Agenda - 04-27-2017 - 1 - Consideration of the Final Draft Durham – Orange Light Rail Cost Sharing Agreement and Final Draft Orange County Transit Plan

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101 federal funding for the project.The most likely cause of a delay of this magnitude is if the D-O LRT Project does not remain on schedule to receive a federal FFGA in FY 2020. To keep the D-O LRT Project on schedule, there are four remaining critical steps in the federal New Starts that need to be met. First, GoTriangle will need to request a funding recommendation from the FTