contained in it, incorporate numerous assumptions and projections as to capital program costs, operating expenses and reserve needs. No assurances can be given that the assumptions contained in such report will occur. Some assumptions used to develop the forecasts may not be realized and unanticipated events and circumstances may occur. Therefore, the actual results achieved during the forecast period may vary, and the variations may be material. See Appendix C – Report of Consulting Engineers.
The Traffic Consultant’s Report, and the toll and traffic forecasts contained in it, incorporate numerous assumptions and projections as to estimated revenues. No assurances can be given that the assumptions contained in such report will occur. Some assumptions used to develop the forecasts may not be realized and unanticipated events and circumstances may occur. Therefore, the actual results achieved during the forecast period may vary, and the variations may be material. See Appendix D —Toll Revenue Study.
Certain Matters Relating to Enforceability of Obligations
The remedies available to the holders of the Bonds upon the occurrence of an Event of Default under the Resolution are, in many respects, dependent upon regulatory and judicial actions that are often subject to discretion or delay. Under existing law and judicial decisions, the remedies specified in the Resolution may not be readily available or may be limited. In addition, enforcement of such remedies (i) may be subject to general principles of equity which may permit the exercise of judicial discretion, (ii) are subject to the exercise in the future by the State and its agencies and political subdivisions of the police power inherent in the sovereignty of the State, (iii) are subject, in part, to the provisions of the United States Bankruptcy Act and other applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors’ rights generally, now or hereafter in effect, and (iv) are subject to the exercise by the United States of the powers delegated to it by the Constitution of the United States of America. The legal opinions to be delivered concurrently with the issuance of the Bonds will be qualified to the extent that the enforceability of certain legal rights related to the Bonds is subject to
33 limitations imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally and by equitable remedies and proceedings generally.
The rights and remedies of owners of Bonds could be limited by the provisions of the Federal Bankruptcy Code, as now or hereafter enacted (the “Bankruptcy Code”) or by other laws or legal or equitable principles which may affect the enforcement of creditors’ rights. Chapter 9 of the Bankruptcy Code permits, under prescribed circumstances, a political subdivision or public agency or instrumentality of a state, such as the Authority, to commence a voluntary bankruptcy proceeding and to file a plan of adjustment in the repayment of its debts, if such entity is generally not paying its debts as they become due. Under the Bankruptcy Code, an involuntary petition cannot be filed against a political subdivision, public agency or instrumentality of a state.
In order to proceed under Chapter 9 of the Bankruptcy Code, state law must authorize the political subdivision, public agency or instrumentality to file a petition under the Bankruptcy Code. The Authority is not currently authorized to file a petition under the Bankruptcy Code.
Forward Looking Statements
This Official Statement, including the appendices, contains forecasts, projections and estimates that are based on current expectations or assumptions. If and when included in this official statement, the words “expects,” “forecasts,” “projects,” “intends,” “anticipates,” “estimates,” “assumes” and analogous expressions are intended to identify forward-looking statements. Any such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those that have been projected. Such risks and uncertainties include, among others, general economic and business conditions, changes in political, social and economic conditions, regulatory initiatives and compliance with governmental regulations, litigation and various other events, conditions and circumstances, many of which are beyond the control of the Authority. These forward-looking statements speak only as of the date of this Official Statement. The Authority does not plan to issue any update or revision to any forward-looking statement contained herein to reflect any change in the Authority’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, subject to its contractual obligations of continuing disclosure as described herein.
Legislative Action
Legislation is introduced from time to time in the Maine Legislature which, if adopted, may affect the Authority or the Turnpike. The Authority cannot predict whether or not any such bills will be enacted into law or how any such legislation may affect the Authority and its ability to meet its payment obligations under the Resolution or the Special Obligation Resolution.
TAX EXEMPTION
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Bond Counsel to the Authority (“Bond Counsel”) is of the opinion that, under existing law, interest on the Bonds will not be included in the gross income of holders of the Bonds for federal income tax purposes. This opinion is expressly conditioned upon continued compliance with certain requirements imposed by the Internal Revenue Code of 1986, as amended (the “Code”), which must be satisfied subsequent to the date of issuance of the Bonds in order to ensure that interest on the Bonds is and continues to be excludable from the gross income of holders of the Bonds. Failure to comply with certain of such requirements could cause interest on the Bonds to be included in the gross income of holders of the Bonds retroactive to the date of issuance of the Bonds. In particular, and without limitation, these requirements include restrictions on the use, expenditure and investment of Bond proceeds and the payment of rebate, or penalties in lieu of rebate, to the United States, subject to
34 certain exceptions. The Authority has provided covenants and certificates as to continued compliance with such requirements.
In the opinion of Bond Counsel, under existing law, interest on the Bonds will not constitute a preference item under Section 57(a)(5) of the Code for purposes of computation of the alternative minimum tax imposed on certain individuals under Section 55 of the Code. Bond Counsel has not opined as to any other matters of federal tax law relating to the Bonds. However, prospective purchasers should be aware that certain collateral consequences may result under federal tax law for certain holders of the Bonds, including but not limited to the requirement that recipients of certain Social Security and railroad retirement benefits take into account receipts or accruals of interest on the Bonds in determining gross income. The nature and extent of these other tax consequences depends on the particular tax status of the holder and the holder’s other items of income or deduction. Holders should consult their own tax advisors with respect to such matters.
Interest paid on tax-exempt obligations such as the Bonds is generally required to be reported by payors to the IRS and to recipients in the same manner as interest on taxable obligations. In addition, such interest may be subject to “backup withholding” if the Bond holder fails to provide the information required on IRS Form W-9, Request for Taxpayer Identification Number and Certification, or the IRS has specifically identified the Bond holder as being subject to backup withholding because of prior underreporting. Neither the information reporting requirement nor the backup withholding requirement affects the excludability of interest on the Bonds from gross income for federal tax purposes.
For federal and Maine income tax purposes, interest includes original issue discount, which with respect to a Bond is equal to the excess, if any, of the stated redemption price at maturity of such Bond over the initial offering price thereof to the public, excluding underwriters and other intermediaries, at which price a substantial amount of all such Bonds with the same maturity was sold. Original issue discount accrues based on a constant yield method over the term of a Bond. Holders should consult their own tax advisers with respect to the computations of original issue discount during the period in which any such Bond is held.
An amount equal to the excess, if any, of the purchase price of a Bond over the principal amount payable at maturity constitutes amortizable bond premium for federal and Maine tax purposes. The required amortization of such premium during the term of a bond will result in reduction of the holder’s tax basis on such Bond. Such amortization also will result in reduction of the amount of the stated interest on the Bond taken into account as interest for tax purposes. Holders of Bonds purchased at a premium should consult their own tax advisers with respect to the determination and treatment of such premium for federal income tax purposes and with respect to the state or local tax consequences of owning such Bonds.
Bond Counsel has not undertaken to advise in the future whether any events after the date of issuance of the Bonds, including legislation, court decisions, or administrative actions, whether at the federal or state level, may affect the tax exempt status of interest on the Bonds or the tax consequences of ownership of the Bonds. No assurance can be given that future legislation, if enacted into law, will not contain provisions which could directly or indirectly reduce or eliminate the benefit of the exclusion of the interest on the Bonds from gross income for federal income tax purposes or any state tax benefit. Tax reform proposals and deficit reduction measures, including but not limited to proposals to reduce the benefit of the interest exclusion from income for certain holders of Bonds, including bonds issued prior to the proposed effective date of the applicable legislation, and other proposals to limit federal tax expenditures, have been and are expected to be under ongoing consideration by the United States Congress. These proposed changes could affect the market value or marketability of the Bonds, and, if enacted into law, could also affect the tax treatment of all or a portion of the interest on the Bonds for some or all holders. Holders should consult their own tax advisors with respect to any of the foregoing tax consequences.
35 In the opinion of Bond Counsel, under existing law, interest on the Bonds is exempt from State of Maine income tax imposed on individuals. Bond Counsel has not opined as to other Maine tax consequences arising with respect to the Bonds. Bond Counsel has not opined as to the taxability of the Bonds, their transfer and the income therefrom, including any profit made on the sale thereof, under the laws of any state other than Maine.
LITIGATION
There is no litigation pending which seeks to restrain or enjoin the issuance or delivery of the Bonds or questions or affects the validity of the Bonds or the proceedings and authority under which they are to be issued. Neither the creation, organization nor existence of the Authority, nor the title of the present members or other officers of the Authority to their respective offices is being contested. There is no litigation pending which in any manner questions the right of the Authority to issue the Bonds in accordance with the provisions of the Enabling Act and the Resolution.
The Authority is not a party to any litigation or other proceeding pending or, to the knowledge of the Authority, threatened in any court, agency or other administrative body (either state or Federal) which, if decided adversely to the Authority, could have a material adverse effect on the Bonds or the Authority.
STATE OF MAINE NOT LIABLE ON THE BONDS
The Bonds shall not be deemed to constitute a pledge of the faith and credit of the State of Maine or debt or liability of the State of Maine or any political subdivision thereof or a pledge of the faith and credit of the State of Maine or any such political subdivision. The Bonds shall be payable solely from the Revenues of the Turnpike pledged by the Authority. Neither the faith and credit nor the taxing power of the State of Maine or any political subdivision thereof is pledged to the payment of the principal of or the interest on the Bonds.
CERTAIN LEGAL MATTERS
The validity of the issuance of the Bonds will be passed upon and is subject to the approving opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Bond Counsel. The form of the approving opinion of Bond Counsel is included as Appendix H. Certain legal matters will be passed upon for the Authority by Bernstein, Shur, Sawyer and Nelson, P.A., Special Counsel to the Authority, and for the Underwriters by Locke Lord LLP.
INDEPENDENT AUDITORS
The financial statements of the Authority as of and for the fiscal years ended December 31, 2019 and 2018 included in Appendix E – Financial Statements of the Authority of this Official Statement, have been audited by Wipfli LLP, independent auditors, as stated in their report appearing therein.
CONSULTING ENGINEERS
Under the Resolution, the Authority engages HNTB Corporation to conduct annual studies of the physical condition and operations of the Turnpike. The results of these studies are stated in their report included as Appendix C – Report of Consulting Engineers of this Official Statement.
36 TRAFFIC CONSULTANT
The Authority engaged CDM Smith Inc. to review and to estimate toll revenue for the Turnpike in connection with the issuance of the Bonds. The results of their review and estimate are stated in their report and supplemental letter included as Appendix D – Toll Revenue Study of this Official Statement.
UNDERWRITING
The underwriters listed on the cover page hereof (the “Underwriters”) have agreed, subject to certain conditions, to purchase the Bonds at a price of $______, an amount which represents the aggregate principal amount of the Bonds, plus [net] original issue premium of $______and less an underwriting discount of $______. The Bonds are being offered for sale to the public at prices shown on the inside cover hereof. The Underwriters may in their discretion change such public offering prices from time to time or offer and sell the Bonds to certain dealers and others at prices lower than the public offering prices.
The following language has been provided by the Underwriters. The Authority take no responsibility as to the accuracy or completeness thereof.
Certain of the Underwriters have entered into distribution agreements with other broker-dealers (that have not been designated by the Issuer as Underwriters) for the distribution of the Bonds at the original issue prices. Such agreements generally provide that the relevant Underwriter will share a portion of its underwriting compensation or selling concession with such broker-dealers.
The obligation of the Underwriters to accept delivery of the Bonds is subject to the terms and conditions set forth in the purchase contract relating to the Bonds, the approval of legal matters by counsel and other conditions. The Underwriters may over-allot or effect transactions which stabilize or maintain the market price of the Bonds at levels above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time.
The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and securities trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services.
In the course of their various business activities, the Underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of the Authority (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with the Authority.
The Underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.
FINANCIAL ADVISOR
Public Resources Advisory Group, Inc. (“PRAG”) is serving as financial advisor to the Authority in connection with the issuance of the Bonds. PRAG is an independent financial advisory firm and is not engaged in the business of underwriting, trading or distributing securities. PRAG is not obligated to
37 undertake, and has not undertaken, either to make an independent verification of or to assume responsibility for, the accuracy, completeness, or fairness of the information contained in this Official Statement and the appendices hereto.
RATINGS
Moody’s Investors Service (“Moody’s”), S&P Global Ratings (“S&P”) and Fitch Ratings (“Fitch”) have assigned the Bonds the ratings “Aa3” (outlook stable), “AA-” (outlook negative) and “AA-” (outlook stable), respectively.
Such ratings reflect only the respective views of the individual rating agencies and an explanation of the significance of such ratings may be obtained from each of the rating agencies furnishing the same.
The Authority furnished to the rating agencies certain information and materials with respect to the Bonds. Generally, rating agencies base their ratings on such information and materials and on investigations, studies and assumptions made by the rating agencies. There is no assurance that such ratings will be maintained for any given period of time or that they may not be lowered, suspended or withdrawn entirely by the rating agencies, or any of them, if in their or its judgment, circumstances warrant. Any such downward change in or suspension of or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. A securities rating is not a recommendation to buy, sell or hold securities.
CONTINUING DISCLOSURE
In order to assist the Underwriters in complying with Rule 15c2-12 promulgated by the Securities and Exchange Commission, the Authority and the Trustee, as dissemination agent, will enter into a written agreement (the “Continuing Disclosure Agreement”) for the benefit of the holders of the Bonds to provide continuing disclosure. The Authority will undertake to provide certain information and operating data relating to the Authority (the “Annual Report”) by no later than 180 days following the end of each of its fiscal years, commencing December 31, 2020 and to provide notices of the occurrence of certain enumerated events. The Annual Report and the event notices will be filed with the MSRB’s Electronic Municipal Market Access System. The specific nature of the information to be contained in the Annual Report or the event notices is set forth in Appendix H – Form of Continuing Disclosure Agreement.
MISCELLANEOUS
References to the Enabling Act and the Resolution are brief summaries of certain provisions thereof. Such summaries do not purport to be complete and reference is made to the Enabling Act and the Resolution for full and complete statements of such and all provisions. The agreements of the Authority with the holders of the Bonds are fully set forth in the Resolution. Copies of the documents mentioned in this paragraph are on file at the offices of the Authority and are available upon request.
So far as any statements made in this Official Statement involve matters of opinion, forecasts or estimates, whether or not expressly so stated, they are set forth as such and not as representations of fact. No representation is made that any of the opinions, forecasts or estimates will be realized. This Official Statement is not intended to be construed as a contract or agreement between the Authority and any purchaser or Beneficial Owner of the Bonds.
38 The execution and delivery of this Official Statement by an Authorized Officer of the Authority have been duly authorized by the Authority.
MAINE TURNPIKE AUTHORITY
By:
Dated: November __, 2020 Chairman
39 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX A
CERTAIN DEFINITIONS
The following are definitions of certain terms used in this Official Statement which relate to the Resolution. Unless the context otherwise requires, all capitalized terms not set forth here or elsewhere in the Official Statement have the meanings set forth in the Resolution.
“Account” shall mean any Account established under or pursuant to the General Resolution.
“Accountant” shall mean any recognized firm of independent certified public accountants selected by the Authority which may be the firm which is regularly engaged by the Authority to audit its financial statements.
“Additional Bonds” shall mean any bonds, notes or other evidence of indebtedness issued by the Authority under any Supplemental Resolution, except the Series 1991 Bonds and the Subordinated Bonds.
“Advance-Refunded Municipal Bonds” shall mean Tax Exempt Obligations which have been advance- refunded prior to their maturity and which are fully and irrevocably secured as to principal and interest by (a) cash or Government Obligations (including, without limitation, Government Obligations which have been stripped of their unmatured interest coupons and interest coupons stripped from Government Obligations), which are held in trust for the payment thereof, (b) Municipal Bonds which have been advance-refunded as provided under (a) above, or (c) a combination of (a) and (b), which Tax Exempt Obligations are rated in the highest rating category by the Rating Agencies.
“Annual Budget” shall mean the Authority’s annual budget adopted pursuant to the General Resolution.
“Authority” shall mean Maine Turnpike Authority, a body corporate and politic, in existence and operating under the laws of the State, including, without limitation, the Enabling Act.
“Authorized Newspapers” shall mean “The Bond Buyer” or “The Wall Street Journal” and any newspaper or financial journal which is customarily published (except in the case of legal holidays) at least once a day for at least five days in each calendar week, printed in the English language, containing financial news, and of general circulation in the State.
“Authorized Official” shall mean the Chairman, the Vice Chairman, the Secretary, the Treasurer, the Executive Director of the Authority or any other person designated as such by a resolution of the members of the Authority.
“Bond Anticipation Notes” shall mean only those Secured Bond Anticipation Notes the interest on which is payable from and secured by the lien of the Pledge created by the General Resolution.
“Bond Counsel” shall mean any attorney or firm of attorneys nationally recognized in rendering opinions with respect to the issuance and tax exempt status of Tax Exempt Obligations, selected by the Authority.
“Bondholder” or “Holder” shall mean the person in whose name the Secured Bond is registered.
“Bond Pledged Collateral” shall mean the Revenues, Funds and Accounts and other moneys and securities pledged under the General Resolution.
“Bond Registrar” shall mean the Trustee acting as such, unless otherwise provided in a Supplemental Resolution.
“Bonds” or “Turnpike Revenue Bonds” shall mean the Series 2004 Bonds, the Series 2008 Bonds, the Series 2009 Bonds, the Series 2012 Bonds, the Series 2014 Bonds, the Series 2015 Bonds, the Series 2018 Bonds and all Additional Bonds.
“Business Day” shall mean any day other than a Saturday, a Sunday or any other day on which any Fiduciary or any provider of a Credit Facility is authorized or required by law to be closed for business.
A-1 APPENDIX A
“Capital Fund” means the Capital Fund established under the General Resolution.
“Capitalized Interest” shall mean any interest which has accrued or has been paid and which is payable or has been paid with proceeds from the sale of any Secured Bonds (including any earnings received from the investment thereof) which were deposited into either the Interest Account or the Subordinated Interest Account upon the issuance and delivery of such Secured Bonds.
“Capital Requisition Certificate” shall mean a Certificate of the Authority which is intended to requisition moneys from the Capital Fund and which sets forth in reasonable detail the following:
(a) the item number of the payment and that such item is a proper charge against the Capital Fund and has not been paid;
(b) the name of the person, firm or corporation to whom payment is due;
(c) the amount to be paid;
(d) the purpose for incurring the obligation to be paid; and certifies with respect to each requisition which involves any construction or reconstruction that there has not been filed with or served upon the Authority any notice of any lien, right to lien, or attachment upon, or claim affecting the right to receive payment of, any of the moneys payable to any of the persons, firms or corporations named in such requisition, which has not been released or will not be released simultaneously with the payment of such obligation.
“Certificate” shall mean a document or report, as the context indicates, of the Authority, an Accountant, the Consulting Engineers and the Traffic Consultant, or of any of them, and signed by an authorized representative thereof, which in the case of the Authority shall be an Authorized Official, attesting to or acknowledging the matters therein stated or setting forth matters to be determined pursuant to the General Resolution.
“Certificate as to Tax Matters” shall mean, with respect to any Series of Bonds, the Certificate of the Authority provided to Bond Counsel for the purpose of rendering an opinion that such Bonds are Tax Exempt Obligations.
“Certified Financial Statements” shall mean financial statements of the Authority for a stated period, as certified by an Accountant, or in the event such financial statements are for a period of less than a Fiscal Year or are for a Fiscal Year the financial statements for which have not yet been audited by an Accountant, as certified by the chief financial officer of the Authority.
“Code” shall mean the Internal Revenue Code of 1986, as amended, including any Regulations promulgated thereunder or applicable thereto.
“Consultant’s Report” shall mean a study and report for any stated period prepared (a) by the Consulting Engineers to the extent such study and report requires any examination of the operation and maintenance of the Turnpike, and (b) by the Traffic Consultant to the extent such report and study requires an examination of the past or expected Revenues for any stated period, and may be or include a Traffic and Revenue Study.
“Consulting Engineers” shall mean the engineer or engineering firm or corporation at the time employed by the Authority under the provisions of the General Resolution to perform and carry out the duties imposed on the Consulting Engineers by the General Resolution.
“Costs of Department of Transportation Projects” shall mean any and all necessary or incidental costs incurred by the Authority or the Department of Transportation in connection with the undertaking of any Department of Transportation Project, including, without limitation, any costs in connection with any planning, engineering study, acquisition, construction, reconstruction or extraordinary maintenance, any costs of financing, including Costs of Issuance, any interest on indebtedness or other charges attributable to, and payable during the construction of, Department of Transportation Projects which could be capitalized, based upon the advice of an accountant, any costs of placing the Department of Transportation Projects into operation, and any costs attributable A-2 APPENDIX A
to payments made from any fund or account in the name of the Authority established in connection therewith and any reserves or deposits required to secure any Bonds issued to finance such Department of Transportation Project.
“Costs of Issuance” shall mean any and all costs incurred in connection with the issuance of Secured Bonds, including without limitation (a) any costs incurred in connection with the offering and sale of the Secured Bonds, including, without limitation, any payment to, or the sum equal to any discount on the Secured Bonds offered by, the original purchasers thereof, underwriting compensation, expenses and charges, legal fees and charges, professional consultants’ fees and charges and cost of credit ratings, (b) any costs incurred in connection with the printing and distribution of any official statement or other disclosure document distributed in connection with the offering and sale of Secured Bonds, (c) any costs in connection with any Credit Facility which secures the Secured Bonds, (d) any payments for services and disbursements of counsel to the Authority and to the Trustee, and Bond Counsel, and (e) all other costs, charges and expenses relating to the issuance of the Secured Bonds and related matters, as may be provided in any purchase agreement for the Secured Bonds or otherwise.
“Costs of Non-Turnpike Projects” shall mean any and all necessary or incidental costs incurred by the Authority in connection with the undertaking of any Non-Turnpike Project, including, without limitation, any costs in connection with any planning, engineering study, acquisition, construction, reconstruction or extraordinary maintenance, any costs of financing, any interest on indebtedness or other charges attributable to, and payable during the construction of, Non-Turnpike Projects which could be capitalized, based upon the advice of an Accountant, any costs of placing the Non-Turnpike Project into operation, and any costs attributable to payments made from any fund or account in the name of the Authority established in connection therewith and any reserves or deposits required to secure any Unsecured Bonds issued to finance such Non-Turnpike Project.
“Costs of Turnpike Projects” shall mean any and all necessary or incidental costs incurred by the Authority in connection with the undertaking of any Turnpike Project, including, without limitation, any costs in connection with any planning, engineering study, Consultant’s Report, Traffic and Revenue Study, acquisition, construction, reconstruction or extraordinary maintenance, any costs of financing, including Costs of Issuance, and placing the Turnpike Project into operation, any interest on indebtedness or other charges attributable to, and payable during the construction of, Turnpike Projects which could be capitalized, based upon the advice of an Accountant, any costs attributable to payments made from the Reserve Maintenance Fund, the Interchange Account or the Improvement Account and any reserves or deposits required to secure any Secured Bonds issued to finance such Turnpike Project.
“Credit Facility” shall mean a letter of credit, revolving credit agreement, standby purchase agreement, surety bond, insurance policy or similar obligation, arrangement or instrument issued by a bank, insurance company or other financial institution, the senior long term debt obligations of which (or the holding company of any bank) are assigned a long-term rating equivalent to a rating which is at least as high as any long-term rating on the Bonds by the Rating Agencies, which provides for payment of all or a portion of the Debt Service Charges on any Series of Secured Bonds or provides funds for the purchase of such Secured Bonds or portions thereof; provided, that if such Credit Facility is furnished to provide funds for the payment of a Tender Option Price of any Secured Bond with a tender option which may be tendered to the Authority for purchase or payment in accordance with the provisions of any Supplemental Resolution authorizing such Secured Bond with a tender option, the issuer of the Credit Facility shall have its short term debt assigned a rating in one of the two highest rating categories for short term debt by the Rating Agencies.
“Debt Service” shall mean, for any stated period of time or on any stated date, the Debt Service Charges on all Outstanding Secured Bonds, unless stated with respect to only certain Secured Bonds, payable during that period or on that date; except that (a) Debt Service shall not include any Capitalized Interest, (b) with respect to any Secured Bond Anticipation Note, Debt Service shall refer only to the Secured Bond Anticipation Note Interest, and (c) with respect to any Secured Bonds which bear interest at a Variable Rate, a Commercial Paper Rate or other rate of interest which is not known for any period, it shall be assumed for purposes of determining the interest rate on the Secured Bond for the period when the interest rate is unknown that the interest rate is the maximum stated interest rate on such Secured Bonds provided in the Supplemental Resolution authorizing such Secured Bonds.
“Debt Service Charges” shall mean, with respect to the Outstanding Secured Bonds, the principal of and interest on and premium, if any, including without limitation any Redemption Price and any Mandatory Sinking Fund Requirements, payable on any Payment Date or upon redemption, maturity or acceleration.
A-3 APPENDIX A
“Debt Service Fund” shall mean the Debt Service Fund established under the General Resolution.
“Debt Service Reserve Collateral” shall include, moneys, including Secured Bond proceeds, and Government Obligations and any financial guarantees, including surety bonds, insurance policies, letters of credit and other guarantees which are rated at least equal to the long term rating on any Outstanding Secured Bonds by the Rating Agencies.
“Debt Service Reserve Fund” shall mean the Debt Service Reserve Fund established under the General Resolution.
“Debt Service Reserve Requirement” shall mean for any stated Fiscal Year, with respect to Bonds which are issued as Tax Exempt Obligations, an amount equal to one-half the maximum annual Debt Service on all Outstanding Bonds for the current Fiscal Year and any future Fiscal Year during which Bonds are Outstanding as long as the Net Revenues for each of the two consecutive immediately preceding Fiscal Years were at least equal to two hundred percent (200%) of the Debt Service on all Outstanding Bonds in each of such two consecutive immediately preceding Fiscal Years; otherwise the maximum annual Debt Service on all Outstanding Bonds for the current and any future Fiscal Year such Bonds are Outstanding; provided, however, “Debt Service Reserve Requirement” shall not be greater than the Maximum Debt Service Reserve Requirement. With respect to any Bonds not issued as Tax Exempt Obligations, “Debt Service Reserve Requirement” for any stated Fiscal Year shall be the amount provided in the Supplemental Resolution authorizing such Bonds, except that such amount shall never be less than the amount required above. With respect to Subordinated Bonds, “Debt Service Reserve Requirement” shall mean for any stated Fiscal Year the amount, if any, provided in the Supplemental Resolution authorizing such Subordinated Bonds.
“Default Interest Rate” shall mean one percent (1%) per annum in excess of the rate of interest otherwise payable for any period during which the Authority shall be in default under the General Resolution, the Sixth Supplemental Resolution or the Loan Commitment.
[The following text effective for all Bonds issued pursuant to the Resolution. For text effective during such time as applicable Bond Insurance is in effect or upon obtaining the necessary Bondholder consents under the General Resolution and the consents of any Credit Facility providers with respect to the outstanding Series 2004 Bonds, Series 2012A Bonds, Series 2012B Bonds and Series 2014 Bonds or upon the retirement or defeasance of the outstanding Series 2004 Bonds, Series 2012A Bonds, Series 2012B Bonds and Series 2014 Bonds, see below.]
"Defeasance Obligations" shall mean the obligations described in clauses (a), (b), (h) and (i) of the definition of Investment Securities herein; provided that such obligations shall not be redeemable prior to the maturity date or stated redemption date relied upon in satisfying the conditions of the General Resolution and provided further that the obligations described in such clause (b) shall be rated in the highest rating category by the Rating Agencies.
[The following text is effective upon obtaining the necessary Bondholder consents under the General Resolution and the consents of any Credit Facility providers with respect to the outstanding Series 2004 Bonds, Series 2012A Bonds, Series 2012B Bonds and Series 2014 Bonds or upon the retirement or defeasance of the outstanding Series 2004 Bonds, Series 2012A Bonds, Series 2012B Bonds and Series 2014 Bonds. For text effective until such time, see above.]
"Defeasance Obligations" shall mean the obligations described in clauses (a), (b), (h) and (i) of the definition of Investment Securities herein; provided that such obligations shall not be redeemable prior to the maturity date or stated redemption date relied upon in satisfying the conditions of the General Resolution.
[Text effective for so long as the applicable Bond Insurance is in effect. For text effective to all Bonds, see above].
Notwithstanding the foregoing, for so long as the Series 2004 Bond Insurance is in effect, “Defeasance Obligations” shall mean for the Series 2004 Bonds:
(a) Cash;
A-4 APPENDIX A
(b) Non-callable direct obligations of the United States of America ("Treasuries");
(c) Evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated;
(d) pre-refunded municipal obligations rated "AAA" and "Aaa" by S&P and Moody's, respectively; or
(e) securities eligible for "AAA" defeasance under then existing criteria of S & P or any combination thereof, shall be authorized to be used to effect defeasance of the Series 2004 Bonds unless the Series 2004 Bond Insurer otherwise approves.
“Department of Transportation” shall mean the Maine Department of Transportation and its lawful successors.
“Department of Transportation Provision Account” shall mean the Department of Transportation Provision Account established within the General Reserve Fund under the General Resolution.
“Depositary” shall mean any bank or trust company selected by the Authority as a depositary of moneys to be held under the provisions of the General Resolution, and may include the Trustee.
“Disbursement Records” shall mean books, records or other documents which set forth the information contained in all Capital Requisition Certificates and all Certificates of the Authority which direct any Fiduciary to transfer moneys from one Fund or Account to another Fund or Account and which, with respect to payments from any Fund or Account (excluding any transfers to another Fund or Account as directed in a Certificate of the Authority), set forth in reasonable detail the following:
(a) the item number of the payment and the corresponding number of the check or withdrawal order;
(b) the name of the person receiving payment;
(c) the amount paid; and
(d) the purpose for incurring the obligation paid.
“Eighteenth Supplemental Resolution” shall mean the Eighteenth Supplemental Resolution authorizing the issuance and delivery of $84,240,000 Turnpike Refunding Revenue Bonds, Series 2012B adopted February 16, 2012.
“Emergency” shall mean an extraordinary event or occurrence the resulting costs to the Authority of which were not provided for in the Annual Budget and which is more particularly defined in a Certificate signed by the Consulting Engineers which characterizes such event or occurrence as an emergency.
“Enabling Act” shall mean Title 23, Part 1, Chapter 24, Sections 1961-1983, inclusive, Maine Revised Statutes, as amended from time to time.
“Event of Default” shall mean an event which, by itself or with the passage of time, constitutes an event of default under the General Resolution.
“Fiduciary” shall mean the Trustee, any Depositary or any Paying Agent.
“Fifteenth Supplemental Resolution” shall mean the Fifteenth Supplemental Resolution authorizing the issuance and delivery of $45,885,000 Maine Turnpike Revenue Refunding Bonds, Series 2008 adopted April 17, 2008 and ratified on May 14, 2008. A-5 APPENDIX A
“First Supplemental Resolution” shall mean the Supplemental Resolution authorizing the issuance and delivery of $15,250,000 Maine Turnpike Authority Turnpike Revenue Bonds, Series 1991 adopted April 18, 1991.
“Fiscal Year” shall mean the twelve months beginning on January 1 and ending on December 31 in each calendar year.
“Fund” shall mean any Fund established under or pursuant to the General Resolution.
“General Reserve Fund” shall mean the General Reserve Fund established under the General Resolution.
“General Resolution” shall mean the General Turnpike Revenue Bond Resolution adopted by the Authority on April 18, 1991, as amended and supplemented from time to time.
“General Special Obligation Resolution” shall mean the General Special Obligation Bond Resolution adopted by the Authority on May 15, 1996.
“Government Obligations” shall mean direct general obligations of, or obligations the timely payment of principal of and interest on which are unconditionally guaranteed by, the United States of America.
“Insurance Account” shall mean the Insurance Account established within the General Reserve Fund under the General Resolution.
“Interchange Project” shall mean any construction, reconstruction, rehabilitation, widening or expansion of, or any extensions, extraordinary repairs, modifications or improvements to interchanges as defined in the Enabling Act, or any portions thereof, determined by the Department of Transportation and the Authority to have a sufficient relationship to the public’s use of the Turnpike and the orderly regulation and flow of traffic on the Turnpike in accordance with Section 1974, subsection 3 of the Enabling Act.
“Interest Account” shall mean the Interest Account established within the Debt Service Fund under the General Resolution.
“Investment Securities” shall mean and include any of the following securities, if and to the extent the same are at the time legal investments by the Authority of the funds to be invested therein and conform to the policies set forth in any investment guidelines adopted by the Authority and in effect at the time of the making of such investment:
(a) Government Obligations and certificates or receipts representing direct ownership of future interest or principal payments on Government Obligations or any obligations of agencies or instrumentalities of the United States of America which are backed by the full faith and credit of the United States, which obligations are held by a custodian in safekeeping on behalf of the holders of such receipts;
(b) Obligations issued or guaranteed by the following: Banks for Cooperatives, Federal Intermediate Credit Banks, Federal Land Banks, Government National Mortgage Association, Federal Home Loan Mortgage Corporation, Student Loan Marketing Association, Financing Corporation, The Resolution Funding Corporation, or any other any agency or instrumentality of the United States, provided that the foregoing obligations are rated in one of the two highest rating categories by the Rating Agencies;
(c) (i) Interest-bearing time or demand deposits, certificates of deposit maturing in one year or less, or other similar banking arrangements with any government securities dealer, bank, trust company, savings and loan association, national banking association or other savings institution (including the Trustee), provided that such deposits, certificates, and other arrangements are fully insured by the Federal Deposit Insurance Corporation or (ii) interest-bearing time or demand deposits or certificates of deposit with any bank, trust company, national banking association or other savings institution (including the Trustee); provided (A) that with respect to (i) and (ii) any such obligations are held by a Fiduciary or a bank, trust company or national banking association (other than the issuer of such obligations, unless the issuer is a Fiduciary), (B) that (1) with respect to (ii) such deposits and certificates are in or with a bank, trust company, national banking association or other savings institution whose long-term unsecured debt is rated in one of A-6 APPENDIX A
the two highest long-term rating categories by the Rating Agencies and (2) the investment in such deposits and certificates will not result in a reduction in any rating on the Secured Bonds by the Rating Agencies;
(d) Repurchase agreements collateralized by securities described in subparagraph (a) above with any registered broker/dealer reporting to the Federal Reserve Bank of New York or with any commercial bank (including any Fiduciary), provided that (i) a specific written repurchase agreement governs the transaction, (ii) the securities are held, free and clear of any lien, by the Trustee or an independent third party acting solely as agent for the Trustee, and such third party is (A) a Federal Reserve Bank, or (B) a bank which is a member of the Federal Deposit Insurance Corporation and which has combined capital, surplus and undivided profits of not less than $50,000,000, and the Trustee shall have received written confirmation from such third party that it holds such securities, free and clear of any lien, as agent for the Trustee, (iii) the repurchase agreement has a term of one year or less and the Trustee will value the collateral securities no less frequently than is required by the Rating Agencies to maintain the rating assigned by the Rating Agencies on the Bonds and will liquidate the collateral securities if any deficiency in the required collateral percentage is not restored within five business days after such valuation, and (iv) the fair market value of the collateral securities in relation to the amount of the repurchase obligation, including principal and interest, is equal to at least an amount (which may be expressed in a percentage of the amount of the repurchase obligation) which is required by the Rating Agencies to maintain the rating assigned by the Rating Agencies on the Bonds;
(e) Money market funds which are authorized to invest only in assets or securities described in subparagraphs (a), (b) and (d) above and are rated in one of the two highest rating categories by the Rating Agencies, provided that the investment in such money market funds will not result in a reduction in the rating on the Secured Bonds by the Rating Agencies;
(f) Investment contracts with financial institutions the long term debt obligations of which are rated in one of the two highest rating categories by the Rating Agencies, provided that such investment contracts are rated at least the same as such debt obligations and will not result in a reduction of the rating on the Secured Bonds by the Rating Agencies;
(g) Municipal Bonds;
(h) State Obligations;
(i) Advance-Refunded Municipal Bonds; provided, that any investment or deposit described above shall comply to the extent applicable with provisions of the Code and Regulations relating to the acquisition of investments at fair market value or on an arms length basis.
“Maximum Annual Debt Service” shall mean the largest total Debt Service payable in the current or any succeeding Fiscal Year.
“Maximum Debt Service Reserve Requirement” shall mean for any stated Fiscal Year an amount equal to the aggregate of the Maximum Series Debt Service Reserve Requirements for such Fiscal Year.
“Maximum Series Debt Service Reserve Requirement” shall mean for any stated Fiscal Year, with respect to any Series of Bonds which are issued as Tax Exempt Obligations, the maximum amount set forth in the authorizing Supplemental Resolution which may be deposited in the Debt Service Reserve Fund so that such Series of Bonds may be issued as Tax Exempt Obligations.
“Municipal Bonds” shall mean obligations issued or guaranteed by any state or political subdivision, agency or instrumentality thereof (including stripped obligations the principal of and interest on which have been separated and offered for sale separate from each other) which are rated in one of the two highest rating categories by the Rating Agencies.
“Net Revenue Requirement” shall mean, for any stated Fiscal Year, the greater of: (a) one hundred twenty percent (120%) of the Debt Service; and A-7 APPENDIX A
(b) one hundred percent (100%) of the sum of (i) the Debt Service, (ii) the Required Reserve Maintenance Deposit, (iii) the Required Debt Service Reserve Deposit and (iv) any other Required Deposit set forth in any Supplemental Resolution.
“Net Revenues” shall mean the Revenues for any stated period of time less Operating Expenses for such stated period of time.
“Nineteenth Supplemental Resolution” shall mean the Nineteen Supplemental Resolution ratifying the issuance and delivery of the $39,715,000 Turnpike Revenue Refunding Bonds, Series 2014 adopted March 27, 2014.
“Non-Turnpike Project” shall mean any activity, project or corporate purpose which the Authority is authorized to undertake under State law, including, without limitation, the Enabling Act, and which is not a Turnpike Project.
“Non-Turnpike Revenues” shall mean any moneys, funds and other income received by the Authority from (a) other than the operation of the Turnpike, including, without limitation, all grants, payments, loans and other contributions received by the Authority directly, or indirectly from the federal government, the State, any political subdivision of the State or other governmental body or unit, in the form of (i) payments from the general revenues of the federal government or the State, such political subdivision or such other governmental body or unit, (ii) any charges, fees or taxes which the Authority is authorized to levy or make following the adoption of the General Resolution in connection with the acquisition, construction, reconstruction, operation or maintenance of Non-Turnpike Projects or (iii) distributions of all or a portion of general, sales or other special tax revenues or user charges or fees and (b) special assessments, special taxes or impact fees assessed or charged by the Authority or any other governmental body against parcels or real property which benefit from the construction or reconstruction of Turnpike Projects; provided that “Non-Turnpike Revenues” shall not include any grants, payments, loans, contributions, charges, fees or taxes which are pledged or dedicated to the payment of any Debt Service Charges pursuant to a Supplemental Resolution.
“Operating Expenses” shall mean the Authority’s reasonable and necessary current expenses of maintenance, repair and operation of the Turnpike and shall include, without limitation, all ordinary and usual expenses of maintenance, repair and operation, which may include expenses not annually recurring, premiums for insurance, all administrative and engineering expenses relating to maintenance, repair and operation of the Turnpike, and all fees and expenses required to be paid by the Authority under the provisions of the General Resolution or by law, all to the extent properly and directly attributable to the operation of the Turnpike, provided that Operating Expenses shall not include any reserves for extraordinary maintenance or repair, any payment of Reimbursement Obligations, any costs or expenses for new construction, any allowance for depreciation, or any deposits or transfers to the credit of the Debt Service Fund, the Debt Service Reserve Fund, the Subordinated Debt Service Fund, the Subordinated Debt Service Reserve Fund, the Reserve Maintenance Fund, the General Reserve Fund or the Rebate Fund.
“Outstanding”, when used with reference to Secured Bonds, shall mean, as of any date, all Secured Bonds theretofore or thereupon being authenticated and delivered under the General Resolution except:
(a) any Secured Bonds canceled by the Trustee at or prior to such date;
(b) any Secured Bond (or portion thereof) for the payment or redemption of which there shall be set aside and held in trust under the General Resolution either:
(i) moneys in an amount sufficient to pay when due the principal or Redemption Price thereof, together with all accrued interest;
(ii) Defeasance Obligations in such principal amounts, of such maturities, bearing such interest and otherwise having such terms and qualifications, as are necessary to provide moneys (whether as principal or interest) in an amount sufficient to pay when due the principal or Redemption Price thereof, together with all accrued interest; or
A-8 APPENDIX A
(iii) any combination of (i) and (ii) above, and, if such Secured Bond or portion thereof is to be redeemed, for which notice of redemption has been given as provided in the General Resolution, or the applicable Supplemental Resolution, or provision satisfactory to the Trustee has been made for the giving of such notice;
(c) any Secured Bond in lieu of or in substitution for which other Secured Bonds have been authenticated and delivered; and
(d) any Secured Bond deemed to have been paid as provided in the General Resolution.
“Paying Agent” shall mean any bank or trust company designated as a Paying Agent by or in accordance with the General Resolution.
“Payment Date” shall mean, with respect to the Outstanding Bonds, January 1 and July 1 of each year, provided that any Supplemental Resolution may provide for different Payment Dates with respect to a Series of Secured Bonds authorized by such Supplemental Resolution.
“Pledge” shall mean the pledge of the Revenues, Funds and Accounts and other moneys and securities as provided in the General Resolution.
“Pledged Collateral” shall mean the Revenues, Funds and Accounts and other moneys and securities pledged under the General Resolution.
“Principal Account” shall mean the Principal Account established within the Debt Service Fund under the General Resolution.
“Principal Payment Date” shall mean any date on which any principal of Outstanding Secured Bonds is due and payable, whether by maturity, Mandatory Sinking Fund Requirements, optional or mandatory redemption or acceleration.
“Rating Agencies” shall mean Moody’s Investors Service Inc. and Standard & Poor’s Corporation and their respective successors and assigns if such rating agency is maintaining a rating on the Secured Bonds at the request of the Authority, and shall also include any other rating agency nationally recognized for skill and expertise in rating the credit of obligations such as the Secured Bonds and which is maintaining a rating on the Bonds at the request of the Authority.
“Rebate Fund Requirement” shall mean, as of any date of calculation, an amount equal to the aggregate of the amounts, if any, specified in each Supplemental Resolution authorizing the issuance of a Series of Secured Bonds which are Tax Exempt Obligations, or tax certificate or regulatory pertaining thereto, as the amount required to be maintained in the Rebate Fund with respect to such Secured Bonds.
“Record Date” shall mean, unless otherwise determined by a Supplemental Resolution for a particular Series of Secured Bonds, the fifteenth day of the month immediately preceding any month in which there occurs a Payment Date.
“Redemption Account” shall mean the Redemption Account established within the Debt Service Fund under the General Resolution.
“Redemption Price” shall mean, when used with respect to a Secured Bond or portion thereof, the principal amount thereof plus the applicable premium, if any, payable upon either optional or mandatory redemption thereof pursuant to the General Resolution.
“Regulations” shall mean the Treasury Regulations applicable to the Code.
A-9 APPENDIX A
“Reimbursement Obligation” shall mean the amount or amounts owing to a provider of a Credit Facility for any amount drawn on or paid from such Credit Facility, including any interest owing on the amount so drawn or paid.
“Required Debt Service Deposit” shall mean the aggregate amount of Revenues which is required to be deposited into the Debt Service Fund and the Subordinated Debt Service Fund during any Fiscal Year in accordance with the certification approved by the Authority, as provided in the General Resolution.
“Required Debt Service Reserve Deposit” shall mean, as of the close of business of the Trustee on the last day of any stated Fiscal Year (unless stated otherwise), the amount of Revenues which is required to be deposited into the Debt Service Reserve Fund in order to eliminate the difference, if any, between the value of the Debt Service Reserve Collateral on deposit in the Debt Service Reserve Fund and the Debt Service Reserve Requirement.
“Required Deposits” shall mean the Required Debt Service Deposit, the Required Debt Service Reserve Deposit, the Required Reserve Maintenance Deposit and any other amount of Revenues required to be deposited during any stated period or as of any stated date under a Supplemental Resolution.
“Required Reserve Maintenance Deposit” shall mean the aggregate amount of Revenues which is required to be deposited into the Reserve Maintenance Fund during any Fiscal Year in accordance with the certification approved by the Authority, as provided in the General Resolution.
“Reserve Maintenance Fund” shall mean the Reserve Maintenance Fund established under the General Resolution.
“Reserve Maintenance Fund Projects” shall mean any project which involves the resurfacing, replacing, renewing or rehabilitating of the Turnpike, or any portion thereof, including any unusual or extraordinary maintenance or repairs, renewals and replacements, any equipment or machinery required in connection with the operation or maintenance of the Turnpike, any additions to the Turnpike required for increased use of the Turnpike or any portion thereof (excluding any extensions or new interchanges which the Annual Budget provides to be funded from the General Reserve Fund), additional or expanded toll plazas and stations, and any similar new construction to operate and maintain the Turnpike.
“Resolution” shall mean the General Resolution, as amended and supplemented from time to time, including by Series Resolutions.
“Revenue Fund” shall mean the Revenue Fund established under the General Resolution.
“Revenues” shall mean all moneys, funds and other income received by the Authority from the operation of the Turnpike, including, without limitation: (a) all concessions, charges, fees, fares, receipts, rents, tolls, proceeds of any use and occupancy insurance relating to the Turnpike and of any other insurance which insures against loss of Revenues and other income received in connection with the use of the Turnpike and other services made available in connection with the Turnpike, (b) the moneys, funds and investment income received from any investment of the Revenues described in (a), and (c) all investment income with respect to the Accounts and Funds established under the General Resolution other than the Capital Fund; provided, however, that Revenues shall not include any moneys, funds or investment income in the Rebate Fund. “Revenues” shall not include any Non-Turnpike Revenues unless expressly provided otherwise in a Supplemental Resolution.
“Secured Bond Anticipation Note Interest” shall mean the accrued interest on Outstanding Secured Bond Anticipation Notes which is not Capitalized Interest.
“Secured Bond Anticipation Notes” shall mean any of the notes issued pursuant to the General Resolution.
“Secured Bonds” or “Secured Bond” shall mean Bonds or Subordinated Bonds.
“Series” shall mean, with respect to any Secured Bonds, any designated series of Bonds, as provided in any Supplemental Resolution.
A-10 APPENDIX A
“Series Resolution” means any Supplemental Resolution, authorizing the issuance by the Authority of a series of Bonds, adopted pursuant to the General Resolution.
“Series 2004 Bond Insurance” shall mean the insurance policy issued by the Series 2004 Bond Insurer guaranteeing the scheduled payment of principal of and interest on the Series 2004 Bonds when due.
“Series 2004 Bond Insurer” shall mean Financial Security Assurance Inc., a New York stock insurance company, or any successor thereto or assignee thereof.
“Series 2004 Bond Insurer Event of Insolvency” shall mean the occurrence and continuance of one or more of the following events: (i) the issuance, under the applicable laws of any state of the United States, of an order of rehabilitation, liquidation or dissolution of the Series 2004 Bond Insurer; (ii) the commencement by the Series 2004 Bond Insurer of a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect including, without limitation, the appointment of a trustee, receiver, liquidator, custodian or other similar official for itself or any substantial part of its property; (iii) the consent by the Series 2004 Bond Insurer to any relief referred to in the preceding clause (ii) in an involuntary case or other proceeding commenced against it; (iv) the making by the Series 2004 Bond Insurer of an assignment for the benefit of creditors; (v) the failure by the Series 2004 Bond Insurer to pay generally its debts as they become due; or (vi) the initiation by the Series 2004 Bond Insurer of any action to authorize any of the foregoing.
“Series 2004 Bonds” shall mean the $115,050,000 Maine Turnpike Authority Turnpike Revenue Bonds, Series 2004 authorized pursuant to the General Resolution as supplemented and amended.
“Series 2012 Bonds” shall mean the $68,990,000 Maine Turnpike Authority Turnpike Revenue Bonds, Series 2012A and the $84,240,000 Maine Turnpike Authority Turnpike Revenue Refunding Bonds, Series 2012B, each authorized pursuant to the Resolution.
“Series 2014 Bonds” shall mean the $39,715,000 Turnpike Revenue Refunding Bonds, Series 2014 authorized pursuant to the Resolution.
“Series 2015 Bonds” shall mean the $44,875,000 Turnpike Revenue Refunding Bonds, Series 2015 authorized pursuant to the Resolution.
“Series 2018 Bonds” shall mean the $150,000,000 Turnpike Revenue Bonds, Series 2018 authorized pursuant to the Resolution.
“Series 2004 Surety Bond” shall mean the surety bond issued by the Surety Bond Provider guaranteeing the payment of up to $1,781,928.74 for deposit into the Series 2004 Debt Service Reserve Account as provided in the Resolution and in accordance with the terms of such surety bond.
“Series 2004 Surety Bond Provider” shall mean Financial Security Assurance Inc. or any successor thereto or assignee thereof.
“Series 2004 Surety Bond Provider Event of Insolvency” shall mean the occurrence and continuance of one or more of the following events: (i) the issuance, under the applicable laws of any state of the United States, of an order of rehabilitation, liquidation or dissolution of the Series 2004 Surety Bond Provider; (ii) the commencement by the Series 2004 Surety Bond Provider of a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect including, without limitation, the appointment of a trustee, receiver, liquidator, custodian or other similar official for itself or any substantial part of its property; (iii) the consent by the Series 2004 Surety Bond Provider to any relief referred to in the preceding clause (ii) in an involuntary case or other proceeding commenced against it; (iv) the making by the Series 2004 Surety Bond Provider of an assignment for the benefit of creditors; (v) the failure by the Series 2004 Surety Bond Provider to pay generally its debts as they become due; or (vi) the initiation by the Series 2004 Surety Bond Provider of any action to authorize any of the foregoing.
A-11 APPENDIX A
“Seventeenth Supplemental Resolution” shall mean the Seventeenth Supplemental Resolution authorizing the issuance and delivery of $68,990,000 Turnpike Revenue Bonds, Series 2012A adopted February 16, 2012.
“Sinking Fund Installment” shall mean with respect to the Bonds, the principal amount thereof required to be redeemed in advance of their stated maturity date on such Interest Payment Date pursuant to the provisions of the applicable Series Resolution.
“Sixteenth Supplemental Resolution” shall mean the Sixteenth Supplemental Resolution authorizing the issuance and delivery of up to $50,000,000 Maine Turnpike Authority Revenue Bonds, Series 2009, adopted January 29, 2009.
“Special Obligation Bonds” shall mean the Authority’s Special Obligation Bonds authorized pursuant to the Special Obligation Bond Resolution.
“Special Obligation Bond Resolution” or “Special Obligation Resolution” shall mean the General Special Obligation Resolution, as amended and supplemented from time to time.
“Special Obligation Bond Trustee” shall mean the trustee appointed pursuant to the Special Obligation Bond Resolution.
“Special Obligation Revenues” shall mean any moneys, funds or other income (a) transferred to the Trustee for deposit in the Debt Service Fund pursuant to the Special Obligation Bond Resolution from the Department of Transportation Provision Account or any other account established under the 1991 General Turnpike Revenue Bond Resolution, (b) the moneys, funds and investment income received from any investment of the Special Obligation Revenues described in (a), and (c) all income with respect to the Accounts and Funds established under the Special Obligation Bond Resolution; provided, however, that Special Obligation Revenues shall not include any moneys, funds or investment income in the Rebate Fund.
“State” shall mean the State of Maine, one of the United States of America.
“State Obligations” shall mean those obligations issued or guaranteed by the State, the due and prompt payment of principal of and interest and premium, if any, on which is secured by the full faith and credit and general taxing power of the State.
“Subaccount” shall mean any subaccount established under or pursuant to the General Resolution.
“Subordinated Bond Pledged Collateral” shall mean the Subordinated Revenues, Funds and Accounts and the other moneys and securities pledged under the General Resolution.
“Subordinated Bond Revenues” shall mean those moneys, funds and investment income in the Improvement Account.
“Subordinated Bonds” shall mean any bond, note or other evidence of indebtedness of the Authority to the extent such indebtedness is payable from Subordinated Bond Revenues and secured by the Subordinated Pledge.
“Subordinated Debt Service Fund” shall mean the Subordinated Debt Service Fund established under the General Resolution.
“Subordinated Debt Service Reserve Fund” shall mean the Subordinated Debt Service Reserve Fund established under the General Resolution.
“Subordinated Interest Account” shall mean the Subordinated Interest Account established within the Subordinated Debt Service Fund under the General Resolution.
“Subordinated Pledge” shall mean the pledge of the Subordinated Revenues, Funds and Accounts and other moneys and securities as provided in the General Resolution.
A-12 APPENDIX A
“Subordinated Principal Account” shall mean the Subordinated Principal Account established within the Subordinated Debt Service Fund under the General Resolution.
“Subordinated Redemption Account” shall mean the Subordinated Redemption Account within the Subordinated Debt Service Fund under the General Resolution.
“Supplemental Resolution” shall mean any resolution supplemental to the General Resolution adopted in accordance with the General Resolution.
“Surety Bond” shall mean the surety bond issued by the Surety Bond Provider guaranteeing certain payments into the Debt Service Reserve Fund as provided in the Resolution and in accordance with the terms of such surety bond.
“Tax Exempt Obligations” shall mean obligations the interest on which is excluded from gross income of the holder thereof for federal income tax purposes which were accompanied by a favorable opinion of Bond Counsel regarding such exclusion on the date of issuance of such obligations.
“Tender Option” shall mean, with respect to any Secured Bonds, an option which may be exercised by the Holder to tender the Secured Bonds to the Authority for purchase or payment of the Tender Option Price prior to the stated maturity thereof.
“Tender Option Price” shall mean, with respect to any Secured Bond which provides for a Tender Option, an amount equal to the unpaid principal amount of such Secured Bond.
“Traffic and Revenue Study” shall mean a traffic and revenue study of the Turnpike for a stated period of time, taking into account, among other things, any anticipated competing facilities to be built by any federal or state agencies.
“Traffic Consultant” shall mean an independent traffic consultant of nationally recognized standing or a firm or corporation of independent traffic consultants of nationally recognized standing selected by the Authority and appointed pursuant to a resolution of the Authority and having a favorable reputation for skill and experience in traffic engineering or consulting matters relating to facilities comparable in scope and character to the Turnpike.
“Trustee” shall mean the trustee appointed pursuant to the General Resolution and its successor or successors.
“Turnpike” shall mean the roadway in the State constructed between York in York County to Augusta in Kennebec County pursuant to Private and Special Law 1941, Chapter 69, Sections 1 to 20, as amended, and shall include all rights-of-way, bridges, tunnels, overpasses, underpasses and interchanges either upon the roadway or connected or connecting therewith as well as all buildings, toll facilities and other equipment, median barriers, shoulders, embankments, property rights, easements, leases and franchises relating thereto and deemed necessary or convenient for the construction, reconstruction, operation or maintenance thereof, and shall further include any and all additional property included in the definition of “Turnpike” in the Enabling Act.
“Turnpike Project” shall mean any construction, reconstruction, rehabilitation, widening or expansion of, or any extensions, extraordinary repairs, modifications or improvements to, the Turnpike, or any portion thereof, including, without limitation, any or all of the following:
(a) all highways or roads which are owned and operated by the Authority and for the use of which the Authority is charging fares, fees or tolls;
(b) all connecting tunnels, bridges, overpasses, underpasses, interchanges, administration, storage and other buildings, toll facilities, entrance plazas, service areas and stations, barriers, machinery, equipment and other facilities relating to the construction, reconstruction, operation or maintenance of any highway or road described in clause (a) above;
(c) all roads connecting with or relating to any highway or road described in clause (a) above; and
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(d) all other modifications, improvements, or extensions of the Turnpike and all other appurtenances necessary for the construction, reconstruction, operation or maintenance of the Turnpike.
“Twelfth Supplemental Resolution” shall mean the Twelfth Supplemental Resolution authorizing the issuance and delivery of $115,050,000 Maine Turnpike Authority Turnpike Revenue Bonds, Series 2004 adopted October 15, 2004.
“Twentieth Supplemental Resolution” shall mean the Twentieth Supplemental Resolution authorizing the issuance and delivery of $144,875,000 Maine Turnpike Authority Turnpike Revenue Refunding Bonds, Series 2015 adopted December 18, 2014.
“Twenty-first Supplemental Resolution” shall mean the Twenty-first Supplemental Resolution authorizing the issuance and delivery of $150,000,000 Maine Turnpike Authority Turnpike Revenue Bonds, Series 2018 adopted October 19, 2017.
“Twenty-second Supplemental Resolution” shall mean the Twenty-second Supplemental Resolution authorizing the issuance and delivery of $130,000,000 Maine Turnpike Authority Turnpike Revenue Bonds, Series 2018 adopted July 23, 2020.
“Unsecured Bonds” shall mean any bonds, notes or other evidence of indebtedness of the Authority which is payable from Non-Turnpike Revenues or other moneys and securities not subject to the Pledge or the Subordinated Pledge as described in the General Resolution.
“Variable Rate” shall mean any rate of interest that may vary from time to time in accordance with a formula or method, as provided in an applicable Supplemental Resolution.
“Widening Project” shall mean any construction, reconstruction, rehabilitation, widening or expansion of, or any extensions, extraordinary repairs, modifications or improvements undertaken in connection with the construction of all or a portion of a third travel lane for each direction of travel pursuant to section 1965, subsection 1, paragraph D of the Enabling Act, and for the construction or reconstruction of overpasses, bridges, interchanges, tunnels, underpasses, toll facilities and related improvements and construction in connection with the addition of any lane or lanes.
A-14 APPENDIX B
SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION The following are summaries of certain provisions of the General Resolution. These summaries do not purport to be complete or definitive and are qualified in their entireties by reference to the full terms of such documents. All capitalized terms used in this summary and not defined below or elsewhere in this Official Statement have the same meanings as in the General Resolution.
Issuance and Delivery of Additional Bonds
Subject to the provisions of the Resolution, and provided that there are no deficiencies in any Fund or Account and there is no Event of Default which has occurred and is continuing, the Authority, may from time to time issue and deliver one or more Series of Additional Bonds for the purpose of (i) refunding any one or more Series, or one or more maturities within any Series, of Outstanding Secured Bonds or Unsecured Bonds (to the extent that Secured Bonds could be issued for the purposes for which such Unsecured Bonds were issued if such Unsecured Bonds had been issued at the time of such refunding) or (ii) paying for all or a portion of the Costs of a Turnpike Project.
Additional Bonds shall be on a parity and shall be secured equally and ratably with the Series 1991 Bonds and any Additional Bonds theretofore or thereafter issued and Outstanding, as to the Bond Pledged Collateral; provided, however, that nothing herein shall prevent payment of Debt Service Charges on any Series of Additional Bonds from being otherwise secured and/or protected with a Credit Facility or from sources or property or instruments not applicable to the Series 1991 Bonds and/or any one or more Series of Additional Bonds.
Before any Additional Bonds may be issued by the Authority and authenticated by the Trustee for delivery, the Authority shall (x) cause the Consulting Engineers to prepare a Consultant's Report on capital cost estimates and projected Operating Expenses and projected Required Reserve Maintenance Deposits for a period of time beginning at the end of the current Fiscal Year and ending on the later of the fifth complete Fiscal Year next following the expected date of issuance of such Additional Bonds or the second complete Fiscal Year next following the estimated completion date of the proposed Turnpike Project being financed by such Additional Bonds, (y) cause the Traffic Consultant to prepare a Traffic and Revenue Study for such period and (z) furnish the Trustee with the following documentation:
(i) A Certificate of the Authority, based upon Certified Financial Statements, stating that Net Revenues were equal to or greater than the Net Revenue Requirement for the Fiscal Year immediately preceding the Fiscal Year in which the Additional Bonds are to be issued; and
(ii) a Certificate of the Authority, based upon the Consultant's Report and the Traffic and Revenue Study described in (c) above, stating that (A) projected Net Revenues (which may include any toll increases then approved and scheduled to be in effect within 6 months after the issuance of the proposed Additional Bonds) for (1) the Fiscal Year in which the Additional Bonds are to be issued and for each complete Fiscal Year thereafter until (2) the fifth Fiscal Year thereafter or the second complete Fiscal Year next following the estimated completion date of the Turnpike Project for which the Additional Bonds are to be issued, whichever is reasonably expected to occur later, are reasonably expected to equal or exceed the Net Revenue Requirement for each such Fiscal Year (assuming the issuance of such Additional Bonds), and (B) projected Net Revenues in the second Fiscal Year next following the Fiscal Year in which completion date of such Turnpike Project is reasonably expected to occur are reasonably expected to equal at least one hundred twenty percent (120%) of the maximum Debt Service with respect to all Outstanding Bonds, including such proposed Additional Bonds, for any Fiscal Year in which such Bonds will be Outstanding; provided, however, that the documentation required by (i) and (ii) above will not need to be furnished in the case of any Additional Bonds issued for the purpose of refunding Outstanding Bonds if the Trustee is furnished a Certificate, signed by an Accountant, stating that the issuance of such Additional Bonds will not result in the Debt Service on all Outstanding Bonds being any greater in any Fiscal Year than the Debt Service would have been had such Bonds not been refunded.
The Supplemental Resolution entered into in connection with a Series of Additional Bonds shall establish and provide for those documents and instruments which must be received by the Trustee, and any other conditions which must be fulfilled, before the Trustee may authenticate and deliver such Additional Bonds. (Section 204) B-1 APPENDIX B
Issuance and Delivery of Subordinated Bonds
Subject to the provisions of the Resolution, the Authority, may from time to time issue and deliver one or more Series of Subordinated Bonds for the purpose of (i) refunding any one or more Series, or one or more maturities within any Series, of Outstanding Secured Bonds or Unsecured Bonds (to the extent that Secured Bonds could be issued for the purposes for which such Unsecured Bonds were issued if such Unsecured Bonds had been issued at the time of such refunding) or (ii) paying for all or a portion of Costs of Turnpike Projects.
Subordinated Bonds shall not be on a parity with the Series 1991 Bonds or any Additional Bonds theretofore or thereafter issued and Outstanding, as to the Bond Pledged Collateral, but shall be payable solely from and secured by the Subordinated Bond Pledged Collateral; provided, however, that nothing herein shall prevent payment of Debt Service Charges on any Series of Subordinated Bonds from being otherwise secured and/or protected with a Credit Facility or from sources or property or instruments not applicable to any one or more Series of Bonds.
Before any Subordinated Bonds may be issued by the Authority and authenticated by the Trustee for delivery, the Authority shall furnish the Trustee with a Certificate of an Authorized Official, based upon Certified Financial Statements, stating that Net Revenues were at least equal to the Net Revenue Requirement for the Fiscal Year immediately preceding the Fiscal Year in which the Subordinated Bonds will be issued.
The Supplemental Resolution entered into in connection with a Series of Subordinated Bonds shall establish and provide for those documents and instruments which must be received by the Trustee, and any other conditions which must be fulfilled, before the Trustee may authenticate and deliver such Subordinated Bonds. (Section 205)
Redemption
Notice of Redemption. Notice of the call for any redemption of Secured Bonds prior to maturity (a) shall be published once, at least thirty (30) and not more than forty-five (45) days before the redemption date, in Authorized Newspapers, (b) shall be filed with the Paying Agent and (c) shall be mailed, by registered or certified mail, postage prepaid, to the Holder of each such Secured Bond to be redeemed at the address shown on the registration books kept by the Trustee, as Bond Registrar; provided, however, that any failure to publish such notice or to give such notice to any Paying Agent or to mail such notice to any Holder of a Secured Bond, or any defect in any such notice, shall not affect the validity of any proceedings for the redemption of any of the Secured Bonds. Each such notice shall identify by designation, letters, numbers, or other distinguishing marks (including CUSIP numbers), the numbers of the Secured Bond, or portions thereof to be redeemed, the Redemption Price to be paid, the date of general mailing of notices to Holders, the date fixed for redemption, the name and address of the place or places where the amounts due upon such redemption are payable, including the name of any Paying Agent together with a contact person and telephone number, and the issue date, interest rate and maturity date of the Secured Bonds. Such notice shall further state that on such date there shall become due and payable upon each Secured Bond to be redeemed the Redemption Price thereof, or the Redemption Price of the specified portions of the principal thereof in the case of Secured Bonds to be redeemed in part only, together with interest accrued to the redemption date, and that from and after such date interest thereon shall cease to accrue and be payable. In case any Secured Bond of a Series is to be redeemed in part only, the notice of redemption which relates to such Secured Bond shall state also that on or after the redemption date, upon surrender of such Secured Bond, a new Secured Bond or Secured Bonds of such Series in principal amount equal to the unredeemed portion of such Secured Bond will be issued. In the case of any optional redemption of Secured Bonds prior to maturity to be made at the direction of the Authority, the Trustee shall give the notices required by this Section as soon as practicable after receipt of written notice from the Authority of such direction and shall not be required to give such notices until such time. (Section 402)
Rights of Bondholders upon Redemption. Notice having been published and filed in the manner and under the conditions hereinabove provided, the Secured Bonds or portions of Secured Bonds so called for redemption shall, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Secured Bonds and portions of Secured Bonds on such date. On the date so designated for redemption, notice having been published and filed and moneys for payment of the redemption price being held in separate accounts by the Trustee or by the Paying Agent in trust for the Holders of the Secured Bonds or portions thereof to be redeemed all as provided in the General Resolution, interest on the Secured Bonds or portions of Secured Bonds so called for redemption shall cease to accrue, such Secured Bonds and portions of Secured Bonds shall cease to be entitled to any lien, benefit or security under the General Resolution, and the Holders or registered owners of such Secured Bonds or portions of Secured Bonds shall have no rights in respect B-2 APPENDIX B
thereof except to receive payment of the redemption price thereof and, to the extent provided in the section entitled “Partial Redemption” to receive Secured Bonds for any unredeemed portions of Secured Bonds. (Section 403)
Partial Redemption. In case part but not all of an Outstanding Secured Bond shall be selected for redemption, the Secured Bondholder or the registered owner thereof or his attorney or legal representative, as the case may be, shall present and surrender such Secured Bond to the Trustee for payment of the principal amount thereof so called for redemption, and the Authority shall execute and the Trustee shall authenticate and deliver to or upon the order of such registered owner or his legal representative, without charge therefor, a Secured Bond for the unredeemed balance of the principal amount of the Secured Bond so surrendered. (Section 404)
Cancellation of Paid or Redeemed Secured Bonds. All Secured Bonds finally paid or redeemed either at or before maturity, shall be delivered to the Trustee when such payment, redemption or purchase is made and such Secured Bonds shall thereupon be cancelled. All cancelled Secured Bonds shall be held by the Trustee until this Resolution shall be released; provided, however, that Secured Bonds so cancelled may at any time be destroyed by the Trustee, which shall execute a certificate of destruction in duplicate describing the Secured Bonds so destroyed, and one executed certificate shall be filed with the Treasurer of the Authority, and the other executed certificate shall be retained by the Trustee. (Section 405)
Purchase or Redemption of Bonds by Authority. The Authority may apply funds held in the Improvement Account under the General Resolution upon compliance with the conditions set forth in section entitled “General Reserve Fund” to redeem Bonds pursuant to the redemption provisions applicable to such Bonds; (ii) to redeem Special Obligation Bonds pursuant to the redemption provisions applicable to such Special Obligation Bonds, or (iii) to purchase Bonds or Special Obligation Bonds of any maturity and credit them against the principal payment for such maturity or, as the case may be, any sinking fund installment for such maturity at the principal amount or applicable redemption price, as the case may be, by delivering them to the Trustee or the Special Obligation Bond Trustee, as appropriate, for cancellation at least sixty (60) days before the principal payment date or sinking fund installment date. (Section 406)
Funds and Accounts
The Pledges Effected by the General Resolution. There are pledged for the payment of the Bonds, in accordance with their terms and the provisions of the General Resolution, subject only to the provisions of the General Resolution permitting the application thereof for or to the purposes and on the terms and conditions set forth in the General Resolution: (i) all Revenues; (ii) all moneys and securities in any of the Funds, Accounts and Subaccounts (except the Rebate Fund, the Subordinated Debt Service Fund and the Subordinated Debt Service Reserve Fund) together with the investment income therefrom except to the extent such income is required to be deposited in the Rebate Fund pursuant to a Supplemental Resolution; and (iii) all other moneys and securities to be received, held or set aside by the Authority or by any Fiduciary pursuant to the General Resolution (except Subordinated Bond proceeds). It is the intention of the Authority that, to the fullest extent permitted by law, this pledge shall be valid and binding from the time when it is made, that the Revenues, moneys, securities and other funds so pledged and then or thereafter received by the Authority shall immediately be subject to the lien of such pledge and shall be valid and binding as against all parties having claims of any kind in tort, contract or otherwise against the Authority, irrespective of whether such parties have notice thereof.
Subject only to the prior pledge created for the payment of the Bonds in the General Resolution and the applications and charges set forth or referred to in the General Resolution, and on the terms and conditions set forth therein with respect to such prior pledge, applications and charges, the Subordinated Bond Revenues, the Subordinated Debt Service Fund and the Subordinated Debt Service Reserve Fund are further pledged to the payment of the Subordinated Bonds. (Section 501)
Establishment of Funds and Accounts. The General Resolution establishes the following special Funds and Accounts in the name of Maine Turnpike Authority:
(a) Capital Fund
(b) Revenue Fund
(c) Debt Service Fund, containing:
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(i) Interest Account
(ii) Principal Account
(iii) Redemption Account
(d) Debt Service Reserve Fund
(e) Reserve Maintenance Fund
(f) General Reserve Fund, containing:
(i) Insurance Account
(ii) Improvement Account
(iii) Department of Transportation Provision Account
(iv) Interchange Account
(g) Subordinated Debt Service Fund, containing:
(i) Subordinated Interest Account
(ii) Subordinated Principal Account
(iii) Subordinated Redemption Account
(h) Subordinated Debt Service Reserve Fund
(i) Rebate Fund.
Any Supplemental Resolution providing for a Series of Secured Bonds may establish separate Accounts or Subaccounts which shall be designated by reference to that particular Series of Secured Bonds in any of the foregoing Funds and Accounts.
Any Supplemental Resolution which provides for a Credit Facility to secure the payment of the principal of and interest on the Secured Bonds authorized thereby or to secure the payment of the Tender Option Price, may establish one or more Accounts in the Debt Service Funds, Debt Service Reserve Fund, the Subordinated Debt Service Fund or the Subordinated Debt Service Reserve Fund, as appropriate, to segregate the moneys received from any draw or payment pursuant to a Credit Facility or to provide a separate source of payment on any such Secured Bonds; provided, however, that to the extent that such moneys are not available to pay Debt Service Charges on all Outstanding Bonds, any reimbursement to the provider of such Credit Facility shall be made solely from Subordinated Bond Pledged Collateral.
Unless otherwise expressly provided in the General Resolution, the Revenue Fund, the Reserve Maintenance Fund and the General Reserve Fund may be held by one or more Depositaries, as determined by the Authority. The Capital Fund, the Debt Service Fund, the Debt Service Reserve Fund, the Subordinated Debt Service Fund, the Subordinated Debt Service Reserve Fund and the Rebate Fund shall be held by the Trustee. (Section 502)
Capital Fund. All payments from the Capital Fund shall be for the Costs of Turnpike Projects, provided that the Authority may requisition the Trustee to make payments for other purposes from the Capital Fund with proceeds from the sale of Bonds which were issued as Tax Exempt Obligations if the Authority shall first deliver to the Trustee an opinion of Bond Counsel to the effect that any such payment shall not adversely affect the exclusion of the interest paid on the Bonds from gross income under federal income tax laws. The Authority shall requisition the Trustee for each payment from the Capital Fund by filing with the Trustee a Capital Requisition Certificate.
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Upon receipt of each such Certificate, the Trustee shall withdraw from the Capital Fund an amount equal to the total of the amounts to be paid as set forth in such Certificate. Each such obligation shall be paid by check (or other method of transaction acceptable to the Authority and the Trustee) signed by an Authorized Official.
When the payments from the Capital Fund shall have been completed, which fact shall be evidenced to the Trustee by a Certificate stating the date of such completion, signed by an Authorized Official of the Authority and approved by the Consulting Engineers, the balance in the Capital Fund not reserved by the Authority for the payment of any remaining part of any Costs of Turnpike Projects (whether or not such Costs were financed with the issuance of any Secured Bonds), shall be transferred by the Trustee to the Debt Service Fund and credited as provided in a Supplemental Resolution. (Section 503)
Revenue Fund. The Authority covenants that all Revenues from and after the time of the issuance and delivery of the Series 1991 Bonds will be collected by the Authority and deposited daily, or as soon as practicable, to the credit of the Revenue Fund. Except for the transfers authorized in the paragraph below, all moneys held for the credit of the Revenue Fund shall be expended solely for Operating Expenses and for the payment of amounts necessary to satisfy the Authority's obligations pursuant to section 148(f) of the Code. During any Fiscal Year the total amount of payments from the Revenue Fund shall not be in excess of the unencumbered balance available for Operating Expenses in accordance with the Annual Budget for such Fiscal Year; provided, however, that payments may be made from the Revenue Fund in excess of such unencumbered balance if the Consulting Engineers approve such payments for an Emergency, as evidenced in a Certificate filed with the Depositary holding the Revenue Fund.
On or before the 15th day of each month, beginning June 15, 1991, the Authority shall cause the Fiduciary holding the Revenue Fund to disburse from the Revenue Fund an amount equal to the reconciled balance of all moneys held for the credit of the Revenue Fund at the close of business on the last day of the next preceding month less an amount (to be retained for Operating Expenses pursuant to the paragraph above) equal to fifteen per centum (15%) of the amount shown by the Annual Budget to be necessary for Operating Expenses for the current Fiscal Year. The respective disbursements shall be set forth by the Authority in a Certificate to such Fiduciary and shall occur in the following order:
(a) to the Trustee for credit to the Interest Account of the Debt Service Fund, such amount as, together with any other funds then in said Interest Account and available for such purpose, shall be equal to the amount required to pay the interest portion of the Debt Service Charges which will become payable on the next ensuing Payment Date on all Outstanding Bonds;
(b) to the Trustee for credit to the Principal Account, such amount as, together with any other funds then in said Principal Account and available for such purpose, shall be required to pay the principal portion of Debt Service Charges on all Outstanding Bonds which will become payable on the next ensuing Principal Payment Date;
(c) to the Trustee for credit to the Debt Service Reserve Fund, such amount as may be required to make the amount then to the credit of the Debt Service Reserve Fund equal to the Debt Service Reserve Requirement; provided, however, that in connection with any Debt Service Reserve Requirement which has been increased as a result of (A) the Net Revenues being less than two hundred percent (200%) of the Debt Service on Outstanding Bonds in either of the two consecutive immediately preceding Fiscal Years, the Authority may establish one or more additional separate Accounts within the Debt Service Reserve Fund for the increased amount which may be funded in level monthly payments over a 12 month period beginning with the month of January following such two immediately preceding Fiscal Years (except that any such monthly payments from prior months which have not been funded shall be funded immediately) and (B) the issuance of any Additional Bonds, the Authority may establish one or more additional separate Accounts within the Debt Service Reserve Fund for the increased amount which may be funded in level monthly payments over a 36 month period, beginning with the month next following the issuance of such Additional Bonds;
(d) to the Fiduciary holding the Reserve Maintenance Fund for credit to the Reserve Maintenance Fund, such amount as may be required to make the amount deposited for the credit of the Reserve Maintenance Fund in such Fiscal Year equal to the Required Reserve Maintenance Deposit; provided, however, that if the amount so deposited for the credit of said Fund in any Fiscal Year shall be less than the Required Reserve Maintenance Deposit, the requirement thereof shall nevertheless be cumulative and the B-5 APPENDIX B
amount of any deficiency in any Fiscal Year shall be added to the amount otherwise required to be deposited in each Fiscal Year thereafter until such time as such deficiency shall have been made up, unless such Required Reserve Maintenance Deposit shall have been modified by the Authority with the consent of the Consulting Engineers as evidenced in a Certificate of the Authority and a Certificate of the Consulting Engineers, signed copies of such Certificates to be filed with the Trustee and the Authority; and
(e) to the Fiduciary holding the General Reserve Fund for credit to the General Reserve Fund, the balance remaining after making the deposits under clauses (i), (ii), (iii) and (iv) above. (Section 504)
Debt Service Funds. The Trustee shall, from time to time, withdraw from the Debt Service Fund and (i) remit by mail to each owner of Bonds the amounts required for paying interest upon such Bonds as such interest becomes due and (ii) set aside or deposit in trust with the Paying Agent sufficient moneys for paying the principal of all Outstanding Bonds as the principal becomes due.
The Trustee further shall, from time to time, withdraw from the Subordinated Debt Service Fund and (i) remit by mail to each owner of Subordinated Bonds the amounts required for paying interest upon such Subordinated Bonds as such interest becomes due and (ii) set aside or deposit in trust with the Paying Agent sufficient moneys for paying the principal of all Outstanding Subordinated Bonds as the principal becomes due. (Section 505)
Debt Service Reserve Funds. Moneys held for the credit of the Debt Service Reserve Fund shall be used for the purpose of paying interest on and principal of Bonds whenever moneys on deposit in the Debt Service Fund shall be insufficient for such purpose. To the extent that the moneys held for the credit of the Debt Service Fund five Business Days prior to a Payment Date shall be insufficient to pay the Debt Service Charges due and payable on Bonds on such Payment Date, the Trustee shall immediately withdraw moneys from the Debt Service Reserve Fund to deposit into the Debt Service Fund in an amount, when added to the moneys in the Debt Service Fund and available to pay the Debt Service Charges on such Payment Date, will be sufficient to pay such Debt Service Charges on such Payment Date. If at the time of evaluation of the investments held in the Debt Service Reserve Fund pursuant to the General Resolution the moneys held for the credit of the Debt Service Reserve Fund shall exceed the Debt Service Reserve Requirement for Outstanding Bonds, such excess amount shall be transferred by the Trustee to the credit of the Capital Fund if there is any balance remaining in the Capital Fund to be applied to Costs of Turnpike Projects, or if there is no such balance, then to the credit of the Debt Service Fund in accordance with the applicable Certificate as to Tax Matters.
Moneys held for the credit of the Subordinated Debt Service Reserve Fund shall be used for the purpose of paying interest on and principal of Subordinated Bonds whenever moneys on deposit in the Subordinated Debt Service Reserve Fund shall be insufficient for such purpose. To the extent that the moneys held for the credit of the Subordinated Debt Service Fund five Business Days prior to a Payment Date shall be insufficient to pay the Debt Service Charges due and payable on Subordinated Bonds on such Payment Date, the Trustee shall immediately withdraw moneys from the Subordinated Debt Service Reserve Fund to deposit into the Subordinated Debt Service Fund in an amount, when added to the moneys in the Subordinated Debt Service Fund and available to pay such Debt Service Charges on such Payment Date, will be sufficient to pay such Debt Service Charges on such Payment Date. If at the time of evaluation of the investments held in the Debt Service Reserve Fund pursuant to the General Resolution the moneys held for the credit of the Subordinated Debt Service Reserve Fund shall exceed the Debt Service Reserve Requirement for Outstanding Subordinated Bonds, such excess amount shall be transferred by the Trustee to the credit of the Capital Fund if there is any balance remaining in the Capital Fund to be applied to Costs of Turnpike Projects, or if there is no such balance, then to the credit of the Subordinated Debt Service Fund in accordance with the applicable Certificate as to Tax Matters.
Moneys held in the Debt Service Reserve Accounts established for each series of Bonds shall be applied in accordance with the provisions set forth in the General Resolution. (Section 506)
Redemption Accounts. Moneys held for the credit of the Redemption Account and the Subordinated Redemption Account shall be applied to the redemption or payment of Outstanding Bonds and Outstanding Subordinated Bonds, respectively, as follows:
(a) Subject to the provisions of the General Resolution and the following paragraph (b), the Trustee shall call for redemption on each Payment Date on which Secured Bonds are subject to redemption such B-6 APPENDIX B
amount of Secured Bonds or portions of Secured Bonds then subject to redemption as, with any premium payable under the General Resolution and all necessary and proper expenses incurred in connection therewith, will exhaust the Redemption Account as nearly as may be; provided, however, that not less than One Hundred Thousand Dollars ($100,000) principal amount of Secured Bonds shall be called for redemption at any one time. Such redemption shall be made pursuant to the provisions of the General Resolution.
(b) Not less than thirty (30) days before the redemption date the Trustee shall withdraw from the Debt Service Fund and from the Redemption Account and set aside in separate accounts the respective amounts required for paying the Debt Service Charges on the Bonds or portions of Bonds so called for redemption, and shall pay from the Redemption Account all expenses in connection with such redemption. Not less than thirty (30) days before the redemption date the Trustee shall withdraw from the Subordinated Debt Service Fund and from the Subordinated Redemption Account and set aside in separate accounts the respective amounts required for paying the Debt Service Charges on the Subordinated Bonds or portions of Subordinated Bonds so called for redemption, and shall pay from the Subordinated Redemption Account all expenses in connection with such redemption.
(c) Moneys in the Redemption Account and the Subordinated Redemption Account shall be allocated by the Trustee in each Fiscal Year for the payment of Bonds and Subordinated Bonds, respectively, then Outstanding, either by purchase or redemption, provided, however, that if the respective Secured Bonds shall not then be subject to redemption and if the Trustee shall at any time be unable to exhaust the moneys applicable to the respective Secured Bonds in the purchase of such Secured Bonds at not more than par and accrued interest to the date of such purchase plus the premium, if any, payable thereon if called for redemption, such moneys or the balance of such moneys, as the case may be, shall be retained in the Redemption Account or the Subordinated Redemption Account, as appropriate, and, as soon as it is feasible, applied to the payment or redemption of any Secured Bonds secured by such Account. (Section 507)
Reserve Maintenance Fund. Moneys held for the credit of the Reserve Maintenance Fund shall be held for the following purposes, as directed by the Authority:
(a) to pay all costs incurred in connection with Reserve Maintenance Fund Projects;
(b) to pay Costs of Turnpike Projects, provided that such payment is necessary to prevent a loss of Revenues;
(c) to pay for premiums for insurance required under the General Resolution;
(d) to replenish the Debt Service Reserve Fund to the extent that there are insufficient moneys in the General Reserve Fund to replenish the Debt Service Reserve Fund, provided that the amount to be withdrawn is not needed for any other purpose for which the Reserve Maintenance Fund was created during the ensuing 12 months; and
(e) to pay for an Emergency, provided that moneys in the Revenue Fund and in the General Reserve Fund are not sufficient to pay for the costs resulting from the Emergency. (Section 508)
General Reserve Fund. (a) On or before the 20th day of each month, beginning June 20, 1991, the Authority shall cause the Fiduciary holding the General Reserve Fund to allocate or transfer the amount transferred from the Revenue Fund to the General Reserve Fund by the close of business on the 15th day of such month as provided in the General Resolution. The respective allocations and transfers shall be set forth by the Authority in a Certificate to such Fiduciary and shall occur in the following order:
(i) to the Trustee for credit to the Interest Account to make up any deficiency therein following the deposit made under the General Resolution;
(ii) to the Trustee for credit to the Principal Account to make up any deficiency therein following the deposit made under the General Resolution;
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(iii) to the Trustee for credit to the Debt Service Reserve Fund to make up any deficiency therein following the deposit made under the General Resolution;
(iv) to the Trustee for credit to the Subordinated Interest Account, such amount as is directed in such Certificate, or if there is no such direction, such amount as, together with any other funds then in said Subordinated Interest Account, shall be equal to the amount required to pay the interest which will become payable on the next following Payment Date on all Outstanding Subordinated Bonds;
(v) to the Trustee for credit to the Subordinated Principal Account, such amount as is directed in such Certificate, or if there is no such direction, such amount as, together with any other funds then in the Subordinated Principal Account, shall be required to pay the principal of all Outstanding Subordinated Bonds which will become payable on the next following Principal Payment Date;
(vi) to the Trustee for credit to the Subordinated Debt Service Reserve Fund, such amount as is directed in such Certificate, or if there is no such direction, such amount as may be required to make the amount then credited to the Subordinated Debt Service Reserve Fund equal to the Debt Service Reserve Requirement applicable to all Outstanding Subordinated Bonds, as such amount may be modified from time to time in accordance with any applicable Supplemental Resolution authorizing the issuance of Subordinated Bonds;
(vii) to the credit of the Insurance Account, the amount, if any, which is directed in such Certificate, for application or transfer as shall be directed by the Authority pursuant to (b) below;
(viii) to the credit of the Improvement Account, the amount, if any, which is directed in such Certificate; and
(ix) to the credit of the Department of Transportation Provision Account, the amount, if any, which is directed in such Certificate;
(x) to the credit of the Interchange Account, the amount, if any, which is directed in such Certificate; and
(xi) the balance, if any, to the credit of the Improvement Account.
(b) Moneys held for the credit of the Insurance Account shall be disbursed, at the direction of the Authority, for the purposes of paying any and all claims against the Authority or the repair or replacement of any damaged or destroyed facilities or property of the Turnpike which has been self-insured pursuant to the provisions of the General Resolution.
(c) Subject to the covenant in the General Resolution, moneys in the Department of Transportation Provision Account shall be transferred, at the direction of the Authority, (i) to a trustee or agent pursuant to Section 1974(6) of the Enabling Act to secure or to be applied to the payment of obligations issued pursuant to Sections 1968(2-A) and 1968(3) of the Enabling Act, (ii) to the Department of Transportation pursuant to Section 1961(2) of the Enabling Act, (iii) to the Trustee for credit to replenish the Debt Service Reserve Fund or (iv) to another Account within the General Reserve Fund.
(d) Moneys in the Interchange Account shall be transferred, at the direction of the Authority, to the Department of Transportation as a proper payment in accordance with Section 1974(3) of the Enabling Act, to the Trustee for credit to replenish the Debt Service Reserve Fund or to another Account within the General Reserve Fund.
(e) Moneys held for the credit of the Improvement Account shall be disbursed, at the direction of the Authority, for the following purposes:
(i) to pay all costs incurred in connection with Reserve Maintenance Fund Projects;
B-8 APPENDIX B
(ii) to pay Costs of Turnpike Projects;
(iii) to pay for an Emergency, provided that moneys held for the credit of the Revenue Fund are insufficient to pay for the costs resulting from the Emergency;
(iv) to the Trustee for credit to replenish the Debt Service Reserve Fund, as directed by the Authority;
(v) to another Account within the General Reserve Fund;
(vi) to the Trustee for credit to the Rebate Fund, as directed by the Authority; and
(vii) to pay for any other lawful corporate purpose of the Authority as authorized in the Enabling Act, provided that (A) there are no deficiencies in any other Fund or Account, (B) there is no Event of Default which has occurred and is continuing and (C) the Net Revenues during the Fiscal Year immediately preceding the Fiscal Year in which such payment is made were at least equal to two hundred percent (200%) of the Debt Service on Outstanding Bonds for such Fiscal Year and provided further that the Authority may create one or more subaccounts within the Improvement Account, and provide for the deposit of certain funds held in the Improvement Account to such subaccounts, to be applied to future Reserve Maintenance Fund Projects or Costs of Turnpike Projects expected to arise within five years of such deposit. The amount of deposits for such future Reserve Maintenance Fund Projects shall be certified by the Consulting Engineers as set forth in the General Resolution. (Section 509)
Rebate Fund. Upon the issuance, sale and delivery of any Series of Secured Bonds subject to the Rebate Fund Requirement, the Trustee shall establish a separate account within the Rebate Fund for such Series. Funds on deposit in the Rebate Fund shall be applied as set forth in the applicable Supplemental Resolution. Unless otherwise specified in the applicable Supplemental Resolution, interest or other income derived from the investment or deposit of moneys in the Rebate Fund shall be transferred to the Revenue Fund. (Section 510)
Deposits and Disbursements. All Revenues and other moneys deposited in any Fund or Account may be placed in a demand or time deposit, if and as directed by the Authority, provided that such deposits shall permit the moneys so held to be available for use at the time when needed. All moneys held by any Fiduciary may be deposited by such Fiduciary in its banking department on demand or, if and to the extent directed by the Authority and acceptable to such Fiduciary, on time deposit, provided that such moneys on deposit be available for use at the time when needed.
Except as otherwise provided in the General Resolution, (i) all payments from any Fund or Account shall be made by check (or other manner of transaction acceptable to the Authority and the Fiduciary) signed by an Authorized Official and (ii) all transfers from one Fund or Account to another Fund or Account shall be made by the Fiduciary upon receiving a Certificate from the Authority setting forth the amount to be transferred and the directions required for the transfer. As long as any Secured Bonds are Outstanding, the Authority shall maintain Disbursement Records with respect to each payment and transfer which will be available for inspection during the ordinary business hours of the Authority, upon reasonable notice, by any Fiduciary, the Consulting Engineers, any Accountant engaged to audit the financial statements or reports of the Authority and any Bondholder.
Any Certificate received by any Fiduciary from the Authority as required in the General Resolution may be relied upon by and shall be retained in the possession of the Fiduciary. (Section 511)
Moneys Held in Trust. Subject to the terms and conditions set forth in the General Resolution, moneys credited to the Debt Service Fund and the Debt Service Reserve Fund shall be held in trust and disbursed by the Trustee for (a) the payment of interest upon the Bonds issued under the General Resolution as such interest falls due or (b) the payment of the principal of such Bonds as such principal payments become payable or (c) the payment of the purchase or Redemption Price of such Bonds before maturity.
Subject to the terms and conditions set forth in the General Resolution, moneys credited to the Subordinated Debt Service Fund and the Subordinated Debt Service Reserve Fund shall be held in trust and disbursed by the Trustee for (a) the payment of interest upon the Subordinated Bonds issued under the General B-9 APPENDIX B
Resolution as such interest falls due or (b) the payment of the principal of such Bonds as such principal payments become payable or (c) the payment of the purchase or Redemption Price of such Bonds before maturity.
Moneys in the Capital Fund, the Revenue Fund, the Reserve Maintenance Fund and the General Reserve Fund shall be held in trust and applied as provided in the General Resolution with respect to each Fund, or Account therein, and, except for moneys in the Subordinated Debt Service Fund and the Subordinated Debt Service Reserve Fund, pending such application, shall be subject to the Pledge in favor of the Holders of Outstanding Bonds and for the security of the Holders of Bonds until paid out or transferred as provided in the General Resolution. Moneys in the Subordinated Debt Service Fund and the Subordinated Debt Service Reserve Fund, pending such application, shall be subject to the Subordinated Pledge in favor of the Holders of Outstanding Subordinated Bonds and for the security of the Holders of Subordinated Bonds until paid out or transferred as provided in the General Resolution. (Section 512)
Unclaimed Moneys in the Debt Service Funds. All moneys which the Trustee shall have withdrawn from the Debt Service Fund or the Subordinated Debt Service Fund or shall have received from any other source and set aside for the purpose of making any payments on account of principal of any Secured Bonds, either at the maturity thereof or upon call for redemption, or for the purpose of paying any interest on any Secured Bonds, shall be held in trust for the respective Holders of such Secured Bonds. But any moneys which shall be set aside or deposited by the Trustee and which shall remain unclaimed by the Holders of the Secured Bonds for the period of five years after the date on which such Secured Bonds or such interest shall have become payable shall upon request in writing be paid to the Authority or to such officer, board or body as may then be entitled by law to receive the same, and thereafter the Holders of such Secured Bonds or other persons entitled to such payment by virtue of having been Holders of such Secured Bonds shall look only to the Authority or to such officer, board or body, as the case may be, for payment and then only to the extent of the amounts so received without any interest thereon, and the Trustee shall have no responsibility with respect to such moneys. (Section 513)
Depositaries and Investment of Funds
Depositaries of Moneys and Securities for Deposits. All moneys received by the Authority under the provisions of the General Resolution shall be deposited with the Trustee, or one or more Depositaries to be designated by the Authority with the approval of the Trustee (which approval shall not be unreasonably withheld). All moneys deposited under the provisions of the General Resolution with the Trustee or any other Depositary shall be held in trust and applied only in accordance with the provisions of the General Resolution, and shall not be subject to lien or attachment by any creditor of the Authority.
All moneys deposited with the Trustee or any other Depositary under the General Resolution shall be continuously secured, for the benefit of the Authority and the Holders of the Secured Bonds, either (a) by depositing with a bank or trust company approved by the Trustee, and the Authority as custodian, as collateral security, Government Obligations or other marketable securities eligible as security for the deposit of trust funds under regulations of the Board of Governors of the Federal Reserve System, having a market value (exclusive of accrued interest) not less than the amount of such deposit, or (b) as to all or any part of such deposit, by depositing with the Trustee, or with the Treasurer of the Authority in the case of moneys deposited or remaining on deposit with the Trustee, the indemnifying bond or bonds of a surety company or companies qualified as surety for United States Government deposits and qualified to transact business in the state in which such Depositary is located in a penal sum not less than the amount of moneys so deposited or such part thereof, such bond or bonds to be approved in writing by the Authority, or (c) in such other manner as may then be required or permitted by applicable state or federal laws and regulations regarding the security for, or granting a preference in the case of, the deposit of trust funds; provided, however, that it shall not be necessary for the Paying Agent to give security for the deposit of any moneys with it for the payment of the principal of or the interest on any Secured Bonds, or for the Trustee to give security for any moneys which shall be represented by obligations purchased under the provisions of the General Resolution as an investment of such moneys.
All moneys deposited with each Fiduciary shall be credited to the particular Fund, Account or Subaccount to which such moneys belong. (Section 601)
Investment of Funds. Moneys on deposit to the credit of the Debt Service Fund, the Subordinated Debt Service Fund and the Rebate Fund shall, as nearly as may be practicable, be continuously invested and reinvested by the Trustee, as directed by an Authorized Official, in Government Obligations which shall mature, or which shall be B-10 APPENDIX B
subject to redemption by the holder thereof at the option of such holder, not later than the respective dates, as estimated by the Authority, when moneys held for the credit of such fund will be required for the purposes intended.
Moneys on deposit to the credit of the Debt Service Reserve Fund and the Subordinated Debt Service Reserve Fund shall be continuously invested and reinvested by the Trustee, as directed by an Authorized Official, in Government Obligations which shall mature, or which shall be subject to redemption by the holder thereof at the option of such holder, not later than seven years after the date of such investment.
Moneys on deposit in the Revenue Fund, the Capital Fund, the Reserve Maintenance Fund, and the General Reserve Fund shall be continuously invested and reinvested by the Depositary holding such Fund in Investment Securities as directed by an Authorized Official.
Interest (net of that which represents a return of accrued interest paid in connection with the purchase of any investment) and other investment earnings on any moneys or investments in the Funds and Accounts, other than the Capital Fund, the Debt Service Fund, the Debt Service Reserve Fund, the Subordinated Debt Service Fund and the Subordinated Debt Service Reserve Fund shall be paid into the Revenue Fund on the last Business Day of each month. Interest (net of that which represents a return of accrued interest paid in connection with the purchase of any investment) and other investment earnings on any moneys or investments in the Capital Fund, the Debt Service Fund and the Subordinated Debt Service Fund shall be retained in the Fund in which such earnings accrued. Interest (net of that which represents a return of accrued interest paid in connection with the purchase of any investment) and other investment earnings on any moneys or investments in the Debt Service Fund shall be paid on the last Business Day of each month, on a pro rata basis based on the required deposits to each Series Subaccount therein, first to the Interest Account of the Debt Service Fund and second to the Principal Account of the Debt Service Fund. Interest (net of that which represents a return of accrued interest paid in connection with the purchase of any investment) and any other investment earnings on the Subordinated Debt Service Fund shall be paid on the last Business Day of each month, on a pro rata basis based on the required deposits to each Series Subaccount therein, first to the Interest Account of the Subordinated Debt Service Fund and second to the Principal Account of the Subordinated Debt Service Fund. Interest (net of that which represents a return of accrued interest paid in connection with the purchase of any investment) and other investment earnings on any moneys or investments in the Debt Service Reserve Fund shall be paid into the Capital Fund and credited to the related Project Account until the presentation to the Trustee of a Certificate stating the date of completion pursuant to the General Resolution and thereafter shall be paid into the Debt Service Fund, in each case on the last Business Day of each month. Interest (net of that which represents a return of accrued interest paid in connection with the purchase of any investment) and other investment earnings on any moneys or investments in the Subordinated Debt Service Reserve Fund shall be credited as provided in the applicable Supplemental Resolution.
The Fiduciary shall sell at the best price obtainable or present for redemption any obligations so purchased whenever it shall be necessary to do in order to provide moneys to meet any payment or transfer from such Fund or Account. Neither the Fiduciary nor the Authority shall be liable or responsible for any loss resulting from any such investment.
Moneys and securities credited to any Fund or Account may be commingled with moneys and securities credited to other Funds or Accounts for the purposes of establishing checking or other bank accounts for purposes of investing funds or otherwise; provided, however, the Trustee and the Authority shall at all times maintain or cause to be maintained accurate books and records reflecting the amounts credited to the respective Funds and Accounts held by each of them. All withdrawals from any commingled moneys or securities shall be charged against the proper Fund or Account and no moneys shall be withdrawn from commingled moneys if there is not on credit to the Fund or Account to be charged sufficient funds to cover such withdrawal. (Section 602)
Valuation and Sale of Investments. Obligations purchased as an investment of moneys in any Fund or Account established under the provisions of the General Resolution shall be deemed at all times to be a part of such Fund or Account and any profit realized from the liquidation of such investment shall be credited to such Fund or Account and any loss resulting from the liquidation of such investment shall be charged to such Fund or Account. Except as is provided below, the Investment Securities credited to any Fund or Account shall be valued on a cost of purchase basis.
In computing the amount in the Debt Service Reserve Fund or the Subordinated Debt Service Reserve Fund for any purpose provided in the General Resolution, obligations purchased as an investment of moneys therein shall B-11 APPENDIX B
be valued at the amortized cost of such obligations; provided, however, such obligations shall be valued at market, as provided in any applicable Certificate as to Tax Matters. As used in the General Resolution, the term "amortized cost", when used with respect to an obligation purchased at a premium above or a discount below par, means the value as of any given time obtained by dividing the total premium or discount at which such obligation was purchased by the number of days remaining to maturity on such obligation at the date of such purchase and by multiplying the amount thus calculated by the number of days having passed since such purchase; and (i) in the case of an obligation purchased at a premium by deducting the product thus obtained from the purchase price, and (ii) in the case of an obligation purchased at a discount by adding the product thus obtained to the purchase price. Any deficiency resulting from a decrease in the valuation of investments held in the Debt Service Reserve Fund or the Subordinated Debt Service Reserve Fund may be disregarded for purposes of calculating deposits required pursuant to the General Resolution, provided that the amount on deposit in the Debt Service Reserve Fund and in the Subordinated Debt Service Reserve Fund is at least 95% of the respective Debt Service Reserve Fund Requirement. The accrued interest paid in connection with the purchase of any obligation shall be included in the value thereof until interest on such obligation is paid. Such computation shall be made annually on July 1 and at such other times as the Authority shall determine or as may be required by the General Resolution.
Except as otherwise provided in the General Resolution, the Trustee shall sell at the best price obtainable, or present for redemption, any obligation so purchased as an investment whenever it shall be requested in writing by an Authorized Official so to do. Whenever it shall be necessary in order to provide moneys to meet any payment or transfer from any Fund held by the Trustee, the Trustee shall sell at the best price obtainable or present for redemption such obligation or obligations designated by an Authorized Official necessary to provide sufficient moneys for such payment or transfer; provided, however, that if the Authority fails to provide such designation promptly after request thereof by the Trustee, the Trustee may in its discretion select the obligation or obligations to be sold or presented for redemption. The Trustee shall not be liable or responsible for any loss resulting from the making of any such investment or the sale or redemption of any obligation in the manner provided above. (Section 603)
Credit Facilities. In connection with the issuance of any Series of Secured Bonds, the Authority may obtain or cause to be obtained one or more Credit Facilities providing for payment of all or a portion of the principal or Redemption Price of or interest due or to become due on such Bonds, providing for the purchase of such Secured Bonds by the provider of such Credit Facility or providing funds for the purchase of such Bonds by the Authority. In connection therewith the Authority may enter into agreements with the provider of such Credit Facility providing for, among other things: (i) the payment of fees and expenses to such provider for the issuance of such Credit Facility; (ii) the terms and conditions of such Credit Facility and the Series of Secured Bonds affected thereby, including without limitation any subrogation rights of the provider; and (iii) the security, if any, to be provided for such Credit Facility.
The Authority may secure such Credit Facility by an agreement providing for the purchase of the Series of Secured Bonds secured thereby with such adjustments to the rate of interest, method of determining interest, maturity, or redemption provisions as specified by the Authority in the applicable Supplemental Resolution. The Authority may also in an agreement with the provider of such Credit Facility agree to reimburse directly such provider for the Reimbursement Obligation. Any unpaid Reimbursement Obligation shall be deemed to be an Outstanding Secured Bond of the Series secured by the Credit Facility for purposes of the General Resolution to the extent that such Reimbursement Obligation resulted from a payment by the Authority of principal, whether at maturity or upon acceleration or redemption. The portion of any Reimbursement Obligation which represents an obligation to reimburse for the payment of principal of or interest on (i) Bonds shall be secured by the Pledge or (ii) Subordinated Bonds shall be secured by the Subordinated Pledge. Any such Credit Facility shall be for the benefit of and secure such Series of Secured Bonds or portion thereof as specified in the applicable Supplemental Resolution. The rights of the provider of a Credit Facility shall be subordinate to or on a parity with the rights of the holders of any Bonds. (Section 207)
Indebtedness Covenants
Payment of Debt Service Charges. The Authority covenants that it will promptly pay the Debt Service Charges on every Secured Bond at the places, on the dates and in the manner provided in the General Resolution and in said Secured Bond, according to the true intent and meaning thereof. Except as otherwise provided in the General Resolution, the Debt Service Charges on the Bonds are payable solely from the Bond Pledged Collateral and the Debt Service Charges on the Subordinated Bonds are payable solely from the Subordinated Bond Pledged B-12 APPENDIX B
Collateral. Nothing in the Secured Bonds or in the General Resolution shall be construed (a) as obligating the State or any political subdivision thereof to pay the Secured Bonds or the interest and any premium thereon except from the Pledged Collateral or (b) as pledging the faith and credit or any taxing power of the State or of any such political subdivision.
The Authority shall not extend or assent to the extension of the maturity of any Secured Bond or any scheduled payment of interest, and if the maturity of any Secured Bond or any scheduled payment of interest shall be extended, such Secured Bond or payment of interest shall not be entitled, in case of any default under the General Resolution, to the benefit of the General Resolution or to payment out of Pledged Collateral (except moneys held in trust for (a) the redemption of such Secured Bonds, as provided in the General Resolution, or (b) the payment or redemption of such Secured Bond, and any accrued interest thereon, pursuant to the General Resolution) until the prior payment of the principal of all Secured Bonds Outstanding the maturity of which has not been extended and of such portion of the accrued interest on the Secured Bonds as shall not be represented by such extended payment of interest; provided, however, nothing in the General Resolution shall be construed to entitle the Holders of Subordinated Bonds to receive any payment of Debt Service Charges, whether or not such payment is in default, from any source other than Subordinated Bond Pledged Collateral. Nothing in the General Resolution shall be deemed to limit the right of the Authority to issue Additional Bonds for purposes of refunding Outstanding Bonds or to issue Subordinated Bonds for the purpose of refunding Outstanding Secured Bonds and such issuance of either Additional Bonds or Subordinated Bonds shall not be deemed to constitute an extension of the maturity of or payment of interest on Bonds. (Section 701)
Further Assurance. The Authority covenants that at any and all times the Authority shall, as far as it may be authorized by law, pass, make, do, execute, acknowledge and deliver, all and every such further resolutions, acts, deeds, conveyances, assignments, transfers and assurances as may be necessary or desirable for the better assuring, conveying, granting, pledging, assigning and confirming all and singular the Pledged Collateral or the rights pledged or assigned by the General Resolution, or any property or rights which the Authority may become bound to pledge or assign. (Section 702)
Power to Issue Secured Bonds. The Authority covenants that it is duly authorized under all applicable laws to issue the Secured Bonds and to adopt the General Resolution and to pledge the Pledged Collateral in the manner and to the extent provided in the General Resolution. Except as provided in the General Resolution, the Pledged Collateral is and will be free and clear of any pledge, lien, charge or encumbrance thereon or with respect thereto prior to, or of equal rank with, the Pledge or the Subordinated Pledge, and all corporate or other action on the part of the Authority to that end has been and will be duly and validly taken. The Secured Bonds and the provisions of the General Resolution are and will be valid and legally enforceable obligations of the Authority in accordance with their terms and the terms of the General Resolution. The Authority shall at all times, to the extent permitted by law, defend, preserve and protect the Pledge and the Subordinated Pledge and all the rights of the Bondholders under the General Resolution against all claims and demands. (Section 703)
Indebtedness and Liens. The Authority shall not issue any bonds, notes or other evidences of indebtedness, other than the Secured Bonds, which are payable from the Pledged Collateral or secured by the Pledge or the Subordinated Pledge, exclusive of the amounts held pursuant to the General Resolution and, except for the Pledge and the Subordinated Pledge and the fees and expenses of the Trustee under the General Resolution, shall not create or cause to be created any lien or charge on the Pledged Collateral.
Notwithstanding any other provision in the General Resolution, the Authority may authorize and issue pursuant to a separate resolution unrelated to the General Resolution one or more series of Unsecured Bonds which are payable solely from, and secured by a pledge or dedication of all or part of, the Non-Turnpike Revenues or other moneys and securities which are not a part of the Pledged Collateral or which are not otherwise held in trust by the Trustee for the payment or redemption of the Secured Bonds. (Section 704)
Tax Covenants. The Authority shall take, or require to be taken, such action as may from time to time be required to assure the continued exclusion from the federal gross income of Holders of any Series of Secured Bonds which are Tax Exempt Obligations, including, without limitation, the preparation and filing of any statements required to be filed by the Authority in order to establish and maintain such tax exclusion and exemption. In addition, the Authority shall not take, or permit to be taken on its behalf, any action which would adversely affect the exclusion from federal gross income of the interest on any Series of Secured Bonds which are Tax Exempt Obligations. B-13 APPENDIX B
The Authority shall not permit the investment or application of the proceeds of any Series of Secured Bonds which are Tax Exempt Obligations, including any funds considered proceeds within the meaning of section 148 of the Code, to be used to acquire any investment property the acquisition of which would cause such Secured Bonds to be "arbitrage bonds" within the meaning of said section 148. (Section 705)
No Impairment of Bondholders' Rights under Resolution. The Authority covenants and agrees that none of the Revenues will be used for any purpose other than as provided in the General Resolution and no contract or contracts will be entered into or any other action taken by which the rights of the Trustee or of the Bondholders might be impaired or diminished. The Authority further covenants that it will, from time to time, execute and deliver such further instruments and take such further action as may be required to carry out the purposes of the General Resolution. (Section 706)
Operation and Maintenance Covenants.
Operation and Maintenance of the Turnpike. So long as any Secured Bonds are Outstanding, the Authority covenants as follows:
The Authority has and will have good right and lawful power to construct, reconstruct, improve, maintain, operate and repair the Turnpike and to fix and collect concessions, charges, fees, fares, receipts, rents, and tolls for its use, all as provided in the Enabling Act as amended to the date of adoption of the General Resolution.
The Authority shall at all times operate or cause to be operated the Turnpike properly and in a sound and economical manner and shall maintain, preserve, reconstruct and keep the same or cause the same to be so maintained, preserved, reconstructed and kept, with the appurtenances and every part and parcel thereof, in good repair, working order and condition, and shall from time to time make, or cause to be made, all necessary and proper repairs, replacements and renewals so that at all times the operation of the Turnpike may be properly and advantageously conducted.
The Authority will establish and enforce reasonable rules and regulations governing the use of the Turnpike and the operation thereof, that it will observe and perform all of the terms and conditions contained in the Enabling Act, and that it will comply with all valid acts, rules, regulations, orders and directions of any legislative, executive, administrative or judicial body applicable to the Turnpike.
The Authority shall not acquire, construct, reconstruct, operate or maintain any road or highway as a part of the Turnpike which is not a part of the Turnpike as of the effective date of the General Resolution if such road or highway is in excess of five miles in length and the Authority is not authorized under the laws of the State, including without limitation the Enabling Act, to charge a toll or other fee which will produce Revenues in amounts which will substantially pay for the operation and maintenance of such road or highway and for the cost of its acquisition, whether purchased with moneys held in any Fund or with moneys received from any borrowing by the Authority, unless the Authority furnishes the Trustee with a Certificate signed by an Authorized Official, based upon a Consultant's Report, stating that, assuming such acquisition, construction, reconstruction, operation or maintenance and assuming that the tolls then in effect for the Turnpike would not be increased, the Net Revenues would reasonably be expected to be an amount at least equal to the Net Revenue Requirement for each Fiscal Year during the period beginning with the Fiscal Year in which such acquisition, construction, reconstruction, operation or maintenance first occurred and ending with the fifth Fiscal Year thereafter; provided, however, the Authority upon a unanimous vote of its members may authorize from time to time the acquisition, construction, operation, or maintenance of any such road or highway as long as there is no Event of Default which has occurred and is continuing under the General Resolution and the Authority is performing and will continue to perform its other agreements and obligations under the General Resolution and is, and, based upon a Consultant's Report, reasonably expects to be, in compliance with the other covenants, conditions and terms contained in the General Resolution for the current Fiscal Year and for each of the following five Fiscal Years.
Notwithstanding any provision contained in the General Resolution, no transfer shall be made to the Department of Transportation from the Department of Transportation Provision Account which in the aggregate during any Fiscal Year (other than the Fiscal Year ending December 31, 1991) exceeds the maximum amount permitted to be transferred pursuant to Title 23, Part 1, Chapter 24, Section 1974(4), Revised Maine Statutes, as in effect on the first day of the Fiscal Year ending December 31, 1991. (Section 801)
B-14 APPENDIX B
Toll Schedules and Revisions. The Authority covenants that tolls will be classified in a reasonable way to cover all traffic, so that the tolls may be uniform in application to all traffic falling within any reasonable class regardless of the status or character of any Person included in the traffic, that no reduced rate of toll will be allowed within any such class except through the use of commuter passes or other privileges based upon frequency or volume, and that, except as provided in the paragraph below or as may be required from time to time on a temporary basis for the safe and efficient operation of the Turnpike, no free vehicular passage will be permitted over the Turnpike, or any portion thereof, except to members, officers and employees of the Authority and of the Department of Transportation and the state police of the State while in the discharge of their official duties and except to employees of independent contractors while in the performance of their duties for which the Authority has contracted and to emergency vehicles authorized by the Authority while performing emergency services on the Turnpike; provided, however, that the Turnpike may be used at any and all times by the armed forces of the United States, the State and any of their allies for defense purposes or preparations therefor free of all tolls and charges, but any structural damage to the Turnpike created by such free use, ordinary deterioration or depreciation excepted, shall be compensated for at cost of repair or replacement.
The Authority covenants that it will continue in effect the present schedule of tolls for traffic over the Turnpike until such schedule shall be revised as hereinafter provided and that, except as hereinafter provided in the Section, it will not authorize or permit a reduction or reclassification in toll rates or any modification (except for the conversion of the north end of the Turnpike to a closed barrier system) to the toll collection system in effect as of the effective date of the General Resolution unless the Authorized Official furnishes the Trustee with a Certificate, based upon a Consultant's Report, stating that it is reasonably expected that the Net Revenue Requirement will be satisfied in the current Fiscal Year and in each of the five Fiscal Years following the rate reduction or reclassification or modification of the toll collection system. Subject to the foregoing provisions of this Section, from time to time and as often as it shall appear necessary the Authority will request the Consulting Engineers and the Traffic Consultants to furnish a Consultant's Report for the purpose of making recommendations as to a revised schedule of tolls and will inform the Trustee of such request. The Authority covenants that it will revise such schedule and such tolls as may be necessary or proper, in order that the Revenues will at all times be sufficient:
(i) to provide funds for the payment of Operating Expenses; and
(ii) to provide Net Revenues that are equal to or greater than the Net Revenue Requirement in any Fiscal Year; provided, however, that nothing herein shall be deemed to limit the Authority's right in its discretion to revise such schedule and such tolls in a reasonable manner in order to provide additional Revenues for making deposits to the General Reserve Fund.
The deposit to the credit of the Debt Service Fund in any Fiscal Year of an amount in excess of the amounts provided for above for such Fiscal Year shall not be taken into account in adjusting the schedule of tolls for any subsequent Fiscal Year or Fiscal Years. Any deficiency in the Required Debt Service Deposit or the Required Reserve Maintenance Deposit, or the amount of any Required Debt Service Reserve Deposit, in any Fiscal Year shall, as promptly as may be practicable, be added to the amounts provided for above for the remaining Fiscal Years in adjusting such schedule of tolls, provided that the amount so to be added to meet the requirements of clauses (i) and (ii) above in each of such subsequent Fiscal Years may be based upon recommendations of the Consulting Engineers and the Traffic Consultant.
If the Net Revenues for any Fiscal Year are less than the Net Revenue Requirement or the Required Reserve Maintenance Deposit in any Fiscal Year shall be less than the amounts recommended by the Consulting Engineers under the section entitled “Duties of Consulting Engineers” for such Fiscal Year, the Authority covenants that it will, before the 15th day of February of the following Fiscal Year, request the Consulting Engineers and the Traffic Consultant to prepare a Consultant's Report for the purpose of making recommendations as to a revised schedule of tolls in order that the Net Revenues will be reasonably expected to be at least equal to the Net Revenue Requirement for the next following Fiscal Year, and copies of such request and of the recommendations of the Consulting Engineers shall be filed with the Trustee.
Anything in the General Resolution to the contrary notwithstanding, if the Authority shall comply with all recommendations contained in such Consultant's Report in respect of tolls, it will not constitute an Event of Default under the provisions of the General Resolution if the total amounts credited to the Debt Service Fund or the Reserve B-15 APPENDIX B
Maintenance Fund in any Fiscal Year shall be less than the Required Debt Service Deposits or the Required Reserve Maintenance Deposits, respectively, for such Fiscal Year, or if the total amount credited to the Debt Service Reserve Fund at the close of any Fiscal Year shall result in the need to make a Required Debt Service Reserve Deposit in order to eliminate a deficiency therein. In the event of any such deficiency or the need for any such Required Debt Service Reserve Deposit, the Trustee or the Holders of not less than fifty per cent (50%) in principal amount of the Bonds Outstanding, or if no Bonds are Outstanding, Subordinated Bonds Outstanding, may, however, and the Trustee shall, upon the request of the Holders of not less than twenty-five per cent (25%) in principal amount of the Bonds then Outstanding, or if no Bonds are Outstanding, Subordinated Bonds Outstanding, and upon being indemnified to its satisfaction, institute and prosecute in a court of competent jurisdiction an appropriate action to compel the Authority to revise the schedule of tolls. The Authority covenants that it will adopt and charge tolls in compliance with any final order, decree or judgment entered in any such proceeding, or any modification thereof.
In the event that the Authority shall request the Consulting Engineers and the Traffic Consultant to prepare a Consultant's Report as provided in third paragraph of this Section above and the Consulting Engineers and the Traffic Consultant, after such request by the Authority, shall fail to file with the Authority a written Consultant's Report within ninety (90) days after such request, the Authority shall immediately designate and appoint other independent engineers or engineering firms or corporations with the qualifications of Consulting Engineers and Traffic Consultant to prepare such written Consultant's Report on or before the 1st day of June following. Such written Consultant's Report shall for all purposes be considered to be the equivalent of and substitute for the written Consultant's Report of the Consulting Engineers and Traffic Consultant referred to in in third paragraph of this Section above.
(f) The Authority covenants that it will adopt and institute the revised toll schedule within one hundred eighty (180) days after receipt of the Consultant's Report referred to in either in third paragraph of this Section or the preceding paragraph above. The Authority further covenants that immediately upon the adoption of any revised schedule of tolls certified copies thereof will be filed with the Trustee. (Section 802)
Annual Budgets and Certification of Required Deposits. The Authority covenants that on or before the 20th day of October in each Fiscal Year it will adopt a preliminary budget of Operating Expenses for the next following Fiscal Year. Copies of each such preliminary budget shall be filed with the Trustee and furnished to the Consulting Engineers. The preliminary budget shall also be accompanied by a written certification approved by the Authority which will determine, on a preliminary basis (i) the Required Debt Service Deposit for such Fiscal Year, which shall be in an amount not less than the Debt Service Charges on all Secured Bonds which are reasonably expected to be Outstanding during such Fiscal Year, (ii) the Required Reserve Maintenance Deposit for such Fiscal Year, which shall be an amount not less than the amount recommended by the Consulting Engineers under the section entitled “Duties of Consulting Engineers” to be deposited into the Reserve Maintenance Fund, and (iii) any anticipated Required Debt Service Reserve Deposit at the end of the current Fiscal Year. The Authority further covenants that it will prepare each such preliminary budget so that it will be possible to determine from the Annual Budget the estimated Operating Expenses for each month during such Fiscal Year.
(b) The Authority covenants that on or before December 20 of each year it will adopt the final budget of Operating Expenses and approve a certification of the final determination of the Required Debt Service Deposit and the Required Reserve Maintenance Deposit for the next following Fiscal Year and the funding in such Fiscal Year of any Required Debt Service Reserve Deposit which is anticipated at the close of the current Fiscal Year and that the total appropriations will not exceed the total appropriations in the preliminary budget. Copies of the Annual Budget shall be filed with the Trustee and furnished to the Consulting Engineers.
If for any reason the Authority shall not have adopted the Annual Budget before the December 20 of the year immediately preceding the Fiscal Year of such Annual Budget, the preliminary budget for such Fiscal Year, if approved by the Consulting Engineers, or, if there is none so approved, the budget for the preceding Fiscal Year, shall, until the adoption of the Annual Budget, be deemed to be in force and shall be treated as the Annual Budget under the provisions of this Article. If for any reason the Authority shall not have approved before December 20 of each year the certification of the final determination of the Required Debt Service Deposit and the Required Reserve Maintenance Deposit for the next following Fiscal Year and the funding in such Fiscal Year of any Required Debt Service Reserve Deposit which is anticipated at the close of the current Fiscal Year the certification of the preliminary determination of such deposits shall be the final determination and deemed amended under the General Resolution to include any amounts of Revenues required to be deposited into the Debt Service Fund, the Debt
B-16 APPENDIX B
Service Reserve Fund, the Subordinated Debt Service Fund and the Subordinated Debt Service Reserve Fund in next following Fiscal Year under the General Resolution.
The Annual Budget for the Fiscal Year ending December 31, 1991 shall be deemed to be in force under the provisions of the General Resolution.
The Authority may at any time adopt an amended or supplemental Annual Budget for the remainder of the then current Fiscal Year, but no such amended or supplemented Annual Budget shall be effective until it shall be approved by the Consulting Engineers; provided, however, that the Authority, without any action required on the part of the Consulting Engineers, shall approve a supplemental certification in any Supplemental Resolution authorizing the issuance of Additional Bonds in order to amend the determination of the Required Debt Service Deposit to take into account any additional Debt Service Charges on such Additional Bonds which were not taken into account in the original Annual Budget. The Annual Budget as so amended or supplemented shall be treated as the Annual Budget under the provisions of this Article. Copies of any such amended or supplemented Annual Budget shall be filed with the Trustee and furnished to the Consulting Engineers.
The Authority covenants that the Operating Expenses incurred in any Fiscal Year will not exceed the reasonable and necessary amount thereof, and that it will not expend any amount or incur any obligations for maintenance, repair and operation in excess of the amounts provided for Operating Expenses in the Annual Budget, except as provided in the section entitled “Revenue Fund” and except amounts payable from the Reserve Maintenance Fund and the General Reserve Fund. The Authority further covenants that it will not authorize or permit any department of the State to make any expenditures for maintenance, repair or operation of the Turnpike for which such department is to be reimbursed from the Revenues, other than through payments from the General Reserve Fund, in excess of the amount provided therefor in the Annual Budget. Nothing in this Section contained shall limit the amount which the Authority may expend for Operating Expenses in any Fiscal Year provided any amounts expended therefor in excess of the Annual Budget shall be received by the Authority from Non-Turnpike Revenues or some source other than the Revenues and the Authority shall not make any reimbursement therefor from such Revenues.
The Authority further covenants that it will cause any additional reports or audits relating to the Turnpike to be made as required by law and that, as often as may be requested, it will furnish to the Trustee and the Holder of any Secured Bond such other information concerning the Turnpike or the operation thereof as any of them may reasonably request. The cost of such reports and audits shall be treated as a part of the cost of operation of the Turnpike. (Section 803)
Financial Records. The Authority covenants that it will keep an accurate record of the Revenues collected, of the number and class of vehicles using the Turnpike, and of the application of the Revenues. Such records shall be open to the inspection of the Trustee and Bondholders, upon reasonable notice, during ordinary business hours of the Authority.
The Authority further covenants that at least once each Fiscal Year it will cause to be filed with the Trustee and furnished to the Consulting Engineers and all Bondholders who shall have filed their names and addresses with the Treasurer of the Authority for such purpose, copies of any revised toll schedule during the preceding Fiscal Year and a report setting forth in respect of the preceding Fiscal Year:
(a) an income and expense statement for the Turnpike, which shows, among other items, Revenues, Operating Expenses, Debt Service and other deposits;
(b) the number of vehicles in each class using the Turnpike;
(c) all deposits to the credit of and withdrawals from each Fund and Account created under the provisions of the General Resolution;
(d) the details of all Bonds issued, paid, purchased or redeemed;
(e) a balance sheet as of the end of such preceding Fiscal Year;
B-17 APPENDIX B
(f) the amounts on deposit at the end of such preceding Fiscal Year to the credit of each such Fund and Account, showing the respective amounts on deposit to the credit of each such Fund and Account in each Depositary and any security held therefor, and showing the details of any investments thereof; and
(g) the amounts of the proceeds received from any sales of property pursuant to the provisions of the General Resolution.
The Authority further covenants that in or before the month of January in each year it will employ an Accountant to audit its books and accounts relating to the Turnpike for the next preceding Fiscal Year. Within 120 days after each Fiscal Year it will cause to be filed with or furnished to the same persons receiving the annual report described above the audited financial statements certified by an Accountant. Each such audit report shall set forth in respect of the preceding Fiscal Year the same matters as are required for the annual report in the above paragraph, and also the findings of the Accountant whether the moneys received by the Authority under the provisions of the General Resolution have been applied in accordance with the provisions of the General Resolution. Such annual reports and audit reports shall be open to the inspection of the Bondholders and their agents and representatives upon reasonable notice during ordinary business hours of the Authority. (Section 804)
Consulting Engineers and Traffic Consultant. The Authority covenants that it will, for the purpose of performing and carrying out the duties imposed on the Consulting Engineers by the General Resolution, employ an independent engineer or engineering firm or corporation having a nationwide and favorable reputation for skill and experience in such work. Any Consulting Engineer employed by the Authority may be replaced by the Authority upon giving notice to the Trustee of thirty days, provided that the new engineer or firm or corporation shall be approved by a resolution adopted by the Authority and certified in writing by two Authorized Officials, including either the Chairman or Vice Chairman, to the Trustee that such engineer or firm or corporation qualifies under the criteria set forth under the General Resolution.
The Authority shall employ a Traffic Consultant, or cause the Consulting Engineers to employ a Traffic Consultant approved by the Authority, to perform any of the duties of the Consulting Engineers under the General Resolution which would ordinarily be performed by a Traffic Consultant. (Section 805)
Duties of Consulting Engineers. The Authority covenants that it will cause the Consulting Engineers employed by it under the provisions of the General Resolution, among such other duties as may be imposed upon them by the Authority or by the General Resolution, to make an inspection at least once a year of the Turnpike, and, on or before the first day of October of each year, to submit to the Authority a report setting forth (a) their findings whether the Turnpike has been maintained in good repair, working order and condition, (b) their advice and recommendations as to the proper maintenance, repair and operation of the Turnpike during the ensuing Fiscal Year and an estimate of the amount of money necessary for such purposes, (c) their advice and recommendations as to the insurance to be carried under the provisions of the General Resolution, and (d) their recommendations as to the amount that should be deposited during the ensuing Fiscal Year to the credit of the Reserve Maintenance Fund for the purposes set forth in the General Resolution. Copies of such reports shall be filed with the Trustee and the Authority.
To the extent the Consulting Engineers deem it reasonably necessary, the Consulting Engineers may rely upon certifications and statements made by the Traffic Consultant and any other independent consultant approved by the Authority they deem necessary in the performance of their duties under the General Resolution. (Section 806)
Maintenance of Insurance. The Authority shall at all times maintain, to the extent reasonably obtainable, the following kinds and the following amounts of insurance, with such variations as shall reasonably be required to conform to applicable standard or customary insurance practice and subject to such exceptions and permissible deductions as are ordinarily required:
(a) Multi-risk insurance on the facilities of the Turnpike which are of an insurable nature and of the character usually insured by an agency, authority or other governmental body or unit responsible for operating and maintaining a turnpike or other transportation system similar in scope and character as the Turnpike, covering direct physical loss or damage thereto from causes customarily insured against, in such amounts as the Consulting Engineers certify to be necessary or advisable to protect against such loss or damage and to protect the interests of the Authority and the Bondholders and which are in excess of any unobligated amounts which are available in the Insurance Account or elsewhere for such loss; B-18 APPENDIX B
(b) Use and occupancy insurance covering loss of Revenues by reason of necessary interruption, total or partial, in the use of facilities of the Turnpike, due to loss or damage to the roadway, including bridges and any such facility on which the Authority maintains such multi-risk insurance, in such amounts as the Consulting Engineers certify will provide income during the period of interruption equal to the amount of the loss of Net Revenues, computed on the basis of Net Revenues for the corresponding period during the preceding Fiscal Year, attributable to such loss or damage; provided that such coverage may exclude any amounts resulting from such losses sustained during the first 14 days of any such interruption;
(c) Public liability insurance covering injuries to persons and property in such amount as the Consulting Engineers certify as adequate to insure the Authority against claims arising out of the construction, maintenance, reconstruction or operation of the facilities of the Turnpike;
(d) Workers' compensation in the amounts required by law, provided that such obligation may be satisfied by participation in a State program for such purposes or through self-insurance acceptable under State rules and regulations;
(e) Officer's and director's insurance in such amounts as are customarily carried by an agency, authority or other governmental body or unit responsible for operating and maintaining a turnpike or other transportation system similar in scope and character as the Turnpike;
(f) During the construction or reconstruction of any portion of the facilities of the Turnpike, such insurance as is customarily carried by others with respect to similar structures used for similar purposes, provided that the Authority shall not be required to maintain any such insurance to the extent that such insurance is carried for the benefit of the Authority by contractors; and
(g) Any additional or other insurance which the Consulting Engineers certify is necessary or advisable to protect the interests of the Authority and the Bondholders.
Any such insurance shall be in the form of policies or contracts for insurance with insurers of good standing and shall be payable to the Authority; provided, however, that in either event set forth below the Authority may self-insure all or any portion of the foregoing risks by (i) depositing into the Insurance Account such amounts each month as recommended by the Consulting Engineers, as contained in a Consultant's Report (a copy of which shall be filed with the Trustee), or (ii) participating in a self-insurance pool qualified by the State if such participation will not adversely affect any rating on the Outstanding Bonds by the Rating Agencies, or a combination of (i) and (ii):
(a) in the event commercial insurance for any such risk is not available from any insurance company authorized to do business in the State, or
(b) in the event such commercial insurance is not economically feasible in the determination of the Consulting Engineers, with respect to the amount of insurance, the risks covered by such insurance or the amount of the premiums required for such insurance. (Section 807)
Insurance Policies and Application of Proceeds. Within the first three (3) months of each Fiscal Year the Authority shall file with the Trustee and shall furnish the Consulting Engineers a schedule of all insurance policies referred to in the General Resolution which are then in effect, stating with respect to each policy the name of the insurer, the amount, number and expiration date, and the hazards and risks covered thereby. All such insurance policies shall be open to the inspection of the Bondholders and their agents and representatives. The Trustee shall not in any way be liable or responsible for the collection of insurance moneys in case of any loss or damage.
The proceeds of any insurance paid on account of damage or destruction of any portion of the Turnpike, and the proceeds of any use or occupancy insurance, shall be applied as follows:
(a) If any useful portion of the Turnpike shall be damaged or destroyed, the Authority, as expeditiously as possible, shall continuously and diligently prosecute the reconstruction or replacement thereof. The proceeds of any insurance paid on account of such damage or destruction, other than use and B-19 APPENDIX B
occupancy insurance, shall, to the extent necessary, be applied to the cost of such reconstruction or replacement. The proceeds of any insurance not so applied within 18 months after receipt shall be paid into the Revenue Fund unless there shall have been sooner filed with the Trustee a certificate of an Authorized Official stating the intention of the Authority to apply such proceeds to such reconstruction or replacement.
(b) If the proceeds of insurance authorized by the General Resolution to be applied to the reconstruction or replacement of any portion of the Turnpike are insufficient for such purpose, the deficiency may be supplied out of moneys in the Reserve Maintenance Fund to the extent, as shown by a Certificate of the Consulting Engineers filed with the Trustee, such moneys not needed to be reserved for the purposes of such Fund, subject to the provisions of the General Resolution and provided that such moneys are drawn from the following accounts in the following order: (A) the Improvement Account, (B) the Interchange Account and (C) the Department of Transportation Provision Account.
(c) The proceeds of insurance against physical loss of or damage to any Turnpike Project, or of contractors' performance bonds with respect to any Turnpike Project, received during the period of construction thereof, shall be paid into the separate subaccount established in the Project Account in the Capital Fund for such Turnpike Project.
(d) The proceeds of any use and occupancy insurance shall be paid into the Revenue Fund. (Section 808)
Security for Contracts. The Authority shall require all persons with whom it may contract for construction, in an amount customary in the business of operating and maintaining a turnpike or other highway transportation system similar in scope and character to the Turnpike, to furnish bonds conditioned upon the satisfactory performance of the work contracted for and upon the payment by each contractor and sub-contractor for all labor performed or materials furnished pursuant to such contract; or, in lieu thereof, to deposit with it, to insure completion and performance of the contract and the payment by each contractor and sub-contractor for all labor performed and materials furnished pursuant to such contract, marketable securities satisfactory to the Authority having a market value equal to the amount of such contract.
Each contract shall also provide in substance that the Authority will retain at least 10% of each partial payment thereunder until such payments, including retained amounts, shall aggregate 50% of the total contract amount; that after work under the contract has been substantially completed, the Authority may release retained amounts which in the opinion of the Consulting Engineers are in excess of the amount reasonably required to be retained to secure performance of the remaining work thereunder in a manner satisfactory to the Consulting Engineers; and that final payments on the contract will not be made until completion of the work thereunder to the satisfaction of the Consulting Engineers and the acceptance thereof by the Authority. (Section 809)
Repairs to Turnpike by State. Notwithstanding any other provision of the General Resolution, the Authority may permit the State or any of its agencies, departments or subdivisions, to pay the cost of maintaining, repairing and operating the Turnpike out of funds other than the Revenues. (Section 810)
Encumbrances, Leases and Sale. The Authority covenants that, except as otherwise permitted in the General Resolution, it will not sell, lease or otherwise dispose of or encumber the Turnpike or any part thereof and will not create or permit to be created any charge or lien on the Revenues, the special funds established under the General Resolution or the other moneys and securities described in the General Resolution except as provided in the General Resolution, and that, from the Revenues, it will pay or cause to be discharged, or will make adequate provision to satisfy and discharge, within sixty (60) days after the same shall accrue, all lawful claims and demands for labor, materials, supplies or other objects which, if unpaid, might by law become a lien upon the Turnpike or any part thereof or the Revenues; provided, however, that the Authority shall not be required to pay or cause to be discharged, or make provision for, any such lien so long as the validity thereof shall be contested in good faith and by appropriate legal proceedings. The Authority may, however, from time to time, sell, mortgage, enter into any capital lease or otherwise dispose of or encumber any property for fair market value if:
B-20 APPENDIX B
(i) in the reasonable judgment of the Authority, the property has become obsolete or worn out or is reasonably expected to become so within one year of the date of such disposition, or is no longer used or useful in the operation of the Turnpike or in the generation of Net Revenues, or is to be or has been replaced by other property; or
(ii) the Consulting Engineers state that the sale, mortgage, lease or other disposition is in accordance with prudent practice for a turnpike or highway system similar in scope and character to the Turnpike; and the Authority certifies (based upon a Consultant's Report prepared by the Consulting Engineers and the Traffic Consultant) that it reasonably expects to satisfy the requirements for issuing Additional Bonds as set forth in the General Resolution after the disposition of such property.
All proceeds from any sale shall be immediately deposited into the Reserve Maintenance Fund.
The Authority may make contracts for the use of any property of the Turnpike consistent with the safe and prudent operation and maintenance of the Turnpike as permitted by the Enabling Act. Any payments to the Authority under or in connection with any lease, contract, license, easement, concession or right in respect of any part of the Turnpike shall constitute Revenues, and the net proceeds of any such sale or concession shall be deposited as received to the credit of the Revenue Fund. (Section 811)
Events of Default and Remedies
Events of Default.
The occurrence of any one or more of the following events shall constitute an Event of Default under the General Resolution:
(a) a default in the payment of principal or the Tender Option Price of any Bonds Outstanding, or if no Bonds are Outstanding, Subordinated Bonds Outstanding, when and as the same shall become due and payable, whether at maturity, upon redemption, upon the exercise of a Tender Option, or otherwise; or
(b) a default in the payment of any interest on any Bonds Outstanding, or if no Bonds are Outstanding, Subordinated Bonds Outstanding, when and as such interest shall become due and payable; or
(c) default by the Authority in the performance or observance of any other of the covenants, agreements or conditions on its part or on the part of the Authority in the General Resolution, any Supplemental Resolution or in the Secured Bonds contained, and such default shall continue for a period of sixty days after written notice thereof stating that such notice is a "Notice of Default" to the Authority by the Trustee or to the Authority and to the Trustee by the Holders of not less than twenty-five percent (25%) in principal amount of the Bonds Outstanding, or if no Bonds are Outstanding, Subordinated Bonds Outstanding; provided that such sixty day period shall be extended to such longer period of time as the Trustee may deem appropriate in the event of defaults which by their nature will require such longer period of time to cure if the Authority shall commence such cure within such sixty day period and pursue the same diligently to completion; or
(d) if the Authority (i) admits in writing its inability to pay its debts generally as they become due, (ii) commences voluntary proceedings in bankruptcy or seeking a composition of indebtedness, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a receiver of the whole or any substantial part of the Turnpike, or (v) consents to the assumption by any court of competent jurisdiction under any law for the relief of debtors of custody or control of the Authority or of the whole or any substantial part of the Turnpike. (Section 901)
Acceleration. Upon the happening and continuance of any Event of Default, the Trustee shall give notice of such occurrence to the registered Holders of the Secured Bonds. Upon the happening and continuance of any Event of Default, the Trustee may, and upon the written request of the Holders of not less than twenty-five percent (25%) in principal amount of the Bonds Outstanding, or if no Bonds are Outstanding, Subordinated Bonds Outstanding, the Trustee shall, in any such case, unless the principal of all the Secured Bonds then Outstanding shall already have become due and payable, declare the principal of all Secured Bonds then Outstanding, and the interest
B-21 APPENDIX B
accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and be immediately due and payable, anything in the General Resolution or in any of the Secured Bonds contained to the contrary notwithstanding. The right of the Trustee to make any such declaration as aforesaid, however, is subject to the condition that if, at any time after such declaration, but before the Secured Bonds shall have matured by their terms, all overdue payments of principal and interest upon the Secured Bonds, together with the reasonable and proper charges, expenses and liabilities of the Trustee, and all other sums then payable by the Authority under the General Resolution (except the interest accrued since the next preceding interest date on the Bonds due and payable solely by virtue of such declaration) shall either be paid by or for the account of the Authority or provision satisfactory to the Trustee shall be made for such payment, and all defaults under the Secured Bonds or under the General Resolution (other than the payment of principal and interest due and payable solely by reason of such declaration) shall be made good or be secured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall be made therefor, then and in every such case the Holders of not less than twenty-five percent (25%) in principal amount of the Bonds Outstanding, or if no Bonds are Outstanding, Subordinated Bonds Outstanding, by written notice to the Authority and to the Trustee, may rescind such declaration and annul such default in its entirety, or, if the Trustee shall have acted without a direction from the Holders of the Secured Bonds as aforesaid at the time of such request, and if there shall not have been theretofore delivered to the Trustee written direction to the contrary by the Holders of not less than twenty-five percent (25%) in principal amount of the Bonds Outstanding or if no Bonds are Outstanding, Subordinated Bonds Outstanding, then any such declaration shall ipso facto be deemed to be rescinded and any such default and its consequences shall ipso facto be deemed to be annulled, but no such rescission and annulment shall extend to or affect any subsequent default or impair or exhaust any right or power consequent thereon. The Trustee shall not be liable for any decision made in good faith as to whether or not to declare all Secured Bonds to be due and payable. (Section 902)
Accounting and Examination of Records After Default. The Authority covenants that if an Event of Default shall have happened and shall not have been remedied, the books of record and account of the Authority shall at all times be subject to the inspection and use of the Trustee and of its agents and attorneys.
The Authority covenants that if an Event of Default shall happen and shall not have been remedied, the Authority, upon demand of the Trustee, will account, as if it were the trustee of an express trust, for all Revenues and other Pledged Collateral for such period as shall be stated in such demand. (Section 903)
Application of Revenues and Other Pledged Collateral After Default. The Authority covenants that if an Event of Default shall happen and shall not have been remedied, the Authority, upon demand of the Trustee following a declaration of acceleration under the General Resolution, shall pay over or cause to be paid over to the Trustee (i) forthwith all Pledged Collateral then held by the Authority, or a Depositary in any Fund, Account or Subaccount under the General Resolution and (ii) as promptly as practicable after receipt thereof, all Revenues.
During the continuance of an Event of Default, the Trustee shall apply the Pledged Collateral and the Revenues and the income therefrom which it receives pursuant to the previous paragraph as follows and in the following order:
(a) to the payment of the reasonable and proper fees, charges and expenses (including reasonable attorneys fees) of the Fiduciaries and of any engineer or firm of engineers or accountants or firm of accountants selected by the Trustee pursuant to the General Resolution and to the payment of any fees and expenses required to keep any Credit Facilities in full force and effect;
(b) to the payment of the amounts required for reasonable and necessary Operating Expenses, including reasonable and necessary reserves and working capital therefor, and for the reasonable repair and replacement of the Turnpike necessary to prevent loss of Revenues or to provide for the continued operation of the Turnpike, as certified to the Trustee by an independent engineer or firm of engineers of recognized standing (who may be an engineer or firm of engineers retained by the Authority for other purposes) selected by the Trustee;
(c) to the payment of the interest and principal or Redemption Price then due and payable on the Bonds as follows:
(i) unless the principal of all of the Bonds Outstanding shall be due and payable, B-22 APPENDIX B
First: To the payment to the persons entitled thereto of all payments of interest which are due and payable in the chronological order of the due dates of such payments of interest, and, if the amount available shall not be sufficient to pay in full all interest payments due on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and
Second: To the payment to the persons entitled thereto of the unpaid principal or Redemption Price of any Bonds which shall have become due, whether at maturity or by call for redemption, in the chronological order of their due dates, and, if the amount available shall not be sufficient to pay in full all the Bonds due on any date, then to the payment thereof ratably, according to the amounts of principal or Redemption Price due on such date, to persons entitled thereto, without any discrimination or preference;
(ii) if the principal of all of the Bonds Outstanding shall be due and payable, to the payment of the principal and interest then due and unpaid upon the Bonds without preference or priority of principal over interest or of interest over principal, or of any payment of interest due and payable over any other payment of interest due and payable, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or preference;
(d) to the payment of the interest and principal or Redemption Price then due and payable on the Subordinated Bonds, as follows:
(i) unless the principal of all of the Subordinated Bonds shall be due and payable,
First: To the payment to the persons entitled thereto of all payments of interest which are due and payable in the chronological order of the due dates of such payments of interest, and, if the amount available shall not be sufficient to pay in full all interest payments due on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and
Second: To the payment to the persons entitled thereto of the unpaid principal or Redemption Price of any Subordinated Bonds which shall have become due, whether at maturity or by call for redemption, in the chronological order of their due dates, and, if the amount available shall not be sufficient to pay in full all the Subordinated Bonds due on any date, then to the payment thereof ratably, according to the amounts of principal or Redemption Price due on such date, to the persons entitled thereto, without any discrimination or preference; and
(ii) if the principal amount of all of the Subordinated Bonds shall have become or have been declared due and payable, to the payment of the principal and interest then due and unpaid upon the Subordinated Bonds without preference or priority of principal over interest or of interest over principal, or of any payment of interest over any other payment of interest, or of any Subordinated Bond over any other Subordinated Bond, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or preference.
Any amounts on deposit in the Subordinated Debt Service Reserve Fund shall not be applied as set forth above to the payment of principal of or interest on Bonds unless there are no Subordinated Bonds Outstanding but, subject to their application as provided in (i) above, shall be applied to the payment of principal and interest on the Subordinated Bonds until all due and unpaid payments of principal and interest have been paid. Any amounts on deposit in the Debt Service Fund and the Debt Service Reserve Fund shall not be applied as set forth above to the payment of the principal of or interest on Bonds unless there are no Bonds Outstanding but, subject to their application as provided in (i) above, shall be applied to the payment of principal and interest on the Bonds until all due and unpaid payments of principal and interest have been paid.
B-23 APPENDIX B
If and when all overdue payments of interest on all Secured Bonds, together with the reasonable and proper charges and expenses of the Trustee, and all other sums payable by the Authority under the General Resolution, including the principal and Redemption Price of and accrued unpaid interest on all Secured Bonds which shall then be payable by declaration or otherwise, shall either be paid by or for the account of the Authority, or provision satisfactory to the Trustee shall be made for such payment, and all defaults under the General Resolution or the Secured Bonds shall be made good or secured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall be made therefor, the Trustee shall pay over to the Authority all such Revenues then remaining unexpended in the hands of the Trustee (except Revenues deposited or pledged, or required by the terms of the General Resolution to be deposited or pledged, with the Trustee), and thereupon the Authority and the Trustee shall be restored, respectively, to their former position and rights under the General Resolution, and all Revenues shall thereafter be applied as provided therein. No such payment over to the Authority by the Trustee or resumption of the application of Revenues as provided in the General Resolution shall extend to or affect any subsequent default thereunder or impair any right consequent thereon. (Section 904)
Proceedings Brought by Trustee. If an Event of Default shall happen and shall not have been remedied, then and in every such case, the Trustee, by its agents and attorneys, if the Trustee shall deem it advisable following the declaration of acceleration pursuant to the General Resolution, may, or in the absence of such declaration and upon the written request of the Holders of not less than twenty-five percent (25%) in principal amount of the Bonds Outstanding, or if no Bonds are Outstanding, Subordinated Bonds Outstanding, shall proceed to protect and enforce its rights and the rights of the Holders of such Secured Bonds under the General Resolution forthwith by a suit or suits in equity or at law, whether by an action for mandamus or a suit for the specific performance of any covenant contained in the General Resolution, or in aid of the execution of any power granted in the General Resolution, or for an accounting against the Authority as if the Authority were the trustee of an express trust, or in the enforcement of any other legal or equitable right as the Trustee, being advised by counsel, shall deem most effectual to enforce any of its rights or to perform any of its duties under the General Resolution.
All rights of action under the General Resolution may be enforced by the Trustee without the possession of any of the Secured Bonds or the production thereof on the trial or other proceedings, and any such suit or proceedings instituted by the Trustee shall be brought in its name.
The Holders of a majority in principal amount of the Bonds at the time Outstanding, or if no Bonds are Outstanding, of Subordinated Bonds Outstanding, may direct by instrument in writing the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, provided that the Trustee shall have the right to decline to follow any such direction if the Trustee shall be advised by counsel that the action or proceeding so directed may not lawfully be taken, or if the Trustee in good faith shall determine that the action or proceeding so directed would involve the Trustee in personal liability or be unjustly prejudicial to the Holders of Secured Bonds not parties to such direction.
Upon commencing a suit in equity or upon other commencement of judicial proceedings by the Trustee to enforce any right under the General Resolution, the Trustee shall be entitled to exercise any and all rights and powers conferred in the General Resolution and provided to be exercised by the Trustee upon the occurrence of an Event of Default; and, as a matter of right against the Authority, without notice or demand and without regard to the adequacy of the security for the Secured Bonds, the Trustee shall, to the extent permitted by law, be entitled to the appointment of a receiver of the moneys, securities and funds then held by the Authority in any Fund, Account or Subaccount under the General Resolution and, subject to application of the Revenues, with all such powers as the court or courts making such appointment shall confer; but notwithstanding the appointment of any receiver, the Trustee shall be entitled to retain possession and control of and to collect and receive income from, any moneys, securities and funds deposited or pledged with it under the General Resolution or agreed to be provided to be delivered or pledged with it under the General Resolution. In any suit, action or proceeding by the Trustee, the fees, counsel fees and expenses of the Trustee and the receiver, if any, and all costs and disbursements allowed by the court shall be a first charge on any Revenues.
Regardless of the happening of an Event of Default, the Trustee shall have the power to, but (unless requested in writing by the Holders of a majority in principal amount of the Bonds Outstanding, or if no Bonds are Outstanding, Subordinated Bonds Outstanding, and furnished with reasonable security and indemnity) shall be under no obligation to, institute and maintain such suits and proceedings, including, without limitation, proceedings for declaratory judgment or injunctive or other equitable relief, as it may determine shall be necessary or expedient to prevent any impairment of the security under the General Resolution, any impairment of the ability of the Authority B-24 APPENDIX B
or the Trustee to satisfy any of its agreements or obligations under the General Resolution, or the impairment of any protection provided by the General Resolution of the interests of the Holders of Secured Bonds by any acts which may be unlawful or in violation of the General Resolution, and such suits and proceedings, including, without limitation, proceedings for declaratory judgment or injunctive or other equitable relief, as the Trustee may determine shall be necessary or expedient to preserve or protect its interest and the interests of the Holders of any Secured Bonds. (Section 905)
Restrictions on Action by Holders of Secured Bonds. No Holder of any Secured Bond shall have any right to institute any suit, action or proceeding at law or in equity for the enforcement of any provision of the General Resolution or the execution of any trust under the General Resolution or for any remedy under the General Resolution, unless such Holder shall have previously given to the Trustee written notice of the happening of an Event of Default, as provided in the General Resolution, and the Holders of at least twenty-five percent (25%) in principal amount of the Bonds then Outstanding, or if no Bonds are Outstanding of Subordinated Bonds Outstanding, shall have filed a written request with the Trustee, and shall have offered it reasonable opportunity, either to exercise the powers granted in the General Resolution or to institute such action, suit or proceeding in its own name, and unless such Holders shall have offered to the Trustee adequate security and indemnity against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall have refused to comply with such request within a reasonable time; it being understood and intended that no one or more Holders of Secured Bonds shall have any right in any manner whatever by their action to affect, disturb or prejudice any pledge created by the General Resolution, or to enforce any right under the General Resolution, except in the manner therein provided, and that all proceedings at law or in equity to enforce any provision of the General Resolution shall be instituted, had and maintained in the manner provided in the General Resolution and for the equal benefit of all Holders of the Outstanding Bonds, in accordance with their rights and interests under the General Resolution and all Holders of Outstanding Subordinated Bonds, in accordance with their rights and interests under the General Resolution.
Nothing in the General Resolution or in the Secured Bonds contained shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay at the respective dates of maturity and places therein expressed the principal of and interest on the Secured Bonds to the respective Holders thereof, or subject to the provisions of the General Resolution, affect or impair the right of action, which is also absolute and unconditional, of any Holder to enforce such payment of their Secured Bond. (Section 906)
Remedies Not Exclusive. No remedy by the terms of the General Resolution conferred upon or reserved to the Trustee or any Holders of Secured Bonds is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under the General Resolution. The Trustee shall have and possess all the powers necessary and appropriate for the exercise of any functions specifically set forth in the General Resolution or incident to the general representation of the Bondholders in the enforcement and protection of their rights. (Section 907)
Limitation of Rights. With the exception of rights expressly conferred in the General Resolution nothing expressed or mentioned in or to be implied from the General Resolution or the Secured Bonds shall give to any person other than the Fiduciaries and the Holders of the Secured Bonds any legal or equitable right, remedy or claim under or with respect to the General Resolution or any covenants, conditions and provisions contained therein. The General Resolution and all of the covenants, conditions and provisions thereof are for the sole and exclusive benefit of the Fiduciaries and the Holders of the Secured Bonds as therein provided.
All rights and remedies conferred by the General Resolution and any Secured Bond upon any Holder or any Fiduciary shall be their sole and exclusive rights and remedies with respect to the General Resolution and the Secured Bonds issued pursuant to the General Resolution. Neither any Holder nor any Fiduciary shall have any other rights or remedies, whether expressed or implied in the Enabling Act or any other provision of law, with respect to the General Resolution or any Secured Bonds; provided, however, nothing contained in the General Resolution or any Secured Bond shall limit any right or remedy of any Holder or any Fiduciary under any federal or state constitutional provision. (Section 1304)
Waivers of Events of Default. At any time, the Trustee may in its discretion waive any event of default under the General Resolution and its consequences and rescind any declaration of maturity of principal, and shall do so upon the written request of the Holders of at least 66 2/3% in aggregate principal amount of all the Bonds
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Outstanding, or if no Bonds are Outstanding, Subordinated Bonds Outstanding; provided, however, that there shall not be waived any event of default with respect to (i) payment of principal or the Tender Option Price of any Bonds Outstanding or, if no Bond are Outstanding, Subordinated Bonds Outstanding, when and as the same shall become due and payable, whether at maturity, upon redemption, upon the exercise of a Tender Option, or otherwise, or (ii) payment of any interest on any Bonds Outstanding, or, if no Bonds are Outstanding, Subordinated Bonds Outstanding, when and as such interest shall become due and payable, or any such declaration in connection therewith rescinded, unless at the time of such waiver or rescission payments of the amounts provided for waiver and automatic rescission in connection with acceleration of maturity have been made or provided for. In case of any such waiver or rescission in any proceeding taken by the Trustee on account of any such event of default shall have been discontinued or abandoned or determined adversely, then and in every such case the Authority, the Trustee and the Bondholders shall be restored to their former positions and rights under the General Resolution respectively; but no such waiver or rescission shall extend to any subsequent or other event of default, or impair any right consequent thereon. (Section 908)
Intervention by the Trustee. In any judicial proceeding which the Trustee believes has a substantial bearing on the interests of the Bondholders, the Trustee may intervene on behalf of the Bondholders. (Section 909)
Concerning Fiduciaries
Trustee: Acceptance of Duties. The Trustee shall signify its acceptance of the duties and obligations imposed upon it by the General Resolution by executing the certificate of authentication endorsed upon the Secured Bonds, and, by executing such certificate upon any Secured Bond, the Trustee shall be deemed to have accepted such duties and obligations not only with respect to the Secured Bond so authenticated, but with respect to all the Secured Bonds thereafter to be issued, but only, however, upon the terms and conditions set forth in the General Resolution. (Section 1001)
Removal of Trustee. The Trustee may be removed at any time by an instrument or concurrent instruments in writing, filed with the Trustee, and signed by the Holders of a majority in principal amount of the Bonds then Outstanding, or if no Bonds are Outstanding, of the Subordinated Bonds then Outstanding, or their attorneys-in-fact duly authorized, excluding any Secured Bonds held by or for the account of the Authority. The Trustee may be removed at any time for any breach of trust or for acting or proceeding in violation of, or for failing to act or proceed in accordance with, any provision of the General Resolution with respect to the duties and obligations of the Trustee, by any court of competent jurisdiction upon the application of the Holders of not less than twenty-five percent (25%) in aggregate principal amount of Bonds Outstanding, or if no Bonds are Outstanding, Subordinated Bonds Outstanding, excluding any Secured Bonds held by or for the account of the Authority.
The Authority may remove the Trustee at any time by filing with the Trustee an instrument signed by an Authorized Official of the Authority and mailed to the Holders of the Bonds and the Subordinated Bonds then Outstanding not less than 30 days before such removal, and provided that no event of default under the General Resolution has occurred and is continuing at the time such notice is given. (Section 1008)
Appointment of Successor Trustee. In the event a Trustee shall be removed pursuant to the General Resolution, the Authority shall appoint a successor Trustee prior to the removal of the Trustee; otherwise, such written notice shall not have any force or effect. In case at any time the Trustee shall resign or shall otherwise be removed pursuant to the General Resolution or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver, liquidator or conservator of the Trustee, or its property, shall be appointed, or if any public officer shall take charge or control of the Trustee, or of its property or affairs, a successor may be appointed by the Holder of a majority in principal amount of the Bonds then Outstanding, or if no Bonds are Outstanding of the Secured Bonds then Outstanding, excluding any Secured Bonds held by or for the account of the Authority, by an instrument or concurrent instruments in writing signed and acknowledged by such Holders of any Secured Bonds or by their attorneys-in-fact duly authorized and delivered to such successor trustee, notification thereof being given to the Authority and the predecessor Trustee; but (unless a successor trustee shall have been appointed by the Holders of the Secured Bonds as aforesaid) the Authority by a duly executed written instrument signed by an Authorized Official shall forthwith appoint a Trustee to fill such vacancy until a successor Trustee shall be appointed by the Holders of the Secured Bonds as authorized in the General Resolution. The Authority shall publish notice of any such appointment made by it once in each week for two consecutive calendar weeks, in Authorized Newspapers, the first publication to be made within twenty days after such appointment. Any successor Trustee appointed by the
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Authority shall, immediately and without further act, be superseded by a Trustee appointed by the Holders of the Secured Bonds as authorized in the General Resolution.
If in a proper case no appointment of a successor trustee shall be made pursuant to the foregoing provisions within forty-five days after the Trustee shall have given to the Authority written notice as provided in the General Resolution or after a vacancy in the office of the Trustee shall have occurred by reason of its inability to act, the Trustee or the Holder of any Secured Bond may apply to any court of competent jurisdiction to appoint a successor Trustee. Said court may thereupon, after such notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee.
Any Trustee so appointed in succession to the Trustee shall be a bank or trust company organized under the laws of any state or a national banking association, and having a capital and surplus aggregating at least $50,000,000, if there be such a bank or trust company or national banking association willing and able to accept the office on reasonable and customary terms and authorized by law to perform all the duties imposed upon it by the General Resolution. (Section 1009)
Resignation or Removal of Depositary or Paying Agent and Appointment of Successor. Any Depositary or Paying Agent may at any time resign and be discharged of the duties and obligations created by the General Resolution by giving at least sixty days' written notice to the Authority and the other Fiduciaries. Any Depositary or Paying Agent may be removed at any time by an instrument filed with such Fiduciary and the Trustee and signed by the Authority. Any successor Depositary or Paying Agent shall be appointed by the Authority, with the approval of the Trustee, and (subject to the requirements of the General Resolution) shall be a bank or trust company organized under the laws of any state of the United States or a national banking association, having a capital and surplus aggregating at least $50,000,000, and willing and able to accept the offer on reasonable and customary terms and authorized by law to perform all the duties imposed upon it by the General Resolution.
In the event of the resignation or removal of any Depositary or Paying Agent, such Fiduciary shall pay over, assign and deliver any moneys held by it as a Fiduciary to its successor, or if there be no successor, to the Trustee. In the event that for any reason there shall be a vacancy in the office of any Depositary or Paying Agent, the Trustee shall act as such Fiduciary. (Section 1014)
Supplemental Resolutions, Amendments and Modifications
Supplemental Resolutions Effective Upon Filing With the Trustee. For any one or more of the following purposes and at any time or from time to time, a Supplemental Resolution may be adopted by the Authority, which upon the filing with the Trustee of a copy thereof certified by an Authorized Official, shall be fully effective in accordance with its terms:
(a) to close the General Resolution against, or provide limitations and restrictions in addition to the limitations and restrictions contained in the General Resolution on, the authentication and delivery of Secured Bonds or the issuance of Unsecured Bonds;
(b) to add to the covenants and agreements of the Authority in the General Resolution other covenants and agreements to be observed by the Authority which are not contrary to or inconsistent with the General Resolution as theretofore in effect including any covenants necessary for compliance with the Code, including without limitation section 148(f) thereof or Regulations promulgated thereunder;
(c) to add to the limitations and restrictions in the General Resolution other limitations and restrictions to be observed by the Authority which are not contrary to or inconsistent with the General Resolution as theretofore in effect;
(d) to surrender any right, power or privilege reserved to or conferred upon the Authority by the terms of the General Resolution, but only if the surrender of such right, power or privilege is not contrary to or inconsistent with the covenants and agreements of the Authority contained in the General Resolution;
(e) to authorize Secured Bonds of a Series and, in connection therewith specify and determine the matters and things relating to the authorization, issuance and form of the Secured Bonds to be issued, and
B-27 APPENDIX B
also any other matters and things relative to such Secured Bonds which are not contrary to or inconsistent with the General Resolution as theretofore in effect, or to amend, modify or rescind any such authorization, specification or determination at any time prior to the first authentication and delivery of such Secured Bonds including, without limiting the generality of the foregoing, provisions amending or modifying the General Resolution to provide for the issuance of Secured Bonds in book-entry form or in coupon form payable to bearer;
(f) to confirm, as further assurance, any pledge under, and the subjection to any lien or pledge created or to be created by, the General Resolution, of the Pledged Collateral or of any other moneys, securities or funds;
(g) to modify any of the provisions of the General Resolution in any respect whatsoever, provided that (i) such modification shall be, and be expressed to be, effective only after all Secured Bonds or Secured Bonds of any Series, or of any stated maturity within any Series, affected by the amendment Outstanding at the date of the adoption of such Supplemental Resolution shall cease to be Outstanding, and (ii) such Supplemental Resolution shall be specifically referred to in the text of all Secured Bonds or Secured Bonds of any Series authenticated and delivered after the date of the adoption of such Supplemental Resolution and of Secured Bonds issued in exchange therefor or in place thereof;
(h) to modify the definition of Investment Securities as directed in a resolution adopted by the Authority, provided that the Authority shall have delivered to the Trustee a written statement from the Rating Agencies assigning a rating on the Outstanding Secured Bonds that the details of such modification have been provided in writing to the Rating Agencies and that the Rating Agencies have either (A) confirmed that such modification will not adversely affect such ratings or (B) issued a rating on a Series of Secured Bonds to be issued on a parity with any Outstanding Secured Bonds which is not lower than the rating assigned by the Rating Agencies to such Outstanding Secured Bonds prior to such modification, or any other evidence satisfactory to the Trustee that modification will not adversely affect the then current ratings, if any, assigned to the Secured Bonds by the Rating Agencies; or
(i) to subject to the lien created by either the Pledge or the Subordinated Pledge under the General Resolution moneys, securities or funds which were not previously included in the definition of Revenues or additional property, collateral or security which was not previously included in the definition of Pledged Collateral. (Section 1101)
Supplemental Resolutions Effective Upon Consent of Trustee. For any one or more of the following purposes and at any time or from time to time, a Supplemental Resolution may be adopted, which, upon (i) the filing with the Trustee of a copy thereof certified by an Authorized Official, and (ii) the filing with the Authority of an instrument in writing made by the Trustee consenting thereto shall be fully effective in accordance with its terms:
(a) to cure any ambiguity, supply any omission, or cure or correct any defect or inconsistent provision in the General Resolution; or
(b) to insert such provisions clarifying matters or questions arising under the General Resolution as are necessary or desirable and are not contrary to or inconsistent with the General Resolution as theretofore in effect; or
(c) to provide for additional duties of the Trustee.
Any such Supplemental Resolution may also contain one or more of the purposes specified in the General Resolution, and in that event, the consent of the Trustee required by the General Resolution shall be applicable only to those provisions of such Supplemental Resolution as shall contain one or more of the purposes for adoption of a Supplemental Resolution set forth in the General Resolution. (Section 1102)
Supplemental Resolutions Effective With Consent of Bondholders. At any time or from time to time, a Supplemental Resolution may be adopted subject to consent by Holders of any Secured Bonds in accordance with and subject to the provisions of the General Resolution governing adoption of Supplemental Resolutions, which Supplemental Resolution, upon the filing with the Trustee of a copy thereof certified by an Authorized Official and
B-28 APPENDIX B
upon compliance with the provisions of the General Resolution, shall become fully effective in accordance with its terms as provided therein. (Section 1103)
General Provisions. The General Resolution shall not be modified or amended in any respect except as provided therein. Nothing in the General Resolution relating to adoption of Supplemental Resolutions shall affect or limit the right or obligation of the Authority to adopt, make, do, execute, acknowledge or deliver any resolution, act or other instrument pursuant to the provisions of the General Resolution or the right or obligation of the Authority to execute and deliver to any Fiduciary any instrument which shall be delivered to said Fiduciary.
Any Supplemental Resolution referred to and permitted or authorized by the General Resolution may be adopted by the Authority without the consent of any of the Holders of any Secured Bonds, but shall become effective only on the conditions, to the extent and at the time provided in the General Resolution. The copy of every Supplemental Resolution filed with the Trustee shall be accompanied by a Bond Counsel's opinion stating that such Supplemental Resolution has been duly and lawfully adopted in accordance with the provisions of the General Resolution, is authorized or permitted by the General Resolution, and is valid and binding upon the Authority provided that such Bond Counsel's opinion may take an exception on account of the laws of bankruptcy, reorganization and insolvency and of other laws affecting creditors' rights generally and to the exercise of judicial discretion in accordance with general equitable principles.
The Trustee is authorized by the General Resolution to accept the delivery of a certified copy of any Supplemental Resolution referred to and permitted or authorized by the General Resolution and to make all further agreements and stipulations which may be therein contained, and the Trustee, in taking such action, shall be fully protected in relying on an opinion of counsel (which may be a Bond Counsel's opinion) that such Supplemental Resolution is authorized or permitted by the provisions of the General Resolution.
No Supplemental Resolution shall change or modify any of the rights or obligations of any Fiduciary without its written assent thereto. (Section 1104)
Powers of Amendment. Except as otherwise provided in the General Resolution any modification or amendment of the General Resolution or of the rights and obligations of the Authority and of the Holders of the Secured Bonds thereunder may be made by a Supplemental Resolution, with the written consent given as provided in the General Resolution, (i) of the Holders of at least two-thirds in principal amount of the Bonds Outstanding at the time such consent is given and at least two-thirds in principal amount of the Subordinated Bonds Outstanding at the time such consent is given and (ii) in case less than all of the several Series of Secured Bonds then Outstanding are affected by the modification or amendment, of the Holders of at least two-thirds in aggregate principal amount of the Secured Bonds of the several Series so affected and Outstanding at the time such consent is given; provided, however, that if such modification or amendment will, by its terms, not take effect so long as any Secured Bonds of any specified like Series and maturity remain Outstanding, the consent of the Holders of such Secured Bonds shall not be required and such Secured Bonds shall not be deemed to be Outstanding for the purpose of any calculation of Outstanding Secured Bonds under the provisions of the General Resolution governing such modification or amendment. No such modification or amendment shall permit a change in the terms of redemption or maturity of the principal of any Outstanding Secured Bond or of any payment of interest thereon or a reduction in the principal amount or the Redemption Price thereof or in the rate of interest thereon without the consent of the Holder of such Secured Bond, or shall reduce the percentages or otherwise affect the classes of Secured Bonds the consent of the Holders of which is required to effect any such modification or amendment, or shall change or modify any of the rights or obligations of any Fiduciary without its written assent thereto. For the purposes of the provisions governing such modification and amendment, a Series shall be deemed to be affected by a modification or amendment of the General Resolution if the same adversely affects or diminishes the rights of the Holders of Secured Bonds of such Series. The Trustee may in its discretion determine whether or not in accordance with the foregoing powers of amendment Secured Bonds of any particular Series or maturity would be affected by any modification or amendment of the General Resolution and any such determination shall be binding and conclusive on the Authority and all Holders of Secured Bonds. For the purposes of the provisions governing such modification and amendment, the Holders of the Secured Bonds may include the initial Holders thereof, regardless of whether such Secured Bonds are being held for immediate resale. (Section 1105)
Consent of Holders of Secured Bonds. The Authority may at any time adopt a Supplemental Resolution making a modification or amendment permitted by the General Resolution, to take effect when and as provided in
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the General Resolution. A copy of such Supplemental Resolution (or brief summary thereof or reference thereto in form approved by the Trustee), together with a request to Holders of Secured Bonds for their consent thereto in form satisfactory to the Trustee, shall be mailed by the Authority to Holders of Secured Bonds and published once in each week for three (3) successive weeks in Authorized Newspapers (but failure to mail or so publish such copy and request shall not affect the validity of the Supplemental Resolution when consented to as provided in the General Resolution). Such Supplemental Resolution shall not be effective unless and until (i) there shall have been filed with the Trustee (a) the written consents of Holders of the percentages of Outstanding Secured Bonds specified in the General Resolution and (b) an opinion of Bond Counsel stating that such Supplemental Resolution has been duly and lawfully adopted and filed in accordance with the provisions of the General Resolution, is authorized or permitted thereby and is valid and binding upon the Authority, and (ii) a notice shall have been published as provided in the provisions of the General Resolution governing such modification and amendment. The Authority may fix a record date for purposes of determining Holders of Secured Bonds entitled to consent to a proposed Supplemental Resolution.
Any such consent shall be binding upon the Holder of the Secured Bonds giving such consent and upon any subsequent Holder of such Secured Bond or any bonds issued in exchange therefor (whether or not such subsequent Holder thereof has notice thereof).
At any time after the Holders of the required percentages of Secured Bonds shall have filed their consents to the Supplemental Resolution, the Trustee shall make and file with the Authority a written statement that Holders of such required percentages of Secured Bonds have filed their consents. Such written statement shall be conclusive evidence that such consents have been so filed. At any time thereafter notice, stating in substance that the Supplemental Resolution (which may be referred to as a Supplemental Resolution adopted by the Authority on a stated date, a copy of which is on file with the Trustee) has been consented to by the Holders of the required percentages of Secured Bonds and will be effective as provided in the General Resolution, shall be given to the Holders of Secured Bonds by the Authority by mailing such notice to such Holders and, if at the time any of such Secured Bonds is in coupon form payable to bearer, by publishing the same in the Authorized Newspapers in which the proposed Supplemental Resolution and form of consent were published at least once not more than ninety days after Holders of the required percentages of Secured Bonds shall have filed their consents to the Supplemental Resolution and the written statement of the Trustee provided for in the General Resolution is filed. The Authority shall file with the Trustee proof of the giving of such notice. A record, consisting of the papers required or permitted by the General Resolution to be filed with the Trustee, shall be proof of the matters therein stated. Such Supplemental Resolution making such amendment or modification shall be deemed conclusively binding upon the Authority, the Fiduciaries and the Holders of all Secured Bonds upon the filing with the Trustee of the proof of the giving of such last mentioned notice. (Section 1106)
Modifications by Unanimous Consent. Notwithstanding anything contained in the General Resolution, the terms and provisions of the General Resolution and the rights and obligations of the Authority and of the Holders of Secured Bonds may be modified or amended in any respect upon the adopting and filing of a Supplemental Resolution and the consent of the Holders of all Secured Bonds then Outstanding, such consent to be given as provided in the General Resolution except that no notice to the Holders of Secured Bonds either by mailing or publication shall be required; but no such modification or amendment shall change or modify any of the rights or obligations of any Fiduciary without the filing with the Trustee of the written assent thereto of such Fiduciary in addition to the consent of the Holders of Secured Bonds. (Section 1107)
Defeasance
Manner of Effecting Defeasance. (a) If, when the Secured Bonds secured by the General Resolution shall have become due and payable in accordance with their terms or otherwise as provided in the General Resolution or shall have been duly called for redemption or irrevocable instructions to call the Secured Bonds for redemption shall have been given by the Authority to the Trustee, the whole amount of the Debt Service so due and payable upon all of the Secured Bonds then Outstanding shall be paid or sufficient moneys or Defeasance Obligations shall be held by the Trustee or the Paying Agents for such purpose, and provision shall also be made for paying all other sums payable under the General Resolution by the Authority, then and in that case the right, title and interest of the Trustee shall thereupon cease, determine and become void, and the Trustee in such case, on demand of the Authority, shall release the General Resolution and shall execute such documents to evidence such release as may be reasonably required by the Authority, and shall turn over to the Authority or to such officer, board or body as may then be entitled by law to receive the same any surplus in any fund or account established under the General B-30 APPENDIX B
Resolution, except for the Rebate Fund and any account therein, and except for moneys held for redemption or payment of Secured Bonds; otherwise the General Resolution shall be, continue and remain in full force and effect.
(b) In the event Defeasance Obligations are deposited with the Trustee for the purpose of complying with the General Resolution, the General Resolution shall only be released upon the Trustee receiving a Certificate by an independent certified public accounting firm of national reputation appointed by the Trustee, with the approval of the Authority, stating that the Defeasance Obligations are of such maturities, redemption dates and Payment Dates, and bearing such rate or rates of interest, as will be sufficient, together with any moneys on deposit with the Trustee and available for such purpose, without further investment or reinvestment of either the principal amount thereof or the interest earnings therefrom (which earnings are to be held in trust and committed for the same purpose) for the payment of all Debt Service on those Secured Bonds, at their maturity or redemption dates, as the case may be; provided, that if any of those Secured Bonds are to be redeemed prior to the maturity thereof, notice of that redemption shall have been duly given or irrevocable provision satisfactory to the Trustee shall have been duly made for the giving of such notice.
(c) For purposes of determining whether Secured Bonds bearing interest at a Variable Rate shall be deemed to have been paid prior to the maturity or redemption date thereof, as the case may be, by the deposit of moneys, or Defeasance Obligations and moneys, if any, in accordance with the General Resolution, the interest to come due on such Secured Bonds on or prior to the maturity date or redemption date thereof, as the case may be, shall be calculated at the maximum rate permitted by the terms thereof; provided, however, that if on any date, as a result of such Secured Bonds having borne interest at less than such maximum rate for any period, the total amount of moneys and Investment Securities on deposit with the Trustee for the payment of interest on such Secured Bonds is in excess of the total amount which would have been required to be deposited with the Trustee on such date in respect of such Secured Bonds in order to satisfy the General Resolution, the Trustee shall, if requested by the Authority, pay the amount of such excess to the Authority free and clear of any lien or pledge securing the Secured Bonds or otherwise existing under the General Resolution.
(d) Secured Bonds subject to a Tender Option shall be deemed to have been paid in accordance with the General Resolution only if, in addition to satisfying the other requirements therein, there shall have been deposited with the Trustee moneys in an amount which shall be sufficient to pay when due the maximum amount of principal of and premium, if any, and interest on such Secured Bonds which could become payable to the Holders of such Secured Bonds upon the exercise of any Tender Option provided to the Holders of such Secured Bonds; provided, however, that if, at the time a deposit is made with the Trustee pursuant to paragraph (b) above, the Tender Options originally exercisable by the Holder of a Secured Bond are no longer exercisable, such Secured Bond shall not be considered a Secured Bond subject to a Tender Option for purposes of this paragraph. If any portion of the moneys deposited with the Trustee for the payment of the Debt Service on such Secured Bonds is not required for such purpose the Trustee shall, if requested by the Authority, pay the amount of such excess to the Authority free and clear of any trust, lien or pledge securing said Secured Bonds or otherwise existing under the General Resolution.
(e) If any Secured Bonds shall be deemed paid and discharged pursuant to the General Resolution, then within 15 days after such Secured Bonds are so deemed paid and discharged the Trustee shall cause a written notice to be given to each Holder as shown on the registration books kept by the Secured Bond Registrar on the date on which such Secured Bonds are deemed paid or discharged. Such notice shall state the numbers of the Secured Bonds deemed paid and discharged or state that all Secured Bonds of a particular Series are deemed paid and discharged, set forth a description of the obligations held pursuant to the first paragraph above and specify any date or dates on which any of the Secured Bonds are to be called for redemption pursuant to notice of redemption given or irrevocable provisions made for such notice pursuant to the first paragraph above.
(f) Notwithstanding any other provision in this Section, any reference to Secured Bonds in this Section may refer to all Outstanding Secured Bonds, all Outstanding Secured Bonds in any Series or to all Outstanding Secured Bonds of a stated maturity within any Series of Secured Bonds, and the provisions set forth with respect to defeasance in the General Resolution may equally apply to all Outstanding Secured
B-31 APPENDIX B
Bonds, all Outstanding Secured Bonds in any Series or to all Outstanding Secured Bonds of a stated maturity within any Series of Secured Bonds.
(g) If a forward supply contract is employed in connection with the advance refunding of the Series 2000 Bonds (i) the verification report provided pursuant to subsection (b) above shall expressly state that the adequacy of the escrow to accomplish the refunding relies solely on the initial escrowed investments and the maturing principal thereof and interest income thereon and does not assume performance under or compliance with the forward supply contract, and (ii) the applicable escrow agreement shall provide that in the event of any discrepancy or difference between the terms of the forward supply contract and the escrow agreement (or the General Resolution, if no separate escrow agreement is utilized), the terms of the escrow agreement or Resolution, if applicable, shall be controlling. (Section 1201)
B-32 APPENDIX C
2020 - 2024 CAPITAL IMPROVEMENT PROGRAM CONSULTING ENGINEER’S REPORT
PRESENTED BY: HNTB CORPORATION PRESENTED TO: MAINE TURNPIKE AUTHORITY OCTOBER 26, 2020
Maine Turnpike Authority CONSULTING ENGINEER’S REPORT TABLE OF CONTENTS
PAGE
1.0 INTRODUCTION 1 2.0 DESCRIPTION OF TURNPIKE FACILITIES 2 2.1 TURNPIKE ADMINISTRATION 2 . The Authority . Management and Personnel . Organization . Staffing . Summary 2.2 TRAFFIC 5 2.3 PHYSICAL FEATURES 8 2.4 CONDITION OF FACILITIES 9 3.0 OPERATION AND MAINTENANCE 14 3.1 GENERAL 14 3.2 REVIEW OF HISTORICAL COST DATA 14 3.3 EXPENDITURES 14 3.4 PROJECTED OPERATING COSTS 15
4.0 RESERVE MAINTENANCE FUND 15 5.0 CAPITAL IMPROVEMENT AND RESERVE 18 MAINTENANCE PROGRAMS 5.1 INTRODUCTION 18 5.2 CAPITAL IMPROVEMENTS 19 . Bridges . Miscellaneous - Guide Sign Replacements . Buildings . Technology . Capacity Improvements . Toll Facilities . Planning and MaineDOT Initiatives 5.3 RESERVE MAINTENANCE PROGRAM 25 5.4 CONSTRUCTION SCHEDULE 25 5.5 PROGRAM COSTS 25 5.6 CONTINGENCIES 26 5.7 TECHNICAL APPROPRIATENESS 26 5.8 IMPLEMENTATION 26 5.9 ENVIRONMENTAL CONSIDERATIONS 27 6.0 CONCLUSIONS 27
MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT PAGE i
MAINE TURNPIKE AUTHORITY
2020-2024 CAPITAL IMPROVEMENT PROGRAM
CONSULTING ENGINEER’S REPORT
1.0 INTRODUCTION
In response to a request from the Maine Turnpike Authority (the "Authority" or "MTA"), a study was undertaken, and this Consulting Engineer’s Report has been prepared for inclusion in the Authority's Official Statement for its Turnpike Revenue Bonds, Series 2020. The primary purpose of this study was to evaluate the condition of the existing facilities based on the findings in the Operation and Maintenance Annual Report prepared in September 2020 (the "2020 Annual Report") and to provide an opinion as to the adequacy of the Authority's proposed 2020-2024 Capital Improvement Program (the "Program" or the "Capital Improvement Program"). This Consulting Engineer’s Report: 1) provides an opinion of the current condition of the Maine Turnpike (the “Turnpike”) facilities; 2) provides an opinion of the reasonableness of the projected Operation and Maintenance expenditures and projected Reserve Maintenance Fund expenditures; 3) identifies the proposed projects in the Program; and 4) provides an opinion regarding the costs and implementation of the Program. This Report does not address the areas of revenue projections and economic viability that are being addressed by the Authority and its Traffic Consultant. In addition, the possible impacts of specific restrictions and requirements of the issuance of revenue bonds on the existing organization and management structure of the Turnpike have not been addressed as part of this Report.
The Authority prepared an update to the 10-Year Planning Report in 2013 in response to the rule adopted for the State's Sensible Transportation Policy Act; the previous revision was 2008. The Authority recognized that many of the Turnpike components were over 50 years old and that the number of repair and rehabilitation projects was increasing in both scope and cost. The 10-Year Planning Report established the Turnpike's transportation and safety related goals for the 2014 through 2023 period. The recommended improvements contained in the report were identified as necessary or desirable to preserve the quality and improve the safety of the entire existing Turnpike system, to improve traffic flow throughout the Turnpike, and to provide improved access and enhance existing facilities. The Turnpike plans to develop an updated 10-Year Planning Report within the next three to five years.
In March 2000, $126,000,000 of Turnpike Revenue Bonds were issued to initiate an essential capital improvement program which consisted of the Modernization and Widening of the mainline roadways between Mile 14 and Mile 44 and other capital improvements to Turnpike facilities. The issuance of $51,000,000 of Turnpike Revenue Bonds in 2003 was required for the completion of this Program, as well as to implement other capital improvements, the largest being the conversion of the toll system to the current E-ZPass system. In 2004, the Authority sold $115,050,000 of Turnpike Revenue Bonds with $40,000,000 of the bonds issued to pay a portion of the cost of Turnpike projects such as toll system upgrades and bridge rehabilitation projects, while the balance of $75,050,000 was used to refund outstanding bonds. In 2005, $76,715,000 Turnpike Revenue Bonds were issued to refund $72,875,000 in aggregate principal amount of Series 2000 Bonds. In September 2007, the Authority issued $50,000,000 Turnpike Revenue Bonds to pay a portion of costs associated with capital projects
MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT PAGE 1 such as bridge reconstruction. In April 2008, the Authority refunded $45,885,000 of the Series 1998 Turnpike Revenue Bonds as well as $19,480,000 of Special Obligation Bonds. This provided a savings benefit that was used to help finance ongoing programs including service plaza reconstruction and bridge rehabilitation as well as other capital improvements. The issuance of $50,000,000 of Turnpike Revenue Bonds, Series 2009, was required to pay a portion of the cost of Turnpike projects such as bridge rehabilitation projects, building projects, and toll projects. $68,990,000 of Turnpike Revenue Bonds, Series 2012A, were sold to fund capital projects such as park-and-ride facilities and bridge rehabilitation and Series 2012B bonds in the amount of $84,240,000 were sold to refund outstanding Turnpike Revenue Bonds. The $39,715,000 Series 2014A Turnpike Revenue Bonds, were sold to refund outstanding Turnpike Bonds and $27,555,000 Series 2014B bonds were sold as Special Obligation Bonds to purchase a 1.9 mile section of I-95 in Kittery from the MaineDOT and extend the Turnpike to approximately 75 feet from the Piscataqua Bridge. $144,875,000 of Maine Turnpike Revenue Bonds, Series 2015, were sold to refund outstanding Turnpike Bonds. $150,000,000 of Turnpike Revenue Bonds, Series 2018, were most recently sold to fund capital projects such as bridge rehabilitation, capacity improvements and toll system upgrades.
The demands placed on Turnpike facilities are enormous. Its roadways, bridges, interchanges, toll plazas, service areas and maintenance areas are subjected to increasing stress due to age, traffic levels, high weight limit (100,000 lb. trucks allowed), and the demands of the harsh northern New England climate. In 2019, a total of 90.3 million transactions and 74.8 million trips were recorded on the Maine Turnpike. The major trucking route for Maine, this vital economic lifeline carries many of the goods shipped throughout the state and to the remainder of New England. Truck traffic has grown steadily over the past five years, averaging just over 2.5% per year. The inevitable aging of the Turnpike combined with the growth in truck weight and trips, increases the ongoing rehabilitation needs of the Turnpike.
To ensure the sound condition and effective operation of the Turnpike, the Authority funds and implements aggressive Operation and Maintenance, Reserve Maintenance, and Capital Improvement programs. The vigilance of the Authority through these programs has resulted in a well maintained and efficiently operated Turnpike. The Authority must continue initiatives such as pavement rehabilitation, bridge rehabilitations and replacements, and system modernization to assure that Turnpike facilities meet current safety standards as well as projected demands. The 2020 annual inspection of the condition of Turnpike facilities as presented in the 2020 Operations and Maintenance Report, undertaken by the Consulting Engineer, concluded that, while there is still work to be done, good progress has been made in the upkeep and maintenance of the Authority’s infrastructure. Given this progress, the focus of the Program is evolving to include a greater emphasis on preservation projects and on projects that address capacity constraints.
2.0 DESCRIPTION OF TURNPIKE FACILITIES
2.1 Turnpike Administration
THE AUTHORITY
The Authority is a "body politic and corporate" and a public instrumentality of the State of Maine existing and operating under 23 MRSA §1961-1983 (the "Enabling Act"). The Enabling Act authorizes and empowers the Authority to operate and maintain the Turnpike between Kittery and Augusta. The Authority, in 2015, acquired approximately 1.9 miles of I-95 beginning at a point 75 feet north of the northern most joint of the Piscataqua River
PAGE 2 MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT
Bridge to a point 200 feet north of Spruce Creek. This provides the Authority with care and control of the roadway from the southern entry into the state to the Turnpike’s northern terminus in Augusta. The Authority was created as an instrumentality of the State to discharge the public functions which have, from time to time, been delegated to it by the Legislature. The Authority acts through seven members (the "Board"), six of whom are appointed by the Governor for staggered six-year terms. One of these six members is designated as Chairman by the Governor. The Commissioner of the Maine Department of Transportation (MaineDOT), or the Commissioner's designee, is a Member of the Authority serving Ex- Officio. The members of the Authority’s Board are compensated and reimbursed for expenses incurred in the performance of their duties as provided in the Enabling Act. The Authority can act only upon the concurrence of at least four of its members.
MANAGEMENT AND PERSONNEL
The Authority provides policy direction, contractual approval, budgetary review and approval, financial oversight, approval of capital projects, and general direction to the MTA's operating staff in addition to overseeing compliance with MTA's General Turnpike Revenue Bond Resolution adopted by the Authority on April 18, 1991, as amended (the "Bond Resolution") and all relevant statutes. An Executive Director is appointed by the Authority and confirmed by the Legislature. The Treasurer and the Chief Financial Officer report directly to the Board.
The Board has three committees that provide more detailed oversight in specific areas:
• The Finance and Audit Committee – oversees financial and related policies and procedures to ensure compliance with MTA objectives and other best practices; reviews results of independent audits; works with the Long Range Planning Committee to determine whether capital projects require new bond issuances; and reviews the annual budget in detail before recommending it to the full Board.
• The Long Range Planning Committee – reviews MTA projects that involve long planning timeframes or have potential for major community impacts; reviews the proposed 30-Year Plan and its supporting detail to develop a list of capital projects prioritized according to MTA’s financial planning goals; and works with the Finance and Audit Committee to determine whether the capital plan requires new bond issuances.
• The Personnel Committee – reviews and recommends collective bargaining agreements and adjustments to compensation, including cost of living adjustments and pay scales. This committee also reviews MTA's human resource practices and policies, and oversees the development or revision of policies, to ensure compliance and consistency with MTA's objectives and other best practices.
The Executive Director manages the operations of the Authority and serves as the Chief Executive Officer of the Authority reporting directly to the Board. The Chief Operations Officer reports directly to the Executive Director. The Chief Financial Officer reports directly to both the Board and the Executive Director. The Treasurer and the Secretary report directly to the Board.
The staff of the Authority is organized into eight functional departments, each managed by a Director. Maintenance, Engineering, and Public Safety report to the Chief Operations Officer
MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT PAGE 3
while Fare Collection, Human Resources, Finance, Information Services and Communications, and Policy and Planning report to the Chief Financial Officer. In addition, the Staff Attorney reports to the Chief Financial Officer. The primary administrative functions of staffing, accounting and financial control, engineering, planning and construction as well as maintenance of the facilities are accomplished or managed within the organization of the Authority.
Under the terms of a contract between the Authority and the State, the Maine State Police provide law enforcement on the Turnpike. The Authority reimburses the State for the expenses of the State Police. The Director of Public Safety manages this contract.
DEPARTMENT ORGANIZATION
This section provides descriptions of the various departments within the Authority.
General Administration is responsible for the routine administration of the Authority. This group includes the Executive Director, Treasurer and Chief Financial Officer, Chief Operations Officer, Secretary and Staff Attorney, Director of Policy and Planning, and support staff.
Human Resources is responsible for personnel matters, safety and loss prevention and environmental compliance activities of the Turnpike. The Human Resources Department is supervised by the Director of Human Resources.
Public Safety is responsible for highway safety, traffic control, law enforcement, on-road communications and patron services on the Turnpike. The Public Safety Department, managed by the Director of Public Safety, also serves as a liaison and administers the contract with the Maine State Police and oversees the operation and maintenance of service areas and rest areas, including administering the contracts with the service area vendors.
Maintenance is responsible for all building, highway and equipment maintenance activities on the Turnpike. The Maintenance Department is managed by a Director. Two Highway Maintenance Supervisors, reporting to the Director, are responsible for the Maintenance areas in York, Kennebunk, South Portland (Crosby), Gray, Auburn, and Gardiner/Litchfield. Each maintenance area is responsible for all maintenance activities within their respective segments of the Turnpike. In addition to the Supervisors, each maintenance area has a foreman. An Equipment Maintenance Supervisor, reporting to the Director, is responsible for equipment maintenance and manages three foremen.
Winter maintenance activities primarily involve snow and ice removal on the roadways, interchange ramps, service areas and toll plazas. Summer maintenance involves mowing, vegetation control, property damage repairs (primarily guardrail), litter control, and minor improvements.
Engineering is responsible for managing all engineering and construction of all Turnpike facilities including its right of way. The Engineering Department is managed by the Chief Operations Officer. The Chief Engineer, Engineering Program Manager, Construction Program Manager, and Maintenance Director report to the Chief Operations Officer. The Right-of-Way Manager reports to the Executive Director. The Department staff is responsible for execution of the Authority’s Capital Improvement and Reserve
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Maintenance Programs, and for administering the Authority's construction contracting process.
Finance is responsible for the overall financial activities for the Authority, including investments and budget development. The Finance Department, headed by the Director of Finance, manages all financial matters of the Authority, including investment of funds, budgeting, accounting, auditing, bondholder reporting, insurance, E-ZPass and customer service and purchasing.
Information Services and Communications manages communication systems. This Department is managed by the Director of Information Systems and Communications and is responsible for the development and maintenance of computer hardware, software, telephone systems and ITS equipment.
Fare Collection is responsible for collecting, sorting, reporting and preparing all toll receipts and for security service pickup and deposit with the appropriate banking institution. Four Fare Collections Superintendents and a Fare Collection Coordinator report to the Director of Fare Collection.
Policy and Planning manages internal and external communications. The Department is managed by the Public Outreach and Marketing Manager and is responsible for government and public relations, project permitting and the dissemination of policy information.
STAFFING
The Turnpike has decreased the number of employees from 387 in 2017 to the current staff of 381 which includes 15 seasonal employees. This staff is supplemented by temporary and part-time help to meet periods of increased maintenance and traffic activities. The current staffing is organized as shown in Table 1. This current staffing reflects the Authority's efforts to employ efficiencies while maintaining customer service. An increase in staffing occurred in the Finance Department, specifically in Customer Service, while a significant staff reduction occurred in the Fare Collection Department. This is due to the increasing demands associated with account management and reviews of electronic toll imaging, a reflection of the increasing number of patrons using Electronic Toll Collection. A minor staff increase was also made in the Public Safety Department.
SUMMARY
The current management and operating procedures of the Authority provide for the efficient operation of the Turnpike facilities in accordance with the Bond Resolution and Special Obligation Resolution and support the effective implementation of the Program. We anticipate current policies and procedures will be maintained and modified, as required, to accommodate the particular requirements imposed by the Bond Resolution.
2.2 Traffic
The Maine Turnpike Authority’s operations are financed entirely by Turnpike revenues. These revenues must pay for: 1) annual operations and maintenance, 2) debt service, 3) reserve maintenance, and 4) capital expenditures. Revenues from tolls account for approximately 93% of revenues, with the remaining 7% of revenues coming from
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concessions, interest income, and transponder sales. This high reliance on toll revenue is typical of most toll agencies.
TABLE 1 TURNPIKE STAFFING
Department 2017 2020 General Administrative 7 7 Human Resources 6 6 Highway Safety Supervisory/Mgmt & Conf 2 3 Communications 5 6 Subtotal 7 9 Highway & Equipment Maintenance Supervisory 14 14 Highway Maintenance 69 70 Seasonal Highway Maintenance 15 15 Equipment Maintenance 15 15 Subtotal 113 114 Engineering & Building Maintenance Supervisory/Mgmnt & Conf 5 5 Building Maintenance 12 13 Engineering 14 13 Subtotal 31 31 Finance Supervisory & Accounting 18 19 Systems Analyst 16 16 Customer Service 31 38 Purchasing 2 2 Subtotal 67 75 Fare Collection Supervisory/Mgmnt & Conf 9 10 South 52 45 Central 52 47 North 43 37 Subtotal 156 139 TOTAL 387 381
Temporary On-Call Toll Collectors 57 37
Traffic on the Turnpike has grown over the past decade, including significant growth from 2013 through 2019. Average Annual Growth was approximately 2.2% per year for the period 2009-2019 and, more recently, 3.6% per year for the period 2014-2019. Vehicle- miles traveled (VMT) grew an average of 1.6% per year for the period 2009-2019. Strong average annual growth of 3.3% has occurred in VMT for the period 2014-2019. Table 2 summarizes Turnpike traffic since 2010.
Beginning in March 2020, numerous events related to the COVID-19 pandemic converged in a relatively short period of time, dramatically reducing economic activity and – as a consequence – suppressing Turnpike traffic as well. At the peak of the COVID crisis in late March and early April 2020, traffic volumes on the Turnpike were cut by nearly half,
PAGE 6 MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT levels not seen since the 1970s. The impact was most profound on passenger cars while commercial traffic was less affected.
TABLE 2 TURNPIKE TRAFFIC
Turnpike % Change From VMT % Change From YEAR Transactions Previous Year (millions) Previous Year (Thousands) 2010 73,713 1.5% 1,237 0.3% 2011 73,064 -0.9% 1,228 -0.7% 2012 73,444 0.5% 1,218 -0.9% 2013 73,066 -0.5% 1,193 -2.0% 2014 75,570 3.4% 1,225 2.7% 2015 79,515 5.2% 1,282 4.7% 2016 83,616 5.2% 1,350 5.3% 2017 86,110 3.0% 1,386 2.7% 2018 88,466 2.7% 1,424 2.8% 2019 90,281 2.1% 1,447 1.6% Avg. Annual Change 1,766 2.2% 21 1.6% (2009-2019) Avg. Annual Change 2,942 3.6% 44 3.3% (2014-2019)
Starting in early May, the Maine economy began a process of gradual reopening and of slowly relaxing personal restrictions. This process has been accompanied by growth in traffic on the Turnpike with traffic volumes continuing to rebound over the summer months. By August 2020, traffic volumes were down approximately 22% from August 2019 levels.
The MTA regularly reviews traffic and its impact on projected revenues. The fluctuating annual increase and decrease in traffic over the past 10 years, including the steady increases seen for the period 2014-2019, is well understood by the MTA and its impacts have been included in the 30-Year Plan. Likewise, the current impact on Turnpike traffic and revenue due to the ongoing COVID-19 pandemic have been estimated by the Turnpike in the 30 Year Plan. The Traffic and Revenue Consultant’s Report will provide more information regarding this matter. The MTA has evaluated and continues to evaluate a range of possible revenue impacts due to the pandemic and accounts for these impacts as part of their overall financial plan.
The Authority has the power to execute toll increases to meet required expenditures to operate the Turnpike in good repair, working order and condition for future years as required by the Bond Resolution.
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2.3 Physical Features
Designed to the most-advanced safety standards of its day, the Turnpike opened the 45-mile, four-lane express toll highway, with its southern terminus in the Town of Kittery and its northern terminus in the City of Portland, in 1947. In 1955, the 66-mile extension from Portland to Augusta was added. The present highway facility includes 109 miles of mainline roadways, the 3-mile Falmouth Spur, 201 bridges or culverts at least 10 feet in length, 19 interchanges, 20 toll plazas, an administration building, five service areas, and nine maintenance facilities (see Figure 1).
FIGURE 1 - MAINE TURNPIKE SYSTEM
The Turnpike has been incorporated into the Interstate Highway System and designated Interstate 95 (I-95). This includes the entire Turnpike from the southern terminus in Kittery to the northern terminus in Augusta.
The Authority acquired a portion of Interstate 95 (approximately 1.9 miles beginning at a point 75 feet north of the northern most joint of the Piscataqua River Bridge to a point 200 feet north of Spruce Creek in Kittery) from MaineDOT with the proceeds of the Special
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Obligation Bonds, Series 2014. This provides the Authority with care and control of the roadway from the southern entry into the state to the Turnpike’s northern terminus in Augusta.
There are four mainline toll plazas and fifteen ramp toll plazas along the length of the Turnpike. Four exits, 75, 80, 86 and 102 do not have toll plazas, but are furnished with E- ZPass equipment for documenting E-ZPass usage at these locations. The present toll collection system is a Closed Barrier / Entry Toll Collection System, from York to New Gloucester and an Open Barrier Toll Collection system from New Gloucester to Augusta. The entire MTA toll collection system utilizes Electronic Toll Collection (E-ZPass), which incorporates the Authority into the E-ZPass Group, formerly the Inter Agency Group (IAG) Toll System. The E-ZPass Group includes 28 toll agencies that operate multiple toll roads, bridges and tunnels in 18 states from Maine to Florida to Illinois. Essentially, travelers can move between Florida and Maine utilizing one Electronic Toll Collection system.
The original Turnpike incorporated state-of-the-art design standards for highway safety; and although the Authority implemented a continuing program to upgrade its facilities incorporating advances in highway safety and efficiency, a number of the older elements of the facility do not conform to current design standards. The Turnpike is a divided highway with barrier guardrail placed within a 26-foot median, consisting of an 18-foot grass median and two four-foot paved shoulders. The section of the Turnpike south of Portland was widened to three 12-foot travel lanes and a 12-foot outside shoulder on both roadways. The roadways through Portland and to the north consists of a similar median and inside shoulder, two 12-foot travel lanes and an eight-foot outside shoulder.
Based on current traffic volumes as well as anticipated traffic growth, the section of the roadways north through Portland from mile 46 to 49 is being widened to three 12-foot travel lanes and a 12-foot outside shoulder. Construction of the widening is underway with the third lane scheduled to commence operation in 2022.
2.4 Condition of Facilities
The Bond Resolution mandates that the Authority shall at all times operate the Turnpike properly and in a sound and reasonable manner and shall maintain, preserve and reconstruct the Turnpike to ensure the good repair, working order and condition of its facilities. In compliance with the provisions of Section 806 of the Bond Resolution, the Consulting Engineer inspects the Turnpike annually and submits a report to the Authority setting forth their findings on whether the Turnpike has been maintained in good repair, working order and condition.
A visual inspection of the entire Turnpike was conducted between April and June 2020. This inspection covered all portions of the Turnpike, including pavement, vegetative cover, bridges, drainage structures, signs, pavement striping, buildings, and other roadway appurtenances. The detailed findings of the inspection presented in the Annual Inspection Report, as well as in the 2020 Operation and Maintenance Annual Report, were submitted to the Authority in July and October 2020 respectively. The most recent inspection of the Turnpike facilities and a review of operations indicate that the Turnpike continues to be operated in an efficient and effective manner and has been maintained in generally good repair, working order and condition. A summary of the findings for the major components are as follows:
MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT PAGE 9
ROADWAY
The roadway pavement is in generally fair to good condition. To maintain the pavement quality and roadway safety, the Authority implements a program of planned pavement rehabilitation generally rehabilitating nine centerline miles per year but not allowing any section to go unserved for more than 12-15 years. This has allowed the Authority to ensure roadway safety in a cost-effective manner. The Authority plans to adequately fund this program over the next several years to maintain the pavement in generally good condition.
VEGETATIVE COVER
Vegetative cover generally includes the grass median and side slopes of the roadway. The inspection revealed that most median slopes are in good condition although the vegetative cover is in poor condition. Most roadway side slopes are stable with good vegetative cover. The typically gentle slope of the median allows sand buildup to be stable, generally replacing the vegetative cover over time. Minor corrective actions are taken annually by MTA maintenance forces as needed.
BRIDGES
The Turnpike bridges are in generally good condition. This conclusion is based on a bridge rating that is made as part of the annual inspection. The rating of Turnpike bridge facilities is consistent with the criteria of the Federal Highway Administration. The categories run from a high rating of “9” to a low rating of “0”. For overpasses and underpasses, each rating category value, determined at the time of inspection, corresponds to one of the “Condition and Brief Descriptions” shown in Table 3.
Based on these ratings, HNTB rates individual components such as the concrete deck, joints, concrete piers and abutments, and steel of each overpass and underpass. Bridges are further separated into five Groups based on the overall condition of the bridges and the safety implications of their deficiencies. These Groups are:
. Group V bridges do not require repair (typically new or recently rehabilitated) . Group IV bridges need repairs, but of a minor nature. This work can most likely be done by maintenance crews. . Group III bridges need repairs, but generally the structural safety is not jeopardized at present. . Group II bridges should be repaired as soon as possible. However, the problem is such that a short delay is not likely to create a safety problem. If left too long, it will become a Group I bridge. . Group I bridges need immediate repair. The problem is such that the safety of the highway is in danger if the repair is not made quickly. For example, heavy deterioration under bridge shoes, shoes excessively tilted to the point where they might roll off the rocker or major bridge deck deterioration, weakened girders due to impact, etc.
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TABLE 3 COMPILED RATING DESCRIPTIONS
Rating* Condition and Brief Description
N NOT APPLICABLE H NOT INSPECTED - element was not inspected due to high water. 10 UNDER REPAIR - element is being repaired or rehabilitated. 9 EXCELLENT CONDITION. 8 VERY GOOD CONDITION - no problems noted. 7 GOOD CONDITION - some minor problems. 6 SATISFACTORY CONDITION - structural elements show some minor deterioration. FAIR CONDITION - all primary structural elements are sound but may have minor section 5 loss, cracking, spalling or scour. 4 POOR CONDITION - advanced section loss, deterioration, spalling or scour. SERIOUS CONDITION - loss of section, deterioration, spalling or scour have seriously 3 affected primary structural components. Local failures are possible. Fatigue cracks in steel or shear cracks in concrete may be present. CRITICAL CONDITION - advanced deterioration of primary structural elements. Fatigue cracks in steel or shear cracks in concrete may be present or scour may have removed 2 substructure support. Unless closely monitored it may be necessary to close the bridge until corrective action is taken.
IMMINENT FAILURE CONDITION - major deterioration or section loss present in 1 critical structural components or obvious vertical or horizontal movement affecting structure stability. Bridge is closed to traffic but corrective action may put it back in light service. 0 FAILED CONDITION - out of service - beyond corrective action.
* Note: Rating system is based on Federal Highway Administration guidance
Table 3A illustrates the number of bridges in each group category based on the 2020 annual inspection. Data for the prior four years have also been provided for reference. The reduction of bridges between 2016 and 2017 is a result of eliminating the Gray interchange bridge as part of the Gray Interchange Reconstruction project. The number of bridges moving between groups from Group V to Group IV and from Group IV to Group III is due to age and the need for general maintenance repairs and is a natural progression. As bridges age, the level of needed repair increases. The increase in the number of bridges in Group V in 2020 is reflective of improvements resulting from the Authority’s ongoing Capital Improvement Program.
In addition, higher priorities are typically assigned to bridges that are classified as "structurally deficient". A bridge classified as structurally deficient is not necessarily unsafe; however, these bridges require repair and maintenance in the near future to ensure their continued safe operation. There are several key structural components that are considered by FHWA in reaching this classification. These components primarily include:
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deck, substructure and superstructure. If any one of these components has a condition rating of 4 or less (indicating that element is in ‘poor’ condition), the bridge is considered structurally deficient.
TABLE 3A BRIDGE TABULATION
TOTAL GROUP V GROUP IV GROUP III GROUP II GROUP I YEAR NUMBER OF BRIDGES BRIDGES BRIDGES BRIDGES BRIDGES BRIDGES 2020 11 65 125 0 0 201 2019 8 74 119 0 0 201 2018 8 73 119 0 0 201 2017 9 74 118 0 0 201 10 73 119 0 0 202 2016
Since 2009, a primary focus of the Authority’s bridge program has been to repair or rehabilitate structurally deficient bridges and tremendous progress has been made. The 2009 inspection report noted 24 structurally deficient bridges equaling 13.6% of all Authority owned bridges. The Authority’s focus on the repair or replacement of these bridges has been successful. The 2020 annual inspection found no Authority owned bridges are structurally deficient. By comparison, 5.4% of the nation’s bridges, and 8.3% of all Maine bridges, are structurally deficient.
The Authority’s planned bridge rehabilitation program is reviewed and adjusted after each year’s inspection program. The Authority plans to adequately fund the bridge program over the next several years with an emphasis on the timely preservation, repair or replacement of bridges to prevent structures from deteriorating into Group I and II bridges, and to avoid having structurally deficient bridges.
The Authority’s rehabilitation program has also taken into consideration structures that are not compliant with current geometric design guidelines. These structures have narrow lanes, shoulder widths, or substandard clearances. However, these features typically do affect operational effectiveness and safety.
The Authority’s approach to bridges that do not meet current geometric design guidelines has been to incorporate geometric improvements as part of planned structural repair or rehabilitation projects when appropriate. For bridges carrying the Turnpike over roadways and water bodies, bridge shoulders are typically widened to be consistent with the approach roadway. When rehabilitating bridges that carry local roadways over the Turnpike, structures with substandard clearance are raised vertically to provide adequate clearance over the Turnpike.
The Authority has improved many of its mainline bridges using this approach and should continue in this manner.
PAGE 12 MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT
DRAINAGE
The roadway surface drainage system, consisting of drainage ditches, catch basins and cross culverts, was inspected and found to be in fair-to-good condition. The MTA maintains the drainage system in two parts, one with Authority maintenance forces and the other with contractors. Maintenance forces annually address berm, ditch, and side slope maintenance and repair ensuring stormwater leaves the roadway and enters ditches or drainage structures. The Authority also implements a program of including larger surface drainage repairs, as well as catch basin and culvert repair, as part of pavement rehabilitation projects. The Authority plans to fund drainage repairs each year.
GUARDRAIL
Guardrail on the Turnpike is generally in good condition. Routine maintenance is addressed by Turnpike maintenance forces. The Turnpike is also addressing updated standards for roadside safety outlined in the 2011 Manual for Assessing Safety Hardware (MASH) manual through the incorporation of updated design standards in new projects. Guardrail and guardrail terminal rehabilitation and replacement are typically completed as part of other major contracts such as paving and bridge rehabilitations.
SIGNS AND PAVEMENT STRIPING
The MTA maintains its signs in generally good condition. Each year, the MTA routinely replaces signs that are damaged, faded, or otherwise in poor condition. In 2016, the MTA initiated a four-year plan to upgrade and/or replace their existing guide signs. This work is now nearly complete with a few remaining signs programmed for replacement as part of ongoing maintenance or capital improvement projects.
MTA maintenance forces have historically re-striped the Turnpike once a year to maintain roadway markings in good condition. In 2020, the roadway will be re-striped twice, once in the spring and once in the fall, in an effort to improve the visibility of pavement markings in the mid to late winter months. In addition, the MTA is also now installing reflectorized milled-in pavement marking tape to supplement the white skip lines. The tape improves visibility of the markings in wet and nighttime conditions. The MTA also maintains pavement markings at the interchanges, typically painting them twice yearly.
BUILDINGS
The toll buildings, service plazas, and maintenance buildings were found to be in generally good condition. The MTA, through its maintenance forces and contractors, is actively completing annual maintenance and repair on all buildings, is currently upgrading the tolling components at the toll plazas, is in the midst of replacing toll plazas, is rehabilitating and improving maintenance buildings, and has begun systematic planning and rehabilitations at its service plazas.
SUMMARY
In summary, the inspection found that the Turnpike is generally in good condition through the continued efforts of the Authority's maintenance program and the efforts carried out under the Reserve Maintenance and Capital Improvement Programs. As noted in the 2020 Annual
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Report, excellent progress has been made addressing the number of structurally deficient bridges with none remaining in the Authority’s bridge inventory. However, as also noted in the 2020 Annual Report, several of the Turnpike's bridges, sections of the roadway pavement surface, and support facilities require continued maintenance and rehabilitation. The proposed Capital Improvement and Reserve Maintenance Programs include significant funding to address these needed improvements.
3.0 OPERATION AND MAINTENANCE
3.1 General
Operation and Maintenance include expenditures of the Authority for Administration, Finance and Data Processing, Maintenance, Fare Collection, and Special Services. The maintenance of a safe highway is both a mandate to the Authority and an important public trust. The Authority's aggressive maintenance policy contributes significantly to ensuring a safe highway for Turnpike patrons. Routine maintenance includes repairing road surfaces, bridges and buildings, replacing damaged guardrail, snow plowing, grass mowing and keeping the roadway and adjacent properties clean and in good physical appearance. The 2020 inspection of the condition of Turnpike facilities, as well as a review of maintenance operations, indicated that the maintenance functions continue to be performed effectively and efficiently, limited only by their available resources. As noted in the 2020 Annual Report, and in previous Annual Reports, the Turnpike has been maintained in good repair, working order and condition, and presents a generally good appearance. There are, however, many elements of the Turnpike’s facilities that are approaching the end of their useful lives, thereby requiring an increased amount of maintenance and rehabilitation.
3.2 Review of Historical Cost Data
The Bond Resolution provides that the Authority will, on or before December 20th of each year (the Authority's Fiscal Year is the calendar year), adopt a final Operating Budget for the following Fiscal Year. Included in the budget are administrative, financial, fare collection, special services and maintenance costs.
3.3 Expenditures
A review of the historical data of expenditures for Operation and Maintenance of the Turnpike (see Table 4) indicates that the Authority has operated in a cost-effective manner. The 1.8% annualized increase in expenditures since 2010 reflects annual inflation, changes in staffing levels and the additional maintenance requirements necessary to maintain an expanding and aging infrastructure.
Sound management practices have kept the Authority's budget in balance. An effective maintenance program, supplemented by capital improvement programs, has kept the highway facility in good repair even though some segments of the roadways are operating near their capacity during peak periods of recreation and commuter traffic.
PAGE 14 MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT
TABLE 4 MTA HISTORICAL OPERATIONS AND MAINTENANCE EXPENDITURES
YEAR CATEGORY 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Administration $ 2,721,038 $ 2,653,361 $ 2,399,757 $ 2,204,851 $ 2,183,602 $ 2,375,593 $ 2,491,143 $ 2,440,987 $ 2,413,827 $ 2,385,818
Finance 3,799,443 3,806,715 3,801,108 3,578,295 3,738,555 3,734,580 4,037,614 3,883,420 4,038,972 4,428,114
Maintenance 9,997,796 11,046,561 10,564,704 10,556,831 11,837,752 11,595,419 11,809,348 13,518,738 13,381,585 13,796,100
Fare Collection 14,059,994 14,247,011 13,392,560 11,812,531 12,199,090 12,295,755 12,985,346 13,322,643 13,771,484 13,876,347
Special Services 6,188,311 5,957,219 5,836,628 6,213,312 6,707,873 6,393,574 6,763,672 7,509,855 7,798,356 8,665,270 TOTALS $ 36,766,581 $ 37,710,865 $ 35,994,757 $ 34,365,818 $ 36,666,872 $ 36,394,921 $ 38,087,124 $ 40,675,643 $ 41,404,224 $ 43,151,649
3.4 Projected Operating Costs
Table 5 summarizes projected Operation and Maintenance expenditures for the Turnpike. The baseline costs for the year 2020, as well as the future year projections, have been provided by the Authority and reviewed by the Consulting Engineers. Escalation rates have been applied for the years 2020 through 2029. These rates take into consideration current inflation trends and historical information on cost increases, as well as anticipated changes to operations and maintenance.
TABLE 5 MTA PROJECTED OPERATION AND MAINTENANCE EXPENDITURES
YEAR CATEGORY 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Administration $ 2,067,800 $ 2,115,980 $ 2,195,794 $ 2,278,624 $ 2,364,582 $ 2,453,788 $ 2,546,365 $ 2,642,438 $ 2,742,143 $ 2,845,615
Finance 4,448,878 4,375,472 4,537,497 4,705,529 4,879,793 5,060,517 5,247,943 5,442,320 5,643,906 5,852,968
Maintenance 13,697,305 13,763,052 14,281,203 14,818,890 15,376,851 15,955,853 16,556,690 17,180,187 17,827,198 18,498,613
Fare Collection 13,861,129 14,240,923 14,768,398 15,315,436 15,882,763 16,471,131 18,856,604 19,543,136 20,254,771 20,992,430
Public Safety 7,883,798 8,152,636 8,469,764 8,799,234 9,141,526 9,497,138 9,866,590 10,250,420 10,649,188 11,063,475 TOTALS $ 41,958,910 $ 42,648,063 $ 44,252,656 $ 45,917,713 $ 47,645,514 $ 49,438,427 $ 53,074,192 $ 55,058,501 $ 57,117,206 $ 59,253,101
Overall, operation and maintenance costs are projected to increase at an annualized rate of 3.90 percent through 2029. There is a projected increase in the fare collection costs in 2026. This is attributed to the possible addition of toll collection for the Gorham Connector should it go forward. The costs projected for the Operation and Maintenance of the Turnpike are a reasonable estimate of future costs assuming that the Turnpike is operated and maintained under the anticipated procedures and practices. The current age and condition of the facilities have been considered.
4.0 RESERVE MAINTENANCE FUND
The Authority is not only responsible for the day-to-day maintenance and operations of the Turnpike, but it is also required to protect, preserve and maintain the valuable properties it owns. To adequately maintain its properties in accordance with the provisions of the Bond Resolution, an amount of money is set aside annually in a reserve account to (A) cover the costs of (i) unusual or extraordinary maintenance, repairs, resurfacing, replacement and reconstruction; (ii) equipment replacement; and (iii) engineering expenses in connection with
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design and construction supervision, (B) provide a source of funds in case of an unanticipated loss of revenue, and (C) cover the cost of premiums on insurance coverage.
Generally, Reserve Maintenance construction projects are of such magnitude that contract documents are prepared by the Authority's design engineers. Construction contracts are advertised, bid upon, and awarded to the lowest responsive and responsible bidder. Construction is performed by a General Contractor and the Authority's engineering staff or their designee provides day-to-day inspection of the construction and processes the Contractor’s pay estimates. The Consulting Engineers are responsible for construction overview and assistance.
Since 2010 the Authority has spent $325,856,571 from the Reserve Maintenance Fund (Table 6) supporting a wide range of projects, including roadway-resurfacing and bridge deck replacement. The annual expenditure has varied from a low of $25,562,178 in 2010 to a high of $38,148,654 in 2014. The increase in expenditures over time reflect both the escalation of construction costs and the increase in the extent of the work required due to the aging of Turnpike facilities and the prudent actions of the Authority to maintain this vital piece of infrastructure and transportation asset.
TABLE 6 MTA HISTORICAL AND PROJECTED RESERVE MAINTENANCE FUND EXPENDITURES & DEPOSITS
YEAR DEPOSITS EXPENDITURES 2010 $29,000,000 $25,562,178 2011 28,000,000 25,995,370 2012 30,000,000 32,110,397 2013 31,000,000 30,132,448 2014 30,000,000 38,148,654 2015 37,000,000 35,031,664 2016 36,500,000 31,733,453 2017 37,000,000 37,545,243 2018 38,000,000 34,198,010 2019 39,000,000 35,399,154 TOTAL ( Ten year) $335,500,000 $325,856,571 2020 $40,000,000 $41,372,130 2021 40,000,000 56,325,797 2022 40,000,000 50,358,813 2023 40,000,000 50,060,765 2024 40,000,000 48,326,640 TOTAL ( Five year) $200,000,000 $246,444,145
In those years where expenditures have exceeded net deposits, the Authority has drawn from Reserve Maintenance Fund balances. As of September of 2020, the Reserve Maintenance Fund balance was $53.8 million. These additional expenditures are a combination of
PAGE 16 MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT advancing projects and performing emergency repairs caused by such things as over-height truck damage.
The Turnpike currently funds its Rehabilitation and Capital Improvements Projects from two sources. The Reserve Maintenance Fund provides monies for construction, reconstruction and repair projects. The Capital Improvement Fund provides monies necessary additions and expansions to existing facilities and the construction of new facilities. For the Turnpike to meet projected transportation demands a significant construction program is underway, and will continue over the next several years, to adequately meet the needs of Turnpike patrons and the residents of Maine, as well as the needs of the State's economy.
The Operation and Maintenance Annual Report, prepared by the Consulting Engineer as required by the Bond Resolution, sets forth our findings and recommendations including the amount that should be deposited during the ensuing fiscal year into the Reserve Maintenance Fund. These monies are used to fund extraordinary repairs, replacements, construction and reconstruction. The purchase of insurance is also funded by the Reserve Maintenance Fund and provides for the following coverages:
1. Comprehensive Package Policy, including Turnpike Property, 2. Business Auto, 3. Comprehensive General Liability, 4. Commercial Umbrella Liability, 5. Comprehensive Crime and Fidelity, 6. Worker's Compensation Self-Insurance Excess, 7. Self-Insured Workers Compensation Bond, and 8. Miscellaneous Policies (e.g., Fiduciary responsibility, cyber- crime, group hospital – surgical, Public Officials and employee liability).
The projected cumulative annual deposits from net revenues to the Reserve Maintenance Fund for the period 2020 through 2024 will total approximately $200,000,000 (Table 6). This amount reflects an increase in the funding level established for this period of major capital improvements and facilitates the financial planning process. Additionally, the anticipated accumulated fund balances will provide the required reserve for unanticipated repairs, replacements or reconstruction, as well as be available to fund future portions of the Capital Improvement Program. The amount to be deposited in the Reserve Maintenance Fund for each fiscal year will be established by the Authority on the basis of an annual certificate of the Consulting Engineer setting forth the expenditures deemed necessary to: 1) restore or prevent physical damage to the Turnpike; 2) achieve the safe and efficient operation of the Turnpike; or 3) prevent loss of revenues, all according to the following listed general categories. (a) Perennials – Includes the projected recurring (annual) costs for Reserve Maintenance (RM) Program administration and insurance. (b) Construction/Reconstruction – Includes the estimated construction costs of anticipated repair, replacement and reconstruction projects, including engineering and contingencies under the RM Program. A detailed summary is included in Table 8. (c) Subtotal Reserve Maintenance Expenditures – Total estimated annual RM Program costs.
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(d) Contingency and Development Costs – Includes estimated costs for engineering and contingency, right-of-way, and program management for implementation of the Capital Improvement Projects. A detailed summary is included in Table 8. (e) Capital Improvements – Includes costs for permitting, environmental remediation, and estimated construction costs for Capital Improvement Projects. A detailed summary is included in Table 8.
As noted in the 2020 Operation and Maintenance Annual Report, the projected Reserve Maintenance and Capital Improvement Fund Expenditures should be viewed in two parts. The first part deals with what is required to keep the Turnpike infrastructure safe and in proper operational condition. This would historically reflect what is considered the normal annual Reserve Maintenance Fund Expenditures in the amount of $41 million to $56 million. These costs are shown in Columns (A), (B) and (C) in Table 7. The second part deals with what is required for the Other Capital Improvements as shown in Columns (E) and (F) in Table 7. In total, this represents a continued increased level of expenditures from the Reserve Maintenance and Capital Improvement Fund compared to historical levels. These expenditures are associated with the completion of several ongoing capacity improvement projects, as well as the routine repair, replacement and rehabilitation of existing Turnpike infrastructure.
TABLE 7 MTA PROJECTED RESERVE MAINTENANCE & CAPITAL IMPROVEMENT FUND EXPENDITURES
A B C D (A+B+C) E F G (D+E+F) RESERVE CAPITAL RESERVE SUBTOTAL RESERVE MAINTENANCE IMPROVEMENTS YEAR MAINTENANCE RESERVE CAPITAL TOTAL MAINTENANCE CONTINGENCY & CONTINGENCY & CONSTRUCTION & MAINTENANCE IMPROVEMENTS PROGRAM PERENNIALS DEVELOPMENT DEVELOPMENT RECONSTRUCTION EXPENSES COSTS COSTS 2020 $ 21,020,276 $ 15,679,395 $ 4,672,460 $ 41,372,130 $ 28,142,731 $ 108,796,213 $ 178,311,075 2021 20,287,145 27,764,755 8,273,897 56,325,797 14,053,023 59,297,398 129,676,218 2022 22,318,038 21,603,062 6,437,713 50,358,813 6,923,032 28,152,504 85,434,349 2023 22,440,147 21,279,367 6,341,251 50,060,765 6,233,594 29,114,663 85,409,023 2024 23,445,926 19,168,501 5,712,213 48,326,640 6,811,812 30,854,789 85,993,241 TOTAL $ 109,511,530 $ 105,495,081 $ 31,437,534 $ 246,444,145 $ 62,164,192 $ 256,215,569 $ 564,823,906
5.0 CAPITAL IMPROVEMENT AND THE RESERVE MAINTENANCE PROGRAMS
5.1 Introduction
Throughout its history, the Maine Turnpike Authority has remained focused on its primary responsibility of operating and maintaining an essential component of the State's transportation network in a safe and effective manner. The Authority has successfully carried out its responsibility through both the Reserve Maintenance Program and the Capital Improvement Program. These programs are used to ensure public safety, rehabilitate existing facilities, improve operating efficiency, and to increase the capacity of the Turnpike. The Turnpike utilizes a 30 Year Asset Model to predict and project needed improvements to its infrastructure. This model uses condition rating information from the annual inspection
PAGE 18 MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT
and applies established rates of deterioration to project when facility improvements will be required. It also uses historical unit costs to predict the estimated cost of the improvements. The program contents are reviewed and modified based on priority and need. The Reserve Maintenance and Capital Improvements Programs are derived from this model. No adjustments have been made to date for COVID-19. The results of the model are also referenced in the Authority’s 30 Year Plan.
The total cost of the Capital Improvement Program and the Reserve Maintenance Construction and Reconstruction Program from 2020 through 2024 is estimated to be approximately $455 million. Table 8 contains a yearly breakdown of the projects and the estimated costs of the programs from 2020 to 2024.
The following is a summary of the Capital Improvement Program and the Reserve Maintenance Program, which constitutes the next major phase of the recommended Programs essential to maintain the Turnpike and allow the Turnpike to safely and efficiently handle increasing traffic.
5.2 Capital Improvements
BRIDGES
Bridges are prioritized for replacement, rehabilitation, or repair based on the conditions observed during the annual inspection and the plans for the bridge.
Bridge Replacement
Bridge replacement involves the removal of the entire existing bridge including reinforced concrete deck, girders, piers, abutments, and foundations followed by new construction including substructure, superstructure, and roadway modifications to tie back into the existing roadway. Bridge replacements currently in the 30-year Asset Model for the period 2020 to 2024 include: • Cummings Road • South Portland Interchange Underpass • Warren Avenue Overpasses, Northbound & Southbound
Bridge Rehabilitation
Bridge rehabilitation involves the complete removal of the existing reinforced concrete deck including curbs, parapets and other elements, in some cases removal and replacement of girders, and the construction of a new reinforced concrete deck superstructure. The vertical clearance between the bottom of the bridge and the roadway pavement below is increased as warranted to minimize the potential of bridge hits due to high loads. Necessary repairs to the substructure concrete and bridge-bearing devices are also accomplished during rehabilitation. Bridge joints are modified, drainage systems are repaired or altered, and the approaches are reconstructed to reduce or eliminate some of the primary causes of bridge deterioration. To improve safety, new bridge parapets and highway guardrail are added when bridge decks are reconstructed.
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Table 8 CAPITAL IMPROVEMENT AND RESERVE MAINTENANCE CONSTRUCTION AND RECONSTRUCTION PROGRAMS
Capital Improvement Program 2020 2021 2022 2023 2024 Total Highway Clear Zone $ 13,300,351 $ 8,256,872 $ 461,203 $ 95,008 $ 97,858 $ 22,211,292 Other (ROW Fencing, Lighting) $ 150,000 $ 150,000 $ 500,000 $ - $ - $ 800,000 Bridge Rehabilitation S. Portland Interchange $ 2,954,606 $ 3,043,244 $ 5,997,851 Stroudwater River NB $ 2,652,250 $ 2,652,250 Stroudwater River SB $ 2,652,250 $ 2,652,250 Maine Central Railroad NB $ 2,474,926 $ 2,474,926 Maine Central Railroad SB $ 2,474,926 $ 2,474,926 Warren Ave. NB $ 3,763,384 $ 3,763,384 Warren Ave. SB $ 3,763,384 $ 3,763,384 Forest Ave NB $ 2,136,103 $ 2,136,103 Forest Ave SB $ 2,136,103 $ 2,136,103 RTE 122 & Old Hotel Rd $ 2,815,110 $ 2,815,110 Route 197 $ 2,318,953 $ 2,318,953 Technology ITS $ - $ 2,500,000 $ - $ - $ - $ 2,500,000 Buildings & Toll Plazas Buildings $ 4,250,000 $ - $ 2,500,000 $ 5,000,000 $ 350,000 $ 12,100,000 Toll Plazas $ 4,286,036 $ 12,063,706 $ - $ - $ 4,776,209 $ 21,125,951 Capacity Improvements Interchange Improvements $ 2,319,138 $ 11,255,088 $ 16,229,837 $ 16,358,516 $ 46,162,580 Mainline Improvements $ 15,897,965 $ 17,614,438 $ 33,512,403 Other Improvements $ 289,819 $ 289,819 York Toll Plaza $ 14,500,000 $ 8,500,000 $ 23,000,000 Exit 45 - South Portland Int. Reconstruction $ 9,600,000 $ 2,302,150 $ 11,902,150 Exit 103 - West Gardiner ORT Plaza $ 15,625,996 $ 15,625,996 Service Areas $ 6,600,140 $ 6,600,140 Off-System Capital Improvements Exit 45 / Maine Mall Rd / Connector Rd Mods $ - Off-System Intersection Improvements $ - Funding for Transportation Alternatives $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 4,000,000 Funding for I-95 Piscataqua River Bridge $ 600,000 $ 600,000 $ 2,500,000 $ 2,500,000 $ - $ 6,200,000 Gorham Greenway Evaluation and Engineering Land Acquisition $ 2,000,000 $ 1,000,000 $ 1,000,000 $ 2,000,000 $ 2,000,000 $ 8,000,000 Construction $ - NEPA & Permitting $ 750,000 $ 750,000 $ 1,500,000 Design Engineering $ 500,000 $ 1,500,000 $ 1,500,000 $ 2,000,000 $ 2,000,000 $ 7,500,000 Construction Engineering $ - Potential other costs $ - Subtotal Capital Improvement Program $108,796,213 $ 59,297,398 $ 28,152,504 $ 29,114,663 $ 30,854,789 $256,215,569 Contingency $ 10,394,621 $ 5,379,740 $ 2,150,250 $ 2,096,466 $ 2,515,479 $ 22,536,557 Engineering $ 17,748,110 $ 8,673,283 $ 4,772,782 $ 4,137,128 $ 4,296,333 $ 39,627,635 Total Capital Improvement Program $136,938,945 $ 73,350,421 $ 35,075,537 $ 35,348,258 $ 37,666,601 $318,379,761 Reserve Maintenance Program 2020 2021 2022 2023 2024 Bridge Re pairs Bridge Repairs $ 1,004,272 $ 1,176,601 $ 2,925,109 $ 4,866,182 $ 1,627,437 $ 11,599,602 Bridge Painting $ 1,670,763 $ 2,180,592 $ 3,938,601 $ 7,789,955 Technology Toll System Replacement $ 2,410,000 $ 2,410,000 $ 2,410,000 $ - $ - $ 7,230,000 ITS $ 300,000 $ 3,050,000 $ 50,000 $ 50,000 $ 75,000 $ 3,525,000 Highway Paving $ 7,549,179 $ 7,390,788 $ 13,477,583 $ 12,484,471 $ 12,382,302 $ 53,284,323 Pavement Crack Sealing $ 77,250 $ 79,568 $ 81,955 $ 84,413 $ 86,946 $ 410,131 Drainage and Slope Repair $ 392,533 $ 327,818 $ 337,653 $ 463,710 $ 358,216 $ 1,879,929 Guide Sign Modifications $ 400,000 $ 400,000 $ 500,000 $ 1,300,000 Clear Zone Imprvmts (median washouts) $ 597,026 $ 597,026 Buildings & Toll Plazas Buildings $ 3,000,000 $ 3,000,000 Capacity Improvements Interchange Improvements $ 2,546,160 $ 682,954 $ 3,229,114 Exit 45 - South Portland Int. Bridge $ 8,000,000 $ 8,000,000 Planning & MaineDOT Initiatives Transportation Planning $ 500,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 1,100,000 Administration / Permitting $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 150,000 $ 750,000 Environmental/Stormwater Management $ 350,000 $ 350,000 $ 350,000 $ 350,000 $ 400,000 $ 1,800,000 Subtotal Reserve Maintenance Program $ 15,679,395 $ 27,764,755 $ 21,603,062 $ 21,279,367 $ 19,168,501 $105,495,081 Contingency $ 1,567,939 $ 2,776,476 $ 2,160,306 $ 2,127,937 $ 1,916,850 $ 10,549,508 Engineering $ 3,104,520 $ 5,497,422 $ 4,277,406 $ 4,213,315 $ 3,795,363 $ 20,888,026 Total Reserve Maintenance Program $ 20,351,855 $ 36,038,652 $ 28,040,775 $ 27,620,619 $ 24,880,714 $136,932,615 Total Capital Improvement and Reserve Maintenance Program $157,290,799 $109,389,073 $ 63,116,312 $ 62,968,876 $ 62,547,315 $455,312,376
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Bridge rehabilitation does more than simply replace the deck. It incorporates improvements that enhance the safety and expected life of the bridges. In each case, the deck replacement incorporates safety features including new bridge railing and end attachments for highway guardrail conforming to current AASHTO standards and guidelines. In addition, improved construction materials and techniques including high- quality, high-strength concrete, epoxy-coated reinforcing steel, membrane waterproofing and special treatment of bridge deck joints will significantly extend the life of the new structures. Bridge rehabilitations currently in the MTA 30-year Asset Model, for the period 2020 to 2024, are shown in Table 8 and here for reference. • Stroudwater River Overpass, Northbound & Southbound • Maine Central Railroad Overpass, Northbound & Southbound • Forest Avenue Overpass, Northbound & Southbound • Route 122 & Old Hotel Road Underpass • Route 197 Underpass
Bridge Repair
Bridge repair involves significant repair to an existing bridge. Bridges repaired under this category typically do not include the replacement of the concrete deck but include repairs to it along with major repairs to other structural elements such as piers, abutments, and bridge rail system.
Bridge repairs are scheduled at 26 locations in the Capital Improvement Program and the Reserve Maintenance Program.
MISCELLANEOUS - GUIDE SIGN REPLACEMENTS
Highway Guide Signs provide needed information to the Turnpike motorists. The signs are retroreflective and are therefore visible in the darkness based on the headlights from vehicles. However, the signs lose their retro reflectivity over time.
In 2016, the Authority initiated a four-year plan to upgrade and replace their existing guide signs. This plan is nearly complete with a few remaining signs scheduled for replacement by maintenance forces, or as part of ongoing capital improvement projects.
BUILDINGS
Maintenance Areas
The Authority plans to construct new roofs and upgrade electrical and mechanical systems at various locations as these existing systems reach the end of their useful life.
In 2020, work was completed on the expansion and upgrade of eight vehicle storage garages built in the 1960’s to better accommodate modern plow truck configurations. The proposed work, located at five separate maintenance facilities, improved storage conditions, enhanced access for maintenance, and upgraded the electrical and HVAC systems. Additionally, the construction of a new mechanics garage in Litchfield began.
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Service Areas
The Authority plans and completes improvements at service areas, including building renovations, fuel system upgrades and parking expansions on an as-needed basis.
A parking expansion at the Kennebunk Service Plazas is currently under construction with completion scheduled for 2021. The project, once completed, will considerably expand truck parking at the service plazas, address the growing needs of the trucking industry and improve safety by minimizing overflow parking in non-designated areas.
TECHNOLOGY
Toll Collection
On February 1, 2005, the Maine Turnpike Authority implemented its current Electronic Toll Collection system, E-ZPass. One of the greatest benefits to the Authority for converting to E-ZPass was admittance into the E-ZPass Group, formerly known as the Inter Agency Group (IAG). The E-ZPass Group includes 38 toll agencies that operate multiple toll roads, bridges and tunnels in 18 states from Maine to Florida and west to Illinois.
However, due to its age and the rapid advancement in technology, much of the existing toll collection equipment has become functionally obsolete. To mitigate this, the Authority has been upgrading their toll collection system. Upgrades have been constructed at the mainline toll plazas at New Gloucester, West Gardiner and Falmouth. The two remaining mainline toll plazas at York and Gardiner I-295 are currently under construction. Upgrades at all side toll plazas, with the exception of Exit 45, have been completed. A new Exit 45 interchange and toll plaza is currently in the early stages of construction. The Authority plans to complete their toll plaza upgrades on or before 2023.
CAPACITY IMPROVEMENTS
Exit 32 Interchange Improvements
The Authority completed a study looking at safety and capacity concerns related to the Exit 32 interchange and Route 111 in Biddeford. Specifically, the purpose of the study is to use short and long term solutions to address building queues on the Exit 32 southbound off ramp, improve capacity at the Exit 32 and Route 111 intersection, and to improve accessibility between local communities and the Turnpike. Alternatives evaluated were designed to increase capacity near the existing interchange and to remove vehicles from congested areas by providing new connections. These alternatives include additional off- ramp lanes, signal modifications, new connections between Route 111 and South Street, and new interchange configurations.
The draft study report recommends short, medium and long-term solutions that add capacity over time. Short-term recommendations included queue detection on the southbound approach to the intersection of Exit 32 and Route 111 as well as an increased deceleration length for the southbound off-ramp. Mid-term recommendations included a new connection from the Turnpike to Route 111 and a second southbound off ramp lane. The recommended long-term improvement involved a reconfiguration of the existing interchange. A connection from South Street proposed by others would be an additional
PAGE 22 MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT mechanism to remove vehicles from the congested intersection of Exit 32 and Route 111. Design and implementation of short-term alternatives is underway with completion expected by 2024. Construction of the mid-term solutions are anticipated to begin in 2026.
Exit 36 Interchange Improvements
The Authority completed a feasibility study in 2019 in the vicinity of Exit 36 and Route 112 in Saco with the goal of identifying long-term improvements and addressing regional transportation issues. Specifically, the study sought to evaluate the potential for managing and improving access to Route 112, making safety improvements at intersections, maintaining and improving easy access to and from the Turnpike, and separating local and through traffic as much as practicable.
The study documents existing conditions and evaluates Alternatives that address transportation congestion and safety deficiencies. Alternatives were evaluated based on transportation measures, environmental resources, land use, cost and funding and property impacts. The study concluded with the recommendation that a modification of Exit 36 be implemented first, followed by a Route 112/Route 5 Connector completed under a separate schedule. Design of the project is now underway and construction of the Exit 36 modification is scheduled for completion in 2024.
Exit 45 Interchange Improvements
Construction of a reconstructed Exit 45 Interchange is underway and will replace the existing and obsolete toll system and infrastructure at this location, address safety and operational deficiencies of the existing interchange, and improve the substandard vertical clearance and deteriorating condition of the Exit 45 underpass bridge. Construction is scheduled for completion in 2022.
Portland-Area Mainline Improvements
The Authority completed a Portland Area Mainline Needs Assessment in 2018 that evaluated solutions to growing safety and capacity issues on the Maine Turnpike between Exits 44 in Scarborough and Exit 53 in West Falmouth. The needs assessment concluded that widening and modernization of the Turnpike Mainline through the Portland area was appropriate and prudent. Construction of the Portland-Area Mainline Improvements project is underway and includes adding a third lane in each direction, together with drainage and median improvements, between Mile Marker 44 and 49. This work is scheduled for completion in 2022.
TOLL FACILITIES
The Authority operates 19 toll plazas. Six of the plazas, referred to as “mainline toll plazas”, range in size from seven lanes to 17 lanes. The remaining 13 plazas are located on various interchange ramps and are responsible for tolling patrons that enter the Turnpike. These smaller plazas, also referred to as “side toll plazas”, are between two and eight lanes wide. Four exits, Exits 75, 80, 86 and 102, do not have toll plazas, but are furnished with E-ZPass equipment for monitoring E-ZPass usage at these locations.
MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT PAGE 23
York Mainline Toll Plaza
In 2019, over 19 million vehicles passed through the York Toll Plaza. Over $59 million in revenue was collected, accounting for about 42% of all toll revenue collected on the Turnpike. Truck traffic (MTA classes 3 through 6) accounted for 10.1% of the transactions at York. About 84% of all traffic through the plaza (including over 95% of all trucks) utilized E-ZPass in 2019.
The existing York Mainline Toll Plaza was constructed in 1969 and is challenged by both operational and safety issues and is functionally obsolete considering existing traffic volumes. The age of the toll plaza, the outmoded conditions of the existing tollbooths, canopy, and tunnel, together with poor soil conditions at the site, require constant attention to maintain it in reasonable condition.
The Authority secured the needed permits to construct a new Open Road Toll (ORT) Plaza at Mile 8.8 approximately one mile north of the existing plaza. Construction of this new plaza began in the fall of 2018 and is scheduled for completion in the summer of 2021.
Gardiner I-295 Mainline Toll Plaza
The existing Gardiner I-295 Mainline Toll Plaza is functionally obsolete. The age of the toll plaza, the outmoded conditions of the existing tollbooths, canopy, and tunnel, and location under an existing bridge make upgrade and expansion of the existing facility infeasible. Construction of a new plaza, including the installation of ORT lanes similar to other barrier toll locations, began in 2019 and is scheduled for completion in 2021.
Gorham Connector Alternatives Analysis
The Gorham Connector Study began in the spring of 2009 at the direction of the 123rd Maine State Legislature and following the issuance of a joint resolution by the municipalities of Gorham, Westbrook, Scarborough, and South Portland. The purpose of the study was to assess the feasibility of a new Maine Turnpike Spur, referred to as the Gorham Connector, that will connect to the terminus of the existing Gorham By-pass located approximately 4.5 miles northwest of the Exit 45 Interchange on the Turnpike.
In 2019, a traffic and revenue feasibility study was completed for the Authority and determined a new Gorham Connector would be financially viable.
Work continues on the Gorham Connector Alternatives Analysis and includes evaluating a range of capacity adding roadway alternatives together with ongoing coordination with the Army Corps of Engineers.
PLANNING AND MAINEDOT INITIATIVES
The MTA and the MaineDOT periodically work together on interchanges and roadways that connect to the Maine Turnpike.
Piscataqua River Bridge Summer peak hour traffic volumes on the southern end of I-95, including the Piscataqua River Bridge, result in significant congestion and motorist delay, especially during peak
PAGE 24 MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT
travel hours. To address this concern, the Authority is working together with MaineDOT on this MaineDOT-led effort to evaluate, prioritize and implement potential transportation alternatives to improve traffic flow on I-95 between New Hampshire and Maine. The study area consists of the stretch of I-95 from Exit 3 in New Hampshire north to Exit 2 in Maine, including the Piscataqua River Bridge.
In recent years, the Authority worked collaboratively with MaineDOT to complete improvements to the Dennett Road bridge and to assess what enhancements can be made to improve highway throughput, such as the use of part-time shoulder use on the I-95 Piscataqua River Bridge. A MaineDOT bridge rehabilitation project at the Piscataqua River Bridge is currently underway and includes bridge preservation activities as well as modifications to allow part-time shoulder use during periods of heavy traffic. The installation of median barrier at the bridge approaches is also included to improve safety.
5.3 Reserve Maintenance Program
In addition to the Modernization and Widening Programs and the Other Capital Improvements projects contained in the Authority’s overall Capital Improvement Program, the Authority also maintains a Reserve Maintenance Program. This program is mandated by the Authority’s Bond Resolution and is used to maintain the Turnpike in good repair, working order and condition. The projects contained in the Reserve Maintenance Program are typically those whose service life is substantially less than the bonds being sold to finance the Capital Improvement Program and are necessary for the continued safe and efficient operation of the Turnpike.
Projects included in the Reserve Maintenance Program include pavement rehabilitation of the Mainline, Toll Plaza Tunnel repairs, electrical and mechanical upgrades at various Turnpike facilities, roof replacements, painting of Turnpike bridges, crack sealing, slope repairs, and environmental initiatives at the various Turnpike maintenance areas.
5.4 Construction Schedule
The Capital Improvement Program and Reserve Maintenance Program are scheduled for construction as shown in Table 8, except for the portions that extend beyond 2024.
5.5 Program Costs
Our opinion of probable project and construction costs is made on the basis of our experience and qualifications and represents our best judgment as experienced and qualified professional engineers, familiar with the construction industry in this area. Actual project or construction costs may vary from the probable costs as prepared. The uncertainty of the future cost and availability of steel, concrete and petroleum by-products, as well as potential impacts of environmental regulations and the COVID-19 pandemic, make it difficult to predict the impact of these issues on the overall project or construction costs.
The costs developed for the Capital Improvement Program and the Reserve Maintenance Program by HNTB Corporation are based on project scope, program cost estimates, inspections and investigations, and where available, on the actual costs incurred for the design and construction of similar projects. The estimates of cost for certain projects,
MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT PAGE 25
however, are by necessity based on broad assumptions and indicative of a general cost range. An inflation factor was applied to convert the estimates, based upon current unit prices, to the anticipated construction period.
Table 8 presents a detail of the estimated costs for the various projects in the Capital Improvement Program and the Reserve Maintenance Construction and Reconstruction Program for 2020 to 2024. According to latest estimates, the total cost of the five-year Capital Improvement Program and Reserve Maintenance Programs will be approximately $455 million. Based on our review of the available data for the elements of both Programs, and the Scope of Work as defined for the various projects, we find these costs to be reasonable. Successful completion of both Programs within funding limitations will require close cost monitoring and control throughout the implementation process.
5.6 Contingencies
Due to the limitations inherent in estimating the costs of the various projects contained in these Programs, some contingency funds have been allocated to address the potential for Program costs to exceed current estimates. Some of the factors that result in uncertainty in future project costs are the degree of competitiveness in the construction environment, unknown conditions encountered at the work sites, and the cost implication of future regulations. Additionally, current and future environmental issues may influence costs. However, these have only been partially explored due to the conceptual level at which new projects are evaluated and scoped as part of program development.
Contingencies have been included for unanticipated additional projects that may become necessary, or substantial changes in the nature or scope of the projects, due to the continued deterioration of the Turnpike facilities during the Program period and as may be determined by future inspections.
5.7 Technical Appropriateness
Sound management practices have kept the Authority's budget in balance and an outstanding program of maintenance has kept the highway in generally good repair; however, the continuing need to maintain a safe and efficient highway and to provide for the future needs of this vital highway facility requires that the Capital Improvement Program be continued. The Capital Improvement Program is a prudent and vital initiative that will protect the Authority's investment. It addresses the problems of capacity and facility constraints, obsolescence and deterioration inherent in an aging facility and it outlines a strategy that will effectively continue to provide the necessary capacity improvements and result in the modernization of essential elements of the facility. It is our opinion that the overall Capital Improvement Program is both technically valid and warranted.
5.8 Implementation
The proposed project delivery schedule is achievable. The projects in the proposed 2020- 2024 Capital Improvement Program are scheduled to be implemented over the next five years. Administration of the Program projects will be conducted by the Authority and their engineering consultants. The staff assigned to manage the Program is fully experienced in the management of these types of projects. Recognizing the current staff levels and the
PAGE 26 MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT
magnitude of the construction program in recent years, as well as the acknowledged priority which has been placed on this Program, the Authority is well positioned to implement its Capital Improvement Program.
In addition to the effective management and administration of the Capital Improvement Program, another key consideration for the successful implementation of the Program is the timing and sequencing of the individual construction contracts. Due to the large volume of traffic, construction must be scheduled such that roadways are free flowing as often as practical. Careful consideration is being given to the projects in the Capital Improvement Program to ensure the effective implementation of the total Program within the anticipated schedule.
The Authority reserves the right to, and may in fact, substitute other projects depending upon construction scheduling, or other considerations which may arise during implementation of its Capital Improvement Program.
5.9 Environmental Considerations
The level of environmental impact and associated permitting vary significantly depending on the particular project. The Authority understands the environmental considerations of the various projects in the Capital Improvement Program and is prepared to address them accordingly. The need for permits will be determined during the planning and preliminary design phase of the project.
6.0 CONCLUSIONS
The Authority has and continues to meet the expectations set forth in the 2013 update to the 10-Year Planning Report including the most recent recommendations made in the 2020 Annual Report. However, to meet the challenges of the foreseeable future, the Authority must continue its efforts to accomplish construction and maintenance projects that directly impact public safety and highway efficiency. The costs projected for the Operation and Maintenance of the Turnpike are a reasonable estimation of future costs and reflect the procedures and practices of the Operation and Maintenance of the Turnpike. Sound management practices have kept the Authority's budget in balance and an outstanding program of maintenance has kept the highway in generally good repair. However, the traffic demands on an aging highway facility require the Authority to undertake the projects in the Program to maintain a safe and efficient highway that meets the State’s transportation needs for the future.
The proposed Capital Improvement Program includes items that are essential to improve the safety, structural integrity, and efficient operation of the Turnpike. The proposed Program is prudent and vital to protect the Authority’s investments.
MAINE TURNPIKE AUTHORITY 2020 CONSULTING ENGINEER’S REPORT PAGE 27
APPENDIX D
Final Report Maine Turnpike 2020 Toll Revenue Study
Prepared for
MAINE TURNPIKE
October 26, 2020
Table of Contents
1. Introduction and Turnpike Operating Profile ...... 1-1 Description of the Maine Turnpike ...... 1-1 Maine Turnpike Operating Profile ...... 1-6 Historical Annual Transaction and Toll Trends: 2000-2019 ...... 1-6 Monthly Transaction and Toll Revenue Trends ...... 1-9 Trends Through February 2020 – Pre-COVID-19 Pandemic ...... 1-9 Since March 2020 – COVID-19 Impacts ...... 1-12 Transactions and Toll Revenue Characteristics, January 2016 through December 2019 ... 1-12 Daily Variations in Transactions ...... 1-15 Hourly Variations in Transactions ...... 1-15 Impacts of COVID-19 on Recent Transactions and Toll Revenue Characteristics ...... 1-18 Transaction Impacts ...... 1-18 Revenue Impacts ...... 1-19 2. Economic and Corridor Growth Considerations ...... 2-1 Economic Overview ...... 2-1 Population ...... 2-2 Employment ...... 2-3 Personal and Per Capita Income ...... 2-7 Gross State Product ...... 2-8 Residential Real Estate ...... 2-9 Retail Sales ...... 2-10 Tourism ...... 2-10 Regional Transportation ...... 2-12 Downeaster Passenger Train ...... 2-12 Portland Jetport ...... 2-12 Port Trends and Developments ...... 2-13 Other Modes of Freight Movement ...... 2-14 Other Regional Considerations ...... 2-15 Maine’s Military Bases ...... 2-15 Portland’s Waterfront ...... 2-15 3. Econometric Forecasts ...... 3-1 Econometric Modeling ...... 3-1 Regression Testing and Data ...... 3-1 Regression Caveats ...... 3-2 Regression Equations and Forecasting ...... 3-4 Econometric Growth Forecasts ...... 3-5 4. Toll Revenue Forecast ...... 4-1 Basic Assumptions ...... 4-1 Turnpike Improvement Program ...... 4-2 Transaction and Toll Revenue Forecasts ...... 4-3 Disclaimer ...... 4-6
i Table of Contents •
List of Figures
Figure 1-1. Maine Turnpike Location Map ...... 1-2 Figure 1-2. Detailed Study Area ...... 1-3 Figure 1-3. Current Toll Configuration and Cash Toll Rates ...... 1-5 Figure 1-4. States with Facilities Accepting E-ZPass ...... 1-7 Figure 1-5. Annual Toll Revenue Trends ...... 1-9 Figure 1-6. Summary of Historical Monthly Transactions and Net Fare Revenue ...... 1-11 Figure 1-7. Monthly Toll Revenue Variations – 12 Months Ending December 2019 ...... 1-13 Figure 1-8. Share of Transactions and Revenue by Payment Type ...... 1-14 Figure 1-9. Hourly Variations in Transactions – 2019 ...... 1-17 Figure 1-10. Passenger Car 7-Day Rolling Average COVID-19 Transaction Impact by Payment Type ...... 1-18 Figure 1-11. Commercial Vehicle 21-Day Rolling Average COVID-19 Transaction Impact by Payment Type ...... 1-19 Figure 1-12. Passenger Car 7-Day Rolling Average COVID-19 Revenue Impact by Payment Type ..... 1-20 Figure 1-13. Commercial Vehicle 21-Day Rolling Average COVID-19 Revenue Impact by Payment Type ...... 1-20 Figure 1-14. Total Transaction and Revenue 7-Day Rolling Average COVID-19 Impacts ...... 1-21 Figure 2-1. Indexed Monthly Employment (seasonally unadjusted) ...... 2-5 Figure 2-2. Monthly Unemployment Rate (seasonally unadjusted) ...... 2-5 Figure 2-3. York Monthly Transactions (Seasonality) ...... 2-11 Figure 3-1. Toll Plaza Groupings ...... 3-3 Figure 3-2. Econometric Summary ...... 3-5 Figure 3-3. York ...... 3-8 Figure 3-4. Wells-Sanford to Saco ...... 3-9 Figure 3-5. Scarborough to Falmouth ...... 3-10 Figure 3-6. Portland North to Gray ...... 3-11 Figure 3-7. New Gloucester ...... 3-12 Figure 3-8. West Gardiner to Gardiner I-95 ...... 3-13 Figure 3-9. Corridor ...... 3-14
List of Tables
Table 1-1. Annual Transactions and Toll Revenue Trends (in thousands) ...... 1-8 Table 1-2. Summary of Monthly Transactions and Net Fare Revenue (in thousands) ...... 1-10 Table 1-3. Timeline of National and Maine Mandates Related to COVID-19 ...... 1-12 Table 1-4. Summary of 2019 Transactions and Toll Revenue by Toll Plaza (in thousands) ...... 1-14 Table 1-5. Variations in Daily Transactions ...... 1-15 Table 1-6. Typical Weekday and Weekend Day Hourly Traffic Variations...... 1-16 Table 2-1. Historical Population ...... 2-3 Table 2-2. Forecast Population ...... 2-3 Table 2-3. Historical Employment...... 2-4
ii Table of Contents •
Table 2-4. Forecast Employment Growth by Industry Sector and State Unemployment Rate ...... 2-6 Table 2-5. Forecast Employment ...... 2-6 Table 2-6. Real Total Personal Income (billions of 2012 dollars) ...... 2-7 Table 2-7. Real Per Capita Personal Income (2012 dollars) ...... 2-8 Table 2-8. Real Gross State Product (billions of 2012 dollars)...... 2-8 Table 2-9. Total Home Sales and Median Home Price ...... 2-9 Table 2-10. Maine Home Sales and Median Sales Price; Q2 2019 vs. Q2 2020 ...... 2-10 Table 2-11. Real Taxable Retail Sales (millions of 2012 dollars) ...... 2-10 Table 2-12. Tourist Visitors to Maine by Season (thousands) ...... 2-11 Table 2-13. Passengers, Flights, and Cargo at Portland International Jetport ...... 2-13 Table 3-1. Toll Plaza Groupings ...... 3-2 Table 3-2. Regression Equation Summary ...... 3-4 Table 3-3. Transaction Growth Summary ...... 3-5 Table 3-4. Transaction Growth – Annual Forecasts ...... 3-6 Table 4-1. Estimated Annual Transactions and Revenue (in thousands) ...... 4-4
iii
Chapter 1 Introduction and Turnpike Operating Profile
CDM Smith is pleased to submit this toll revenue study for the Maine Turnpike Authority (the Turnpike, the Authority, or MTA). This study represents a comprehensive update of the last full traffic and toll revenue report prepared by CDM Smith in 2017 and includes an update of historical Turnpike performance data and socioeconomic variables which drive travel demand and behavior, and a review of the macroeconomic and toll revenue forecasting methodology. Updated historical performance data, including actual traffic and revenue through August 2020, are summarized in this chapter. A detailed update of socioeconomic variables and related growth considerations along the Turnpike corridor is provided in Chapter 2. Chapter 3 summarizes the econometric analysis used to derive transaction annual growth rates based on relevant regional socioeconomic forecasts. Chapter 4 describes the methodology and assumptions made in the process of forecasting transactions and toll revenue and presents the resulting traffic and revenue (T&R) forecast for 2020 through 2050.
The toll revenue forecast developed for this update is predicated on the existing toll collection system and toll rates, as directed by the Authority. The Authority has indicated that there are no commitments to future toll increases or changes in the discount program; therefore, no future toll rate increase is included in this forecast. The forecast also assumes that all of the Authority’s currently planned capital improvements will be completed based on the existing timelines as provided in both the Ten-Year Planning Report (2014-2023) and Four-Year Capital Improvement Plan (2021-2024). Description of the Maine Turnpike The Maine Turnpike serves as a primary travel corridor through the southern portion of the state, extending approximately 109 miles from the New Hampshire/ Maine border at Kittery northward to Augusta. As shown in Figure 1-1, the Turnpike provides access to the coastal area between York and Portland, an area that receives a large number of recreational travelers. The vast majority of Maine’s population (1.3 million in 2019) lives and works in the southern portion of the state served by the Turnpike. Major communities served by the Turnpike include Biddeford/Saco, South Portland, Portland, Westbrook, Lewiston/Auburn, and Augusta. The Turnpike is the primary link between Maine and the rest of the United States, serving a diverse mix of travelers, including a significant proportion of commercial vehicles, as well as recreational travelers and commuters. Figure 1-2 provides a more detailed view of the immediate Turnpike corridor, including existing interchanges.
Originally, tolls were collected under a ticket system, whereby motorists received a ticket upon entering the system and surrendered the ticket upon exit, with the toll based on the actual distance traveled. To reduce maintenance and operating costs on the Turnpike, the Authority began to convert the system to a barrier system of toll collection in 1991. At that time, the north end of the Turnpike (north of Interchange 63) was converted to a barrier system with fixed tolls.
1-1 Maine Turnpike 2020 Toll Revenue Study
N 1
Canada Houlton
95 2 Canada
201
1
2
9 201 Bangor 2 95
1 Vermont 2 Waterville
Augusta
Lewiston Auburn 1 295
95
Portland Atlantic Ocean Biddeford Maine Turnpike New Wells Hampshire Kittery
MAINE TURNPIKE LOCATION MAP FIGURE 1-1 Maine Turnpike 2020 Toll Revenue Study
LEGEND 00 Interchange Number Kennebec Maine Turnpike 109 Augusta 202 Oxford 95
Androscoggin 103 Gardiner 102
Sabattus Auburn Lewiston 86 80 295 Lincoln 75 1 302 Sagadahoc 202 1 63 Gray Cumberland 95 25 295
302 53
25 52
Portland See York Inset Scarborough 36 Saco 202
32 Biddeford 1 25 Kennebunk 25 48 302
25 19 47 Wells 95 22 46 95 22 Atlantic Ocean Portland 295 7 York 45 114 44 1 Kittery 701 42 N 95 114 Inset
DETAILED STUDY AREA FIGURE 1-2 Chapter 1 • Introduction and Turnpike Operating Profile
Conversion of the last remaining portion of the Turnpike operating as a ticket system took place in September 1997. At the same time, the Authority implemented its electronic toll collection (ETC) program known as Transpass, which was later replaced with the regional E-ZPass system.
Figure 1-3 presents a schematic diagram of the existing barrier system configuration and current passenger car and five-axle truck cash toll rates. As shown, motorists are typically assessed a toll upon entering the Turnpike. The exceptions to this are at the I-295 Connector, Falmouth/I-295, and Gardiner/I-295 where exit tolls are also assessed. In addition to the ramp barrier plazas, the Turnpike also has three mainline plazas at York, New Gloucester, and West Gardiner.
The Gardiner/I-295 toll plaza is on the I-295 mainline where it merges with the Turnpike, thereby functioning as an exit/entrance toll for traffic continuing between I-295 and the Turnpike. As shown in Figure 1-3, the Turnpike is a closed barrier system between the York and New Gloucester mainline plazas, collecting a toll from all users. North of the New Gloucester mainline toll plaza, tolls are assessed only at the West Gardiner mainline plaza and at Interchange 103 (Gardiner I-295 plaza) where a toll is assessed for southbound exiting and northbound entering movements.
Under the current toll system and rate structure, which have been in effect since November 1, 2012, cash rates at all ramp toll locations are $1.00 for passenger cars and $4.00 for five-axle trucks, except at Interchange 19 (Wells) and Interchange 63 (Gray) where the cash rates are $1.50 for passenger cars and $6.00 for five-axle trucks. Passenger car cash rates at the mainline barrier plazas, which assess tolls in both travel directions, range from $1.75 at West Gardiner to $3.00 at York. Commercial vehicle rates for five-axle trucks range from $7.00 at West Gardiner to $12.00 at York.
The latest changes to the Turnpike's toll structure took effect on November 1, 2012 and involved the following:
1. Class 1 (two-axle four-tire vehicles and motorcycles) cash toll at York raised by $1.00 from $2.00 to $3.00.
2. Class 1 cash toll at New Gloucester raised by $0.50 from $1.75 to $2.25.
3. Class 1 cash toll on the mainline at West Gardiner raised by $0.50 from $1.25 to $1.75.
4. Class 1 cash tolls at the Wells northbound and Gray southbound entrances raised by $0.50 from $1.00 to $1.50.
5. Class 1 E-ZPass standard toll rate per mile increased from $0.067 to $0.077 while preserving the $0.50 minimum toll and capping each E-ZPass charge at the cash charge applicable to the same movement.
Multipliers for Classes 2 through 8 and the discount system for commercial users were unchanged.
In addition to the cash rates just described, there are electronic toll collection (ETC) rates and a volume-based discount program. ETC rates for those joining through the Authority are based on the rate structure developed for the previous mileage-based ticket system.
1-4 Maine Turnpike 2020 Toll Revenue Study
Match Line
$1.00 47 - Westbrook / 109 - Augusta ($4.00) Rand Rd.
$1.00 46 – Jetport ($4.00) $1.00 103 - Gardiner ($4.00) I-295
$1.00 45 - South Portland $1.75 100 - WEST ($4.00) ($7.00) GARDINER
$1.00 44 – I-295 Connector 86- Sabattus / ($4.00) State Rte. 9
$1.00 42 - Scarborough 80 - Lewiston ($4.00)
75 - Auburn
$1.00 36 - Saco $2.25 ($4.00) ($9.00) 67 - NEW GLOUCESTER
$1.00 32 - Biddeford ($4.00) $1.50 63 - Gray ($6.00)
$1.00 25 - Kennebunk $1.00 ($4.00) LEGEND 53 - West Falmouth ($4.00)
Mainline Toll Plaza $1.00 $1.50 19 - Wells Ramp Toll 52 - Falmouth / ($6.00) Plaza ($4.00) I-295
$3.00 - Car Cash Rates $1.00 7 - YORK $0.00 48 - Portland ($12.00) ($0.00) - 5-Axle Truck Cash ($4.00) Westbrook Rates
Match Line
Note: The barrier toll collection system generally assesses tolls for vehicles entering the Turnpike. Exceptions exist at 44, 52, and 103 where exit tolls are also charged.
CURRENT TOLL CONFIGURATION AND CASH TOLL RATES
FIGURE 1-3 Chapter 1 • Introduction and Turnpike Operating Profile
Both passenger car motorists and commercial vehicle operators can join the ETC program; all rates are either equal to or less than the cash rates for the same movement. ETC users enrolled through other states will pay the equivalent cash toll rates.
The Authority’s Transpass ETC system was converted to the E-ZPass system in 2005. E-ZPass is a regional consortium whose members include the New Hampshire Turnpike, the Massachusetts Turnpike, the New York State Thruway, and other facilities in the Northeast, East Coast, and Midwest. Figure 1-4 shows the states in which there are toll facilities currently accepting E- ZPass. The expanded ETC market results in more Turnpike users (especially during peak summer periods) being able to take advantage of E-ZPass toll lanes. This increased toll plaza throughput delayed the need for future plaza expansion.
Since November 1, 2012, the Authority has implemented a volume-based discount program for all customers with Maine-issued E-ZPass accounts. Under this plan, accounts with 40 or more one- way trips per month automatically receive a 50 percent discount on E-ZPass rates, and accounts with 30 to 39 trips receive a 25 percent discount on E-ZPass rates. The volume-based discount program replaced the commuter discount plan which was discontinued on November 1, 2012. Maine Turnpike Operating Profile A thorough review of historical transactions and toll revenue trends on the Turnpike was conducted. Total transactions and toll revenue trends were reviewed by year, month, vehicle type, and payment type and are presented herein. Additional data are presented breaking down the toll plaza market share of annual transactions and toll revenue in 2019—the last complete calendar year for which data is available. Finally, data addressing variations in Turnpike traffic by day and hour are presented. Historical Annual Transaction and Toll Revenue Trends: 2000-2019 Table 1-1 presents a summary of historical annual toll revenue trends on the Turnpike between years 2000 and 2019. Toll revenue has been disaggregated into three major market segments— passenger cars, commercial vehicles, and commuters—and includes both cash and ETC revenue. It should be noted that commuter rates are no longer available since the discontinuation of the commuter plan on October 31, 2012. Figure 1-5 provides a visual representation of toll revenue trends for the same three major market segments between years 2000 and 2019.
As shown in Table 1-1, annual toll revenue increased from $57.7 million in 2000 to $154.1 million in 2019, representing a compound annual growth rate (CAGR) of 5.3 percent. Three toll rate adjustments were made over this time period including systemwide increases in 2005, 2009 and the most recent in November 2012. Passenger car toll revenue growth slowed considerably between 2006 and 2007, to 0.2 percent, and revenue declined by 2.6 percent between 2007 and 2008, the first annual decline in passenger car revenue since 1992. Commercial vehicle revenues declined even more sharply in 2008, by 4.4 percent. Total revenue increased significantly in 2009 in all three market segments following a toll rate increase. Between 2009 and 2012, total toll revenue increased slightly with an annual growth rate of 1.6 percent over the period.
1-6 Maine Turnpike 2020 Toll Revenue Study
LEGEND
Note: In Florida, The Central Florida Expressway operates within the E-ZPass network. MAINE
VT
NH
MA NEW YORK CT RI
PENNSYLVANIA NJ OHIO MD ILLINOIS INDIANA DE
WEST VIRGINIA
VIRGINIA KENTUCKY
NORTH CAROLINA TENNESSEE
SOUTH CAROLINA
ALABAMA GEORGIA
FLORIDA
STATES WITH FACILITIES ACCEPTING E-ZPASS FIGURE 1-4 Chapter 1 • Introduction and Turnpike Operating Profile
Table 1-1: Annual Transactions and Toll Revenue Trends (in thousands) Annual Transactions Annual Toll Revenue Volume Net Fare Year Pass. Comm. Commuters Pass. Comm. Discounts & Total Commuters Total Revenue Cars Veh. & Non Rev Cars Veh. Adjustments 2000 (1) 53,954 5,785 7,506 67,245 38,654 16,289 2,778 57,721 (1,954) 55,767 % Change 0.8% -4.0% 1.2% 0.4% 1.7% -3.6% 6.2% 0.4% 1.5% 2001 (1) 54,369 5,554 7,599 67,522 39,314 15,710 2,949 57,973 (1,342) 56,631 % Change 4.3% 9.7% 4.1% 4.7% 3.4% 9.4% 3.1% 5.0% 5.2% 2002 (1)(2) 56,716 6,094 7,907 70,718 40,665 17,179 3,040 60,884 (1,280) 59,604 % Change 4.6% 4.1% 5.6% 4.7% 1.9% 4.2% 3.9% 2.6% 2.5% 2003 (1) 59,346 6,346 8,346 74,038 41,426 17,904 3,158 62,488 (1,402) 61,086 % Change 1.0% 5.3% 1.3% 1.4% 3.3% 7.0% 9.0% 4.6% 4.6% 2004 (1)(3) 59,962 6,681 8,457 75,100 42,777 19,165 3,443 65,385 (1,482) 63,903 % Change -1.5% 14.1% 5.2% 0.6% 21.4% 43.0% 15.6% 27.4% 26.8% 2005 (4) 59,054 7,625 8,899 75,579 51,923 27,409 3,981 83,313 (2,284) 81,029 % Change -0.2% 3.0% 4.2% 0.7% 2.1% 4.4% 3.4% 2.9% 3.0% 2006 58,965 7,856 9,274 76,094 53,020 28,618 4,117 85,756 (2,316) 83,440 % Change 0.6% 1.2% 0.1% 0.6% 0.2% 2.9% -0.4% 1.1% 1.3% 2007 59,347 7,948 9,281 76,577 53,145 29,460 4,101 86,705 (2,173) 84,532 % Change -3.0% -4.7% 0.2% -2.8% -2.6% -4.4% -0.3% -3.1% -3.4% 2008 57,592 7,577 9,296 74,465 51,768 28,169 4,090 84,027 (2,361) 81,666 % Change -3.0% -7.1% 4.5% -2.5% 26.8% 15.5% 24.4% 22.9% 23.0% 2009 (5) 55,875 7,039 9,712 72,626 65,628 32,526 5,088 103,242 (2,791) 100,451 % Change 1.8% 1.7% -0.5% 1.5% 2.8% 1.1% 1.8% 2.2% 2.3% 2010 56,895 7,157 9,661 73,713 67,486 32,889 5,178 105,552 (2,784) 102,768 % Change -1.0% 0.4% -1.3% -0.9% -1.9% 0.4% 0.6% -1.1% -1.1% 2011 56,345 7,182 9,537 73,065 66,201 33,004 5,211 104,416 (2,761) 101,655 % Change 3.4% -0.8% -15.7% 0.5% 5.7% 2.3% -16.1% 3.6% 2.8% 2012 (6)(7) 58,282 7,123 8,039 73,444 69,970 33,779 4,374 108,123 (3,615) 104,508 % Change 12.6% 0.1% -96.4% -0.5% 28.6% 23.5% -- 21.8% 16.6% 2013 65,646 7,128 292 73,066 89,985 41,708 0 131,693 (9,875) 121,817 % Change 3.7% 1.2% 2.6% 3.4% 2.6% 0.6% NA 2.0% 1.5% 2014 68,056 7,214 300 75,570 92,350 41,959 0 134,309 (10,698) 123,611 % Change 5.6% 2.4% -2.8% 5.2% 4.9% 2.1% NA 4.0% 3.7% 2015 71,837 7,386 292 79,515 96,885 42,858 0 139,743 (11,546) 128,197 % Change 5.4% 3.3% -2.0% 5.2% 5.0% 4.0% NA 4.7% 4.4% 2016 75,702 7,628 286 83,616 101,767 44,561 0 146,328 (12,508) 133,820 % Change 3.0% 2.4% 9.5% 3.0% 2.0% 2.2% NA 2.0% 1.7% 2017 77,987 7,810 313 86,110 103,761 45,551 0 149,312 (13,271) 136,041 % Change 2.8% 2.2% -1.7% 2.7% 2.0% 1.7% NA 1.9% 1.8% 2018 80,176 7,982 308 88,466 105,886 46,317 0 152,204 (13,771) 138,432 % Change 2.0% 2.5% 4.0% 2.1% 1.4% 0.8% NA 1.2% 1.1% 2019 81,782 8,179 320 90,281 107,412 46,676 0 154,088 (14,137) 139,951 Compound Annual Growth Rate 2000-2005 1.8% 5.7% 3.5% 2.4% 6.1% 11.0% 7.5% 7.6% -- 7.8% 2005-2010 -0.7% -1.3% 1.7% -0.5% 5.4% 3.7% 5.4% 4.8% -- 4.9% 2010-2015 4.8% 0.6% -50.3% 1.5% 7.5% 5.4% -- 5.8% 0.3 4.5% 2015-2019 3.3% 2.6% 2.3% 3.2% 2.6% 2.2% -- 2.5% 0.1 2.2% 2000-2019 2.2% 1.8% -15.3% 1.6% 5.5% 5.7% -- 5.3% 0.1 5.0% 1. Turnpike five-year widening project between York and Scarborough began in spring 2000 and continued through the end of 2004. 2. The Westbrook/Rand Road Interchange (Exit 47) opened in December 2002. 3. The Sabattus Interchange (Exit 86) was completed in December 2004. 4. A systemwide toll increase took place on February 1, 2005. At the same time, E-ZPass was implemented on the Turnpike. 5. A systemwide toll increase took place on February 1, 2009. 6. A systemwide toll increase took place on November 1, 2012. 7. The Commuter Plan was discontinued on October 31, 2012 and a new Volume Based Discount Program was created. Source: Maine Turnpike Authority
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Figure 1-5: Annual Toll Revenue Trends
$180 Toll Increase Commercial Vehicles $160 November 1, 2012 Commuters Toll Increase $140 Passenger Cars February 1, 2009 Indicates Toll Increase Toll Increase $120 * February 1, 2005
$100
$80
$60 Annual Revenue (Millions) Annual Revenue $40
$20
$0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Note: The Commuter program was discontinued on October 31, 2012 Calendar Year and replaced by a volume-based discount program for Maine class 1 passenger cars. Revenue increased by 21.8 percent in 2013 following the November 2012 toll rate increase. After experiencing revenue growth of 4.0 percent in 2015 and 4.7 percent in 2016, annual increases have been more modest in the last three years: 2.0 percent in 2017, 1.9 percent in 2018 and 1.2 percent in 2019.
In general, toll revenue variations through 2019 were largely the result of the economic climate affecting Maine and the rest of the country, as well as the toll rate adjustments made by the Authority. There have been no major fundamental changes in the variables which drive traffic such as a shift in population or employment centers to or away from the Turnpike corridor. Future performance is expected to continue in tandem with the state and national economic trends. Monthly Transaction and Toll Revenue Trends A review of transactions and net fare revenue on a month-by-month basis is shown in Table 1-2 for the period from January 2016 through September 2020. This information is also presented graphically in Figure 1-6. A review on a monthly basis allows for the identification of unique occurrences such as construction- or weather-related anomalies as well as the impact of the COVID-19 pandemic starting in March 2020 with the introduction of national and state mandates that resulted in significantly less travel. Trends Through February 2020 – Pre-COVID-19 Pandemic Until March 2020 when the impacts from the COVID-19 pandemic began, transaction and net fare revenue trends were largely explained by a favorable economic outlook, low motor fuel prices, low unemployment rate, and no change in the toll rates and discount programs.
Annual transactions increased by 3.0 percent in 2017 compared to 2016, 2.7 percent in 2018 and 2.1 percent in 2019. The first two months of 2020 saw strong growth rates of 4.7 and 4.8
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Table 1-2: Summary of Monthly Transactions and Net Fare Revenue (in thousands) Percent Percent Percent Percent Month 2016 2017 2018 2019 2020 Change Change Change Change Transactions January5,5346.1%5,8740.0%5,8743.6%6,0864.7%6,372 February5,426-4.8%5,1689.5%5,6572.0%5,7714.8%6,046 March6,1322.1%6,2581.2%6,3326.1%6,719-22.5%5,204 April6,2262.6%6,3874.1%6,6483.2%6,860-53.7%3,173 May7,0655.0%7,4184.2%7,7292.0%7,880-42.9%4,503 June7,6863.6%7,9652.6%8,1760.6%8,224-29.0%5,835 July8,8752.0%9,0562.6%9,2952.1%9,490-24.1%7,203 August9,1662.7%9,4123.2%9,7121.0%9,813-21.7%7,687 September 7,6662.5%7,8540.8%7,9201.4%8,032-13.7%6,928 October7,2604.8%7,6072.6%7,8073.2%8,053 November6,4035.8%6,774-2.2%6,6222.8%6,807 December6,1792.6%6,3385.6%6,695-2.2%6,546 Total 83,6163.0%86,1102.7%88,4662.1%90,281-23.1%52,951 Net Fare Revenue January$8,6797.0%$9,287(1.9%)$9,1141.7%$9,2703.3%$9,578 February8,635-3.6%8,3215.9%8,8130.6%8,8634.2%9,239 March9,7100.1%9,7150.6%9,7694.4%10,194-14.3%8,739 April10,0001.3%10,1303.3%10,4662.0%10,680-43.8%5,997 May11,3483.8%11,7833.1%12,1440.9%12,259-35.6%7,892 June12,3482.6%12,6641.5%12,8590.2%12,880-24.2%9,760 July14,4070.6%14,4961.3%14,6871.5%14,911-21.0%11,786 August14,8230.7%14,9283.0%15,3700.7%15,479-19.2%12,510 September 12,3220.5%12,3870.7%12,4690.0%12,474-9.6%11,276 October11,5972.6%11,8942.0%12,1332.3%12,414 November10,2203.9%10,618-2.7%10,3361.4%10,484 December9,7310.9%9,8174.6%10,272-2.2%10,043 Total $133,8201.7%$136,0411.8%$138,4321.1%$139,951 -18.9% $86,777 Source: Maine Turnpike Authority percent, respectively, compared to the same months in 2019. Growth during the 2016-2019 period was steady across all months of the year. Between 2016 and 2019, the strongest growth occurred during the months of May and October with compound annual growth rates of 3.7 and 3.5 percent, respectively. The lowest growth during the same 3-year period occurred in the months of December and September with compound annual growth rates of 1.9 and 1.6 percent, respectively. Notable outliers in month-by-month growth rates can be seen in some winter months due to severe weather conditions. The negative growth rates observed in February 2017, November 2018 and December 2019 can all be attributed to high monthly snowfalls recorded in Maine.
Between 2016 and 2019, net fare revenue trends had generally tracked transaction trends, with revenue growth lower than transaction growth. Net fare revenue was up by 1.7 percent in 2017, 1.8 percent in 2018, and 1.1 percent in 2019. The first two months of 2020 saw strong net fare revenue growth rates of 3.3 and 4.2 percent, respectively, compared to the same months in 2019. The volume discounts and adjustments have been consistently increasing since 2012 as shown in Table 1-1.
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Figure 1-6: Summary of Historical Monthly Transactions and Net Fare Revenue
Transactions 10,000 9,500 2016 2017 9,000 2018 8,500 2019 8,000 2020 7,500 7,000 6,500 6,000 5,500 5,000 4,500
Total Transactions (Thousands) Transactions Total 4,000 3,500 3,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Net Fare Revenue $16,000 2016 $15,000 2017 $14,000 2018 2019 $13,000 2020 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 Total Net Fare Revenue (Thousands) Revenue Fare Net Total $5,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
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Since March 2020 – COVID-19 Impacts Beginning in March 2020, national travel trends started to decline as the awareness and severity of COVID-19 became more apparent. A national emergency was declared on March 13th and many states followed suit, including Maine where Governor Mills declared a state of emergency on March 15th. Following the state of emergency, a series of executive orders were put in place including closure of schools and non-essential businesses and bans on large gatherings of people. Table 1-3 provides a timeline of these national and Maine restrictions related to COVID-19 and any subsequent changes.
As previously shown in Table 1-2, these restrictions resulted in declines in transactions and net fare revenue in March of 22.5 and 14.3 percent, respectively, over 2019. Once the full impacts of COVID-19 on travel were reached in April, transactions were down 53.7 percent over 2019 and net fare revenue was down 43.8 percent. During the April-September period, the magnitude of the impacts declined as public restrictions were lifted in a phased manner. By September, transactions were down 13.7 percent over 2019 and net fare revenue was down 9.6 percent.
Table 1-3: Timeline of National and Maine Mandates Related to COVID-19
Date Location Description
March 11, 2020 USA - International travel is halted (excluding Great Britain). March 13, 2020 USA - National Emergency declared. - Governor Mills declares State of Emergency requiring closures of public March 15, 2020 ME schools and keeping public events limited to 50 people. March 18, 2020 ME - Closure of bars and restuarants for indoor service. March 24, 2020 ME - Closure of all non-essential businesses. - Mandate initiated requiring travelers arriving in Maine to self-quarantine for 14 April 3, 2020 ME days. - Suspension of lodging operations including hotels, motels, short-term rentals April 5, 2020 ME (VRBO, AirBnb), RV parks, campgrounds, and camping facilities. May 1, 2020 ME - Start of Phase 1 of statewide reopening plan. -Rural counties allowed to open retail stores and restaurants with reduced May 18, 2020 ME capacity and social distanced safety measures. - Staggered opening of additional business in rural counties and restaurants opened for limited service in York, Cumberland, and Androscoggin Counties. June 2020 ME - Added alternative for 14-day quarantine requirement: negative test result prior to travel. -New Hampshire and Vermont declared exempt from the 14-day quarantine June 26, 2020 ME requirement. - Connecticut, New York, and New Jersey residents declared exempt from the July 3, 2020 ME 14-day quarantine requirement.
August 28, 2020 ME - All counties declared low risk and acceptable for in-person school openings. September 23, 2020 ME - Massachusetts declared exempt from the 14-day quarantine requirement. Source: https://www.maine.gov/covid19/timeline
Transactions and Toll Revenue Characteristics, January 2016 through December 2019 Figure 1-7 provides a visual summary of the 2019 distribution of Turnpike revenue by month, for passenger cars and commercial vehicles. In 2019, passenger cars represented 69.7 percent of
1-12 Chapter 1 • Introduction and Turnpike Operating Profile total Turnpike revenue, while commercial vehicles represented 30.3 percent. Passenger cars exhibit a distinct peaking pattern with significantly higher transactions and revenue in July and August due to the influx of tourists. Monthly total passenger car revenue in the peak summer months of July and August is approximately double that of the lowest months of January and February. Commercial vehicles exhibit considerably less variation and monthly revenues are stable throughout the year. The winter months experience slightly lower revenue. There is little variation between the months of April through October.
Figure 1-7: Monthly Toll Revenue Variations ‒ 12 Months Ending December 2019
Figure 1-8 presents 2019 annual transactions and revenue by payment category. As shown, E- ZPass transactions accounted for 80 percent of total transactions, while cash customers represented 20 percent. The Maine E-ZPass market share has climbed steadily since the program was first introduced in 2005. In 2016, Maine E-ZPass transactions represented 45 percent of the total, increasing to 48 percent by 2019. Maine E-ZPass is the single largest segment of transactions. On the revenue side, E-ZPass payments accounted for 81 percent of total revenue, while cash payments represented 19 percent.
Table 1-4 presents 2019 transactions and toll revenue at each toll plaza. The table provides insight into the relative contribution of each toll location to the Turnpike’s total transactions and toll revenue. It should be noted that the revenue shown in this table does not account for volume- based discounts and adjustments. In 2019, the York mainline toll plaza accounted for 17.4 percent of all transactions. As the York plaza also has the highest toll, it generates an even greater share of systemwide toll revenue (39.5 percent). The New Gloucester mainline plaza, which charges the second highest toll on the Turnpike, generates the second highest share of toll revenue (12.2 percent). In total, the York and New Gloucester mainline plazas account for less than 25 percent of systemwide transactions, but more than 50 percent of the systemwide toll
1-13 Chapter 1 • Introduction and Turnpike Operating Profile revenue. The I-295 plaza in Gardiner generates the second most transactions (10.1 percent) but ranked only fourth in terms of revenue due to its lower toll.
Figure 1-8: Share of Transactions and Revenue by Payment Type
2019 Total Transactions and Revenue by Payment Type
Transactions Revenue
20% 19% 32% 42%
48% 39%
Cash Maine E-ZPass Out-of-State ETC
Source: Maine Turnpike Authority.
Table 1-4: Summary of 2019 Transactions and Toll Revenue by Toll Plaza (in thousands)
Annual Annual Toll Toll Plaza % of Total % of Total Transactions (1) Revenue (1)(2)
York Mainline 15,715 17.4% $60,801 39.5% Wells 3,700 4.1% 3,124 2.0% Kennebunk 2,492 2.8% 2,234 1.5% Biddeford 5,737 6.4% 5,449 3.5% Saco 6,919 7.7% 6,331 4.1% Scarborough 2,976 3.3% 2,977 1.9% I-295 Connector 7,335 8.1% 9,397 6.1% South Portland 6,014 6.7% 6,986 4.5% Congress St./Jetport 3,856 4.3% 3,833 2.5% Rand Road 2,195 2.4% 2,148 1.4% Portland/Westbrook 4,511 5.0% 4,288 2.8% Falmouth Spur 3,937 4.4% 4,680 3.0% Portland North 2,405 2.7% 2,225 1.4% Gray 3,495 3.9% 4,191 2.7% New Gloucester Mainline 5,764 6.4% 18,742 12.2% West Gardiner Mainline 4,091 4.5% 8,284 5.4% Gardiner I-295 9,138 10.1% 8,397 5.4% Total 90,281 100.0% $154,088 100.0% 1. Includes transactions and revenue for all of 2019 2. Does not account for volume discounts and adjustments Source: Maine Turnpike Authority
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Daily Variations in Transactions Table 1-5 provides a summary of variations in daily traffic at three locations along the Turnpike: the York mainline plaza in the south, the New Gloucester mainline plaza in the north, and the South Portland plaza about midway between the two. Daily traffic variations were reviewed for the period between May 12 and May 18, 2019. These dates were chosen because May is typically the month in which total traffic is most representative of the yearly average. Both daily transaction volumes and an index value indicating the relative volume for each day of the week are included for each tolled location.
Table 1-5: Variations in Daily Transactions (1) Daily Transactions Daily Variations (2) Day South New South New York York Portland Gloucester Portland Gloucester Monday 42,642 25,970 21,157 88.5 106.2 101.0 Tuesday 39,458 26,362 20,739 81.9 107.8 99.0 Wednesday 43,205 27,174 21,804 89.7 111.2 104.0 Thursday 46,791 27,986 23,333 97.2 114.5 111.3 Friday 58,246 27,864 24,471 120.9 114.0 116.8 Saturday 50,895 19,240 17,592 105.7 78.7 83.9 Sunday 55,881 16,535 17,607 116.0 67.6 84.0 Average Day 48,160 24,447 20,958 100.0 100.0 100.0 1. The data shown reflects Turnpike transactions for the period May 12 through May 18, 2019 2. Daily variations show the relationship of the particular day to the average day. For instance, a value of 91 would indicate that that day is 91 percent of the average day while a value of 112 would represent a transaction volume 112 percent of the average day. Source: Maine Turnpike Authority
As shown, the York plaza experiences significantly different variations in daily traffic as compared with the other two locations. Traffic volumes at the York plaza are highest on Friday, Saturday, and Sunday, with Friday volumes peaking at 20.9 percent greater than the average day. This pattern reflects the tourist-oriented nature of travel through the York mainline plaza. Daily variations at the South Portland and New Gloucester plazas are indicative of predominantly commuter traffic patterns. As shown, traffic generally builds throughout the weekdays, peaks on Thursday or Friday, and drops on Saturday and Sunday. This pattern is fairly typical of traffic predominantly comprised of commuters. Hourly Variations in Transactions Hourly variations in transactions were also reviewed and are presented in Table 1-6 for the same three tolling locations shown in Table 1-5. The hourly transaction trends are also illustrated in Figure 1-9. Transactions were reviewed for both a typical weekday (Wednesday, May 15, 2019) and a typical weekend day (Saturday, May 18, 2019).
At the York plaza, weekday traffic increases rapidly between 5:00 a.m. and 8:00 a.m. and then plateaus until early afternoon when traffic rises further to a peak of almost 3,900 vehicles between 3:00 p.m. and 4:00 p.m. This indicates an influx of northbound traffic into the state in the afternoons, likely a reflection of both tourist traffic from neighboring states to the south, and commuter traffic returning from New Hampshire and the Boston area. At the South Portland and
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Table 1-6: Typical Weekday and Weekend Day Hourly Traffic Variations Hourly Transactions Percent of Total Day Hour South New South New Begin York Portland Gloucester York Portland Gloucester Typical Weekday (Wednesday, May 15, 2019) 0 422 134 152 0.9% 0.5% 0.7% 1 302 97 105 0.6% 0.3% 0.5% 2 269 107 124 0.6% 0.4% 0.5% 3 364 111 158 0.8% 0.4% 0.7% 4 648 189 301 1.4% 0.7% 1.3% 5 1,345 540 699 2.8% 1.9% 3.0% 6 2,129 1,342 1,466 4.5% 4.8% 6.3% 7 2,767 2,467 2,047 5.8% 8.8% 8.9% 8 2,832 2,264 1,666 6.0% 8.0% 7.2% 9 2,758 1,449 1,231 5.8% 5.2% 5.3% 10 2,835 1,458 1,204 6.0% 5.2% 5.2% 11 2,989 1,456 1,148 6.3% 5.2% 5.0% 12 3,022 1,555 1,237 6.4% 5.5% 5.3% 13 2,994 1,601 1,284 6.3% 5.7% 5.6% 14 3,442 1,777 1,403 7.3% 6.3% 6.1% 15 3,860 2,189 1,672 8.1% 7.8% 7.2% 16 3,576 2,883 2,175 7.5% 10.3% 9.4% 17 3,353 2,615 1,886 7.1% 9.3% 8.2% 18 2,311 1,370 1,077 4.9% 4.9% 4.7% 19 1,693 940 679 3.6% 3.3% 2.9% 20 1,268 663 551 2.7% 2.4% 2.4% 21 921 456 390 1.9% 1.6% 1.7% 22 709 263 227 1.5% 0.9% 1.0% 23 593 199 247 1.3% 0.7% 1.1% Total 47,402 28,125 23,129 100.0% 100.0% 100.0% Typical Weekend Day (Saturday, May 18, 2019) 0 534 162 194 1.0% 0.8% 1.0% 1 331 124 164 0.6% 0.6% 0.9% 2 299 101 113 0.5% 0.5% 0.6% 3 273 102 131 0.5% 0.5% 0.7% 4 387 119 190 0.7% 0.6% 1.0% 5 645 221 264 1.2% 1.1% 1.4% 6 1,284 435 530 2.3% 2.2% 2.9% 7 2,188 697 770 3.9% 3.5% 4.1% 8 3,030 926 1,109 5.5% 4.7% 6.0% 9 3,754 1,155 1,138 6.8% 5.8% 6.1% 10 4,360 1,391 1,342 7.9% 7.0% 7.2% 11 4,629 1,485 1,341 8.3% 7.5% 7.2% 12 4,325 1,563 1,391 7.8% 7.9% 7.5% 13 4,062 1,537 1,294 7.3% 7.7% 7.0% 14 4,018 1,522 1,322 7.2% 7.7% 7.1% 15 3,931 1,510 1,292 7.1% 7.6% 7.0% 16 3,853 1,514 1,302 6.9% 7.6% 7.0% 17 3,546 1,378 1,184 6.4% 6.9% 6.4% 18 2,909 1,141 1,012 5.2% 5.7% 5.4% 19 2,363 883 750 4.3% 4.4% 4.0% 20 1,785 708 575 3.2% 3.6% 3.1% 21 1,392 575 542 2.5% 2.9% 2.9% 22 945 382 382 1.7% 1.9% 2.1% 23 661 244 255 1.2% 1.2% 1.4% Total 55,504 19,875 18,587 100.0% 100.0% 100.0% Source: Maine Turnpike Authority
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Figure 1-9: Hourly Variations in Transactions ‒ 2019 Typical Weekday 4,000 York 3,500 South Portland New Gloucester 3,000
2,500
2,000
1,500 Transactions
1,000
500
0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Hour
Typical Weekend 5,000 York 4,500 South Portland 4,000 New Gloucester 3,500
3,000
2,500
2,000 Transactions 1,500
1,000
500
0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Hour
New Gloucester plazas, a more typical dual-peak commute pattern is seen, with traffic peaking first between 7:00 a.m. and 9:00 a.m., and again between 3:00 p.m. and 6:00 p.m. Afternoon peaks are higher than morning peaks at York and South Portland, while at New Gloucester both peaks are of equal magnitude. Relative to total daily traffic, the single largest hourly peak occurred at South Portland, where traffic in the 4:00 p.m. to 5:00 p.m. hour accounted for 10.3 percent of the daily total.
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As is typical for most highway facilities, weekend traffic on the Turnpike tends to build gradually through the day and decline in similar fashion through the afternoon and evening, rather than exhibiting the sharp peaking patterns seen on weekdays. The patterns at the three locations are fairly similar. At the South Portland and New Gloucester plazas, transactions reach a plateau by 10:00 a.m. and then remain stable before declining after 6:00 p.m. At the York plaza, transactions peak during the 11:00 a.m. to 12:00 p.m. hour, dipping slightly in the afternoon before declining after 6:00 p.m. Impacts of COVID-19 on Recent Transactions and Toll Revenue Characteristics Transaction Impacts Using the most recently available daily data, CDM Smith estimated COVID-19 impacts for passenger cars and commercial vehicles by method of payment. To calculate the impacts, 2020 transactions and revenue without COVID-19 impacts were estimated by taking 2019 daily data and applying a growth rate consistent with trends shown prior to March 2020. These estimates were compared to actual data through July 31st. Figure 1-10 provides the 7-day rolling average of these impacts on transactions for passenger cars for ETC and cash, separately. The date shown in the figure represents the end of the rolling average period.
Transactions started to significantly decline mid-March when the state of emergency and public mandates were implemented. The peak impact occurred by mid-April with ETC transactions at 60 percent below those that were estimated to occur under normal conditions, and cash transactions down just over 70 percent. Cash transactions experienced a higher impact likely due to the infrequency of cash customers and their ability to forego their trip, or no longer required the trip due to COVID-19 restrictions. Since the peak in April, the impact has steadily declined due to reductions in public mandates and increases in traveler comfort. Since the end of June, impacts have remained steady, leveling off around 25 percent for ETC transactions and 38 percent for cash transactions by the end of July.
Figure 1-10: Passenger Car 7-Day Rolling Average COVID-19 Transaction Impact by Payment Type 10%
0%
-10%
-20%
-30%
-40%
-50%
Percent Impact (%) Impact Percent -60%
-70% ETC Cash -80% 2/28/20 3/13/20 3/27/20 4/10/20 4/24/20 5/8/20 5/22/20 6/5/20 6/19/20 7/3/20 7/17/20 7/31/20 Period Ending
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Figure 1-11 provides the 7-day rolling average of COVID-19 impacts for commercial vehicles by ETC and cash, separately. For commercial vehicles, trends vary more per day compared to passenger vehicles, and therefore a larger rolling average period was used to smooth out the trend.
Comparable to other regions of the country, commercial vehicles in Maine had a delayed impact and were not impacted as severely as passenger cars. Commercial vehicles did not show declines until after the end of March and at its peak, commercial vehicle impacts reached 15 percent for ETC transactions and 35 percent for cash transactions.
In conjunction with an overall lower peak impact, commercial vehicles have shown a slower recovery. Impacts remained steady for both methods of payment from the beginning of June through mid-July but showed a slightly higher impact through the end of July.
Figure 1-11: Commercial Vehicle 7-Day Rolling Average COVID-19 Transaction Impact by Payment Type 20%
10%
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Percent Impact (%) Impact Percent -30%
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-60% ETC Cash -70% 2/28/20 3/13/20 3/27/20 4/10/20 4/24/20 5/8/20 5/22/20 6/5/20 6/19/20 7/3/20 7/17/20 7/31/20 Period Ending Revenue Impacts Revenue impacts were analyzed in addition to transactions to estimate the revenue impacts of COVID-19. Travelling restrictions interrupted the summer seasonal traffic while commercial vehicles fared better due to the necessity of the industry even at the height of stay-at-home orders. Due to this, revenue impacts vary from transaction impacts on a system and have been considered separately.
Figure 1-12 provides the 7-day rolling average of COVID-19 impacts on revenue for passenger cars for ETC and cash, separately. Figure 1-13 provides the same graphic for commercial vehicles. In Figure 1-12, passenger car ETC and cash revenue impacts followed a trend similar to transactions with a large decline through March that peaked by mid-April at around 65 percent for ETC and 75 percent for cash. After the initiation of Phase 1 on May 1, 2020, impacts began to decrease through the end of June. Through July there has been a flattening of impacts and by the end of month, ETC revenue impacts averaged 27 percent and cash revenue impacts averaged 36 percent.
1-19 Chapter 1 • Introduction and Turnpike Operating Profile
Figure 1-12: Passenger Car 7-Day Rolling Average COVID-19 Revenue Impact by Payment Type 20%
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-70% ETC Cash -80% 3/3/20 3/18/20 4/2/20 4/17/20 5/2/20 5/17/20 6/1/20 6/16/20 7/1/20 7/16/20 7/31/20 Period Ending
Figure 1-13: Commercial Vehicle 7-Day Rolling Average COVID-19 Revenue Impact by Payment Type 20%
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Percent Impact (%) Impact Percent -40%
-50% ETC Cash -60% 3/4/20 3/18/20 4/1/20 4/15/20 4/29/20 5/13/20 5/27/20 6/10/20 6/24/20 7/8/20 7/22/20 8/5/20 Period Ending As presented in Figure 1-13, commercial vehicle revenue impacts have shown a slight recovery since April but have remained relatively consistent through the summer at 10 percent for ETC and 30 percent for cash.
Figure 1-14 provides the aggregated 7-day rolling average of COVID-19 impacts for total transactions and revenue for the system.
1-20 Chapter 1 • Introduction and Turnpike Operating Profile
Figure 1-14: Total Transactions and Revenue 7-Day Rolling Average COVID-19 Impacts
20%
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-60% Transactions Revenue -70% 2/26/20 3/14/20 3/31/20 4/17/20 5/4/20 5/21/20 6/7/20 6/24/20 7/11/20 7/28/20 Period Ending
1-21
Chapter 2 Economic and Corridor Growth Considerations
Socioeconomic variables such as population, employment, income, and gross regional product (GRP) are key factors that drive travel demand and behavior along the Maine Turnpike. In this study, CDM Smith analyzed historical and forecast socioeconomic data at national, state, and corridor levels to better understand the characteristics of the corridor, and to update input data for the traffic and revenue modeling. This chapter summarizes that socioeconomic data.
Socioeconomic data were collected from: the United States Census Bureau; the United States Bureau of Economic Analysis (BEA), the United States Bureau of Labor Statistics (BLS), the Maine Office of Policy and Management (OPM), the Maine Consensus Economic Forecasting Commission (CEFC), the Maine Department of Economic and Community Development (Office of Tourism), Woods & Poole Economics, Inc., 20201 (Woods & Poole), and, Moody’s Analytics. Socioeconomic variables collected include: population, employment/unemployment, personal income, gross regional product, retail sales, tourism, airport and seaport activity, and other area-specific developments. Where available, data were analyzed at the narrowest available geography, e.g., the county. For comparative purposes, the corridor-level socioeconomics were benchmarked against national trends wherever applicable. Note that, in some cases, historical and forecast data come from different sources. Economic Overview The economic recession that began in late 2007 adversely impacted national, regional, and state economies. Based on real Gross State Product (GSP) data from the BEA, Maine’s economy grew at 2.6 percent per year, on average, in the decade from 1997 through 2006. In contrast, in the following decade, from 2007 through 2016, the average real GSP growth was relatively flat, at 0.2 percent. However, that overall flatness is a consequence of mostly serial annual declines through 2013, followed by a resumption of annual growth through 2019 of about 1.8 percent per year. In 2019, Maine’s real GSP grew 1.9 percent over 2018. Such general patterns are observable in most proximate New England states (New Hampshire and Massachusetts); however, those states observed post-great recession rebounding earlier than Maine. Woods & Poole forecasts a 1.6 percent average growth in Maine GSP through 2050, a rebound long-term growth relatively higher than the post-recessionary stagnation, but at a decelerated pace from the longer-term historical trend. Note that the Woods & Poole forecast does not reflect short-term effects stemming from COVID-19 and assumes COVID-19 “does not appear to have made a quantifiable long-term economic impact that would affect forecasts.”
Employment growth, like real GSP, decelerated since the 1980s and 1990s, with little overall growth since the turn of the century, at just 0.1 percent per year, on average, in the first decade of
1 Woods and Poole do not guarantee the accuracy of this dataset. The use of this dataset and the conclusions drawn from it are solely the responsibility of CDM Smith.
2-1 Chapter 2 • Economic and Corridor Growth Considerations the new millennium and a slightly accelerated pace of 0.8 percent per year between 2010 and 2019. While this pattern of longer-term deceleration follows national trends, the employment growth in Maine is recently slower than the nation and neighboring states. Within the Turnpike corridor, York and Cumberland Counties experienced the strongest relative annual employment growth between 2010 and 2019, at 1.5 percent and 1.8 percent, respectively; about double the statewide average. The CEFC forecasts the statewide employment to notably decline from 2019 levels due to COVID-19, then only partially rebound through their 2025 forecast, with some shifts in industry composition. Woods & Poole forecasts a 0.7 percent average annual growth through 2050.
Population growth in Maine continues to decelerate relative to previous decades. Since 2000, and particularly since 2010, population growth generally lagged neighboring New Hampshire and Massachusetts, and the United States. Since 2010, Maine’s population has been almost flat. Two sources compiled Maine population forecasts. One is the OPM that is forecasting a slight population decline through 2050. In contrast, the second source, Woods & Poole, is forecasting a slight growth of 0.1 percent per year, on average, through 2050.
The macroeconomic outlook for Maine is a short-term notable contraction in 2020 due to COVID- 19, followed by a slight rebound in growth, but not to pre-COVID levels for a few years. After COVID-19 effects, the assumptions are for growth at an expected slower pace than previous business cycles/expansion periods. Several qualitative arguments are often touted for this slower-recovery and expansion rationale, including fundamental structural changes to the economy such as a continued shift to services, technological advancements (accelerating), information proliferation and accessibility, maturing domestic markets, and globalization (trade interdependency and increased competition). All these factors and others, especially in combination, have shifted the economic paradigm, leading to overall expectations of a future economic picture that differs from those observed in the past. Population Table 2-1 shows historical Census Bureau population since 1980 for individual and clustered counties in Maine, as well as Maine, New Hampshire, Massachusetts, and the United States. Data are presented for the decennial Census years and the most-recent estimate for 2019; compound annual growth rates (CAGR) are calculated for timeframes between the presented years.
York County, at 1.0 percent CAGR between 1980 and 2019, had the strongest relative historical population growth in the corridor, and maintained faster growth than the state. Cumberland County population grew at 0.8 percent CAGR over that same historical timeframe, followed by Lincoln/Sagadahoc counties at 0.7 percent. The AVCOG region (Androscoggin, Oxford and Franklin counties) and the KVCOG region (Kennebec and Somerset counties) experienced the slowest population growth in the corridor at 0.3 percent CAGR. In contrast, the remaining counties in Maine experienced almost no population growth at all during the 36-year historical horizon, at just 0.1 percent CAGR.
Maine and Massachusetts both grew at 0.5 percent CAGR since 1980, at half-pace of the nation (1.0 percent CAGR); whereas, New Hampshire had similar growth as the nation, but with an uneven distribution – most growth occurred in the 1980s. Similar to New Hampshire, Maine’s
2-2 Chapter 2 • Economic and Corridor Growth Considerations population growth decelerated over last few decades, with very little growth since the 1980s, and especially since 2010.
Table 2-1: Historical Population History Compound Annual Growth Rates Area 1980 1990 2000 2010 2019 1980-'90 1990-'00 2000-'10 2010-'19 1980-'19 York 139,739 164,587 186,742 197,131 207,641 1.7% 1.3% 0.5% 0.6% 1.0% Cumberland 215,789 243,135 265,612 281,674 295,003 1.2% 0.9% 0.6% 0.5% 0.8% Androscoggin/Oxford/Franklin 175,999 186,869 188,015 196,303 196,451 0.6% 0.1% 0.4% 0.0% 0.3% Kennebec/Somerset 154,938 165,671 168,002 174,379 172,786 0.7% 0.1% 0.4% -0.1% 0.3% Lincoln/Sagadahoc 54,486 63,892 68,830 69,750 70,490 1.6% 0.7% 0.1% 0.1% 0.7% Other Maine Counties 384,092 403,774 397,722 409,124 401,841 0.5% -0.2% 0.3% -0.2% 0.1% Maine 1,125,043 1,227,928 1,274,923 1,328,361 1,344,212 0.9% 0.4% 0.4% 0.1% 0.5% New Hampshire 920,610 1,109,252 1,235,786 1,316,470 1,359,711 1.9% 1.1% 0.6% 0.4% 1.0% Massachusetts 5,737,093 6,016,425 6,349,097 6,547,629 6,892,503 0.5% 0.5% 0.3% 0.6% 0.5% United States 226,542,250 248,790,925 281,421,906 308,745,538 328,239,523 0.9% 1.2% 0.9% 0.7% 1.0% Table 2-2 shows forecasted population and growth for 2019 through 2050 from two sources, which vary in methodologies, base years, geographies, and forecast time horizons. Maine’s OPM forecast Maine’s population to contract slightly, at effectively 0.0 percent CAGR. In contrast, Woods & Poole forecasts a slow population increase in Maine, at 0.1 percent CAGR, reaching 1.4 million by 2050.
Table 2-2: Forecast Population History Forecast Compound Annual Growth Rates Area 2019 2030 2040 2050 2019-'30 2030-'40 2040-'50 2019-'50 Maine Office of Policy and Management York 207,641 216,832 223,050 229,161 0.4% 0.3% 0.3% 0.3% Cumberland 295,003 300,825 304,204 307,378 0.2% 0.1% 0.1% 0.1% Androscoggin/Oxford/Franklin 196,451 193,193 190,450 187,676 -0.2% -0.1% -0.1% -0.1% Kennebec/Somerset 172,786 166,569 162,722 158,973 -0.3% -0.2% -0.2% -0.3% Lincoln/Sagadahoc 70,490 66,077 63,626 61,294 -0.6% -0.4% -0.4% -0.4% Other Maine Counties 401,841 397,433 390,893 384,508 -0.1% -0.2% -0.2% -0.1% Maine 1,344,212 1,340,929 1,334,946 1,328,990 0.0% 0.0% 0.0% 0.0% Woods and Poole Economics, Inc. York 207,641 215,103 219,985 223,627 0.3% 0.2% 0.2% 0.2% Cumberland 295,003 307,437 315,483 321,796 0.4% 0.3% 0.2% 0.3% Androscoggin/Oxford/Franklin 196,451 199,818 201,579 202,318 0.2% 0.1% 0.0% 0.1% Kennebec/Somerset 172,786 176,600 177,677 177,691 0.2% 0.1% 0.0% 0.1% Lincoln/Sagadahoc 70,490 70,802 71,497 72,199 0.0% 0.1% 0.1% 0.1% Other Maine Counties 401,841 404,731 404,712 403,155 0.1% 0.0% 0.0% 0.0% Maine 1,344,212 1,374,491 1,390,933 1,400,786 0.2% 0.1% 0.1% 0.1% New Hampshire 1,359,711 1,418,009 1,461,637 1,501,877 0.4% 0.3% 0.3% 0.3% Massachusetts 6,892,503 7,185,118 7,341,533 7,458,977 0.4% 0.2% 0.2% 0.3% United States 328,239,523 353,002,641 372,934,650 392,768,433 0.7% 0.6% 0.5% 0.6% Maine OPM are based on interpolation/extrapolation of five-year forecasts for 2016 to 2036 Sources: United States Census Bureau; Maine Office of Policy and Management; and, Woods & Poole Economics, Inc., 2020 Employment Historical employment data presented in Table 2-3 are from the BEA and the BLS. Note that the BEA employment data were available only through 2018 at the time of data compilation; to estimate 2019, the annual growth from 2019/2018 from the BLS was applied to BEA data.
Employment growth decelerated for all geographies from 1980 through 2010 but has accelerated since. In the 1980s, employment growth in Maine outpaced the nation, with multiple counties in
2-3 Chapter 2 • Economic and Corridor Growth Considerations the corridor outpacing statewide growth. After 1990, employment growth in Maine decelerated to a pace slower than the nation. In the decade following the millennium, growth at all geographic levels was largely flat, with only a 0.4 percent CAGR nationally, 0.1 percent in Maine, and from 0.8 percent to -0.3 percent in the corridor. A relatively flat average growth for that decade reflects the recession between end-of-2007 and 2009 that mostly offset job gains earlier in the decade and continued for a few years—in most Maine counties during that decade, employment peaked in 2007. York and Cumberland counties consistently matched or outpaced the state, regional, and to some degree national employment growth.
Table 2-3: Historical Employment History Compound Annual Growth Rates Area 1980 1990 2000 2010 2019 1980-'90 1990-'00 2000-'10 2010-'19 1980-'19 York 61,252 81,319 89,998 97,191 109,169 2.9% 1.0% 0.8% 1.3% 1.5% Cumberland 128,272 181,280 212,280 223,436 254,582 3.5% 1.6% 0.5% 1.5% 1.8% Androscoggin/Oxford/Franklin 83,153 91,991 102,813 100,881 104,455 1.0% 1.1% -0.2% 0.4% 0.6% Kennebec/Somerset 75,878 96,037 101,163 98,537 101,426 2.4% 0.5% -0.3% 0.3% 0.7% Lincoln/Sagadahoc 25,629 37,252 39,991 40,327 41,289 3.8% 0.7% 0.1% 0.3% 1.2% Other Maine Counties 178,561 213,123 237,794 230,959 235,784 1.8% 1.1% -0.3% 0.2% 0.7% Maine 552,745 701,002 784,039 791,331 846,706 2.4% 1.1% 0.1% 0.8% 1.1% New Hampshire 481,610 642,570 783,545 813,707 908,035 2.9% 2.0% 0.4% 1.2% 1.6% Massachusetts 3,133,686 3,614,703 4,070,320 4,115,539 4,937,147 1.4% 1.2% 0.1% 2.0% 1.2% United States 113,983,200 138,330,900 165,370,800 172,901,700 203,036,212 2.0% 1.8% 0.4% 1.8% 1.5% Sources: Bureau of Economic Analysis and the Bureau of Labor Statistics (BLS annual growth to estimate 2019)
Figure 2-1 shows monthly employment growth since January 2017 (indexed to the first month) to easily compare growth across various geographies with large differences in absolute employment. Data are seasonally unadjusted, and seasonal variation at all geographic levels is clearly visible, with expected summertime peaks and wintertime troughs for the Maine counties. Generally, between 2017 and 2019, steady employment growth occurred at the national level and in Massachusetts and New Hampshire. However, most of Maine exhibited little overall growth, other than seasonal peaks. In March 2020, with COVID-19, employment precipitously declined, with only a partial rebounding in subsequent months. Only the rural northern counties in Maine resumed employment levels on-par with pre-COVID levels with all other geographies still lagging.
Figure 2-2 shows seasonally unadjusted unemployment rates. Following the great recession, the unemployment rates steadily declined. As of January 2017, the preliminary unemployment rate estimate from the BLS for Maine was 4.3 percent, and 5.1 percent for the nation (not seasonally adjusted). Since then, unemployment rates declined slowly through 2019. However in March 2020, unemployment spiked due to COVID-19, an unprecedented month-over-month increase unseen previously. Nationally, unemployment jumped almost 10 percent from 4.5 percent to 14.4 percent in just one month, with a slight decline in the following months, but still at historically high levels. Maine, and the constituent counties did not observe as steep of an unemployment spike, but nonetheless unprecedented. Maine’s unemployment jumped from 3.6 percent to 10.8 percent. Regionally, the counties with the fastest relative rebound (albeit not pre-COVID-levels) were Lincoln/Sagadahoc, at 5.5 percent in June 2020.
The CEFC report from July 2020 provides short-term estimates and forecasts of annual employment by industry sector for Maine. Annual industry growth forecasts and the statewide unemployment rate are summarized in Table 2-4. CEFC forecasts a notable decline in total wage and salary employment in Maine for 2020, reflective of COVID-19 impacts, with a loss of 8.0
2-4 Chapter 2 • Economic and Corridor Growth Considerations
Figure 2-1: Indexed Monthly Employment (seasonally unadjusted) 1.15
1.10
1.05
1.00 Index 0.95
0.90 Cumberland County York County Androscoggin/Oxford/Franklin (AVCOG) Kennebec/Somerset (KVCOG) Lincoln/Sagadahoc 0.85 Other Maine Counties Maine Massachusetts New Hampshire United States 0.80 Jul-17 Jul-18 Jul-19 Jul-20 Jan-17 Jan-18 Jan-19 Jan-20 Mar-17 Mar-18 Mar-19 Mar-20 Nov-17 Nov-18 Nov-19 Sep-17 Sep-18 Sep-19 May-17 May-18 May-19 May-20
Figure 2-2: Monthly Unemployment Rate (seasonally unadjusted) 20% Cumberland County York County 18% Androscoggin/Oxford/Franklin (AVCOG) Kennebec/Somerset (KVCOG) Lincoln/Sagadahoc Other Maine Counties 16% Maine Massachusetts New Hampshire 14% United States
12%
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2-5 Chapter 2 • Economic and Corridor Growth Considerations percent over 2019 employment. In 2021, the CEFC forecasts a slight rebound, but not back to pre- COVID-19 levels, which are then forecast to taper-off with no growth between 2023 and 2025. The state unemployment rate is forecast at 8.0 percent in 2020, dropping back down to around 3.5 in the recovery years post-COVID-19 (2023 to 2025).
Industry sector composition is forecast to shift slightly, with some sectors contracting, others expanding. Industry sectors with the strongest relative growth include Education and Health Services and Professional and Business Services, whereas industries forecast to contract the most include Manufacturing, Financial Activities, Trade/Transportation/Public Utilities, and Other Services. Leisure and Hospitality industries are forecast to be impacted severely from COVID-19 in 2020, and thereafter rebound, albeit not entirely to pre-COVID levels.
Table 2-4: Forecast Employment Growth by Industry Sector and State Unemployment Rate Estimate Forecast Industry Sector 2019 2020 2021 2022 2023 2024 2025 Total Wage and Salary Empoyment 0.9% -8.0% 4.0% 2.0% 0.0% 0.0% 0.0% Natural Resources -1.5% -9.4% 5.0% 5.5% 0.0% -0.1% -0.7% Construction 1.5% -2.8% -5.3% 0.2% -1.5% 0.2% 1.0% Manufacturing 2.3% -6.3% -2.4% 3.0% 0.1% 0.2% 0.2% Trade/Transportation/Public Utilities -0.4% -6.7% 5.7% -1.1% -8.0% -0.3% 0.0% Information -3.1% -11.9% 3.0% 3.4% -0.2% 0.3% -0.8% Financial Activities 2.7% -2.0% -3.5% 2.9% -0.2% -0.4% -0.3% Professional and Business Services 0.0% -7.9% 3.3% 7.4% 2.8% 0.2% 0.9% Education and Health Services 1.8% -5.9% 5.1% 1.3% 3.6% 0.9% 0.3% Leisure and Hospitality Services 0.7% -27.8% 25.9% 2.9% 4.6% -1.0% -1.6% Other Services 0.6% -4.4% -5.0% 1.8% -1.0% -1.5% -1.1% Government 1.0% -3.5% 0.5% 2.0% 0.2% -0.1% 0.0%
Maine Unemployment Rate 3.0% 8.0% 5.7% 4.3% 3.7% 3.5% 3.4% Source: Maine Consensus Economic Forecasting Commission (CEFC), 2020
Table 2-5 shows employment forecasts from Woods & Poole, in decade-increments through 2050. Woods & Poole forecasts employment growth in the next decade from 2019 through 2030 at 0.9 percent CAGR. Growth is then assumed to decelerate to 0.6 percent in the following two decades, slightly exceeding one million by 2050. In comparison with the nation, employment growth in Maine is forecasted to be slower, but is similar to expected growth in New Hampshire.
Table 2-5: Forecast Employment History Forecast Compound Annual Growth Rates Area 2019 2030 2040 2050 2019-'30 2030-'40 2040-'50 2019-'50 York 109,169 124,120 135,377 146,442 1.2% 0.9% 0.8% 1.0% Cumberland 254,582 295,053 326,942 361,000 1.4% 1.0% 1.0% 1.1% Androscoggin/Oxford/Franklin 104,455 113,196 118,326 123,084 0.7% 0.4% 0.4% 0.5% Kennebec/Somerset 101,426 109,421 113,515 116,744 0.7% 0.4% 0.3% 0.5% Lincoln/Sagadahoc 41,289 44,581 46,483 48,167 0.7% 0.4% 0.4% 0.5% Other Maine Counties 235,784 251,529 257,981 262,710 0.6% 0.3% 0.2% 0.3% Maine 846,706 937,900 998,624 1,058,147 0.9% 0.6% 0.6% 0.7% New Hampshire 908,035 1,025,018 1,115,654 1,200,193 1.1% 0.9% 0.7% 0.9% Massachusetts 4,937,147 5,705,178 6,313,692 6,887,157 1.3% 1.0% 0.9% 1.1% United States 203,036,212 234,749,589 260,952,286 287,459,364 1.3% 1.1% 1.0% 1.1% Sources: Bureau of Economic Analysis; Bureau of Labor Statistics; and Woods & Poole Economics, Inc., 2020
2-6 Chapter 2 • Economic and Corridor Growth Considerations
Within Maine, Woods & Poole projects relatively similar growth patterns, with small variation from the statewide total growth, ranging between 0.3 percent and 1.1 percent CAGR over the entire forecast horizon. As with population, York and Cumberland Counties are expected to continue to experience the strongest relative growth. Personal and Per Capita Income Real total personal income data (in 2012 dollars) from 2010 to 2019 are presented in Table 2-6 for the five corridor counties, Maine, and the nation. Statewide personal income was $61.8 billion in 2019, or 0.4 percent of the $16.9 trillion total personal income for the nation. During the 2010 to 2019 period, the average rate of total personal income growth was 1.8 percent CAGR for Maine, a little more than 60 percent of the national pace of 2.9 percent. Of the corridor Turnpike counties, Androscoggin and Kennebec Counties have historically grown below the state average, while Cumberland, Sagadahoc, and York have grown at or above the statewide rate. Real personal income is forecasted to decelerate slightly relative to the recent-decade historical average growth, with Maine forecast to increase by 1.7 percent CAGR from 2019 to 2050, compared with a slightly higher 2.1 percent CAGR for the nation.
In 2019, 28.2 percent of the statewide total real personal income and 45.0 percent of the five- county total was earned in Cumberland County. York County earned the second highest real income in the corridor, accounting for 16.5 percent of the state and 26.3 percent of the five- county total.
Table 2-6: Real Total Personal Income (billions of 2012 dollars) Corridor Counties Year Maine United States Androscoggin Cumberland Kennebec Sagadahoc York 2010 $3.8 $13.6 $4.8 $1.5 $8.2 $52.6 $13,105 2011 $3.8 $13.9 $4.8 $1.5 $8.4 $53.4 $13,569 2012 $3.8 $14.1 $4.7 $1.5 $8.4 $53.5 $13,998 2013 $3.7 $13.9 $4.7 $1.5 $8.4 $52.6 $13,987 2014 $3.8 $14.5 $4.7 $1.5 $8.7 $54.1 $14,570 2015 $3.9 $15.2 $4.8 $1.6 $9.0 $56.2 $15,245 2016 $4.0 $15.8 $4.9 $1.6 $9.3 $57.4 $15,478 2017 $4.0 $16.4 $5.0 $1.6 $9.6 $58.7 $15,926 2018 $4.1 $17.0 $5.1 $1.7 $9.9 $60.5 $16,472 2019 $4.2 $17.4 $5.2 $1.7 $10.2 $61.8 $16,901 Compound Annual Growth Rate (CAGR) 2010-'19 1.1% 2.8% 0.9% 1.9% 2.4% 1.8% 2.9% 2019-'50 1.7% 2.0% 1.6% 1.4% 1.8% 1.7% 2.1% Source: Woods & Poole Economics Inc., 2020
Real per capita incomes (in 2012 dollars) are provided in Table 2-7. Cumberland County had the highest relative per capita income at $59,100 in 2019, which was 28.3 percent greater than the statewide per capita income of $46,100, and 15.1 percent over the national per capita income of $51,300. In contrast, Androscoggin had a per capita income level 15.0 percent below the statewide level; all remaining corridor counties reported per capita income close to the statewide average. During the 2010 to 2019 period, real per capita income growth for Maine was 1.7 percent CAGR, and 2.2 percent CAGR for the nation, The CAGR for corridor counties are close to the statewide average, excepting Cumberland, with a higher 2.3 percent and Kennebec with a lower 0.9 percent. Forecast growth is for around 1.5 percent CAGR for all geographies.
2-7 Chapter 2 • Economic and Corridor Growth Considerations
Table 2-7: Real Per Capita Personal Income (2012 dollars) Corridor Counties Year Maine United States Androscoggin Cumberland Kennebec Sagadahoc York 2010 $35,530 $48,178 $39,091 $41,274 $41,730 $39,611 $42,366 2011 $35,713 $49,251 $39,260 $41,963 $42,389 $40,224 $43,549 2012 $35,615 $49,766 $38,777 $42,288 $42,476 $40,288 $44,599 2013 $34,904 $48,657 $38,573 $41,951 $42,183 $39,631 $44,255 2014 $35,283 $50,238 $38,929 $43,394 $43,214 $40,667 $45,763 2015 $36,703 $52,615 $39,880 $44,803 $44,850 $42,330 $47,530 2016 $36,805 $54,200 $40,260 $45,956 $45,859 $43,077 $47,910 2017 $37,383 $56,010 $40,684 $46,035 $46,885 $43,963 $48,980 2018 $38,401 $57,815 $41,556 $47,460 $48,147 $45,222 $50,346 2019 $39,173 $59,096 $42,238 $48,193 $49,134 $46,066 $51,323 Compound Annual Growth Rate (CAGR) 2010-'19 1.1% 2.3% 0.9% 1.7% 1.8% 1.7% 2.2% 2019-'50 1.6% 1.7% 1.5% 1.3% 1.5% 1.6% 1.6% Source: Woods & Poole Economics Inc., 2020 Gross State Product Gross State Product (GSP) is the cumulative value-added of goods and services produced by the labor and capital in a state, equivalent to gross output (including sales and other operating income, commodity taxes, and inventory change) less intermediate inputs (consumption of goods and services from other industries). GSP is a state’s equivalent of the nation’s Gross Domestic Product (GDP). Table 2-8 presents real GSP for Maine, New Hampshire, and Massachusetts and real GDP for the United States for the last decade. The data (in 2012 dollars) was developed by the BEA. Forecasted growth from 2019 to 2050 developed by Woods & Poole is also shown.
In the last decade, Maine’s real GSP growth was relatively slow with a 0.9 percent CAGR, whereas the nation grew at a 2.3 percent CAGR. Massachusetts grew at the national pace, but New Hampshire slightly below. Woods & Poole forecasts that Maine’s real GSP will grow at a CAGR of 1.6 percent, slightly below the forecasted national average of 1.9 percent.
Table 2-8: Real Gross State Product (billions of 2012 dollars) Year Maine New Hampshire Massachusetts United States 2010 $53.8 $66.4 $424.6 $15,599 2011 $53.1 $66.8 $434.7 $15,841 2012 $52.9 $67.7 $444.3 $16,197 2013 $52.5 $68.8 $444.9 $16,495 2014 $53.4 $69.5 $453.9 $16,912 2015 $53.8 $71.5 $471.1 $17,404 2016 $55.0 $72.8 $479.0 $17,689 2017 $56.2 $74.1 $490.8 $18,108 2018 $57.5 $75.8 $506.1 $18,638 2019 $58.5 $77.9 $518.7 $19,073 Compound Annual Growth Rate (CAGR) 2010-'19 0.9% 1.8% 2.3% 2.3% 2019-'50 1.6% 1.5% 1.9% 1.9% Sources: Bureau of Economic Analysis and Woods & Poole Economics Inc., 2020
2-8 Chapter 2 • Economic and Corridor Growth Considerations
Residential Real Estate Table 2-9 presents recent total home sales and median home prices in Maine and corridor counties from 2010 through 2019. While not shown in the table, a notable decline in total home sales occurred during and following the great recession and remained around ten thousand per year through 2011. In 2012 and thereafter, a rebound occurred in home sales statewide, with mostly double-digit annual growth through 2016 and a tapering-off since with little growth between 2016 and 2019. On average, home sales increased 6.6 percent in the state during the prior decade; and, most of the corridor counties exhibited similar growth patterns.
Median home prices in Maine and corridor counties overall increased in the prior decade, with a 3.2 percent CAGR for the state; however, there were notable vacillations within that timeframe. A decline occurred in 2011, and no growth in 2014, with tepid growth in the other interim post- recessionary years. After 2014, median home prices increased at a faster pace, with relatively large growth of 7.5 percent in 2018. Statewide median prices were $225,000 in 2019. Within the corridor counties, Cumberland and York Counties have relatively higher prices than the surrounding counties and the statewide average and exhibited the largest relative overall increase in median prices within the last decade.
Table 2-9: Total Home Sales and Median Home Price Geography 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2010-'19 Total Home Sales Androscoggin 724 658 768 827 929 934 1,109 1,119 1,179 1,171 Cumberland 2,594 2,494 2,965 3,432 3,654 4,141 4,252 4,096 4,073 4,086 Kennebec 940 848 991 1,096 1,178 1,325 1,453 1,530 1,562 1,599 Sagadahoc 317 278 334 366 438 434 499 494 497 471 York 1,696 1,652 1,929 2,287 2,513 2,793 3,122 3,120 3,153 3,120 Maine 10,213 9,837 11,521 13,088 14,123 15,672 17,507 17,633 17,864 18,140 Annual Change in Total Home Sales Androscoggin -4.2% -9.1% 16.7% 7.7% 12.3% 0.5% 18.7% 0.9% 5.4% -0.7% 5.5% Cumberland 1.3% -3.9% 18.9% 15.8% 6.5% 13.3% 2.7% -3.7% -0.6% 0.3% 5.2% Kennebec -7.2% -9.8% 16.9% 10.6% 7.5% 12.5% 9.7% 5.3% 2.1% 2.4% 6.1% Sagadahoc 3.3% -12.3% 20.1% 9.6% 19.7% -0.9% 15.0% -1.0% 0.6% -5.2% 4.5% York -3.7% -2.6% 16.8% 18.6% 9.9% 11.1% 11.8% -0.1% 1.1% -1.0% 7.0% Maine -2.6% -3.7% 17.1% 13.6% 7.9% 11.0% 11.7% 0.7% 1.3% 1.5% 6.6% Median Home Price (in thousands) Androscoggin $135.8 $127.5 $133.3 $135.0 $130.0 $136.8 $146.7 $154.0 $165.0 $175.0 Cumberland $225.3 $224.8 $226.0 $242.0 $244.0 $250.0 $265.0 $285.0 $307.0 $325.0 Kennebec $132.7 $133.5 $130.0 $134.3 $139.9 $139.0 $145.0 $150.0 $162.5 $170.0 Sagadahoc $175.0 $162.8 $171.5 $175.5 $171.3 $187.0 $198.0 $214.0 $229.0 $245.0 York $211.0 $207.0 $215.0 $220.0 $215.0 $226.0 $239.0 $257.7 $279.9 $295.0 Maine $168.8 $165.0 $170.0 $175.0 $175.0 $180.5 $189.4 $200.0 $215.0 $225.0 Annual Change in Median Home Price Androscoggin 1.7% -6.1% 4.5% 1.3% -3.7% 5.2% 7.3% 5.0% 7.1% 6.1% 2.9% Cumberland 2.4% -0.2% 0.6% 7.1% 0.8% 2.5% 6.0% 7.5% 7.7% 5.9% 4.2% Kennebec 2.9% 0.6% -2.6% 3.3% 4.2% -0.6% 4.3% 3.4% 8.3% 4.6% 2.8% Sagadahoc 4.2% -7.0% 5.4% 2.3% -2.4% 9.2% 5.9% 8.1% 7.0% 7.0% 3.8% York 11.1% -1.9% 3.9% 2.3% -2.3% 5.1% 5.8% 7.8% 8.6% 5.4% 3.8% Maine 2.9% -2.2% 3.0% 2.9% 0.0% 3.1% 4.9% 5.6% 7.5% 4.7% 3.2% Source: Maine Association of Realtors
Table 2-10 presents a snapshot of most-recent housing trends, comparing 2019 and 2020 second quarter home sales and median prices. While the prior decade exhibited growth since the great recession of 2007-2009, last year exhibited a slowdown statewide in sales with a 3.6 percent
2-9 Chapter 2 • Economic and Corridor Growth Considerations decrease in units sold, but a 6.2 percent increase in the median sales price. Within the corridor, changes in home prices were positive in all counties, while unit sales were lower statewide and in Cumberland and Androscoggin counties.
Table 2-10: Maine Home Sales and Median Sales Price; Q2 2019 vs. Q2 2020 Number of Units Sold Median Sales Price Geography Q2 2019 Q2 2020 % Change Q2 2019 Q2 2020 % Change Androscoggin 321 309 -3.7% $179,000 $207,500 15.9% Cumberland 1,256 1,037 -17.4% $343,950 $362,000 5.2% Kennebec 474 521 9.9% $175,000 $195,000 11.4% Sagadahoc 122 124 1.6% $252,450 $269,950 6.9% York 925 948 2.5% $299,000 $329,000 10.0% Maine 5,262 5,075 -3.6% $234,450 $249,000 6.2% Source: Maine Association of Realtors Retail Sales Table 2-11 presents real taxable retail sales in the last decade, along with forecasts of growth through 2050. During the past decade, statewide retail sales grew by 3.3 percent CAGR. This was faster than the growth in all the corridor counties. Real retail sales in the state are forecasted to grow by 1.3 percent CGAR through 2050.
Table 2-11: Real Taxable Retail Sales (millions of 2012 dollars) Corridor Counties Year Maine Androscoggin Cumberland Kennebec S. ME/York 2010 $1,698 $3,996 $1,883 $2,013 $17,279 2011 $1,682 $4,037 $1,881 $1,996 $17,409 2012 $1,700 $4,073 $1,888 $2,053 $17,544 2013 $1,744 $4,208 $1,915 $2,093 $18,035 2014 $1,778 $4,359 $1,947 $2,152 $18,465 2015 $1,889 $4,603 $2,041 $2,276 $19,394 2016 $1,995 $4,901 $2,138 $2,431 $20,564 2017 $2,020 $4,986 $2,167 $2,504 $21,183 2018 $2,053 $5,104 $2,206 $2,544 $21,978 2019 $2,083 $5,163 $2,238 $2,574 $23,043 Compound Annual Growth Rate (CAGR) 2010-'19 2.3% 2.9% 1.9% 2.8% 3.3% 2019-'50 1.2% 1.4% 1.2% 1.4% 1.3% Sources: Maine Office of Policy and Management (history), converted to 2012 dollars with Bureau of Labor Statistics CPI, Woods & Poole Economics, Inc. (forecast). Tourism Vital to Maine’s economy and a major generator of statewide traffic, tourism affects traffic volumes significantly on the Maine Turnpike. Table 2-12 shows recently available statistics on tourism visits to Maine as reported in the 2016 through 2019 Maine Office of Tourism Visitor Tracking Annual Reports. Maine had 21.8 million overnight visitors in 2019, and an additional 24.6 million day visitors. Overnight visitation was up 6.4 percent compared to 2018, while day visitation was down 0.8 percent. The greatest annual percentage increase in overnight visitation was observed in the Fall season, while day visitation increased the most in Winter/Spring.
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Table 2-12: Tourist Visitors to Maine by Season (thousands) Winter/Spring Summer Fall Total Year Overnight Day Overnight Day Overnight Day Overnight Day 2016 3,089 2,526 9,673 15,655 6,098 4,133 18,860 22,315 2017 3,494 2,919 10,480 15,781 6,275 4,392 20,249 23,091 2018 3,630 2,740 11,000 17,270 5,900 4,780 20,520 24,790 2019 3,360 2,880 12,010 17,090 6,470 4,630 21,830 24,590 Annual Change 2016-'17 13.1% 15.5% 8.3% 0.8% 2.9% 6.3% 7.4% 3.5% 2017-'18 3.9% -6.1% 5.0% 9.4% -6.0% 8.8% 1.3% 7.4% 2018-'19 -7.4% 5.1% 9.2% -1.0% 9.7% -3.1% 6.4% -0.8% Source: Maine Office of Tourism; Annual Reports
A significant proportion of tourists are from other states. In 2019, out-of-state residents represented 95 percent of overnight visitors, and 63 percent of day visitors. In 2019, proportionately more overnighters originated from the Mid-Atlantic states and Canada (and less from New England), with notable increases from PA, NJ and Quebec as compared to 2018.
Recent traffic on the Maine Turnpike is also a strong indicator of tourist activity, particularly during the summer months and at the York mainline plaza. Figure 2-3 shows monthly traffic through the York mainline plaza from 2016 to 2019. Summer traffic in 2018 and 2019 was higher than the previous years, particularly during the peak month of August. Over the six-month period from April to September, traffic was up by 1.5 percent in 2018 and 0.7 percent in 2019.
Figure 2-3: York Monthly Transactions (Seasonality) 2.0 2016 2017 1.8 2018 2019
1.6
1.4
1.2
1.0 Total Transactions (millions)
0.8
0.6 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Maine Turnpike Authority
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Regional Transportation While the Maine Turnpike is important to the state’s transportation network, the network is composed of many facilities and modes. Competing and feeder facilities and modes include the Downeaster passenger train, the Portland Jetport, the state’s deep-water ports, and freight railways. However, in addition to offering modal options, the Jetport, freight rail, and maritime infrastructure contribute to traffic on the Maine Turnpike. Downeaster Passenger Train The Downeaster passenger train connecting Portland and Boston began service in December 2001 and has experienced significant ridership increases in recent years. Improvements were made to enhance the Downeaster services, including increased speeds and capacity expansions between Plaistow, New Hampshire and Portland, Maine. Capacity expansions allowed for an additional fifth daily train, which became operational in August 2007. An extension from Portland to Brunswick and Freeport opened to daily passenger train service on November 1, 2012.
Fiscal Year (FY) 2017 (ending June 2017) was a year of growth, strong performance and record- setting revenue for the Downeaster. A third round trip was added to Freeport and Brunswick in November 2016, and record ridership occurred in 6 out of 12 months in FY 2017. In that year, the Downeaster transported 511,422 passengers, an 8 percent increase over FY 2016. In FY 2018, the Downeaster transported 551,038 passengers, a 6 percent increase over FY 2017. In FY 2019, ridership declined by 0.7 percent with 547,293 passengers.
It is noteworthy that, while the Downeaster experienced impressive growth in ridership and serves an important market, the Maine Turnpike recorded 90.3 million vehicle transactions in Calendar Year (CY) 2019. By comparison, passenger ridership on the Downeaster in FY 2019 was about 550,000.2 The Downeaster should be viewed as contributive to the Maine economy and complementary to the Turnpike, not just competition. Portland Jetport A summary of Portland Jetport’s total passengers, flights, and cargo for years 2000 through 2019 is presented in Table 2-13. This was the last year for which data was available at the time of this study. Between 2000 and 2019, the total number of passengers using the airport increased by 2.6 percent CAGR. While 2006, 2009 through 2011, and 2014 experienced declines in total passengers, these annual declines were modest in comparison with overall growth since 2003. Between 2005 and 2010, passenger growth averaged 3.2 percent per year, which occurred despite reductions in the total number of flights. Since 2000, total flights declined by 3.4 percent annually, which is likely the result of rising fuel costs and an industry shifts toward higher load factors as major air carriers attempt to increase efficiency and reduce empty seats.
Total cargo handled at the airport has been very volatile. After averaging a 1.0 percent annual decline between 2000 and 2005, cargo further declined by 7.8 percent per year between 2005 and 2010. In the subsequent five years between 2010 and 2015, a CAGR of 2.6 percent occurred.
2 Source: Northern New England Passenger Rail Authority, Annual Report, FY 2019 (July 1, 2018 – June 30, 2019).
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Cargo traffic dropped sharply in 2016 by 21.9 percent, then dropped again by 10.6 percent in 2017 before increasing by 7.8 percent in 2018.
Recent improvements at the Jetport include a complete renovation of the commercial passenger terminal, completed in October 2011. Currently there are six commercial operators offering service to destinations as far away as Atlanta, Detroit, Chicago, Charlotte, or Sarasota.
Based on Federal Aviation Administration (FAA) forecasts, the Portland International Jetport is expected to experience compound annual growth averaging 1.6 percent for passenger enplanements and 0.7 percent for total aircraft operations for the 2019 through 2050 period.
Table 2-13: Passengers, Flights, and Cargo at Portland International Jetport Year Passengers % ∆ Flights % ∆ Cargo (tons) % ∆ 2000 1,342,557 106,252 17,940 2001 1,252,597 -6.7% 112,043 5.5% 15,914 -11.3% 2002 1,248,362 -0.3% 102,630 -8.4% 16,038 0.8% 2003 1,248,972 0.0% 88,143 -14.1% 17,665 10.1% 2004 1,365,078 9.3% 90,241 2.4% 16,811 -4.8% 2005 1,455,925 6.7% 80,257 -11.1% 17,020 1.2% 2006 1,410,484 -3.1% 77,422 -3.5% 17,448 2.5% 2007 1,650,581 17.0% 72,985 -5.7% 20,129 15.4% 2008 1,762,925 6.8% 73,776 1.1% 17,648 -12.3% 2009 1,736,941 -1.5% 62,160 -15.7% 13,140 -25.5% 2010 1,707,426 -1.7% 60,257 -3.1% 11,337 -13.7% 2011 1,674,814 -1.9% 57,143 -5.2% 11,006 -2.9% 2012 1,617,826 -3.4% 54,566 -4.5% 11,203 1.8% 2013 1,675,978 3.6% 51,568 -5.5% 12,260 9.4% 2014 1,667,734 -0.5% 46,633 -9.6% 12,035 -1.8% 2015 1,728,746 3.7% 48,898 4.9% 12,910 7.3% 2016 1,785,649 3.3% 50,993 4.3% 10,086 -21.9% 2017 1,862,213 4.3% 51,805 1.6% 9,019 -10.6% 2018 2,134,430 14.6% 56,926 9.9% 9,725 7.8% 2019 2,180,154 2.1% 58,232 2.3% NA NA Compound Annual Growth Rates 2000-'05 1.6% -5.5% -1.0% 2005-'10 3.2% -5.6% -7.8% 2010-'15 0.2% -4.1% 2.6% 2015-'19 6.0% 4.5% NA 2019-'45 1.6% 0.7% NA Source: FAA, Terminal Area Forecast (January 2020). Port Trends and Developments Maine continues to promote cargo activity at the three major deep-water ports in Portland, Searsport, and Eastport. The ports have shown steady, consistent growth. In 1980, only a small amount of dry cargo was handled at the Port of Searsport and none in Eastport and Portland. The three ports collectively handle over 1.5 million tons of dry cargo. Additionally, Portland and Searsport also handle roughly 125 million barrels of petroleum products.
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Over the years, the MaineDOT invested significantly in the three ports to help promote this growth. In Eastport, a $20 million facility was completed in 1998. In Searsport, a $20 million investment in a public/private partnership with Sprague Energy resulted in a new terminal being completed in 2003. And in Portland, improvements to the International Marine Terminal, including the purchase of a new container crane and additional land, has ensured that the Port of Portland remains competitive.
Though the Port of Portland accommodates many different industries, the cruise industry plays an important role in the vitality of Portland’s waterfront. In 2015, a total of 83 cruise ships made call at the Port of Portland with a total of over 94,000 passengers.
Ferry service also operates from the Port of Portland. Currently, only Casco Bay Lines provide ferry service operating between Portland and the islands of Peaks, Little Diamond, Great Diamond, Diamond Cove, Long, Chebeague and Cliff. A high-speed catamaran service operating between Portland and Yarmouth, Nova Scotia was discontinued in 2009. In May 2014, a new daily ferry service running from May to November started operations. Other Modes of Freight Movement Per the 2017 Maine Integrated Freight Strategy report, trucking is the dominant mode for freight shipments, accounting for 86 percent of all freight tonnage moved to, from, and within the State.
Railroads and other modes of freight transportation are also important to Maine’s existing and emerging industries. Unlike much of the rest of the United States in which rail systems were established to connect regions to the rest of the country, many of Maine’s rail lines were designed to link the state and its ports to Montréal and the Great Lakes area. Based on 2013 data reported in the 2014 State Rail Plan, the rail system in Maine includes 1,130 miles of currently active freight lines connected to the North American rail system. Maine is served by six private railroads: Central Maine and Quebec Railway; Pan Am Railway; Maine Northern Railway; Maine Eastern Railroad; Eastern Maine Railway; Saint Lawrence and Atlantic Railroad; and New Hampshire North Coast Railroad. The State of Maine owns more than 430 miles of track. Rail is important not only in that it offers an alternative to highway freight movement, but also due to its cost-effectiveness in moving high-volume, low-value commodities such as lumber, paper pulp, and other forest products over long distances.
Facilities such as the Intermodal Freight Transfer Station in Auburn impact traffic along the Turnpike. The intermodal facility, off Lewiston Junction Road across from the Auburn-Lewiston Municipal Airport, opened in 1994 and was expanded in 2000 by the St. Lawrence and Atlantic Railroad. It offers high-capacity freight shipping between Canada and the rest of the U.S. via the Canadian National Railway and St. Lawrence and Atlantic’s U.S. line. Between its opening in 1994 and 2001, the facility experienced growth in annual containers from approximately 6,000 to 15,000. Growth at the facility has the potential to have a positive impact on commercial traffic on the Turnpike.
Finally, while constituting a small portion of Maine’s total freight movement, air freight transportation plays an important part in the shipping of perishable items and other time- sensitive goods. The Portland International Jetport and Bangor International airport handle the majority of air cargo activity in the state.
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Other Regional Considerations Information on major projects and developments within the study corridor was obtained for this study, reviewed for its potential impact on the various socioeconomic variables previously discussed and the potential impacts on traffic. Maine’s Military Bases Historically, two military bases within Maine contributed significantly to the state’s economy. The Naval Air Station Brunswick (NASB) and the Portsmouth Naval Shipyard (PNS) in Kittery have each directly employed more than 4,000 military and civilian workers, which in turn support several thousand additional jobs in the state.
The NASB officially closed on May 31, 2011. Since 2009, the Midcoast Regional Redevelopment Authority (MRRA) has been actively working to manage redevelopment of the site as a technology park, hotel, and general aviation airport facility. Targeted sectors include aviation and aerospace, composites and advanced materials, information technology, education, alternative energy, and biotechnology.
According to its 2018 Strategic Business Plan, MRRA has identified the following short, intermediate and long-term milestones or goals:
• Short-term Goal (achieved): Recover active base civilian employment (create approximately 700 jobs). Estimated 3-5 years from base closure.
• Intermediate Goal: Recover economic impact of active base operations (create approximately $140 million in annual payroll, 2,500 jobs). Estimated 10-15 years from base closure.
• Long-term Goal: Realize maximum build-out of base properties (create approximately 14,000 jobs). Estimated 25-30 years from base closure.
There are now more than 100 entities doing business at Brunswick Landing and the Topsham Commerce Park, which have collectively created more than 1,200 jobs (exceeding the short-term economic goal). Many of these entities are in the targeted business sectors and a large number are new to Maine. Portland’s Waterfront On the western-most end of Portland’s Waterfront, developers of the Thompson's Point project along the Fore River are currently proceeding with their plans to create a mixed-use development. Thompson’s Point has recently seen a reincarnation as a hub of creative activity: brewers, restaurateurs, designers, and musicians have set up shop in the site’s once forgotten buildings. These 2.25 million square feet of land at the burgeoning edge of the city is poised to become a new center for residential and commercial activity, with plans for a hotel, children’s museum, and recreational opportunities that take advantage of the water and trails nearby, homes, office spaces, and shared green space.
The Maine Port Authority made significant upgrades to the International Marine Terminal property, which laid the groundwork for bringing Eimskip in as a primary operator in April 2013.
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Eimskip, an Icelandic shipping company, recently relocated its North American headquarters to Portland. This decision is considered a catalyst for investment and new trade opportunities at the International Marine Terminal just west of the central waterfront zone. Eimskip is providing direct liner service to eastern Canada, Scandinavia, and other parts of northern Europe as opposed to 'feeder' services.
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Chapter 3 Econometric Forecasts
An econometric analysis was conducted to estimate long-term travel demand on the Maine Turnpike. Historical travel demand for toll plaza groupings was econometrically estimated via regression equations, with regional socioeconomics as explanatory variables. With such historical trend-based equations, regional socioeconomic forecasts were applied to the equation coefficients to estimate annual future demand. Seven demand equations were derived for either individual plazas or combinations of proximate plazas to derive a baseline forecast through year 2050. Econometric equations and forecasts are updated from the analysis conducted in 2017. Econometric Modeling Multivariate regression analysis establishes a mathematical equation for a dependent variable (e.g., annual transactions) as a function of other independent variables (e.g., annual socioeconomic data), with associated statistics explaining the equation robustness. Generally, a regression equation is expressed as follows:
푦푡 = 훼 + (훽1 ∗ 푥1,푡) + (훽2 ∗ 푥2,푡) + ⋯ + 휀
▪ 푦푡 is the dependent variable in timeframe t
▪ 푥1,푡 and 푥2,푡 etc. are the independent variables in timeframe t
▪ 훼 is the intercept coefficient
▪ 훽1 and 훽2 etc. are the slope coefficients for the respective independent variables
▪ 휀 is the residual error
In each regression equation, an analysis of variation (ANOVA) table is created that explains the statistical parameters, such as adjusted R2 (coefficient of determination) and t-statistics for each independent variable, which indicate overall equation and independent variable robustness, respectively. A regression equation can be leveraged for forecasting the dependent variable if ANOVA metrics are statistically significant, the equation’s relationships are conceptually valid, and forecasts of independent variables are credibly available. Regression Testing and Data Individual highway travel occurs for myriad reasons, such as recreation, commuting, trade, etc., and is influenced by factors such as fuel prices, other travel costs, weather, trip urgency, and economics. Aggregate highway travel typically trends closely with regional socioeconomic variables. As such, conceptually relevant socioeconomic data were hypothesized, compiled, and regression-tested for explaining annual travel demand, and include: population, employment, real gross regional product, and real retail sales, compiled at various geographic boundaries.
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Multiple regression equations were tested and evaluated for each toll plaza/toll plaza grouping to account for the numerous possible combinations of relevant geographies (county clusters) for each possible socioeconomic variable. A final equation was selected based on multiple criteria, including but not limited to: overall equation robustness (adjusted R2), independent variable robustness (t-statistics and p-values), logic and reasonableness of equation coefficients, logic and reasonableness of geographic catchment area relative to the physical location of the plaza(s), and the credibility of the independent variable(s) and source(s).
Plazas were grouped based on physical proximity, historical travel demand patterns, data availability, and other characteristics such as operations history into seven separately analyzed transaction trends. Table 3-1 lists the plaza(s) included for each dependent variable and these are graphically shown in Figure 3-1.
Annual historical transactions were available and analyzed from 1987 through 2019 (excepting two groupings, New Gloucester and Gardiner, which opened in 1997), providing 33 (or 23) years of data per time series equation. Historical transactions were normalized to eliminate the influence of any single-occurrence exogenous factors that affected traffic, such as construction shut-downs, plaza openings, toll rate increases, leap-years, etc., prior-to regression modeling with socioeconomic variables.
Table 3-1: Toll Plaza Groupings Dependent Variable Plazas Included 1 York York 2 Wells-Sanford to Saco Wells-Sanford Kennebunk Biddeford Saco 3 Scarborough to Falmouth I-295 South Portland Portland Westbrook Falmouth Rt1 4 Portland North to Gray Portland North Gray 5 New Gloucester New Gloucester 6 West Gardiner to Gardiner I-95 West Gardiner Gardiner I-95 T Corridor York to Gray (i.e., groupings 1-4 combined) Source: CDM Smith
Data compiled for regression testing included:
▪ Maine Turnpike Authority – historical transactions ▪ United States Census Bureau – historical population ▪ United States Bureau of Economic Analysis (BEA) – historical employment ▪ Woods & Poole Economics, Inc. (Woods & Poole) – historical and forecast population, employment, real gross regional product (GRP), and real retail sales ▪ Moody’s Analytics – historical and forecast real gross regional product (GRP) Regression Caveats Econometrically derived long-term demand forecasts served as the basis for further transaction and toll revenues estimates. Growth forecasts from the regressions do not explicitly consider route choice assumptions, the existing roadway network and planned improvements, existing and anticipated roadway capacities, origin-destination pairing, peak and directional factors, traffic diversions, or future toll pricing changes. It provides baseline travel demand growth.
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Figure 3-1: Toll Plaza Groupings
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As this regression analysis attempts to estimate aggregate travel demand, the equations cannot account for all potentially influencing factors, especially any small-scale, qualitative/difficult-to- quantify, and/or irregularly occurring factors. Also, a regression analysis is incapable of forecasting unprecedented factors (positive or negative influence) such as catastrophic climate change, health epidemics, terrorism, natural disasters, civil unrest, or any other significantly destabilizing factors.
Forecasts are estimates, limited by the availability and robustness of input data, both historical and projected. Data unavailability, discrepancies, aberrations, and inaccuracies can hinder the robustness and results of econometric forecasting. Regression Equations and Forecasting Equations were estimated in 2017, reflecting annual transaction data through 2016. Such equations were updated with transaction data through 2019 and checked for continued reasonableness and statistical fit. A final regression equation was estimated for each plaza grouping, relating historical annual travel demand (average daily total transactions) with a regional socioeconomic variable. After testing the compiled socioeconomics for various geographic clusters, it was determined/confirmed that real GRP was the best-suited explanatory variable, as originally identified in 2017.
Geographically, regional combinations of contiguous counties in Maine, New Hampshire, and Massachusetts served as logical and statistically acceptable catchment areas, with real GRP as the aggregation of the catchments’ economic activity. Maps of each catchment area are in the respective econometric modeling snapshots at the end of this chapter (Figures 3-3 to 3-9).1 Some of the catchments were adjusted slightly from the 2017 equations, to improve overall statistical fits, via the inclusion or exclusion of adjacent counties. Table 3-2 identifies the number of counties in the geographic catchments and the adjusted R2 statistics for each equation.
Adjusted R2 (overall statistical robustness) is between 91.1% and 98.0% for the plaza groupings, with a 99.0% adjusted R2 for the more-aggregated Corridor equation. Such relatively high statistical fits indicate good relationships.
Table 3-2: Regression Equation Summary Catchment Counties Plaza(s) Adj. R2 ME NH MA Total York 5 2 0 7 96.3% Wells-Sanford to Saco 5 2 3 10 97.9% Scarborough to Falmouth 7 2 0 9 96.9% Portland North to Gray 6 2 2 10 98.0% New Gloucester 8 0 0 8 91.1% West Gardiner to Gardiner I-95 7 2 0 9 93.0% Corridor 5 2 2 9 99.0% Source: CDM Smith
1 Catchment areas regionalize socioeconomic variables as related to travel demand; however, the catchment areas should not imply that travel demand is only from those geographies, but rather that the catchment is a logical, statistically valid representation for the aggregate demand.
3-4 Chapter 3 • Econometric Forecasts
With the final equations, real GRP forecasts were applied to the regression coefficients to estimate future long-term travel demand. Real GRP forecasts were obtained from both Woods & Poole and Moody’s Analytics. Both sources forecast almost identical long-term annual real GRP trends for the identified catchment areas, with very minor average growth rate differentials. Woods & Poole forecasts were smooth growth, whereas Moody’s incorporates some year-over- year fluctuations. Moody’s forecasts were applied to equations to forecast baseline travel demand, similar to the forecasting in 2017. Econometric Growth Forecasts Econometrically derived travel demand forecasts for the Maine Turnpike were based on regression equations with real GRP as the socioeconomic explanatory variable, and with real GRP forecasts from Moody’s Analytics. A summary of the compound average growth rates (CAGR) for the plaza groupings is provided in Table 3-3, depicting the average historical transaction growth from 1987 to 2019 (as applicable), 1997 to 2019, 2010 to 2019, and the forecast 2019 to 2050 from each equation. Figure 3-2 depicts the historical trends with the long-term econometrically- derived forecasts for the plaza groupings (excepting the aggregated Corridor – excluded from graphic so as not to visually distort the sub-corridor groupings due to different scaling).
Table 3-3: Transaction Growth Summary Historical Forecast Plaza(s) 1987- 1997-'19 2010-'19 2019-'50 '19 York 1.4% 1.3% 1.5% 1.2% Wells-Sanford to Saco 3.7% 3.8% 3.5% 2.1% Scarborough to Falmouth 2.4% 2.3% 3.1% 1.7% Portland North to Gray 3.5% 3.8% 3.3% 2.1% New Gloucester1 N/A 3.4% 1.2% 2.4% West Gardiner to Gardiner I-951 N/A 2.1% 2.2% 1.8% Corridor 2.7% 2.7% 3.0% 1.8% 1. Data unavailable from 1987 – 1996. Source: CDM Smith Figure 3-2: Econometric Summary
250 York Wells-Sanford to Saco Scarborough to Falmouth 200 Portland North to Gray New Gloucester West Gardiner to Gardiner I-95 150
100
50 Daily Transactions (thousands.) Transactions Daily
0 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050 Source: CDM Smith
3-5 Chapter 3 • Econometric Forecasts
Generally, the Maine Turnpike exhibited 2.7% average transaction growth between 1987 and 2019. Within the corridor, variations in historical growth were observed, with the York and the northern plazas exhibiting lower relative historical growth than the plazas between them. Over the future horizon through 2050, the Maine Turnpike transactions are econometrically forecast to grow 1.8% on average, annually. Table 3-4 shows annual transactions growth over the forecast horizon by plaza grouping.
Table 3-4: Transaction Growth – Annual Forecasts Wells-Sanford to Scarborough to Portland North to West Gardiner to Year York New Gloucester Corridor Saco Falmouth Gray Gardiner I-95 2020 -2.6% -6.9% -4.3% -6.2% -8.8% -4.4% -5.9% 2021 1.3% 2.7% 2.2% 2.6% 4.6% 2.3% 2.3% 2022 2.7% 6.6% 4.4% 6.1% 7.9% 4.4% 5.5% 2023 2.1% 4.8% 3.4% 4.4% 5.3% 3.4% 4.0% 2024 1.4% 2.9% 2.2% 2.7% 3.1% 2.2% 2.4% 2025 1.2% 2.3% 1.9% 2.2% 2.6% 1.9% 2.0% 2026 1.2% 2.2% 1.8% 2.1% 2.5% 1.8% 1.9% 2027 1.2% 2.3% 1.9% 2.2% 2.7% 1.9% 1.9% 2028 1.3% 2.4% 2.0% 2.3% 2.8% 2.0% 2.1% 2029 1.3% 2.3% 1.9% 2.2% 2.7% 2.0% 2.0% 2030 1.3% 2.3% 1.9% 2.2% 2.7% 1.9% 2.0% 2031 1.3% 2.3% 1.9% 2.2% 2.7% 1.9% 2.0% 2032 1.3% 2.3% 1.9% 2.2% 2.7% 1.9% 2.0% 2033 1.3% 2.3% 1.9% 2.3% 2.7% 2.0% 2.0% 2034 1.3% 2.3% 1.9% 2.2% 2.6% 1.9% 2.0% 2035 1.3% 2.3% 1.9% 2.2% 2.6% 1.9% 2.0% 2036 1.2% 2.2% 1.8% 2.1% 2.5% 1.8% 1.9% 2037 1.2% 2.1% 1.7% 2.1% 2.4% 1.8% 1.8% 2038 1.2% 2.1% 1.7% 2.0% 2.3% 1.7% 1.8% 2039 1.2% 2.1% 1.7% 2.1% 2.3% 1.8% 1.8% 2040 1.2% 2.2% 1.8% 2.1% 2.4% 1.8% 1.9% 2041 1.2% 2.1% 1.7% 2.0% 2.3% 1.7% 1.8% 2042 1.2% 2.0% 1.7% 2.0% 2.2% 1.7% 1.8% 2043 1.2% 2.0% 1.6% 2.0% 2.2% 1.7% 1.8% 2044 1.2% 2.1% 1.7% 2.0% 2.2% 1.7% 1.8% 2045 1.2% 2.0% 1.7% 2.0% 2.2% 1.7% 1.8% 2046 1.2% 2.0% 1.7% 2.0% 2.2% 1.7% 1.8% 2047 1.2% 2.0% 1.7% 1.9% 2.1% 1.7% 1.8% 2048 1.2% 2.0% 1.6% 1.9% 2.1% 1.7% 1.8% 2049 1.2% 2.0% 1.7% 2.0% 2.1% 1.7% 1.8% 2050 1.3% 2.1% 1.7% 2.0% 2.2% 1.7% 1.9% Source: CDM Smith
Revenues are the last component of the forecasting process. Growth rates developed from this econometric regression analysis are applied to historical traffic trends, with some post-regression adjustments to address COVID-19 and other considerations. Moody’s real GRP data incorporated COVID-19 considerations, with economic contraction in 2020, followed by tepid growth in 2021, and a rebound in 2022 into 2023. While Moody’s real GRP data reflect a macroeconomic contraction due to the virus and policy response, it does not entirely reflect the aggregate behavioral response that is atypical of normal circumstances for passenger travel. Passenger travel is curtailed beyond just the macroeconomic response (e.g., less spending, lost job/commuting, etc.) and is layered with an additional behavioral response, such as reduced
3-6 Chapter 3 • Econometric Forecasts
grocery visits, limits on visiting friends, family, etc., and quarantining, even if purchasing behavior continues (online). Such aggregate behavioral response is uncharacteristic relative to historical behavior and macroeconomic trends. CDM Smith applied alternative COVID-19 related recovery assumptions than derived from Moody’s and applied them to the econometrics. The baseline transaction growth estimates presented in Table 3-4 were used as the starting point in developing transaction and revenue forecasts. Any adjustments made to these growth rates and the resultant transaction and revenue forecasts are described in more detail in Chapter 4, Toll Revenue Forecasts.
3-7 Chapter 3 • Econometric Forecasts
Figure 3-3: York Catchment Area ANOVA Statistics Maine Multiple R 98.2% Cumberland R^2 96.4% Knox Adj. R^2 96.3% Lincoln Std. Error 891.5 Sagadahoc Obs. 33 York df SS MS F Sig. F New Hampshire Regression 1 6.7E+08 6.7E+08 837.3 5.3E-24 Rockingham Residual 31 2.5E+07 7.9E+05 Strafford Total 32 6.9E+08 Coef. SE t Stat P-value Intercept 2.0E+04 683.6 29.8 2.1E-24 GRP 0.5 0.0 28.9 5.3E-24
$120 York - 7-County Catchment GRP $100
$80
$60
$40
Real GRP (billions Real (billions GRP of 2012$) $20
$0 80 York - Transaction Forecasts 60
1 40 2 3 20 Daily Transactions Daily Transactions (thous.)
0 10% York - Transaction Growth 5%
0% Annual Annual Percent Change -5%
-10%
1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050
3-8 Chapter 3 • Econometric Forecasts
Figure 3-4: Wells-Sanford to Saco Catchment Area ANOVA Statistics Maine Multiple R 99.0% Androscoggin R^2 97.9% Cumberland Adj. R^2 97.9% Kennebec Std. Error 3,386.7 Sagadahoc Obs. 33 York df SS MS F Sig. F New Hampshire Regression 1 1.7E+10 1.7E+10 1,462.0 1.2E-27 Rockingham Residual 31 3.6E+08 1.1E+07 Strafford Total 32 1.7E+10 Massachusetts Coef. SE t Stat P-value Essex Intercept -2.4E+04 2,462.7 -9.8 4.6E-11 Middlesex GRP 0.3 0.0 38.2 1.2E-27 Suffolk
$800 Wells-Sanford to Saco - 10-County Catchment GRP
$600
$400
$200 Real GRP (billions Real (billions GRP of 2012$)
$0 250 Wells-Sanford to Saco - Transaction Forecasts 200
150 1 2 100 3
Daily Transactions Daily Transactions (thous.) 50
0 15% Wells-Sanford to Saco - Transaction Growth 10%
5%
0% Annual Annual Percent Change -5%
-10%
1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050
3-9 Chapter 3 • Econometric Forecasts
Figure 3-5: Scarborough to Falmouth
3-10 Chapter 3 • Econometric Forecasts
Figure 3-6: Portland North to Gray Catchment Area ANOVA Statistics Maine Multiple R 99.0% Androscoggin R^2 98.0% Cumberland Adj. R^2 98.0% Kennebec Std. Error 986.4 Lincoln Obs. 33 Sagadahoc df SS MS F Sig. F York Regression 1 1.5E+09 1.5E+09 1,535.2 5.7E-28 New Hampshire Residual 31 3.0E+07 9.7E+05 Rockingham Total 32 1.5E+09 Strafford Coef. SE t Stat P-value Massachusetts Intercept -5.6E+03 715.7 -7.8 7.5E-09 Essex GRP 0.1 0.0 39.2 5.7E-28 Middlesex
$600 Portland North to Gray - 10-County Catchment GRP $500
$400
$300
$200
Real GRP (billions Real (billions GRP of 2012$) $100
$0 80 Portland North to Gray - Transaction Forecasts 60
1 40 2 3 20 Daily Transactions Daily Transactions (thous.)
0 15% Portland North to Gray - Transaction Growth 10%
5%
0% Annual Annual Percent Change -5%
-10%
1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050
3-11 Chapter 3 • Econometric Forecasts
Figure 3-7: New Gloucester Catchment Area ANOVA Statistics Maine Multiple R 95.7% Androscoggin R^2 91.5% Aroostook Adj. R^2 91.1% Franklin Std. Error 837.7 Kennebec Obs. 23 Knox df SS MS F Sig. F Lincoln Regression 1 1.6E+08 1.6E+08 226.1 1.0E-12 Sagadahoc Residual 21 1.5E+07 7.0E+05 Somerset Total 22 1.7E+08 Coef. SE t Stat P-value Intercept -1.5E+04 2,148.7 -7.2 4.3E-07 GRP 1.9 0.1 15.0 1.0E-12
$40 New Gloucester - 8-County Catchment GRP
$30
$20
$10 Real GRP (billions Real (billions GRP of 2012$)
$0 50 New Gloucester - Transaction Forecasts 40
30 1 2 20 3
Daily Transactions Daily Transactions (thous.) 10
0 25% 20% New Gloucester - Transaction Growth 15% 10% 5% 0% Annual Annual Percent Change -5% -10% -15%
1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050
3-12 Chapter 3 • Econometric Forecasts
Figure 3-8: West Gardiner to Gardiner I-95 Catchment Area ANOVA Statistics Maine Multiple R 96.6% Androscoggin R^2 93.3% Cumberland Adj. R^2 93.0% Kennebec Std. Error 927.7 Piscataquis Obs. 23 Sagadahoc df SS MS F Sig. F Somerset Regression 1 2.5E+08 2.5E+08 292.0 8.5E-14 York Residual 21 1.8E+07 8.6E+05 New Hampshire Total 22 2.7E+08 Rockingham Coef. SE t Stat P-value Strafford Intercept 2.1E+03 1,606.9 1.3 2.1E-01 GRP 0.5 0.0 17.1 8.5E-14
$150 West Gardiner to Gardiner I-95 - 9-County Catchment GRP
$100
$50 Real GRP (billions Real (billions GRP of 2012$)
$0 80 West Gardiner to Gardiner I-95 - Transaction Forecasts 60
1 40 2 3 20 Daily Transactions Daily Transactions (thous.)
0 15% West Gardiner to Gardiner I-95 - Transaction Growth 10%
5%
0%
Annual Annual Percent Change -5%
-10%
-15%
1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050
3-13 Chapter 3 • Econometric Forecasts
Figure 3-9: Corridor Catchment Area ANOVA Statistics Maine Multiple R 99.5% Androscoggin R^2 99.0% Cumberland Adj. R^2 99.0% Kennebec Std. Error 5,210.1 Sagadahoc Obs. 33 York df SS MS F Sig. F New Hampshire Regression 1 8.6E+10 8.6E+10 3,165.2 8.9E-33 Rockingham Residual 31 8.4E+08 2.7E+07 Strafford Total 32 8.7E+10 Massachusetts Coef. SE t Stat P-value Essex Intercept -6.7E+03 4,032.5 -1.7 1.1E-01 Suffolk GRP 1.4 0.0 56.3 8.9E-33
$500 Corridor - 9-County Catchment GRP $400
$300
$200
$100 Real GRP (billions Real (billions GRP of 2012$)
$0 600 Corridor - Transaction Forecasts 500
400 1 300 2 200 3
Daily Transactions Daily Transactions (thous.) 100
0 10% Corridor - Transaction Growth 5%
0% Annual Annual Percent Change -5%
-10%
1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050
3-14
Chapter 4 Toll Revenue Forecast
This chapter summarizes CDM Smith’s estimate of transactions and toll revenue for the Maine Turnpike through 2050. The text that follows presents the basic assumptions used in the development of the forecast and the forecast itself. Basic Assumptions Chapter 3 describes the methodology by which socioeconomic and operating trends are used to produce the forecast. In addition, certain assumptions must be made with respect to future conditions for the forecast to remain as relevant and accurate as possible. The estimates of future toll revenue for the Maine Turnpike are based on the following assumptions which CDM Smith believes to be reasonable:
▪ Improvements on the Turnpike system will be completed in accordance with the time frame indicated in this report;
▪ Roadway widening, plaza reconstruction or movement, and other construction impacts will be minimized to the fullest extent, with no peak-period lane closures;
▪ Any changes in toll collection methodology, including introduction of all-electronic tolling (AET) or open-road tolling (ORT) will be net revenue neutral or positive;
▪ No toll rate increases are assumed as part of this forecast;
▪ Toll rates and estimates of toll revenue included in this report are calculated in future dollars;
▪ Economic growth in the study corridor will generally follow the underlying socioeconomic projections prepared by CDM Smith and described elsewhere in this report;
▪ No other limited-access facilities, tolled or toll-free, will be constructed in the Turnpike corridor;
▪ The Turnpike will continue to be well-operated and maintained to encourage maximum usage;
▪ No double dip or new major recession or significant economic restructuring will occur which would substantially reduce traffic in the region;
▪ No natural disasters will occur that could significantly alter travel patterns throughout the area;
▪ Motor fuel will remain in adequate supply and price increases will be generally in proportion to the overall rate of inflation;
4-1 Chapter 4 • Toll Revenue Forecast
▪ No local, regional or national emergency will arise which would abnormally restrict the use of motor vehicles; and
▪ No future pandemic will occur which would substantially reduce traffic in the region.
Any significant departure from the above basic assumptions could materially affect estimated toll revenue. Turnpike Improvement Program In addition to the above assumptions, specific attention was paid to future improvements or other substantial alterations of the regional transportation network. Local and regional transportation planning documents were reviewed for the committed projects or programs which might significantly impact the transportation network. Review of these documents revealed that while improvements are continually being made on the regional network, due to either their scope or location, few will have a notable positive or negative impact on projected future travel demand on the Maine Turnpike.
There are a few exceptions. Several projects are scheduled to take place during the forecast period as identified in the Maine Turnpike Authority’s Ten-Year Planning Report (2014-2023) and the draft Four-Year Capital Investment Plan (2021-2024). They are as follows:
Mainline Widening and Modernization of the Turnpike between Scarborough and Portland – This project entails constructing an additional (third) lane of travel in each direction along with full shoulders and safety slopes where practicable between mileposts 44 and 48 in the southbound direction, and between mileposts 42 and 49.3 in the northbound direction. This section carries higher traffic than the adjoining segments to the north and south, and is starting to exhibit capacity and safety constraints. The improvement is needed to maintain free-flow travel conditions. Construction started in 2020 and is estimated to be completed in 2022. The widening may have a positive increase in traffic along this segment by pulling market share from the parallel I-295. CDM Smith assumes that there may be some negative impact during construction and associated lane closures, but assumes that MTA will mitigate this to the maximum extent possible.
Replacement of the York Mainline Toll Plaza – The project consists of highway, structures, building and site work required to construct a new 15-lane open road tolling (ORT) plaza and demolish the existing toll facility. The work at Mile 8.8 includes constructing six high-speed (70 mph) E-ZPass center lanes (three in each direction) with overhead open frame gantries with electronic toll collection equipment and nine cash lanes with toll booths (four northbound and five southbound). The project includes reconstruction of the mainline to accommodate approach and departure lanes at the new toll plaza, construction of a precast pedestrian tunnel for employee access and utilities, a driveway from Chases Pond Road, a parking lot and an Administration Building. The work also includes the installation of tolling equipment in the tunnel, canopy, and toll booth and maintenance of traffic. Construction started in 2018 and is estimated to be completed in 2021. After the project is complete, additional work will be necessary at Mile 7.3 including demolition of the existing 17-lane toll plaza and tunnel, repurposing of the administration building, removal of existing utilities and driveway and
4-2 Chapter 4 • Toll Revenue Forecast reconstruction of the existing facility to a three-lane highway southbound and a four-lane highway northbound. CDM Smith assumes that changes in toll collection at the York mainline toll plaza will be net revenue neutral.
Replacement of the Gardiner I-295 Mainline Toll Plaza – The project consists of constructing a new ORT plaza 800 feet north of the existing toll plaza. The new plaza will have two northbound and two southbound ORT lanes, and three northbound and three southbound cash/E-ZPass lanes. The project also includes construction of a precast pedestrian tunnel for employee access and utilities and an administration building and access road. In addition, reconfiguration of the Exit 51 ramps and I-295 northbound ramp will occur. The contract also includes demolition of the existing toll plaza and reconstruction of the mainline. Construction started in 2019 and is estimated to be completed in 2021.
Exit 45 Interchange Reconstruction – Exit 45 (the Maine Mall Exit) in South Portland is being reconstructed as a diamond interchange to accommodate growing traffic numbers with two new ramp toll plazas and wider bridge. The existing bridge over the Turnpike will be replaced and raised approximately six feet to provide a 16.5-foot clearance. The existing toll booth will be removed and two new ramp toll plazas with both cash and electronic toll collection on either side of the Turnpike mainline will be constructed. Work on the project is anticipated to begin in 2021 and last until 2023 with the new roadways and toll plazas being operable in late 2022.
Widening between the New Hampshire border and York Mainline Toll Plaza – In 1995, the Authority purchased from the Maine DOT the 4.78-mile section of I-95 between the York Toll Plaza and Spruce Creek (Mile 2.2). In 2015, the Authority purchased the remaining section of I-95 from the I-95 high-level bridge over the Piscataqua River at the New Hampshire line to Spruce Creek. It is anticipated that widening of this section of interstate highway from three lanes to four lanes in each direction may be required to accommodate future traffic volumes. Transaction and Toll Revenue Forecasts Estimates of annual transactions, gross toll revenue, and net toll revenue, based on the methodologies and assumptions described in this document are presented in Table 4-1. The forecast extends from 2020 through 2050 and incorporates actual values through August 2020, and preliminary data on September 2020 performance. The annual net fare revenue forecast is calculated based on an estimate of annual discounts and adjustments. Annual volume discounts as a share of gross revenue were forecasted based on historical trends (2013-2019) and an estimated logarithmic relationship. An increasing trend in volume discounts has been observed since the introduction of the volume-based discount program in October 2012.
As previously reviewed in Chapter 1 (Table 1-2), observed transactions indicated that the peak impact of COVID-19 on the Maine Turnpike was reached in April 2020 with systemwide transactions down by about 54 percent compared to 2019 levels. Since the peak in April, the level of impact on traffic has steadily declined to about -22 percent in August and -13 percent in September as compared to those same months in 2019. Revenue performed better than transactions, down 44 percent in April 2020 versus April 2019 and declining to about a -19 percent impact in August and a -10 percent impact in September as compared to 2019 levels. The smaller impact on revenue is a combination of trucks performing better than passenger vehicles
4-3 Chapter 4 • Toll Revenue Forecast
Table 4 1: Estimated Annual Transactions and Revenue (in thousands) Volume % Average Gross Toll % Discounts vs Net Toll Year Transactions Discounts/ % Chg. Chg. Toll Revenue Chg. Gross Rev. Revenue Adjustments 2019 (1) 90,281 2.1% $1.71 $154,088 1.2% ($14,137) 9.2% $139,951 1.1% 2020 (2) 71,471 -20.8% 1.76 125,839 -18.3% (10,287) 8.2% 115,552 -17.4% 2021 85,951 20.3% 1.73 148,878 18.3% (12,933) 8.7% 135,945 17.6% 2022 90,130 4.9% 1.71 154,436 3.7% (14,207) 9.2% 140,229 3.2% 2023 94,077 4.4% 1.71 160,603 4.0% (14,911) 9.3% 145,692 3.9% 2024 96,964 3.1% 1.70 165,097 2.8% (15,456) 9.4% 149,641 2.7% 2025 98,822 1.9% 1.70 168,009 1.8% (15,848) 9.4% 152,161 1.7% 2026 100,637 1.8% 1.70 170,856 1.7% (16,229) 9.5% 154,627 1.6% 2027 102,575 1.9% 1.70 173,912 1.8% (16,626) 9.6% 157,285 1.7% 2028 104,535 1.9% 1.69 176,999 1.8% (17,023) 9.6% 159,976 1.7% 2029 106,478 1.9% 1.69 180,055 1.7% (17,414) 9.7% 162,641 1.7% 2030 108,433 1.8% 1.69 183,128 1.7% (17,804) 9.7% 165,323 1.6% 2031 110,412 1.8% 1.69 186,241 1.7% (18,197) 9.8% 168,045 1.6% 2032 112,418 1.8% 1.68 189,397 1.7% (18,592) 9.8% 170,806 1.6% 2033 114,478 1.8% 1.68 192,640 1.7% (18,994) 9.9% 173,646 1.7% 2034 116,540 1.8% 1.68 195,879 1.7% (19,394) 9.9% 176,485 1.6% 2035 118,596 1.8% 1.68 199,108 1.6% (19,793) 9.9% 179,316 1.6% 2036 120,617 1.7% 1.68 202,278 1.6% (20,184) 10.0% 182,094 1.5% 2037 122,584 1.6% 1.68 205,359 1.5% (20,566) 10.0% 184,792 1.5% 2038 124,562 1.6% 1.67 208,454 1.5% (20,949) 10.0% 187,505 1.5% 2039 126,576 1.6% 1.67 211,604 1.5% (21,337) 10.1% 190,267 1.5% 2040 128,644 1.6% 1.67 214,837 1.5% (21,732) 10.1% 193,105 1.5% 2041 130,672 1.6% 1.67 218,006 1.5% (22,121) 10.1% 195,885 1.4% 2042 132,665 1.5% 1.67 221,119 1.4% (22,503) 10.2% 198,616 1.4% 2043 134,667 1.5% 1.67 224,246 1.4% (22,887) 10.2% 201,359 1.4% 2044 136,729 1.5% 1.66 227,465 1.4% (23,280) 10.2% 204,185 1.4% 2045 138,796 1.5% 1.66 230,694 1.4% (23,674) 10.3% 207,020 1.4% 2046 140,881 1.5% 1.66 233,952 1.4% (24,070) 10.3% 209,882 1.4% 2047 142,973 1.5% 1.66 237,218 1.4% (24,467) 10.3% 212,750 1.4% 2048 145,073 1.5% 1.66 240,497 1.4% (24,866) 10.3% 215,631 1.4% 2049 147,214 1.5% 1.66 243,835 1.4% (25,270) 10.4% 218,565 1.4% 2050 149,447 1.5% 1.65 247,312 1.4% (25,689) 10.4% 221,622 1.4% 1. Actual 2019 traffic and revenue data. 2. Values for 2020 include actual traffic and revenue data through August 2020.
(as they pay a higher toll than cars) and reduced rebates for passenger vehicles, which are tied to trip frequency, and therefore would have reduced considerably during the pandemic. Both factors result in a higher overall effective average toll for the system during 2020 as compared to 2019.
Truck impacts as compared to 2019 levels since the pandemic (other than the severe impact in April 2020) have in general stayed relatively flat at approximately -9 to -12 percent with the latest data showing a -6 percent impact for August 2020 versus 2019. The increase in e- commerce and stay at home activities has been, in general, a strong positive for many of the “legacy” type toll facilities across the country and specifically, the Maine Turnpike has followed this similar pattern with truck revenue providing a backstop when passenger car travel was down three, four, or five times the impact on trucks. Passenger vehicle impacts peaked at
4-4 Chapter 4 • Toll Revenue Forecast approximately -60 percent in April and have steadily decreased to -30 percent through July, with August showing a strong rebound to about -23 percent as the reduction of travel restrictions and increased level of traveler comfort has occurred.
Similar to other tourist and coastal toll roads CDM Smith has been tracking through this pandemic, the Turnpike has experienced a very strong rebound during the summer and into September as Maine “reopened”, regional quarantine requirements were lifted, and considering Maine provides a variety of safe activities that people can enjoy while the weather was favorable. While it is anticipated that October will continue the recent rebound, more conservative impacts for November and December 2020 have been assumed, as well as cautious impacts through the first quarter of 2021. It is expected that the negative impacts on traffic and revenue could slightly increase again in November and December as tourism traffic subsides and the Turnpike relies more on the typical background traffic dependent on national and regional economics and commuting. We have assumed that impacts will remain fairly stable at these levels into the Spring of 2021, before a more robust recovery begins in the spring of 2021, noting there are still some risks and negative impacts that will persist for some time, some of which include:
▪ The potential for a second wave of the virus this fall/winter into 2021.
▪ Continued high levels of unemployment and permanent job losses resulting in elevated levels of unemployment that will persist for some time.
▪ Work from home has increased significantly and will likely remain higher than prior to the COVID-19 pandemic.
▪ Tempered overall holiday shopping and traffic due to economic impacts and uncertainty, while on-line shopping continues to gain market share.
▪ No clear catalyst for further additional rebound in traffic during the winter months and during the first quarter of 2021.
▪ The timeframe for mass distribution of advanced therapeutics and/or possible vaccine production to combat the virus.
By the end of 2021, transactions and net toll revenue are estimated to be about 5 percent and 3 percent below 2019 levels, respectively. By 2022, estimated toll transactions and revenue are expected to be approximately in line with 2019 levels, followed by slightly higher than average growth in traffic and revenue in 2023 and 2024 as the economy recovers and travel behavior returns to more typical patterns before returning to an average growth pattern correlated to long term regional GDP growth.
In general, toll transaction estimates starting in 2025 were calculated by applying annual growth rates derived from the econometric model for each of the six toll segments as described in Chapter 3. Average annual growth in transactions and net toll revenue between 2024 and 2050 is estimated to be 1.7 percent and 1.5 percent, respectively.
4-5 Chapter 4 • Toll Revenue Forecast
Disclaimer CDM Smith used currently-accepted professional practices and procedures in the development of these traffic and revenue (T&R) estimates. However, as with any forecast, differences between forecasted and actual results may occur, as caused by events and circumstances beyond the control of the forecasters. In formulating the estimates, CDM Smith reasonably relied upon the accuracy and completeness of information provided (both written and oral) by the Maine Turnpike Authority. CDM Smith also relied upon the reasonable assurances of independent parties and is not aware of any material facts that would make such information misleading.
CDM Smith made qualitative judgments related to several key variables in the development and analysis of the T&R estimates that must be considered as a whole; therefore, selecting portions of any individual result without consideration of the intent of the whole may create a misleading or incomplete view of the results and the underlying methodologies used to obtain the results. CDM Smith gives no opinion as to the value or merit of partial information extracted from this report.
All estimates and projections are based on CDM Smith’s experience and judgment and on a review of information obtained from different sources, including the Maine Turnpike Authority. These estimates and projections may not be indicative of actual or future values, and are therefore subject to substantial uncertainty. Future developments cannot be predicted with certainty, and may affect the estimates or projections expressed in this report, such that CDM Smith does not specifically guarantee or warrant any estimate or projection contained within this report.
While CDM Smith believes that the projections or other forward-looking statements developed in this study are based on reasonable assumptions as of the date of the report, such forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the results predicted. Therefore, following the date of this report, CDM Smith will take no responsibility or assume any obligation to advise of changes that may affect its assumptions contained within the report, as they pertain to socioeconomic and demographic forecasts, proposed residential or commercial land use development projects and/or potential improvements to the regional transportation network.
CDM Smith is not, and has not been, a municipal advisor as defined in Federal law (the Dodd Frank Bill) to the Maine Turnpike Authority and does not owe a fiduciary duty pursuant to Section 15B of the Exchange Act to the Maine Turnpike Authority with respect to the information and material contained in this report. CDM Smith will not recommend and has not recommended any action to the Maine Turnpike Authority. The Maine Turnpike Authority should discuss the information and material contained in this report with any and all internal and external advisors that it deems appropriate before acting on this information.
4-6 [THIS PAGE INTENTIONALLY LEFT BLANK] APPENDIX E
THE MAINE TURNPIKE AUTHORITY
Financial Statements
For the Years Ended December 31, 2019 and 2018
THE MAINE TURNPIKE AUTHORITY
Financial Statements
For the Years Ended December 31, 2019 and 2018
TABLE OF CONTENTS
Page(s)
Independent Auditor’s Report 1-2
Management’s Discussion and Analysis 3-9
Statements of Net Position 10-11
Statements of Revenues, Expenses and Changes in Net Position 12
Statements of Cash Flows 13-14
Notes to Financial Statements 15-44
Required Supplementary Information 45-48
Other Supplementary Information 49-50
2019 Financial Statements – The Maine Turnpike Authority
30 Long Creek Drive | South Portland, Maine 04106-2437
Phone 207.774.5701 | Fax 207.774.7835
Independent Auditor’s Report
To the Board of Directors Maine Turnpike Authority Portland, Maine
Report on the Financial Statements
We have audited the accompanying financial statements of the Maine Turnpike Authority, a component unit of the State of Maine, as of and for the years ended December 31, 2019 and 2018, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Maine Turnpike Authority, as of December 31, 2019 and 2018, and the changes in financial position and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 3-9, the trend data on infrastructure condition on page 45, the schedule of changes in net OPEB liability and related ratios – group health insurance, on page 46, the schedule of proportionate share net OPEB liability – group life insurance, on page 47, the schedule of OPEB contributions – group life insurance, on page 47, the schedule of proportionate share of net pension liability on page 48, and the schedule of contributions on page 48, be presented to supplement the basic financial statements.
1 wipfli.com/maine
To the Board of Directors Maine Turnpike Authority
Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that comprise the Authority’s basic financial statements. The Calculation of the Composite Debt Service Ratio on page 49, as required by the bond resolutions and related documents, and the Statement of Activities for the State of Maine General Purpose Financial Statements on page 50, is presented for purposes of additional analysis and is not a required part of the basic financial statements.
The Calculation of the Composite Debt Service Ratio on page 49 and the Statement of Activities for the State of Maine General Purpose Financial Statements on page 50 is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Calculation of the Composite Debt Service Ratio on page 49, and the Statement of Activities for the State of Maine General Purpose Financial Statements on page 50, are fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report, dated March 12, 2020, on our consideration of the Maine Turnpike Authority's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of Maine Turnpike Authority’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Maine Turnpike Authority’s internal control over financial reporting and compliance.
South Portland, Maine March 12, 2020
2
THE MAINE TURNPIKE AUTHORITY Management’s Discussion and Analysis
December 31, 2019
The management of the Maine Turnpike Authority (the Authority) offers this narrative overview and analysis of the Authority’s financial activities for the years ended December 31, 2019 and 2018. This discussion and analysis is designed to assist the reader in focusing on the significant financial issues and activities and to identify any significant changes in financial position. The information presented here should be read in conjunction with the Authority’s basic financial statements.
Financial Highlights
Net operating income for the Maine Turnpike Authority was $61,625,443 and $62,032,803 for calendar years 2019 and 2018, respectively. The decrease in net operating income is due to an increase in Net Fare Revenue and Interest Income and a decrease in Preservation Expenses offset by an increase in Operations and Maintenance Expenses. Total Revenues increased 2.2% in 2019, which is mostly due to an increase in traffic of 2.1% over the prior year as well as an increase in Interest Income. The increase in Operating Expenses over the prior year is due to an increase in Operations & Maintenance Expenses attributable primarily to increases in the OPEB and pension liability valuations.
Current year activity produced a change in net position of $45,560,486 compared to $42,975,787 for fiscal years 2019 and 2018, respectively. The term “net position” refers to the difference between assets, deferred outflows of resources, liabilities and deferred inflows of resources. At the close of calendar year 2019, the Authority had a net position of $383,830,165, an increase of 13% over calendar year 2018. At the close of calendar year 2018, the Authority’s net position was $338,550,390. The Authority’s overall financial position has improved as shown by the increase in net position.
Overview of the Basic Financial Statements
This discussion and analysis is intended to serve as an introduction to the Authority’s basic financial statements. The Authority’s financial statements are presented in a manner similar to a private-sector business and have been prepared according to accounting principles generally accepted (GAAP) in the United States. Revenues are recorded as they are earned and expenses are recorded as they are incurred, regardless of when cash is received or disbursed.
Basic Financial Statements
The statement of net position presents information on all of the Authority’s assets, deferred outflows of resources, liabilities and deferred inflows of resources, with the difference reported as net position. Over time, increases and decreases in net position serve as a relative indicator of the change in financial position of the Authority.
The statement of revenues, expenses, and changes in net position shows the result of the Authority’s total operations during the fiscal year and reflects both operating and non-operating activities. Changes in net position reflect the fiscal period operating impact upon the overall financial position of the Authority.
The statement of cash flows provides a detailed analysis of all sources and uses of cash. The direct method of cash flows is presented, ending with a reconciliation of operating income to net cash provided by operating activities.
2019 Financial Statements – The Maine Turnpike Authority
3
Management Discussion and Analysis, continued
The statement of cash flows is divided into the following activities: operating, capital and related financing, and investing.
Notes to the Financial Statements
The notes provide additional information that is essential to fully understand the data provided in the basic financial statements.
Other Information
In addition to the basic financial statements and notes, this report also presents required supplementary information concerning infrastructure condition, the retiree healthcare plan, and information on the Authority’s participation in the Maine Public Employer’s Retirement System. Additionally, certain supplementary information concerning the Authority’s debt service ratio, as defined by the bond resolution, is included.
Financial Analysis
Maine Turnpike Authority’s Statement of Net Position
December 31, 2019 2018 Assets and Deferred Outflows Current Assets $ 203,705,559 $ 258,093,332 Capital Assets, Net of Accumulated Depreciation 750,103,176 662,029,303 Non-Current Restricted Assets 58,513,885 58,208,081 Other Assets 232,241 255,838 Deferred Outflows of Resources 20,021,077 13,535,876 Total Assets and Deferred Outflows $ 1,032,575,938 $ 992,122,430 Liabilities and Deferred Inflows Current Liabilities 62,436,833 56,651,668 Bonds Payable, Net of Unamortized Premiums and Discounts, net of current position 508,267,061 529,227,610 Other Post Employment Benefits Liabilities 58,813,492 47,757,062 Other Non-current Liabilities 1,892,878 2,687,945 Net Pension Liability 11,437,656 10,611,572 Deferred Inflows of Resources 5,897,854 6,636,182 Total Liablilities and Deferred Inflows $ 648,745,774 $ 653,572,040 Net Position: Net Investment in Capital Assets 296,413,176 278,823,345 Restricted 141,439,297 108,388,235 Unrestricted (Deficit) (54,022,309) (48,661,189) Total Net Position $ 383,830,165 $ 338,550,390 Total Liabilities, Deferred Outflows and Net Position $ 1,032,575,938 $ 992,122,430
2019 Financial Statements – The Maine Turnpike Authority
4
Management Discussion and Analysis, continued
As noted earlier, net position serves as an indicator of the Authority’s overall financial position. In the case of the Authority, assets and deferred outflows exceeded liabilities and deferred inflows by $383,830,165 at the close of 2019. This represents an increase of $45,279,774 (13%) over the net position balance of $338,550,390 as of December 31, 2018.
The largest portion of the Authority’s net position reflects its net investment in capital assets (e.g., right-of-way, roads, bridges, toll equipment, etc.) less any related outstanding debt used to acquire those assets. The Authority uses these capital assets to provide service and consequently, these assets are not available for liquidating liabilities or for other spending. The net investment in Capital Assets was $296,413,176 and $278,823,345 as of December 31, 2019 and 2018, respectively.
In 2019, a joint agreement was made between the Maine Turnpike Authority, the MaineDOT and NHDOT regarding repairs needed to the Piscataqua River Bridge that connects the states of Maine and New Hampshire. This also is the primary gateway to the Maine Turnpike from the south. The rehabilitation includes widening and improving the outside shoulder to accommodate future traffic when functioning as a travel lane, paving the median and installing a concrete median barrier, paving and restriping the full width. The Maine Turnpike Authority’s share of the project cost is approximately $12 million and the project began in the fall of 2019 and is expected to take approximately three years to complete. Since the Piscataqua River Bridge is jointly owned by the MaineDOT and the NHDOT, the Maine Turnpike Authority has no ownership interest in the bridge, therefore the Authority’s share of the project cost is treated as a transfer of equity to the MaineDOT. The total transfer of equity to the MaineDOT in 2019 was $280,712.
Restricted net position is reserved for projects defined in the bond resolutions and applicable bond issue official statements. The Authority’s restricted net position was $141,439,297 and $108,388,235 as of December 31, 2019 and 2018, respectively. The unrestricted net position for the year ended December 31, 2019 and December 31, 2018 are negative due to recording the net pension and OPEB liabilities.
2019 Financial Statements – The Maine Turnpike Authority
5
Management Discussion and Analysis, continued
The Maine Turnpike Authority’s Changes in Net Position
For the Years Ended December 31, 2019 2018 Revenues: Net Fare Revenues $ 139,963,970 $ 138,432,432 Concession Rental 4,753,317 4,887,895 Investment Income 6,221,619 5,268,861 Miscellaneous 2,034,904 1,925,414 Total Revenues $ 152,973,810 $ 150,514,602
Expenses (Income): Operations 26,969,730 25,608,813 Maintenance 36,873,598 30,320,354 Administrative 2,385,818 2,413,827 Depreciation 10,871,868 9,477,831 Preservation 12,021,363 17,547,460 Interest Expense 22,296,553 22,569,567 Other (4,005,606) (399,037) Total Expenses $ 107,413,324 $ 107,538,815
Change in Net Position 45,560,486 42,975,787
Net Position, beginning of year $ 338,550,390 $ 295,574,604 Equity Transfers - MaineDOT $ (280,712) $ - Net Position, end of year $ 383,830,165 $ 338,550,390
The Authority’s net fare revenues, which represent approximately 95% of all operating revenues, increased $1,531,538 (1.1%) in 2019. The increase is due to an increase in traffic of 2.1% over the prior year. Investment Income increased 18.1% over prior year due to favorable short-term interest rates. Operations, Maintenance and Administrative expenses increased $7,886,153 (13.5%) in 2019. This increase is mainly attributed to an increase in the OPEB and pension liability valuations due to a decrease in the valuation discount rate. This rate is based on the Bond Buyer 20-Bond GO Index and decreased 136 basis point in 2019 (2.74% vs 4.10%). Please see Note 8 and Note 10 for additional information on Pensions and OPEB. The capital program in 2019 was the largest in the Authority’s history and 2020 is expected to equal or be even greater than 2019’s program. This is due to several large projects that are occurring which includes a number of bridge repair projects and pavement rehabilitation projects as well as the widening of the mainline in the Portland area, the Exit 45 Interchange project and the York Toll Open Road Tolling (ORT) project. Preservation expenses decreased $5,526,097 (31.5%) in 2019 due to a reduction to bridges needing repair and painting.
2019 Financial Statements – The Maine Turnpike Authority
6
Management Discussion and Analysis, continued
Capital Assets and Debt Administration
Capital Assets
The Authority’s investment in capital assets as of December 31, 2019 amounted to $853,581,701 of gross asset value with accumulated depreciation of $103,478,525, leaving a net book value of $750,103,176. Capital assets include right-of-way, roads, bridges, buildings, equipment and vehicles. Please see Note 3 of the financial statements for a schedule of changes in the Authority’s capital assets.
Capital asset acquisitions are capitalized at cost. Acquisitions are funded through debt issuance and Authority revenues.
The Authority has been in the process of updating and modernizing its electronic toll system and toll facilities. The toll system, operational since 2004, is being replaced by Transcore’s Infinity system. This project will upgrade each toll plaza location with improved traffic counting and video/image technology to continue the highly accurate data collection the Authority requires. Outdated toll booths, administrative buildings and access tunnels at each location are being replaced or rehabilitated. In 2019, upgrades to Exit 75 (Auburn), and Exit 44 ORT (Scarborough – I295), were completed and the upgrades to Exit 103 (Gardiner – I295), and Exit 7 (York) continued. The toll plazas at Exit 103 (Gardiner) and Exit 7 (York) are being reconfigured to allow for an Open Road Tolling (ORT) Plaza, which allows patrons to travel through the plaza at highway speed in the center lanes or allow those that want to pay cash that option as well. Major interchange and toll system improvements at Exit 45 (Maine Mall) began in the fall of 2019. This is the last plaza to be converted to Transcore’s Infinity electronic toll system. The first phase of the Exit 45 project consists of preloading and preparing the site for future construction. There were also several bridge rehabilitation projects in 2019, which included the Exit 103 I-295 Bridge rehabilitation, which was completed in 2019, and work continued on the Cobbosseecontee Stream bridge. In 2019, the first phase of the Portland area widening began which includes the widening and rehabilitation of the Cummings Road bridge, the Maine Central Railroad Overpass, and the Warren Avenue and Stroudwater bridges. Lastly, the fuel system at the Kennebunk Service Plaza Northbound was completed which included the replacement of outdated fuel tanks, pumps and canopy. Work began on fuel system upgrades at the Gray Service plaza.
Modified Approach for Infrastructure Assets
The Maine Turnpike Authority has elected to use the modified approach to infrastructure reporting. This means that, in lieu of reporting depreciation on infrastructure, the Authority reports the costs associated with maintaining the existing asset in good condition as preservation expense. Infrastructure assets include: roads, bridges, interchanges, tunnels, right of way, drainage, guard rails, and lighting systems associated with the road. Pursuant to its bond covenants, the Authority maintains a reserve maintenance fund for these preservation expenses. For fiscal 2019, $12,021,363 was spent for preservation compared to an estimated cost of $11,153,159.
The roadways are rated on a 10-point scale, with 10 meaning that every aspect of the roadway is in new and perfect condition. The Authority’s system as a whole is given an overall rating, indicating the average condition of all roadways operated by the Authority. The assessment of condition is made by visual inspection designed to reveal any condition that would reduce highway-user benefits below the maximum level of service. The Authority’s policy is to maintain the roadway condition at a rating of 8 (generally good condition) or better. The results of the 2019 2019 Financial Statements – The Maine Turnpike Authority
7
Management Discussion and Analysis, continued inspection states that the Maine Turnpike has been maintained in generally good condition and presents a favorable appearance, which is the same assessment the Authority received in 2018.
Long-term Debt
The Authority has outstanding bonds payable of $453,690,000 and $26,350,000 for revenue and subordinated bonds, excluding unamortized bond discounts and premiums. Please see Note 6 of the financial statements for the annual principal payment requirements on revenue and subordinated bonds as of December 31, 2019.
The Authority has a bond cap, set by the Legislature, on the amount of revenue bonds that can be outstanding at any given time. As of December 31, 2019, the Maine Turnpike Authority has a bond cap of $486 million for general turnpike projects and a $150 million bond cap for the Gorham connector project. As of December 31, 2019, outstanding bonds were $453,690,000, leaving $32,310,000 available under the cap for general turnpike projects. There have been no bonds issued under the Gorham connector cap.
In February 2020, the Legislature approved a $114 million increase to the general turnpike revenue bond cap to be available to pay for interchange improvements and the Portland area mainline widening. The new bond cap is $600 million. The Gorham connector bond cap remains unchanged at $150 million.
The Authority’s current bond ratings are as follows:
Fitch AA- Moody’s Aa3 Standard & Poor’s AA-
In 2019, Fitch, Standard & Poor’s and Moody’s reviewed the Authority’s finances and each agency affirmed the Authority’s ratings and gave a stable outlook.
Debt Service Reserve Fund
The general bond resolution requires the Authority to fund the Debt Service Reserve Requirement with cash and investments or with a surety policy or letter of credit.
Currently, the Debt Service Reserve requirement is approximately $19,976,858, which is fifty percent of maximum annual debt service (MADS). The debt service reserve requirement is fully funded with cash and qualified surety bonds. The Authority has approximately $6,650,000 of surety bonds in place, however, with the exception of Assured Guaranty (FSA), the sureties are rated lower than the Authority’s bond ratings and therefore do not count towards the Debt Service Reserve requirement.
In 2014 FSA, now Assured Guaranty, was upgraded by Moody’s and currently meets the debt service reserve fund requirements towards one half of MADS. The value of the Assured Guaranty sureties is approximately $1,780,000.
Please see Note 7 of the Financial Statements for more discussion of the Debt Service Reserve Fund.
2019 Financial Statements – The Maine Turnpike Authority
8
Management Discussion and Analysis, continued
Budgetary Controls
Each year the Maine Turnpike Authority presents their Operating, Reserve Maintenance and Capital budgets to the Transportation Committee and it is ultimately voted on by the State of Maine Legislature. The Authority has made several decisions which have resulted in significant reductions to preceding budgets that have been received very positively by the Committee and the Legislature. More importantly, actual expenses have begun to prove that these decisions have positively affected the Authority’s outcome without negatively impacting the mission of the Authority which is to provide a safe and efficient highway operated at a reasonable cost.
Requests for Information
This financial report is designed to provide a general overview of the Authority’s finances for all those with an interest in its finances. Questions concerning any of the information provided in this report or request for additional financial information should be addressed to the Chief Financial Officer, Maine Turnpike Authority, 2360 Congress Street, Portland, ME 04102; or email your questions to [email protected].
2019 Financial Statements – The Maine Turnpike Authority
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STATEMENTS OF NET POSITION
December 31, ASSETS AND DEFERRED OUTFLOWS OF RESOURCES 2019 2018
Current Assets: Cash and Equivalents $ 23,390,222 $ 24,749,563 Restricted Cash and Equivalents to meet current restricted liabilities 91,486,122 107,609,105 Restricted Investments - Short Term 80,487,683 116,998,064 Accounts Receivable and Accrued Interest Receivable 5,458,083 5,530,280 Inventory 1,133,827 1,520,142 Other - Current Assets 1,749,622 1,686,178
Total Current Assets 203,705,559 258,093,332
Non-Current Assets: Restricted Assets Cash and Equivalents 58,172,867 57,691,506 Accounts Receivable and Accrued Interest Receivable 341,018 516,575
Total Restricted Assets 58,513,885 58,208,082
Other Assets Prepaid Bond Insurance - Net 232,241 255,837
Total Other Assets 232,241 255,837
Capital Assets not being Depreciated: Land and Infrastructure 549,933,438 526,663,398 Construction in Progress 100,622,258 52,625,748 Capital Assets net of Accumulated Depreciation: Property and Equipment 99,547,480 82,740,157 Total Capital Assets - Net of Accumulated Depreciation 750,103,176 662,029,303
Total Non-Current Assets 808,849,302 720,493,221
TOTAL ASSETS 1,012,554,861 978,586,553
Deferred Outflows of Resources: Deferred Loss on Refunding Bonds 9,238,148 10,171,833 Deferred Pension Outflows 3,102,761 3,075,233 Deferred Other Post Employment Benefit Outflows 7,680,168 288,810 Total Deferred Outflows of Resources 20,021,077 13,535,876
Total Assets and Deferred Outflows of Resources $ 1,032,575,938 $ 992,122,428
See independents auditor’s report. The accompanying notes are an integral part of these financial statements.
2019 Financial Statements – The Maine Turnpike Authority
10
STATEMENTS OF NET POSITION, continued
December 31, LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION 2019 2018
Current Liabilities Payable from Unrestricted Assets: Accounts, Contracts and Retainage Payable $ 4,253,913 $ 4,510,422 Accrued Salary, Vacation and Sick Leave Payable 3,136,340 3,478,434 Unearned Fare Revenue 11,860,792 11,216,932 Unearned Concession Rentals 100,279 346,121 Total Current Liabilities Payable from Unrestricted Assets 19,351,324 19,551,908
Current Liabilities Payable from Restricted Assets: Accounts, Contracts and Retainage Payable 15,301,857 10,000,603 Accrued Salary, Vacation and Sick Leave Payable 382,829 272,355 Bond Interest Payable 10,963,483 11,333,071 Current Portion of Revenue Bonds and Subordinated Debt Payable 16,015,000 14,945,000 Other Current Liabilities 422,340 548,730 Total Current Liabilities Payable from Restricted Assets 43,085,509 37,099,759 Total Current Liabilities 62,436,833 56,651,667
Non-current Liabilities: Long-term Revenue Bonds and Subordinated Debt Payable 508,267,061 529,227,610 Other Post Employment Benefits Liabilities 58,813,492 47,757,062 Other Non-current Liabilities 1,892,878 2,687,945 Net Pension Liability 11,437,656 10,611,572 Total Non-current Liabilities 580,411,087 590,284,189 Total Liabilities 642,847,920 646,935,855
Deferred Inflows of Resources: Deferred Pension Inflows 3,250,089 2,977,882 Deferred Other Post Employment Benefit Inflows 2,647,765 3,658,300 Total Liabilities and Deferred Inflows of Resources 648,745,774 653,572,037
Net Position: Net Investment in Capital Assets 296,413,176 278,823,345 Restricted 141,439,297 108,388,235 Unrestricted (Deficit) (54,022,308) (48,661,189) Total Net Position 383,830,165 338,550,390 Total Liabilities, Deferred Inflows of Resources and Net Position $ 1,032,575,938 $ 992,122,428
See independents auditor’s report. The accompanying notes are an integral part of these financial statements.
2019 Financial Statements – The Maine Turnpike Authority
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STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
For the Years Ended December 31, 2019 2018 REVENUES Operating Revenue: Net Fare Revenue $ 139,963,970 $ 138,432,432 Concession Rentals 4,753,317 4,887,895 Miscellaneous 2,034,904 1,925,414 Total Operating Revenues 146,752,191 145,245,741 Interest Income Revenue Fund 505,741 373,331 Reserve Maintenance Fund 2,383,259 1,254,813 Improvement Account 832,408 258,077 Interchange Account 244,340 207,272 Maine Department of Transportation Account 29,881 61,853 Total Interest Income 3,995,629 2,155,346 Total Revenues 150,747,820 147,401,087
EXPENSES Operating Expenses: Operations 26,969,730 25,608,813 Maintenance 36,873,598 30,320,354 Administration 2,385,818 2,413,827 Depreciation 10,871,868 9,477,831 Reserve Maintenance - Preservation 12,021,363 17,547,460 Total Operating Expenses 89,122,377 85,368,285 Net Operating Income 61,625,443 62,032,803 Non-Operating Revenue/(Expenses): Investment Income 2,225,990 3,113,515 Gain/(Loss) on Sale and Disposal of Capital Assets 49,227 (76,573) Interest Expense (22,296,553) (22,569,567) Bond Issuance Cost - (1,130,987) Bond Insurance Amortization (23,597) (56,017) Bond Premium/Discount Amortization 4,945,549 5,119,934 Deferred Loss on Refunding Amortization (933,684) (1,087,320) General Reserve Expense (31,889) - MDOT Prepaid Transfer Amortization - (2,370,000) Total Non-Operating Revenue/(Expenses) (16,064,957) (19,057,015) Change in Net Position 45,560,486 42,975,787
Net Position at beginning of year 338,550,390 295,574,604 Equity Transfers - MaineDOT (280,712) - Net Position at end of year $ 383,830,165 $ 338,550,390
See independents auditor’s report. The accompanying notes are an integral part of these financial statements. 2019 Financial Statements – The Maine Turnpike Authority
12
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2019 2018 Operating Activities: Cash Received from Tolls/Customers $ 179,136,134 $ 178,427,694 Cash Payments to Suppliers (78,723,606) (87,163,901) Cash Payments to Employees (26,031,474) (24,317,122) Net Cash Provided by Operating Activities 74,381,054 66,946,671 Capital and Related Financing Activities: Acquisition and Construction of Capital Assets (96,694,293) (39,052,232) Proceeds from Issuance of Revenue Bonds - 172,545,571 Payments for Bond Issuance Expenses - (1,196,657) Interest Paid on Revenue Bonds (21,428,640) (18,195,798) Payment of Principal on Revenue Bonds (13,740,000) (18,270,000) Interest Paid on Subordinated Debt Bonds (1,237,500) (1,332,300) Payment of Principal on Special Obligation Bonds (1,205,000) (2,370,000) Net Cash Provided by (Used in) Capital and Financing Activities (134,305,433) 92,128,584 Investing Activities: Purchase of Investments - (82,682,898) Proceeds from Sales and Maturities of Investments 36,884,880 24,057,485 Interest Received 6,038,536 5,042,854 Net Cash Used in Investing Activities 42,923,416 (53,582,560)
Net Increase (Decrease) in Cash and Equivalents (17,000,962) 105,492,695 Cash and Equivalents at Beginning of Year 190,050,174 84,557,479 Cash and Equivalents at End of Year $ 173,049,211 $ 190,050,174
Cash and Equivalents - Unrestricted $ 23,390,222 $ 24,749,563 Restricted Cash and Equivalents - Current 91,486,122 107,609,105 Restricted Cash and Equivalents - Non-Current 58,172,867 57,691,506 $ 173,049,211 $ 190,050,174
See independents auditor’s report. The accompanying notes are an integral part of these financial statements.
2019 Financial Statements – The Maine Turnpike Authority
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STATEMENTS OF CASH FLOWS, continued
For the Years Ended December 31, 2019 2018 Reconciliation of Net Operating Income to Net Cash Provided by Operating Activities: Income from Operations $ 61,625,443 $ 62,032,803 Adjustments to Reconcile Operating Income to Net Cash provided by Operating Activities: Depreciation 10,871,868 9,477,831 Interest (Income)/Expense Included in Operating Revenue (3,995,629) (2,155,346) Changes in Assets and Liabilities: Accounts Receivable 62,127 (75,787) Prepaid Accounts (63,444) (175,568) Inventory 386,315 (369,145) Accounts, Contracts and Retainage Payable 1,602,677 70,284 OPEB Liability 2,654,537 783,631 Net Pension Liability and Deferred Inflows/Outflows 1,070,763 (4,019,867) Unearned Toll and Concession Revenue 398,017 951,390 Accrued Salary, Vacation and Sick Leave Payable (231,619) 426,445 Net Cash Provided by Operating Activities $ 74,381,054 $ 66,946,671
See independents auditor’s report. The accompanying notes are an integral part of these financial statements.
2019 Financial Statements – The Maine Turnpike Authority
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THE MAINE TURNPIKE AUTHORITY Notes to Financial Statements For the Years Ended December 31, 2019 and 2018
Note 1 – Summary of Organization and Significant Accounting Policies and Procedures
Reporting Entity – The Maine Turnpike Authority (the Authority) is a body corporate and politic created by an act of the Legislature of the State of Maine, Chapter 69 of the Private and Special Laws of 1941 as amended, authorized and empowered to construct, maintain and operate a turnpike at such a location as shall be approved by the State Highway Commission and to issue turnpike revenue bonds of the Authority, payable solely from revenues of the Authority. Under the provisions of the Act, turnpike revenue bonds and interest thereon shall not be deemed debt or liability or a pledge of the faith and credit of the State of Maine.
During 1982, the Legislature of the State of Maine, Chapter 595 of the Public Laws of the State of Maine 1982, authorized an act to amend the Maine Turnpike Authority Statutes. This act states that the Maine Turnpike Authority shall continue in existence until such a time as the Legislature shall provide for termination and all outstanding indebtedness of the Authority shall be repaid or an amount sufficient to repay that indebtedness shall be set aside in trust.
In evaluating the Authority as a reporting entity, management has addressed all potential component units for which the Authority may be financially accountable and, as such, should be included within the Authority’s financial statements. In accordance with Governmental Accounting Standards Board (GASB) Statement No. 14 as amended by GASB Statement No. 61, the Authority is financially accountable if it appoints a voting majority of the organization’s governing board and (1) it is able to impose its will on the organization or (2) there is a potential for the organization to provide specific financial benefits to or impose specific financial burdens on the Authority. Additionally, the Authority is required to consider other organizations for which the nature and significance of their relationship with the Authority are such that exclusion would cause the reporting entity’s financial statements to be misleading. Based on the application of these criteria, there are no other entities that should be included as part of these financial statements.
Under these standards, the Authority is considered to be a component unit of the State of Maine.
Basis of Accounting – The Governmental Accounting Standards Board (GASB) is the standard-setting body for governmental accounting and financial reporting. The GASB periodically updates its codification of the existing Governmental Accounting and Financial Reporting Standards which, along with subsequent GASB pronouncements (standards and interpretations), constitute GAAP for governmental units. GAAP also includes guidance from the American Institute of Certified Public Accountants in the publication entitled, State and Local Governments. The Authority prepares its financial statements on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America for governmental proprietary funds, which are similar to those for private business enterprises. Accordingly, revenues are recorded when earned and expenses are recorded when incurred. Proprietary funds distinguish operating revenues and expenses from non-operating activity. Operating revenues arise from providing goods or services to outside parties for a fee. The intent of the governing body is that the operating costs, including administration and depreciation, of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. Revenues and expenses that are not derived directly from operations are reported as non-operating revenues and expenses.
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 1 – Summary of Organization and Significant Accounting Policies and Procedures, continued
Operating Revenues and Expenses – The Authority’s operating revenues and expenses consist of revenues earned and expenses incurred relating to the operation and maintenance of its System. Operating revenues for fares are recognized as the vehicles pass through the toll system. Prepayments on account are recorded as unearned fare revenue. Concession rental income is recognized based on the terms of the rental agreements. Net fare revenue is net of credit card fees of $2,604,773 and $2,492,440 for 2019 and 2018, respectively.
Non-operating revenues – Non-operating revenues consists of the amortization of bond premiums and discounts realized on previously issued debt, investment income earned and non-operating accounts and gains or loss from the sale of capital assets.
Interest Income on Operating Accounts – Interest income generated from on-going operations is included in operating revenue.
Cash and Equivalents – For purposes of the statements of cash flow, demand deposit accounts with commercial banks, and cash invested in short-term investments with original maturities of three months or less from the date of acquisition are considered cash equivalents.
Investments – Investments are carried at fair value. Accrued interest paid upon the purchase of investments is recognized as interest income in the period it is earned.
Fair Value Measurements - Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Authority uses various methods, including market, income and cost approaches. Based on these approaches, the Authority often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Authority utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Authority is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:
• Level 1 – Quoted prices for identical assets and liabilities traded in active exchange markets, such as the New York Stock Exchange.
• Level 2 – Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data.
• Level 3 – Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 1 – Summary of Organization and Significant Accounting Policies and Procedures, continued
In determining the appropriate levels, the Authority performs a detailed analysis of the assets and liabilities. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.
Accounts Receivable – Accounts receivable consists primarily of toll revenues due from commercial accounts and other tolling agencies. The Authority obtains surety bonds to cover commercial accounts receivable. Management believes that all accounts receivable as of December 31, 2019 and 2018 are fully collectable. Therefore, no allowance for doubtful accounts was recorded.
Inventory – Inventory consists of EZ Pass transponders, salt and fuel for MTA vehicles. The EZ Pass transponders will be sold to customers and are valued using the First-In First-Out (FIFO) method. Salt and vehicle fuel, to be used in operations, are valued using a weighted average method. Inventory items are carried at the lower of cost or market.
Other Assets – Expenses that benefit more than one reporting period are charged to Prepaid Expenses and expensed over its service period. Examples include insurance premiums, software site licenses and service contracts.
Restricted Assets – Restricted assets of the Authority represent bond proceeds designated for construction, and other monies required to be restricted for debt service, operations, maintenance, renewal and replacement.
Capital Assets – All capital assets are recorded on the balance sheet at historical cost. Capital assets are included in one of the following categories: Infrastructure; Land and Land Improvements; Buildings; Vehicles; Toll System; Computer and Other Equipment; Intangible Assets; and Construction in Progress.
Costs to acquire additional capital assets, and to replace existing assets or otherwise prolong their useful lives, are capitalized for toll equipment, buildings, toll facilities, other related costs and furniture and equipment. The Authority has elected to use the modified approach to infrastructure reporting. This means that, in lieu of reporting depreciation on infrastructure, the Authority reports as preservation expense the costs associated with maintaining the existing road in good condition. Infrastructure assets include roads, bridges, interchanges, tunnels, right of way, drainage, guardrails, and lighting systems associated with the road.
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 1 – Summary of Organization and Significant Accounting Policies and Procedures, continued
Depreciation of toll equipment, buildings, toll facilities, other related costs, signs, software and furniture and equipment is computed using the straight-line method, using the full-month convention, over the estimated useful lives of the assets as follows:
Buildings 30 – 50 years Building Improvements 15 – 20 years Land Improvements (exhaustible) 15 years Toll Equipment 5 – 10 years Furniture and Fixtures 5 – 15 years Software 3 – 10 years Computers, Printers and IT Equipment 3 – 5 years Other Equipment (incl. Vehicles) 5 – 20 years
The following minimum capitalization thresholds for capitalizing fixed assets are as follows:
Land and Improvements (non-exhaustible) $ 1 Land Improvements (exhaustible) $ 5,000 Buildings and Improvements $ 25,000 Machinery/Equipment/Vehicles $ 5,000 Computers, Printers & IT Equipment $ 5,000 Software $ 10,000 Infrastructure $ 100,000
Under the modified approach, infrastructure assets are considered to be “indefinite lived” assets; that is, the assets themselves will last indefinitely and are, therefore, not depreciated. Costs related to maintenance, renewal and replacement for these assets are not capitalized, but instead are considered to be period costs and are included in preservation expense.
Construction in Progress represents costs incurred by the Authority for in-process activities designed to expand, replace, or extend the lives of existing property and equipment.
Retainage Payable – Retainage payable represents amounts billed to the Authority by contractors for which payment is not due pursuant to retained percentage provisions in construction contracts until substantial completion of performance by contractor and acceptance by the Authority.
Accrued Vacation and Sick Leave Payable – Accrued vacation and sick leave payable includes accumulated vacation pay and vested sick pay.
Accrued Salaries Payable – Accrued salaries payable includes salary and wage expense incurred at the end of the period but not paid until the following period, which amounted to $281,987 and $699,789 for the years ended December 31, 2019 and 2018, respectively, and are included on the statement of net position under Accrued Salary, Vacation and Sick Leave Payable.
Unearned Toll Revenue – The Authority offers a prepaid balance program which allows patrons to carry a balance on their account for future toll expenses. This balance is reduced by each trip through the tolls and can be increased
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 1 – Summary of Organization and Significant Accounting Policies and Procedures, continued by the patron at any time but also includes a minimum balance set by the Authority. The Authority offers a Volume Discount Plan for passenger vehicles for which revenue is earned based on the vehicle passing through the toll system. Any amount remaining in the patrons account is accounted for as unearned revenue.
Bond Premium, Discount and Issuance Costs – Bond premiums and discounts associated with the issuance of bonds are amortized using the effective interest rate method over the life of the bonds. Bond issuance costs such as bond insurance are amortized using the straight-line method over the life of the bonds. Other bond issuance costs, such as consulting, legal and underwriter fees are expensed in the period they are incurred.
Refunded Bonds – The Authority defeased certain bonds in 2004, 2008, 2012, 2014 and 2015 by placing cash received from the advanced refunding into an irrevocable escrow account to provide for all future debt service payments on the defeased bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the Authority’s balance sheets.
Deferred Outflows of Resources - In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that apples to a future period(s) and so will not be recognized as an outflow of resources (expense) until then. The Authority has two items that qualifies for reporting in this category. The first is a deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. The second deferred charge relates to recognition of the net pension liability and can include: the differences between expected and actual experience, change in assumptions, the net difference between projected and actual earnings on pension plan investments, and changes between the Authority’s contributions and proportionate share of contributions, and also Authority contributions subsequent to the measurement date.
Deferred Inflows of Resources - In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The deferred inflows of resources recognized on the statement of net position and balance sheet relate to the net pension liability, which include the net difference between projected and actual earnings on pension plan investments and changes in proportion and differences between the Authority’s contributions.
Use of Estimates – The preparation of basic financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure for contingent assets and liabilities at the date of the basic financial statements, and reported amounts of the revenues and expenditures/expenses during the fiscal year. Actual results could vary from estimates that were used.
Use of Restricted/Unrestricted Net Position – When an expense is incurred for purposes for which both restricted and unrestricted assets are available, the Authority’s policy is to apply restricted net position first.
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 1 – Summary of Organization and Significant Accounting Policies and Procedures, continued
Recent Accounting Pronouncements – In June 2015, the GASB issued GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefit Plan Other Than Pension Plans (OPEB). This statement improves accounting and financial reporting for OPEB. This statement replaces GASB Statement No. 45 and establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense. The new statement is effective for periods beginning after June 15, 2017, and was implemented during 2018.
In June 2017, the GASB issued GASB 87, Leases. This new standard will provide users of the financial statements a more accurate picture of the assets and the long-term financial obligations of governments that lease. Lessees will recognize a lease liability and an intangible asset representing the lessee’s right to use the leased asset and lessors will recognize a lease receivable and a deferred inflow of resources. The new leasing standard will apply for fiscal years beginning after December 15, 2019.
Note 2 – Deposits and Investments
Deposits
Custodial Credit Risk-Authority Deposits: For deposits, custodial credit risk is the risk that in the event of a bank failure, the Authority’s deposits may not be returned to it. As of December 31, 2019, the Authority reported deposits of $126,488 with bank balances of $763,631. The entire balance of $763,631 was covered by the F.D.I.C. As of December 31, 2018, the Authority reported deposits of $6,402,003 with bank balances of $6,483,251. The entire balance of $6,483,251 was covered by the F.D.I.C.
Investments
At December 31, 2019, the Authority had the following investments and maturities:
Fair Value Less Than 1 Year 1-5 Years More Than 5 Years
Money Market $ 80,487,879 $ 80,487,879 $ - $ - U.S. Government Securities 6,759,256 6,759,256 - -
Federated Treasury Obligation Fund 166,163,271 166,163,271 - -
Total Investments $ 253,410,406 $ 253,410,406 $ - $ -
At December 31, 2018, the Authority had the following investments and maturities:
Fair Value Less Than 1 Year 1-5 Years More Than 5 Years
Money Market $ 112,769,800 $ 112,769,800 $ - $ -
U.S. Government Securities 7,117,045 7,117,045 - - U.S. Government Obligations 4,228,264 4,228,264 - - Federated Treasury Obligation Fund 176,531,126 176,531,126 - - Total Investments $ 300,646,235 $ 300,646,235 $ - $ -
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 2 – Deposits and Investments, continued
Deposits and investments are as follows: 2019 2018 Deposits $ 126,488 $ 6,402,003 Investment 253,410,406 300,646,235 Total Deposits and Investments $ 253,536,894 $ 307,048,238
Deposits and investments have been reported as follows in the financial statements:
2019 2018
Cash and Equivalents $ 23,390,222 $ 24,749,563
Current Restricted Cash and Equivalents 91,486,122 107,609,105
Noncurrent Restricted Cash and Equivalents 58,172,867 57,691,506 Current Restricted Investments - Short Term 80,487,683 116,998,064 Total Deposits and Investments $ 253,536,894 $ 307,048,238
Fair Value
Fair Values of Assets measured on a recurring basis at December 31 are as follows:
Total Level 1 Level 2 Level 3 December 31, 2019 Cash Equivalents 126,488 126,488 - -
Money Market 80,487,879 80,487,879 - -
U.S. Government Securities 6,759,256 6,759,256 - - U.S. Government Obligations - - - - Federated Treasury Obligations Fund 166,163,271 - 166,163,271 - $ 253,536,894 $ 87,373,623 $ 166,163,271 -$
Total Level 1 Level 2 Level 3 December 31, 2018
Cash Equivalents 6,402,003 6,402,003 - -
Money Market 112,769,800 112,769,800 - - U.S. Government Securities 7,117,045 7,117,045 - - U.S. Government Obligations 4,228,264 4,228,264 - - Federated Treasury Obligations Fund 176,531,126 - 176,531,126 - $ 307,048,238 $ 130,517,112 $ 176,531,126 -$
There were no assets classified Level 3 as of December 31, 2019 or December 31, 2018.
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 2 – Deposits and Investments, continued
Interest Rate Risk: The Authority’s policy for investment rate risk is as follows: Portfolio maturities will provide for stability of income and reasonable liquidity; liquidity will be assured through practices ensuring that the next disbursement date is covered through maturities to be staggered to avoid undue concentration in a specific maturity sector.
Maturities selected will provide investments or marketable securities which can be sold to raise cash in a day’s notice without loss of principal; and, risks of market price volatility will be controlled through maturity diversification such that aggregate price losses on instruments with maturities exceeding one year shall not be greater than coupon interest on investment income received from the balance of the portfolio.
Credit Risk: Maine statutes authorize the Authority to invest in obligations of the U.S. Treasury and U.S. agencies and repurchase agreements. The Authority does not have a formal policy related to credit rate risk. The Federal Treasury Obligations Fund is a money market fund and is rated AAAm by Standard & Poors.
Custodial credit risk: investments – For investments, this is the risk that in the event of failure of the counterparty, the Authority will not be able to recover the value of its investments or collateral securities that are in possession of an outside party. The Authority is authorized to invest in: obligations of the U.S. government and its agencies provided they are full faith and credit obligations fully insured or collateralized certificates of deposit at commercial banks and savings and loan associations, repurchase agreements collateralized by U.S. Treasury or Agency securities; and money market mutual funds whose portfolios consist of government securities.
The Authority’s investment policy is to attain a market rate of return considered reasonable under generally accepted market principles throughout budgetary and economic cycles while preserving and protecting capital in the overall portfolio thus ensuring prudent use of public funds and preservation of the public’s trust. The standard of prudence to be used by investment officials shall be the “prudent investor” standard and shall be applied in the context of managing the overall portfolio. All security transactions, including collateral for repurchase agreements, entered into by the MTA shall be conducted on a “delivery vs. payment” basis. Securities will be held by a third party custodian, or Trust Department designated by the Executive Director, CFO, or Director of Finance and evidenced by safekeeping receipts.
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 3 – Capital Assets
A Summary of changes to capital assets for the year ended December 31, 2019 is as follows: Balance Balance 12/31/2018 Additions Transfers Disposals 12/31/2019 Capitalized Assets Not Being Depreciated (cost) Land $ 50,836,293 943,958 3,385,096 - $ 55,165,346 Infrastructure 475,827,106 - 18,940,986 - 494,768,092
Construction in Progress 52,625,747 91,638,353 (43,641,843) - 100,622,258
Total Capital Assets Not Being Depreciated 579,289,146 92,582,311 (21,315,761) - 650,555,696
Capitalized Assets Being Depreciated (cost)
Land Improvements (exhaustible) 19,646,924 - 2,226,210 - 21,873,134 Buildings 69,042,080 - 6,693,777 (300,547) 75,435,309 Machinery and Equipment 89,073,856 6,537,834 12,395,774 (2,289,903) 105,717,562 Total Capital Assets Being Depreciated 177,762,860 6,537,834 21,315,761 (2,590,450) 203,026,006
Less Accumulated Depreciation for: Land Improvements (exhaustible) (9,269,176) (1,001,423) - - (10,270,599) Buildings (31,469,968) (2,328,297) - 219,566 (33,578,698) Machinery and Equipment (54,283,560) (7,542,148) - 2,196,480 (59,629,228) Total Accumulated Depreciation (95,022,704) (10,871,868) - 2,416,046 (103,478,525) Total Capital Assets Being Depreciated, net 82,740,156 (4,334,034) 21,315,761 (174,404) 99,547,480 Total Capital Assets $ 662,029,303 88,248,277 - (174,404) $ 750,103,176
A Summary of changes to capital assets for the year ended December 31, 2018 is as follows:
Balance Balance
12/31/2017 Additions Transfers Disposals 12/31/2018
Capitalized Assets Not Being Depreciated (cost)
Land $ 49,776,554 219,000 840,739 - $ 50,836,293
Infrastructure 471,149,831 - 4,742,592 (65,317) 475,827,106 Construction in Progress 23,839,887 39,269,879 (10,484,019) - 52,625,747 Total Capital Assets Not Being Depreciated 544,766,272 39,488,879 (4,900,688) (65,317) 579,289,146
Capitalized Assets Being Depreciated (cost) Land Improvements (exhaustible) 17,274,513 - 2,372,411 - 19,646,924 Buildings 69,043,007 - 36,037 (36,964) 69,042,080 Machinery and Equipment 85,319,190 2,783,789 2,492,240 (1,521,363) 89,073,856 Total Capital Assets Being Depreciated 171,636,710 2,783,789 4,900,688 (1,558,327) 177,762,860
Less Accumulated Depreciation for: Land Improvements (exhaustible) (8,475,041) (794,135) - - (9,269,176) Buildings (29,221,198) (2,275,774) - 27,004 (31,469,968) Machinery and Equipment (49,195,229) (6,407,923) - 1,319,592 (54,283,560) Total Accumulated Depreciation (86,891,468) (9,477,832) - 1,346,596 (95,022,704) Total Capital Assets Being Depreciated, net 84,745,242 (6,694,043) 4,900,688 (211,731) 82,740,156 Total Capital Assets 629,511,514 32,794,836 - (277,048) $ 662,029,303
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 4 – Letter of Credit
The Authority has a $35 million letter of credit with Bangor Savings Bank which expires on December 31, 2020. It is secured under the General Resolution solely by the Authority’s Revenues (as defined therein) on a subordinated basis to the Authority’s outstanding bonds and additional bonds to be issued on a senior basis, all in accordance with the Resolution. There was no outstanding balance on the letter of credit as of December 31, 2019 and 2018.
Note 5 – Net Position
Net position represents the difference between assets, deferred outflows of resources, liabilities and deferred inflows of resources. Net investment in capital assets, consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of bonds and adding back any unspent proceeds. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislations or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. The Authority’s net investment in capital assets was calculated as follows:
Years Ended December 31, 2019 2018 Capital Assets $ 853,581,702 $ 757,052,007
Unspent Bond Proceeds $ - 84,224,042 Accumulated Depreciation $ (103,478,525) (95,022,704) Bonds Payable $ (453,690,000) (467,430,000) Total Net Investment In Capital Assets $ 296,413,176 $ 278,823,345
Note 6 – Long-term Debt
Revenue Bonds Payable
The Authority issues revenue bonds from time to time for the purpose of financing capital improvements and new projects. As of December 31, 2019, the Authority had the following outstanding bonds:
• $115,050,000 of Series 2004 Revenue Bonds, issued in October 2004, to pay a portion of the costs of various turnpike projects and to advance refund a portion of the principal amount of the Series 1994, 1997 and 2000 bonds.
• $68,990,000 of Series 2012A Revenue Bonds, issued in March 2012, to pay a portion of the costs of various turnpike projects.
• $84,240,000 of Series 2012B Revenue Refunding Bonds. The proceeds from the bonds were used to advance refund all of the Series 2003 Bonds maturing in the years 2014 through 2033, and a portion of the Series 2004 Bonds maturing in the years 2022 through 2030, in the outstanding principal amount of $87,055,000.
• $39,715,000 of Series 2014 Revenue Refunding Bonds, issued in July 2014. The proceeds from the bonds were used to advance refund a portion of principal amounts of the Series 2004 maturing in the years 2015 through 2020 and Series 2007 maturing in the years 2018 through 2024, in the outstanding principal amount of $43,765,000.
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 6 – Long-term Debt, continued
Revenue Bonds Payable, continued
• $144,875,000 of Series 2015 Revenue Refunding Bonds, issued in April 2015. The proceeds from the bonds were used to refund the principal amounts of the Series 2005 Bonds maturing in the years 2016 through 2030; Series 2007 Bonds maturing in the years 2025 through 2035; and Series 2009 Bonds maturing 2020 through 2038
• $150,000,000 of Series 2018 Revenue Refunding Bonds, issued in February 2018, to pay a portion of the costs of various turnpike projects.
Interest on all bonds is payable semi-annually on January 1st and July 1st of each year. The bonds will mature on July 1st in the years and principal amounts noted below:
Issue Amount Issued Maturity Date Interest Rate Balance 12/31/2019 Series 2004 $ 115,050,000 7/1/2005 - 2030 3.00-5.25 % $ 6,590,000 Series 2012 (A & B) 153,230,000 7/1/2014 - 2042 2.00-5.00 % 140,075,000 Series 2014 39,715,000 7/1/2015 - 2024 2.00-5.00 % 12,150,000 Series 2015 144,875,000 7/1/2015 - 2038 2.00-5.00 % 144,875,000 Series 2018 150,000,000 7/1/2018 - 2047 4.00-5.00 % 150,000,000 Total Revenue Bonds Payable $ 453,690,000
Requirements for the repayment of the outstanding revenue bonds are as follows:
Total debt Year Ending Principal Interest service
2020 14,750,000 20,749,715 35,499,715 2021 16,020,000 20,057,640 36,077,640 2022 17,050,000 19,281,890 36,331,890
2023 17,910,000 18,429,390 36,339,390 2024 22,265,000 17,533,890 39,798,890 2025 - 2029 128,145,000 71,591,980 199,736,980 2030 - 3034 89,230,000 46,046,605 135,276,605 2035 - 2039 67,620,000 27,915,550 95,535,550 2040 - 2044 52,040,000 14,078,800 66,118,800 2045 - 2047 28,660,000 2,912,750 31,572,750
Totals $ 453,690,000 $ 258,598,210 $ 712,288,210
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 6 – Long-term Debt, continued
Revenue Bonds Payable, continued
A summary of changes in revenue bonds is as follows:
Issue 12/31/2018 Additions Reductions 12/31/2019
Series 2004 $ 9,640,000 -$ (3,050,000) $ 6,590,000
Series 2009 1,320,000 - (1,320,000) $ - Series 2012 143,620,000 - (3,545,000) $ 140,075,000 Series 2014 17,975,000 (5,825,000) $ 12,150,000 Series 2015 144,875,000 - - $ 144,875,000 Series 2018 150,000,000 - - $ 150,000,000
Totals $ 467,430,000 -$ $ (13,740,000) $ 453,690,000
Special Obligation Bonds Payable
• $27,555,000 of Series 2014 Special Obligation Bonds, issued in July 2014, to purchase a section of Interstate 95 in Kittery extending approximately 1.9 miles from the current southern end of the Turnpike to the abutment of the bridge over the Piscataqua River at the New Hampshire Border. This Kittery segment of the Interstate was maintained by the Authority under contract with Maine DOT and the Authority was reimbursed for the costs associated with upkeep of this section of the Interstate.
Issue Amount Issued Maturity Date Interest Rate Balance 12/31/2019
Series 2014 27,555,000 7/1/2019 - 2034 3.00-5.00 % 26,350,000
Total Special Obligation Bonds Payable $ 26,350,000
2019 Financial Statements – The Maine Turnpike Authority
26
Notes to Financial Statements, continued
Note 6 – Long-term Debt, continued
Special Obligation Bonds Payable, continued
Requirements for the repayment of the outstanding special obligation bonds are as follows:
Total Debt Year Ending Principal Interest Service
2020 1,265,000 1,177,250 2,442,250 2021 1,330,000 1,114,000 2,444,000
2022 1,385,000 1,060,800 2,445,800 2023 1,450,000 991,550 2,441,550 2024 1,525,000 919,050 2,444,050 2025 - 2029 8,705,000 3,510,650 12,215,650 2030 - 2034 10,690,000 1,522,650 12,212,650
Totals $ 26,350,000 $ 10,295,950 $ 36,645,950
A summary of changes in special obligation bonds is as follows:
Issue 12/31/2018 Additions Reductions 12/31/2019
Series 2014 $ 27,555,000 -$ $ (1,205,000) $ 26,350,000
Totals $ 27,555,000 -$ $ (1,205,000) $ 26,350,000
Changes in Revenue and Special Obligation long-term liability for the year ended December 31, 2019, were as follows:
Due within Bond Type 12/31/2018 Additions Reductions 12/31/2019 one year
Revenue Bonds $ 467,430,000 $ - $ (13,740,000) $ 453,690,000 $ 14,750,000 Special Obligation Bonds 27,555,000 - (1,205,000) 26,350,000 1,265,000 Subtotal 494,985,000 - (14,945,000) 480,040,000 16,015,000
Adjustment for Premium / Discounts 49,187,608 - (4,945,547) 44,242,061 - Total $ 544,172,608 $ - $ (19,890,547) $ 524,282,061 $ 16,015,000
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 6 – Long-term Debt, continued
Changes in Revenue and Special Obligation long-term liability for the year ended December 31, 2018, were as follows:
Due within Bond Type 12/31/2017 Additions Reductions 12/31/2018 one year
Revenue Bonds $ 335,700,000 150,000,000 $ (18,270,000) $ 467,430,000 $ 13,740,000 Special Obligation Bonds 29,925,000 - (2,370,000) 27,555,000 1,205,000
Subtotal 365,625,000 150,000,000 (20,640,000) 494,985,000 14,945,000
Adjustment for Premium / Discounts 31,029,682 23,277,861 (5,119,934) 49,187,608 - Total $ 396,654,682 $ 173,277,861 $ (25,759,934) $ 544,172,608 $ 14,945,000
Note 7 – Debt Service Reserve Fund
The general bond resolution requires the Authority to fund the Debt Service Reserve Requirement with cash and investments or with a surety policy or letter of credit. In order to satisfy this requirement, the Authority acquired surety policies issued by Financial Security Assurance, Inc (FSA) and AMBAC Assurance Corporation. The surety policies cover various series and terminate on various dates in the future. A summary of the surety policies purchased is as follows:
Debt Service Reserve Fund Surety Policy Termination Maximum Provider Series Availability Date Amount
Assured Guarantee/FSA 2004 July 1, 2021 $ 1,781,929 Ambac All Turnpike Revenue Bonds July 1, 2030 $ 4,871,359
Each of the providers of the Debt Service Reserve Fund surety policies was rated Aaa by Moody’s and AAA by Standard & Poor’s (S&P) at the time of issuance of its respective policy. However, Ambac and FSA had been downgraded significantly as a result of their exposure to the 2008 sub-prime mortgage risk and did not maintain ratings by Moody’s and S&P at least equal to the ratings on the Authority’s outstanding revenue bonds.
Accordingly, the policy from Ambac, while still in effect, no longer qualify under the general bond resolution to meet the Debt Service Reserve Fund requirement. In 2017 FSA, now Assured Guaranty, was upgraded by Moody’s and currently meets the debt service reserve fund requirements towards one half of MADS.
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 7 – Debt Service Reserve Fund, continued
Currently, the Debt Service Reserve requirement is $19,976,858, which is one half of maximum annual debt service (MADS). The debt service reserve fund is currently funded with a combination of cash and FSA/Assured Guaranty sureties.
Note 8 – Maine Public Employees Retirement System (MainePERS) – Consolidated Retirement Pension Plan
Plan Descriptions
The Authority contributes to the Maine Public Employees Retirement System, as part of the PLD Consolidated Plan (the Plan) which is a cost sharing multiple employer defined benefit pension plan. The Plan was established as the administrator of a public employee retirement system under the Laws of the State of Maine. The PLD Plan covers 307 participating employers. The Authority’s full-time and permanent part-time employees are eligible to participate in the Plan.
Benefit terms are established by Maine statute, in the case of the PLD Consolidated Plan, an advisory group, also established by statute, reviews the terms of the Plan and periodically makes recommendations to the legislature to amend them. The Plan’s retirement programs provide defined retirement benefits based on members' average final compensation and service credit earned as of retirement. Vesting (i.e., eligibility for benefits upon reaching qualification) occurs upon the earning of five years of service credit (effective October 1, 1999, the prior ten year requirement was reduced by legislative action to five years). In some cases, vesting occurs on the earning of one year of service credit immediately preceding retirement at or after normal retirement age. For PLD Plan members, normal retirement age is 60 for members hired before July 1, 2014. Normal retirement age is 65 for members hired on or after July 1, 2014. The monthly benefit of members who retire before normal retirement age by virtue of having at least 25 years of service credit is reduced by a statutorily prescribed factor for each year of age that a member is below her/his normal retirement age at retirement. The Plan also provides disability and death benefits which are established by statute for State employee members and by contract with other participating employers under applicable statutory provisions.
Upon termination of membership, members' accumulated employee contributions are refundable with interest, credited in accordance with statute. Withdrawal of accumulated contributions results in forfeiture of all benefits and membership rights. The annual rate of interest credited to members' accounts is set by the Plan's Board of Trustees and is currently 2.69%.
For the years ended December 31, 2019 and 2018, the Authority's total payroll for all employees was $25,467,152 and $24,361,903, respectively and total covered payroll was $23,673,818 and $22,811,303, respectively for the PLD Plan. Covered payroll refers to all compensation paid by the Authority to active employees covered by the Plan.
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 8 – Maine Public Employees Retirement System (MainePERS) – Consolidated Retirement Pension Plan, continued
Contributions
The contribution requirements of the PLD Plan members are defined by law or the Plan's Board. Employees of the Authority are required to contribute 7.35% or 8.10% of covered compensation to the PLD Plan, depending on the date they were hired. The contributions are deducted from the employee’s wages or salary and remitted by the Authority to the Plan on a monthly basis. Employer contribution rates are determined through actuarial valuations. The Authority's required contribution rate for the years ended December 31, 2019 and 2018, was 10.0% of annual payroll, actuarially determined as an amount that, when combined with employee contributions, is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The Authority’s contributions to the Plan for the years ended December 31, 2019 and 2018 were $2,545,495 and $2,391,982, respectively.
Pension Liabilities, Pension Expense, Deferred Outflows of Resources, and Deferred Inflows of Resources Related to Pensions
At December 31, 2019 and 2018, the Authority reported a liability of $11,437,656 and $10,611,572, respectively for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2019 and June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by actuarial valuations as of these dates. The Authority’s proportion of the net pension liability was based on a projection of the Authority's long-term share of contributions to the pension plan relative to the projected contributions of all participating entities, actuarially determined. At June 30, 2019, the Authority's proportion was 3.74%, which was a decrease of 0.140% from its proportion measured as of June 30, 2018. At June 30, 2018, the Authority’s proportion was 3.88%, which was a decrease of 0.050% from its proportion measured as of June 30, 2017.
For the years ended December 31, 2019 and 2018, the Authority recognized pension expense of $3,432,181 and ($1,819,175), respectively. At December 31, 2019 and 2018, the Authority reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
2019 Financial Statements – The Maine Turnpike Authority
30
Notes to Financial Statements, continued
Note 8 – Maine Public Employees Retirement System (MainePERS) – Consolidated Retirement Pension Plan, continued
December 31, 2019
Deferred Deferred Outflows of Inflows of
Resources Resources
Differences between expected and actual results $ 1,354,255 $ - Changes of assumptions 579,242 - Net difference between projected and actual earnings on Plan investments - 2,864,850 Changes in proportion and differences between contributions and proportionate share of contributions - 385,239 Contributions subsequent to the measurement 1,169,264 - Total $ 3,102,761 $ 3,250,089
December 31, 2018
Deferred Deferred
Outflows of Inflows of Resources Resources
Differences between expected and actual results $ 33,224 $ 116,551 Changes of assumptions 1,693,679 - Net difference between projected and actual earnings on Plan investments - 2,562,272 Changes in proportion and differences between contributions and proportionate share of contributions 251,482 299,059 Contributions subsequent to the measurement 1,096,848 -
Total 3,075,233$ $ 2,977,882
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 8 – Maine Public Employees Retirement System (MainePERS) – Consolidated Retirement Pension Plan, continued
The $1,169,264 of deferred outflows of resources as of December 31, 2019, resulting from the Authority’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending December 31, 2020. The $1,096,848 of deferred outflows of resources as of December 31, 2018, resulting from the Authority’s contribution subsequent to the measurement date were recognized as a reduction of the net position liability in the year ended December 31, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources will be netted and recognized in pension expense, (addition or (reduction) to expense) as follows:
Years ending December 31,
2020 $ 320,022 2021 (1,338,948) 2022 (295,850) 2023 (1,816)
Total $ (1,316,592)
Actuarial Assumptions
The total pension liability in the June 30, 2019 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:
Inflation PLD Plan 2.75%, per annum
Salary increases PLD Plan 2.75%-9.0%, per year
Investment rate of return PLD Plan 6.75%, per annum, compounded annually
Mortality rates were based on the RP-2014 Total Dataset Healthy Annuitant Mortality Table.
The actuarial assumptions used in the June 30, 2019 and June 30, 2018 valuations were based on the results of actuarial experience studies for the periods of June 30, 2012 to June 30, 2015.
The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 8 – Maine Public Employees Retirement System (MainePERS) – Consolidated Retirement Pension Plan, continued
Actuarial Assumptions - Continued Target Long-term Allocation Expected Real Asset Class % Rate of Return
Public Equities 30.0% 6.0% U.S. Government 7.5% 2.3% Private Equity 15.0% 7.6% Real Assets: Real Estate 10.0% 5.2% Infrastructure 10.0% 5.3% Natural Resources 5.0% 5.0% Traditional Credit 7.5% 3.0% Alternative Credit 5.0% 4.2% Diversifiers 10.0% 5.9%
Total 100.0%
Discount Rate
The discount rate used to measure the total pension liability was 6.75% for the PLD Plan. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that contributions from employers will be made at contractually required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on Plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate
The following presents the Authority’s proportionate share of the net pension liability calculated using the discount rate of 6.75%, as well as what the Authority’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (5.75%) or 1-percentage-point higher (7.75%) than the current rate: Authority's
proportionate Discount share of net Rate pension liability
1% decrease 5.750% $ 26,054,245 Current discount rate 6.750% 11,437,656 1% increase 7.750% (2,234,763)
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 8 – Maine Public Employees Retirement System (MainePERS) – Consolidated Retirement Pension Plan, continued
Plan Fiduciary Net Position
Detailed information about the Plan’s fiduciary net position is available in the separately issued Maine Public Employees Retirement System financial report.
Note 9 – Operating Lease
In 2006, the Authority entered into lease agreements with HMS Host and CN Brown to operate its five service plazas on the Turnpike. The Authority entered into the arrangements as a means to provide services to users of the Turnpike in a more efficient, cost-effective manner. The terms of the agreements are as follows. The lease agreement with HMS Host is contingent based on sales however also provides a guaranteed minimum rent of $3,317,649 or 85% of the previous year’s rental, whichever is greater. In 2019, the monthly minimum rent payments were $276,471, which brings the annual minimum rent to $3,317,649. In previous years the Authority has waived the minimum rent requirement for HMS Host, and has only required them to pay the contingent rent for any such years. In addition, the Authority received contingent rentals of $383,104 and $575,765 in 2019 and 2018, respectively. The lease agreement with CN Brown provides for contingent rent based on sales. The Authority received $1,071,983 and $1,053,276 in contingent rentals from CN Brown in 2019 and 2018, respectively.
On April 1st, 2018 the Authority entered into a lease agreement with Maine Crafts Association for an area located in the Authority’s West Gardiner Service Plaza. The lease agreement is contingent based on gross sales however also provide a guaranteed minimum rent of $800 per month from April 1, 2018 through March 31, 2023. The Authority received minimum rent of $9,600 from Maine Crafts Association in 2019. There was contingent rent due to the Authority for 2019 based on gross sales from Maine Crafts Association for a total of $1,806.
Contingent rent for HMS host is 20% of sales for years 1-10, 21% of sales for years 11-20 and 22% of sales for years 21-30. Contingent rent for CN Brown is based on the gallons of gasoline and diesel fuel sold at a fuel rent factor of 8 cents per gallon, adjusted upward each year for the Consumer Price Index Change, plus 10% of the sales of other products, plus 5% of the sales of tobacco products and plus 2% of the amount received from the Lottery Commission. The Authority has retained the right to approve the activities of the lessees and also has established limits to the prices that can be charged to customers. Contingent rent for the Maine Crafts Association is 2% on all gross sales exceeding $500,000, and 4% on all gross sales exceeding $600,000.
The lease agreement with HMS Host requires $8 million of capital improvements to be paid for by HMS Host, consisting of leasehold improvements, equipment and furnishings as approved by the Authority. $4 million of these improvements must be incurred prior to December 31, 2017 and the remaining $4 million must be incurred prior to December 31, 2027. If the required amount of $8 million has not been reinvested by HMS Host by the end of the term, then the remainder of the sum shall be rebated to the Authority in cash. Prior to the December 31, 2017 requirement date, HMS Host did invest in excess of $4 million dollars in the facilities.
The leased facilities are reported as capital assets of the Authority with a net book value of $30,909,742 and $26,536,835 as of December 31, 2019 and 2018, respectively.
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 9 – Operating Lease, continued
Future minimum rentals to be received under the HMS Host lease as of December 31, 2019 are as follows:
2020 3,317,649
2021 3,317,649
2022 3,317,649
2023 3,317,649 2024 3,317,649 2025 - 2029 16,588,245 2030 - 2034 16,588,245 2035 - 2037 8,294,123
Total $ 58,058,858
Future minimum rentals to be received under the Maine Crafts Association lease as of December 31, 2019 are as follows: 2020 9,600 2021 9,600 2022 9,600 2023 2,400
Total $ 31,200
Note 10 – POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)
Participating Local District Consolidated Plan – Retiree Group Life Insurance
General Information
Plan description. Employees are provided with OPEB through the Participating Local District Consolidated Plan – Retiree Group Life Insurance (PLD Plan), a cost-sharing multiple-employer defined benefit OPEB plan administered by the Maine Public Employees Retirement System (MainePERS). State of Maine Statutes grants the authority to establish and amend the benefit terms to the MainePERS Board of Trustees. MainePERS issues a publicly available financial report that can be obtained at www.mainepers.org.
Benefits provided. The Group Life Insurance Plan (the Plan) provides basic group life insurance benefits, during retirement, to retirees who participated in the Plan prior to retirement for a minimum of 10 years (the 10-year participation requirement does not apply to recipients of disability retirement benefits). The level of coverage in retirement is initially set to an amount equal to the retirees’ average final compensation. The initial amount of basic life is then subsequently reduced at the rate of 15% per year to the greater of 40% of the initial amount or $2,500.
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 10 – POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB), continued
Contributions. Premium rates are those determined by the System’s Board of Trustees to be actuarially sufficient to pay anticipated claims. PLD employers are required to remit a premium of $0.46 per $1,000 of coverage for covered active employees, a portion of which is to provide a level of coverage in retirement. PLD employers with retired PLD employees continue to remit a premium of $0.46 per $1,000 of coverage per month during the post- employment retired period. Contributions to the OPEB plan from the Authority were $91,853 and $87,138 for the years ended June 30, 2019 and June 30, 2018 actuarial valuations. Employees are not required to contribute to the OPEB plan.
OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB
At December 31, 2019 and 2018, the Authority reported a liability of $1,785,923 and $1,645,671, respectively for its proportionate share of the collective net OPEB liability. The collective net OPEB liability was measured as of June 30, 2019 and June 30, 2018, and the total OPEB liability used to calculate the collective net OPEB liability was determined by an actuarial valuation as of these dates. The Authority’s proportion of the collective net OPEB liability was based on a projection of the Authority’s long-term share of contributions to the OPEB plan relative to the projected contributions of all participating employers, actuarially determined. At June 30, 2019, the Authority’s proportion was 8.3464%, which was a slight increase from its proportion measured as of June 30, 2018 (8.1465%).
For the years ended December 31, 2019 and 2018, the Authority recognized OPEB expense of $100,074 and $70,975, respectively. The Authority’s reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources as of December 31:
2019 2018
Deferred Deferred Deferred Deferred Outflows of Inflows of Outflows of Inflows of Resources Resources Resources Resources Differences Between Expected and Actual Results $ 113,827 $ - $ 138,876 $ - Changes of Assumptions 148,643 233,334 105,502 303,660 Net Difference Between Projected and Actual Earnings on Plan Investments - 79,853 - 86,360 Changes in Proportion and Differences Between Contributions and Proportionate Share of Contributions 37,324 1,932 863 2,576 Contributions Subsequent to the Measurement Date 45,927 - 43,569 -
Total $ 345,721 $ 315,119 $ 288,810 392,596$
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 10 – POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB), continued
Participating Local District Consolidated Plan – Retiree Group Life Insurance, continued
Of the total amount reported as deferred outflows of resources related to OPEB as of December 31, 2019, $45,927 resulting from Authority contributions subsequent to the measurement date will be included as a reduction of the collective net OPEB liability in the year ending December 31, 2020. Of the total amount reported as deferred outflows of resources related to OPEB as of December 31, 2018, $43,569 resulting from Authority contributions subsequent to the measurement date was included as a reduction of the collective net OPEB liability in the year ending December 31, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in the Authority’s OPEB expense, as follows:
Year Ended December 31,
2020 $ (39,127) 2021 (39,127) 2022 (22,423) 2023 65,591 2024 19,761
Total $ (15,325)
Actuarial assumptions. The total OPEB liability was determined by an actuarial valuation as of June 30, 2018, rolled forward to June 30, 2019, using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified:
Inflation 2.75 percent
Salary increases 2.75%-9.00% including inflation
Investment rate of return 6.75% per annum, compounded annually
Healthcare cost trend rates Not applicable to the group life insurance plan
For active members and non-disable retirees of the PLD Plan the RP2014 Total Dataset Healthy Annuitant Mortality Table, for males and females, is used. For all recipients of disability benefits, the RP2014 Total Dataset Disable Annuitant Mortality Table, for males and females, is used. These tables are adjusted by percentages ranging from 104% to 120% based on actuarially determined demographic differences.
The actuarial assumptions used in the June 30, 2019 and June 30, 2018 valuations were based on the results of an actuarial experience study for the period from June 30, 2012 through June 30, 2015.
The long-term expected rate of return on OPEB plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. Those ranges are combined to produce the long- term expected rate of return by weighting the expected future real rates of return by the target asset allocation
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 10 – POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB), continued
Participating Local District Consolidated Plan – Retiree Group Life Insurance, continued percentage and by adding expected inflation. The target allocation and best estimates of arithmetical rates of return for each major asset class are summarized in the following table:
Asset Class Target Long-Term Allocation Expected Real Rate of Return
Public Equities 70% 6.0% Real Estate 5% 5.2% Traditional Credit 15% 3.0%
US Government Securities 10% 2.3%
Total 100%
The discount rate used to measure the total OPEB liability for the PLD Plan was 4.98%, which is a blend of the assumed long-term expected rate of return of 6.75% and a municipal bond index rate of 3.5%, based on the Bond Buyer GO 20-Year Municipal Bond Index as of June 30, 2019. Projections of the Plan’s fiduciary net position indicate that it is not expected to be sufficient to make projected benefit payments for current members beyond 2050. Therefore, the portion of future projected benefit payments after 2050 are discounted at the municipal bond index rate. The projection of cash flows used to determine the discount rate assumed that employer contributions will be made at contractually required rates, actuarially determined.
Sensitivity of the Authority’s proportionate share of the collective net OPEB liability to changes in the discount rate. The following presents the Authority’s proportionate share of the collective net OPEB liability, as well as what the Authority’s proportionate share of the collective net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (3.98%) or 1-percentage-point higher (5.98%) than the current discount rate:
1% Decrease Discount Rate 1% Increase (3.98%) (4.98%) (5.98%)
Authority's Proportionate Share of the Collective Net OPEB Liability $ 2,358,482 $ 1,785,923 $ 1,334,544
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued
Note 10 – POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB), continued
Retiree Group Health Insurance Plan General Information
Plan description. In addition to providing pension benefits, the Authority provides health care benefits for certain retired employees. Eligibility to receive health care benefits follows the same requirements as MainePERS. Eligible retirees receive 100% paid health benefit coverage, Anthem POS plan until age 65 or Medicare Advantage plan at the age of 65. The Authority paid approximately $1,371,480 and $1,417,849 of insurance contributions for approximately 284 retirees for the years ended December 31, 2019 and 2018 respectively. Benefit provisions are established and amended through negotiations between the Authority and the respective unions.
The Authority does not issue a separate financial report for its OPEB as the Authority does not fund an OPEB plan and operates on a pay-as-you-go basis. Employers fund their own benefits. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement 75.
Benefits provided. The Health Plan provides healthcare and life insurance benefits for retirees and their dependents. Authority employees with 1 year of continuous service and health plan participation at retirement are eligible to participate in the Health Plan. Retirees who are not eligible for Medicare retain coverage in the same group health plan as active employees. Retirees must pay for Medicare Part B coverage to be eligible to participate in the State- sponsored employer funded Companion Plan.
Plan Membership. At December 31, 2019, the following were covered by the benefit terms:
Inactive Employees or Beneficiaries Currently Receiving Benefit Payments 284
Active Employees 390
Total 674
Total OPEB Liability
The Authority’s total OPEB liability of $57,027,569 was measured as of December 31, 2019 and $46,111,390 was measured as of December 31, 2018, and was determined by an actuarial valuation as of January 1, 2020.
Actuarial assumptions and other inputs. The total OPEB liability in the January 1, 2020 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified:
General inflation of 2.75% was used along with an aggregate payroll increase of 3.00%. Merit payroll increases, mortality, termination, disability and retirement assumptions relied on the MainePERS December 31, 2012 through
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued Note 10 – POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB), continued
Retiree Group Health Insurance Plan, continued
June 30, 2015's experience study. Mortality rates were based on the RP-2014 Total Dataset Healthy Annuitant Mortality Table for Males or Females. The mortality improvement scale RPEC-2015 was modified to converge to an ultimate rate of 0.85% for ages 20 to 85 grading down to 0.00% for ages 111 to 120 with convergence to the ultimate rate in 2020.
The discount rate was based on high quality AA/Aa or higher bond yields in effect for 20-year, tax exempt general obligation municipal bonds using the Bond Buyer index.
The actuarial assumptions used in the January 1, 2020 valuation were based on the results of an actuarial experience study, conducted by the MainePERS Consolidated Plan for Participating Local Districts, for the period July 1, 2012 through June 30, 2015.
Changes in the Total OPEB Liability
December 31, December 31, 2019 2018
Balance as of beginning of year $ 46,111,390 $ 48,981,486
Changes for the Year:
Service Cost 1,333,533 1,704,318 Interest 1,909,232 1,500,957
Changes in Benefit Terms - - Differences Between Expected and Actual Experience - - Changes in Assumptions of Other Inputs 9,430,003 (4,198,762) Benefit Payments (1,756,589) (1,876,608) Net Changes 10,916,179 (2,870,095) Balance as of end of year $ 57,027,569 $ 46,111,390
Changes in assumptions or other inputs reflect a change in the discount rate from 4.10% in 2018 to 2.74% in 2019.
2019 Financial Statements – The Maine Turnpike Authority
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Notes to Financial Statements, continued Note 10 – POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB), continued
Retiree Group Health Insurance Plan, continued
Sensitivity of the total OPEB liability to changes in the discount rate.
The following table shows how the total OPEB liabilities would change if the discount rate used was one percentage point lower or one percentage point higher than the current rate. The current rate used for the Health Plan is 2.74%.
1% Decrease Discount Rate 1% Increase (1.74%) (2.74%) (3.74%)
Total OPEB Liability $ 65,854,645 $ 57,027,569 $ 49,849,801
Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates.
The following table shows how the total OPEB liabilities would change if the healthcare rate used was one percentage point lower or one percentage point higher than the current rate of 5.75% to 6.50%.
1% Decrease Current Trend 1% Increase (4.75%-5.50%) (5.75%-6.50%) (6.75%-7.50%)
Total OPEB Liability $ 48,924,675 $ 57,027,569 $ 67,171,320
OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB
For the years ended December 31, 2019 and 2018, the Authority recognized OPEB expense of $4,405,263 and $2,272,2017, respectively. At December 31, 2019 and 2018, the Authority reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:
2019 Financial Statements – The Maine Turnpike Authority
41
Notes to Financial Statements, continued
Note 10 – POST EMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB), continued
Retiree Group Health Insurance Plan, continued
December 31, 2019 December 31, 2018
Deferred Deferred Deferred Outflows of Inflows of Outflows of Deferred Inflows Resources Resources Resources of Resources Differences Between Expected and Actual Results $ - $ - $ - $ - Changes of Assumptions 7,334,447 2,332,646 - 3,265,704 Net Difference Between Projected and Actual Earnings on OPEB Plan Investments - - - -
Changes in Proportion and Differences Between Authority Contributions and Proportionate Share of Contributions - - - - Contributions Subsequent to the Measurement Date - - - - Total $ 7,334,447 $ 2,332,646 -$ $ 3,265,704
Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:
Year Ended December 31,
2020 $ 1,162,498 2021 1,162,498 2022 1,629,026 2023 1,047,779
Total $ 5,001,801
Note 11 – Union Contract
In December 2019, the Authority agreed to extend the current contract with its two bargaining units, Supervisors and Employees for one additional year, while the parties negotiate a longer term contract in 2020.
2019 Financial Statements – The Maine Turnpike Authority
42
Notes to Financial Statements, continued
Note 12 – Commitments and Contingencies
The Authority is a defendant in various lawsuits. Although the outcomes of the lawsuits are not presently determinable, it is the belief of the Authority’s legal counsel that any settlement or damages assessed would be covered by insurance, and therefore should not have a material adverse effect on the Authority’s financial condition.
Future commitments on outstanding construction projects for improvements and maintenance totaled approximately $123,287,679 and $101,739,401 as of December 31, 2019 and December 31, 2018, respectively.
Due to changes to enabling legislation in 2011, the Authority is potentially obligated to provide 5% of its annual operating revenues to the Maine Department of Transportation (MaineDOT). The Authority has incurred and expects to continue to incur significant expenses from construction projects that will be of mutual benefit to MaineDOT and accordingly has met its obligation to MaineDOT.
Note 13 – Risk Management
The Authority is exposed to various risks of loss related to theft of, damage to and destruction of assets, errors and omissions and natural disasters for which the Authority is insured through various commercial insurance carriers. As required by the Authority’s contract with its bondholders, the Authority’s consulting engineer certifies each year that insurance limits and coverage adequately protect the properties, interests, and operations of the Authority. Claims expenditure, liabilities and reserves are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated.
The Authority is self-insured for its workers’ compensation liability. The program provides coverage for up to a maximum of $1,000,000 for each workers’ compensation claim and $25,000,000 in the aggregate. In addition, the Authority purchases excess workers’ compensation insurance to limit its financial risk. The Authority is responsible for claims made up to $750,000 per covered claim. Reserves are estimated at one hundred percent of expected expenditures. Settled claims have not exceeded the commercial coverage in any of the past three years.
The following summarizes the claims activity with respect to the Authority’s self-insured workers’ compensation program: 2019 2018
Unpaid Claims as of January 1 $ 3,232,908 $ 2,883,184 Incurred Claims / Claim Resolutions (513,366) 761,679 Total Claim Payments 404,325 411,955
Current Claims Liability 422,340 548,730 Long-term Claims Liability 1,892,878 2,684,178
Total Unpaid Claims Liability $ 2,315,218 $ 3,232,908
2019 Financial Statements – The Maine Turnpike Authority
43
Notes to Financial Statements, continued
NOTE 14 – MaineDOT Equity Transfers
In 2019, a joint agreement was made between the Maine Turnpike Authority, the MaineDOT and NHDOT regarding repairs needed to the Piscataqua River Bridge that connects the states of Maine and New Hampshire. This bridge is the primary gateway to the Maine Turnpike from the south. The rehabilitation includes widening and improving the outside shoulder to accommodate future traffic when functioning as a travel lane, paving the median and installing a concrete median barrier, paving and restriping the full width. The Maine Turnpike Authority’s share of the project cost is approximately $12 million, which the Authority considers as a transfer of equity to the MaineDOT. The project began in the fall of 2019 and is expected to take approximately three years to complete. Since the Piscataqua River Bridge is jointly owned by the MaineDOT and the NHDOT, the Maine Turnpike Authority has no ownership interest in the bridge, therefore the Authority’s share of the project cost is treated as a transfer of equity to the MaineDOT. The total transfer of equity to the MaineDOT in 2019 was $280,712.
2019 Financial Statements – The Maine Turnpike Authority
44
REQUIRED SUPPLEMENTARY INFORMATION
Trend Data on Infrastructure Condition
The Authority has elected to use the modified approach to infrastructure reporting under GASB 34. The Authority’s consulting engineers are required to make an inspection at least once a year of the Turnpike, and, on or before the first day of October of each year, to submit to the Authority a report setting forth (a) their findings whether the Turnpike has been maintained in good repair, working order and condition, (b) their advice and recommendations as to the proper maintenance, repair and operation of the Turnpike during the ensuing Fiscal Year and an estimate of the amount of money necessary for such purposes, (c) their advice and recommendations as to the amounts and types of insurance to be carried, and (d) their recommendations as to the amount that should be deposited into the Reserve Maintenance Fund during the upcoming Fiscal Year.
The roadways are rated on a 10-point scale, with 10 meaning that every aspect of the roadway is in new and perfect condition. The Authority’s system as a whole is given an overall rating, indicating the average condition of all roadways operated by the Authority. The assessment of condition is made by visual inspection designed to reveal any condition that would reduce highway-user benefits below the maximum level of service. The Authority’s policy is to maintain the roadway condition at rating of 8 (generally good condition) or better. The results of the 2019 inspection states that the Maine Turnpike has been maintained in generally good condition and presents a favorable appearance.
The budget to actual expenditures for Preservation for 2019 is as follows:
Budget Actual Preservation Expense $ 11,153,159 $ 12,021,363
2019 Financial Statements – The Maine Turnpike Authority
45
REQUIRED SUPPLEMENTARY INFORMATION, Continued
Maine Turnpike Authority Schedule of Changes in Net OPEB Liability and Related Ratios - MTA Group Health Insurance Plan December 31, 2019
Total OPEB liability
2019 2018
Service cost $ 1,333,533 $ 1,500,957
Interest 1,909,232 1,704,318
Changes in benefit terms - - Differences between expected and actual experience - - Changes of assumptions or other inputs 9,430,003 (4,198,762) Benefit payments (1,756,589) (1,876,608) Net change in total OPEB liability 10,916,179 (2,870,095) Total OPEB liability - beginning 46,111,390 48,981,486 Total OPEB liability - ending $ 57,027,569 $ 46,111,391
Covered payroll $ 22,682,162 $ 20,878,892
Total OPEB liability as a percentage of 251.4% 220.9%
covered payroll
Discount rate used: 2.74% 4.10%
Notes to schedule:
Changes of assumptions: Changes of assumptions and other inputs reflect the effects of changes in the
discount rate each period.
Funding method was changed from Projected Unit Credit funding to Entry Age Normal funding method.
This schedule is presented to illustrate requirements to show information for 10 years. However, until a
full 10 year trend is completed, the Authority presents information for those years of which information is
available.
2019 Financial Statements – The Maine Turnpike Authority
46
REQUIRED SUPPLEMENTARY INFORMATION, Continued
Group Term Life Healthcare Plan
Maine Turnpike Authority Schedule of Proportionate Share of Net OPEB Liability - Group Life Insurance Maine Public Employees Retirement System December 31, 2019
Authority's Authority's Authority's State's Proportionate Proportion Proportionate Proportionate Share of the Plan Fiduciary
of the Share of the Share of the Total Collective Net Net Position as a Collective Collective Net Collective Net Collective NetAuthority'sOPEB LiabilityPercentage of the YearNet OPEB OPEB OPEB OPEBCovered as a Percentage of itsTotal OPEB EndedLiability LiabilityLiabilityLiabilityPayrollCovered PayrollLiability
Dec. 31, 20198.35% $ 1,785,923 -$ $ 1,785,923 $ 23,673,818 7.54% 43.18% Dec. 31, 20188.15% 1,645,671 - 1,645,671 22,811,303 7.21% 43.92%
Dec. 31, 20178.14% 1,361,435 - 1,361,435 22,246,620 6.12% 47.42%
This schedule is presented to illustrate requirements to show information for 10 years. However, until a full 10 year trend is completed, the Authority presents information for those years of which information is available.
Maine Turnpike Authority
Schedule of OPEB Contributions - Group Life Insurance Maine Public Employees Retirement System December 31, 2019
Contributions
Relative to Contributions as Contractually Contractually Contribution Authority's as a Percentage Year Required Required Deficiency Covered of Covered Ended Contribution Contribution (Excess) Payroll Payroll
Dec. 31, 2019 34,000$ 34,000$ -$ $ 23,673,818 0.14%
Dec. 31, 2018 31,300 31,300 - 22,811,303 0.14% Dec. 31, 2017 33,000 33,000 - 22,246,620 0.15%
This schedule is presented to illustrate requirements to show information for 10 years. However, until a full 10 year trend is completed, the Authority presents information for those years of which information is available. 2019 Financial Statements – The Maine Turnpike Authority
47
REQUIRED SUPPLEMENTARY INFORMATION, Continued
Maine Turnpike Authority Schedule of Proportionate Share of Net Pension Liability Maine Public Employees Retirement System December 31, 2019
Maine Public Employee Retirement System
Authority's Authority's Authority's Share of the Plan Fiduciary Net Proportion of the Proportionate Covered Net Pension Liability as a Position as a Percentage Net Pension Share of the Net Employee Percentage of Covered of the Total Pension Fiscal Year Valuation Date Liability Pension Liability Payroll Payroll Liability
2019 07/01/2019 $ 11,437,656 3.7419% $ 23,673,818 48.31% 90.60% 2018 07/01/2018 10,611,572 3.8774% 22,811,303 46.52% 91.14% 2017 07/01/2017 16,098,398 3.9318% 22,246,620 72.36% 86.43% 2016 07/01/2016 20,031,423 3.7701% 20,397,862 98.20% 81.61% 2015 07/01/2015 12,529,254 3.9271% 19,263,547 65.04% 88.27% 2014 07/01/2014 5,724,658 3.7202% 18,906,556 30.28% 94.10%
Maine Turnpike Authority Schedule of Contributions Maine Public Employees Retirement System December 31, 2019
Maine Public Employee Retirement System
Contributions Relative to Contractually Contractually Contribution Contributions as a
Valuation Required Required Deficiency Covered Employee Percentage of Covered Fiscal Year Date Contribution Contribution (Excess) Payroll Employee Payroll
2019 07/01/2019 $ 2,545,495 $ 2,545,495 $ - $ 23,673,818 10.75% 2018 07/01/2018 2,391,982 2,391,982 - 22,811,303 10.49%
2017 07/01/2017 2,285,861 2,285,861 - 22,246,620 10.28% 2016 07/01/2016 2,034,516 2,034,516 - 20,397,862 9.97% 2015 07/01/2015 1,739,777 1,739,777 - 19,263,547 9.03% 2014 07/01/2014 1,471,779 1,471,779 - 18,906,556 7.78%
2019 Financial Statements – The Maine Turnpike Authority
48
OTHER SUPPLEMENTARY INFORMATION
Calculation of the Composite Debt Service Ratio, as Defined by the Bond Resolutions and Related Documents (000’s)
Years Ended December 31st,
2019 2018
Revenues:
Net Fare Revenue $ 139,964 $ 138,432
Concession Rental 4,753 4,888
Investment Income 1 4,736 2,821
Miscellaneous 2,035 1,925
Total Revenues $ 151,488 $ 148,066
Expenses: Operations 26,970 25,608 Maintenance 13,796 13,382 Adminstrative 2,386 2,414 Total Expenses $ 43,152 $ 41,404
Net Operating Revenues $ 108,336 $ 106,662
Debt Service Payments 2 35,169 36,466
Reserve Maintenance Fund Deposit 39,000 38,000
MDOT Account / Sub Debt Fund Deposit 2,443 3,702
Other General Reserve Fund Deposits $ 31,724 $ 28,494
Debt Service Ratio of Net Revenues to Debt Service 3 3.08 2.92
Note: Revenues and expenses are presented on this schedule on the accrual basis in accordance with accounting principles generally accepted in the United States of America. Certain amounts included on the Statements of Revenues, Expenses, and Changes in Net Position are not part of the net revenues, as defined, and therefore excluded from this schedule.
1 Capital fund and Rebate Fund earnings are not included in investment income, consistent with the Maine Turnpike Revenue Bond Resolution. 2 Represents Debt Service Deposits, net of capitalized interest, on the outstanding Revenue Bonds only. 3 Net Revenues divided by Debt Service. The Bond Resolution requires a minimum ratio of 2.0.
2019 Financial Statements – The Maine Turnpike Authority
49
OTHER SUPPLEMENTARY INFORMATION, Continued
Statement of Activities for the State of Maine General Purpose Financial Statements (000’s)
Program Operating Capital Charges for Investment Grants and Grants/ Functions/Programs Expenses Services Income Contrib. Contrib. Total Governmental Activities
Subtotal Governmental Activities ------
Business-type Activities:
THE MAINE TURNPIKE AUTHORITY 107,464 139,964 32,500
Subtotal Business-type Activities 107,464 139,964 - - - 32,500 Total 107,464 139,964 - - - 32,500
General Revenues: Unrestricted Interest and Investment Earnings 6,223 Non program Specific Grants, Contrib. & Approp. - Miscellaneous Income 6,788 Gain (Loss) on Asset Dispositions 49 Extraordinary Item - Total General Revenues and Extraordinary Items 13,060 Change in Net Assets 45,560
Net Assets, Beginning of the Year 338,550
Equity Transfers - MaineDOT (281) Net Assets, End of the Year 383,830
This schedule is strictly used by the State of Maine for the purpose of component unit reporting.
2019 Financial Statements – The Maine Turnpike Authority
50
APPENDIX F
THE DEPOSITORY TRUST COMPANY
BOOK-ENTRY ONLY SYSTEM
The information in this section concerning DTC and the Book-Entry System has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the Authority or the Trustee.
Beneficial ownership in the Bonds will be available to Beneficial Owners (as described below) only by or through DTC Participants via a book-entry system (the “Book-Entry System”) maintained by DTC.
DTC and Its Participants
DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully registered bond certificate will be issued for each maturity of the Bonds, in the aggregate principal amount of such maturity of Bonds, and will be deposited with DTC.
DTC, the world's largest depository, is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC's participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org.
Purchases of Bonds under the Book-Entry System must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on
F-1 APPENDIX F behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the Book-Entry System for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to Bond documents. For example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in the Bonds to be redeemed.
Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Trustee as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, principal and interest payments on the Bonds will be made to Cede & Co. or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Authority or the Trustee, on the payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee, or the Authority, subject to any statutory or regulatory requirements as may be in effect from time to time. Payments of redemption proceeds, principal and interest to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Trustee, disbursement of such payments to Direct Participants is the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
F-2 APPENDIX F
Discontinuance of DTC Services
DTC may discontinue providing its services as securities depository with respect to Bonds at any time by giving notice to the Authority and the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, bond certificates are required to be printed and delivered.
The Authority may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, bond certificates will be printed and delivered to DTC.
The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Authority believes to be reliable, but the Authority takes no responsibility for the accuracy thereof.
Use of Certain Terms in Other Sections of the Official Statement
WHILE THE BONDS ARE IN THE BOOK-ENTRY SYSTEM, REFERENCE IN OTHER SECTIONS OF THIS OFFICIAL STATEMENT TO OWNERS OF SUCH BONDS SHOULD BE READ TO INCLUDE ANY PERSON FOR WHOM A PARTICIPANT ACQUIRES AN INTEREST IN THE BONDS, BUT (I) ALL RIGHTS OF OWNERSHIP, AS DESCRIBED HEREIN, MUST BE EXERCISED THROUGH DTC AND THE BOOK-ENTRY SYSTEM AND (II) NOTICES THAT ARE TO BE GIVEN TO REGISTERED OWNERS BY THE TRUSTEE WILL BE GIVEN ONLY TO DTC. DTC IS REQUIRED TO FORWARD (OR CAUSE TO BE FORWARDED) THE NOTICES TO THE PARTICIPANTS BY ITS USUAL PROCEDURES SO THAT SUCH PARTICIPANTS MAY FORWARD (OR CAUSE TO BE FORWARDED) SUCH NOTICES TO THE BENEFICIAL OWNERS.
F-3 [THIS PAGE INTENTIONALLY LEFT BLANK] Appendix G
One Financial Center Boston, MA 617 542 6000 617 542 2241 fax
FORM OF OPINION OF BOND COUNSEL
[Closing Date]
Maine Turnpike Authority 2360 Congress Street Portland, Maine 04102
Re: Maine Turnpike Authority Turnpike Revenue Bonds, Series 2020 (the “Bonds”)
We have acted as Bond Counsel to the Maine Turnpike Authority in connection with the authorization and issuance of the Bonds. In that capacity we have examined such law and such certified proceedings, certifications and other documents as we have deemed necessary to render this opinion. The Bonds are issued pursuant to Title 23, Part 1, Chapter 24, Sections 1961 - 1983, inclusive, of the Revised Statutes of the State of Maine, as amended (the “Enabling Act”), the General Turnpike Revenue Bond Resolution adopted on April 18, 1991 (the “General Resolution”), as amended and supplemented by supplemental resolutions, including the Twenty-Second Supplemental Resolution Authorizing the Issuance of Maine Turnpike Authority Turnpike Revenue Bonds, Series 2020 authorized by a resolution adopted on July 23, 2020 (the “Twenty-Second Supplemental Resolution”). The General Resolution, as amended and supplemented, is referred to herein as the “Resolution.” Other capitalized terms used herein shall, unless otherwise specified, have the meaning set forth in the Resolution.
The Bonds are obligations of the Authority secured by the Resolution and a pledge of the Revenues received by or for the account of the Authority and monies and securities on deposit in the Funds and Accounts pledged as security therefor under the Resolution.
As to questions of fact material to our opinion, we have relied upon the representations of the Authority contained in the Resolution and in the certified proceedings and other certifications of Authority officials furnished to us without undertaking to verify the same by independent investigation.
Based upon the foregoing, under existing law, we are of the following opinion:
(a) The Authority is duly organized and validly existing under the Enabling Act as a body politic and corporate of the State of Maine (the “State”), with the right and power under the Enabling Act to adopt the Resolution and the Issuance Resolution, perform the agreements on its part contained therein, and issue the Bonds.
(b) The Bonds are obligations of the Authority secured by the Resolution and a pledge of the Revenues received by or for the account of the Authority and monies and securities on deposit in the Funds and Accounts pledged as security therefor under the Resolution, and the Resolution creates the valid pledge which it purports to create for the benefit of the holders of the Bonds, subject to the application of such Revenues, monies and securities to the purposes and on the conditions permitted by the Resolution.
MINTZ
[Closing Date] Page 2
(c) The Bonds have been duly authorized, executed, authenticated and delivered, and all conditions required by the Resolution precedent to the issuance of the Bonds have been met. The Bonds are valid and binding obligations of the Authority, payable solely from the sources provided therefor in the Resolution, enforceable in accordance with their terms, and entitled to the benefits and security of the Resolution, subject only to applicable bankruptcy, insolvency, moratorium, reorganization or other laws affecting creditors’ rights heretofore or hereafter enacted and to general equity principles.
(d) The Resolution and the Issuance Resolution have been duly and lawfully adopted by the Authority, are in full force and effect, and are valid and binding agreements of the Authority, enforceable in accordance with their respective terms, subject only to applicable bankruptcy, insolvency, moratorium, reorganization or other laws affecting creditors’ rights heretofore or hereafter enacted and to general equity principles.
(e) Under existing law, interest on the Bonds will not be included in the gross income of holders of the Bonds for federal income tax purposes. This opinion is rendered subject to compliance with various requirements imposed by the Internal Revenue Code of 1986, as amended which must be satisfied subsequent to the issuance of the Bonds in order that interest thereon is and continues to be excludable from the gross income of holders of the Bonds for federal income tax purposes. Failure to comply with certain of such requirements could cause interest on the Bonds to be included in the gross income of the holders of the Bonds retroactive to the date of issuance of the Bonds. Interest on the Bonds will not constitute a preference item for purposes of computation of the alternative minimum tax imposed on certain individuals. We express no opinion as to any other federal tax consequences resulting from holding the Bonds.
(f) Under existing laws of the State, interest on the Bonds is exempt from State income tax imposed on individuals. We express no opinion with respect to taxation of the Bonds and the interest thereon under the laws of any states other than the State.
This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur.
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.
G-2 APPENDIX H
FORM OF CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement dated ______, 2020 (this “Disclosure Agreement”) is executed and delivered by the Maine Turnpike Authority (the “Authority”) and Bangor Savings Bank, as Trustee (the “Trustee”) in connection with the issuance of $[par] Maine Turnpike Authority Turnpike Revenue Bonds, Series 2020 (the “Bonds”). The Bonds are being issued pursuant to Title 23, Part 1, Chapter 24, Sections 1961-1983, inclusive, of the Maine Revised Statutes, as amended (the “Enabling Act”) and pursuant to the General Turnpike Revenue Bond Resolution (“General Resolution”) of the Authority adopted April 18, 1991, as from time to time amended and supplemented, including a Twenty-Second Supplemental Resolution Authorizing the Issuance of Maine Turnpike Authority Turnpike Revenue Bonds, Series 2020 (the “Twenty-Second Supplemental Resolution” and together with the General Resolution, the “Resolution”). The Authority and the Trustee covenant and agree as follows:
Section 1. Purpose; Beneficiaries. This Disclosure Agreement is entered into solely to assist the Participating Underwriter (defined below) in complying with subsection (b)(5) of the Rule (defined below). This Disclosure Agreement constitutes a written undertaking for the benefit of the beneficial owners (within the meaning of the Rule) of the Bonds (such beneficial owners being sometimes called herein “owners”).
Section 2. Definitions. The following words and terms used in this Disclosure Agreement shall have the following respective meanings:
(a) “Annual Report” shall mean any Annual Report provided by the Authority to the Trustee, and consistent with the requirements of Sections 3 and 4 of this Disclosure Agreement.
(b) “EMMA” means the MSRB’s Electronic Municipal Market Access system, or its successor as designated by the MSRB.
(c) “Fiscal Year” shall mean the twelve months beginning on January 1 and ending on December 31 in each calendar year.
(d) “MSRB” means the Municipal Securities Rulemaking Board.
(e) “Participating Underwriter” shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.
(f) “Rule” means Rule 15c2-12 promulgated by the SEC under the Securities and Exchange Act of 1934, as amended (17 CFR Part 240, §240.15c2-12), as in effect on the date of this Disclosure Agreement, including any official interpretation thereof.
(g) “SEC” means the United States Securities and Exchange Commission.
(h) “SID” means, at any time, a then-existing, state information depository, if any, as operated or designated as such by or on behalf of the State of Maine for the purposes referred to in the Rule. As of the date of this Disclosure Agreement, there is no SID.
All capitalized words and terms used in this Disclosure Agreement and not otherwise defined herein shall have the meaning ascribed to such words and terms in the Official Statement dated January 25, 2018 (the “Official Statement”) pertaining to the Bonds.
H-1 APPENDIX H
Section 3. Provision of Annual Reports. Not later than 180 days after the end of its Fiscal Year the Authority shall deliver to the Trustee its Annual Report for such Fiscal Year. If said Annual Report does not contain the Authority’s audited financial statements for the Fiscal Year of the Annual Report, then the Authority shall, in any event, deliver to the Trustee said audited financial statements no later than 240 days after the end of its Fiscal Year.
The Trustee shall forward to EMMA the Authority’s Annual Report, with or without the Authority’s audited financial statements, or notice of the Authority’s failure to provide said Annual Report (in the form set forth in Exhibit A hereto), no later than 195 days after the end of the Fiscal Year. If the Authority elects not to provide the Trustee with its audited financial statements as part of its Annual Report within the 180 day period described above, the Trustee shall forward to EMMA the Authority’s audited financial statements, or notice of the Authority’s failure to provide said audited financial statements, no later than 255 days after the end of such Fiscal Year.
Upon its forwarding of the Annual Report and audited financial statements, the Trustee shall file a report with the Authority certifying that the Annual Report and audited financial statements have been forwarded to EMMA pursuant to this Disclosure Agreement, stating the date each was mailed.
Section 4. Content of Annual Reports. The Annual Report shall contain (i) the audited financial statements of the Authority for such Fiscal Year if audited financial statements are then available, and (ii) financial information and operating data, in each case updated through the last day of such Fiscal Year unless otherwise noted, of the type provided in the following tables contained in the Official Statement relating to the Bonds, in each case substantially in the same level of detail as is found in the referenced section of the Official Statement:
Financial Information and Reference to Official Statement Operating Data Category for Level of Detail 1. Traffic and toll revenues for the most “SUMMARY OF HISTORICAL OPERATIONS - recent fiscal year. Historical Traffic Trends and Toll Revenue - Historical Traffic and Toll Revenue 2015-2019” 2. Monthly Traffic and Net Toll Revenue for “SUMMARY OF HISTORICAL OPERATIONS - the most recent fiscal year. Historical Traffic Trends and Toll Revenue - Monthly Traffic and Net Revenues 2017-2019” 3. Fare schedules for the most recent fiscal “APPENDIX D – TOLL REVENUE STUDY - year. Figure 1-3” 4. Historical operating results for the most “SUMMARY OF HISTORICAL OPERATIONS - recent fiscal year. Historical Operating Results and Deposits - Historical Operating Results and Deposits 2015- 2019”
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Any or all of the items listed above may be included by reference to other documents, including official statements pertaining to debt issued by the Authority, which have been submitted to EMMA. The Authority’s annual financial statements for each fiscal year shall consist of the statement of assets, liabilities and retained revenues prepared in accordance with the Resolution. Such financial statements shall be audited by a firm of certified public accountants appointed by the Authority. The Trustee is the agent of the Authority in the dissemination of the Annual Report and the other notices referenced herein and has no duty or responsibility as to the legal correctness or accuracy of the form or content of said Annual Report or notices.
Section 5 Reporting of Significant Events. Upon the occurrence of any of the following listed events with respect to the Bonds, the Authority shall direct the Trustee to provide to EMMA in a timely manner not in excess of ten business days after the occurrence of the event, notice of such occurrence (numbered in accordance with the provisions of the Rule):
(i) principal and interest payment delinquencies;
(ii) non-payment related defaults, if material;
(iii) unscheduled draws on debt service reserves reflecting financial difficulties;
(iv) unscheduled draws on credit enhancements reflecting financial difficulties;
(v) substitution of credit or liquidity providers, or their failure to perform;
(vi) adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds;
(vii) modifications to rights of any owners of the Bonds, if material;
(viii) bond calls, if material, and tender offers;
(ix) defeasances;
(x) release, substitution or sale of property securing repayment of the Bonds, if material;
(xi) rating changes;
(xii) bankruptcy, insolvency, receivership or similar event of the Authority;
(xiii) the consummation of a merger, consolidation, or acquisition involving the Authority or the sale of all or substantially all of the assets of the Authority, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material;
(xiv) appointment of a successor or additional trustee or the change of name of a trustee, if material;
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(xv) incurrence of a financial obligation* of an obligated person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a financial obligation* of an obligated person, any of which affect Bondholders, if material; and
(xvi) default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a financial obligation* of an obligated person, any of which reflect financial difficulties.
For the purposes of the event identified in subparagraph (xii) above, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for the Authority in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Authority, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Authority.
Section 6. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Authority from providing any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, in addition to that which is required by this Disclosure Agreement. If the Authority chooses to provide any information in addition to that which is specifically required by this Disclosure Agreement, the Authority and the Trustee shall have no obligation under this Disclosure Agreement to update such information or to provide similar information in the future.
Section 7. Enforceability of This Disclosure Agreement; Termination. To the extent permitted by law, the provisions of this Disclosure Agreement are enforceable against the Authority and the Trustee in accordance with the terms hereof by any owner of a Bond, including any beneficial owner acting as a third party beneficiary (upon proof of its status as a beneficial owner reasonably satisfactory to an Authorized Official). To the extent permitted by law, any such owner shall have the right, for the equal benefit and protection of all owners of the Bonds, to enforce its rights against the Authority and the Trustee and to compel the Authority and the Trustee and any of their officers, agents or employees to perform and carry out their duties under the provisions of this Disclosure Agreement; provided, however, that the sole remedy for a violation of this Disclosure Agreement shall be an action to compel specific performance of the obligations of the Authority and the Trustee under this Disclosure Agreement and shall not include any rights to monetary damages. A breach or default under this Disclosure Agreement shall not constitute an Event of Default under the General Resolution. This Disclosure Agreement shall terminate if no Bonds remain outstanding (without regard to an economic defeasance) or if the provisions of the Rule concerning continuing disclosure are no longer in effect, whichever occurs first.
Section 8. Amendments. This Disclosure Agreement may be amended, changed or modified by the parties hereto, without the consent of, or notice to, any owners of the Bonds, (a) to comply with or conform to the provisions of the Rule or any amendments thereto or authoritative interpretations thereof by the Securities and Exchange Commission or its staff (whether required or optional), (b) to make any necessary or desirable provisions with respect to the Trustee, (c) to add to the covenants of the Authority or the Trustee for the benefit of the owners of the Bonds, (d) to modify the contents, presentation and format of the Annual
* As noted in Rule 15c2-12, the term “financial obligation” means (i) a debt obligation, (ii) a derivative instrument entered into in connection with, or pledged as security or a source of payment for, an existing or planned debt obligation or (iii) a guaranty of an instrument described in (i) or (ii). The term does not include municipal securities as to which a final official statement has been provided to the MSRB consistent with Rule 15c2-12.
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Report from time to time as a result of a change in circumstances that arises from a change in legal requirements, or (e) to otherwise modify the undertaking of the Authority in this Disclosure Agreement in a manner consistent or otherwise responding to the requirements of the Rule concerning continuing disclosure; provided, however, that in the case of any amendment pursuant to clause (d) or (e), (i) the undertaking, as amended, would have complied with the requirements of the Rule at the time of the offering of the Bonds, after taking into account any amendments or authoritative interpretations of the Rule, as well as any change in circumstances, and (ii) the amendment does not materially impair the interests of the owners of the Bonds, as determined either by a party unaffiliated with the Authority or the Trustee (such as the firm serving at the time as bond counsel to the Authority) or by the vote or consent of the Registered Owners of a majority in outstanding principal amount of the Bonds affected thereby at or prior to the time of such amendment, which consent shall be obtained as provided in this Disclosure Agreement with respect to consents of Registered Owners. Any amendment, change or modification to this Disclosure Agreement shall be in writing.
If this Disclosure Agreement is amended with respect to the Annual Report to be submitted by the Authority hereunder, the Annual Report containing the amended financial information will explain, in narrative form, the reasons for the amendment and the impact of the change in the type of financial information being provided. If this Disclosure Agreement is amended with respect to the accounting principles to be followed in preparing financial statements, the Annual Report for the year in which the change is made will present a comparison between the financial statements or information prepared on the basis of the new accounting principles and the financial statements or information prepared on the basis of the former accounting principles. Such comparison will include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Authority to meet its obligations. To the extent reasonably feasible, the comparison will also be quantitative. The Authority shall direct the Trustee to give notice of any change in the accounting principles to EMMA as promptly as practicable after such change has been determined.
Section 9. Duties, Immunities and Liabilities of the Trustee. The Trustee shall have only such duties under this Disclosure Agreement as are specifically set forth in this Disclosure Agreement, and the Authority hereby agrees to indemnify and save the Trustee, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the cost and expenses (including attorney’s fees) of defending against any claim of liability, but excluding liabilities due to the Trustee’s negligence or willful misconduct in the performance of its duties hereunder. The obligations of the Authority under this Section 9 shall survive resignation or removal of the Trustee and payment of the Bonds.
Section 10. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.
Section 11. Governing Law. This Disclosure Agreement shall be governed by and construed in accordance with the laws of the State of Maine and applicable law of the United States of America.
Section 12. Titles of Sections. The titles of sections in this Disclosure Agreement shall have no effect in construing this Disclosure Agreement.
Section 13. Actions to be Performed on Non-Business Days. Any action required by this Disclosure Agreement to be taken on a Saturday, Sunday or holiday within the State of Maine may be taken on the next business day with the same force and effect as if taken on the day so required.
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IN WITNESS WHEREOF, THE MAINE TURNPIKE AUTHORITY and BANGOR SAVINGS BANK, as Trustee, have executed this Disclosure Agreement, under seal, all as of the day and year first above written.
MAINE TURNPIKE AUTHORITY
By:______Executive Director
BANGOR SAVINGS BANK, as trustee
By:______Authorized Officer
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MAINE TURNPIKE AUTHORITY • Turnpike Revenue Bonds, Series 2020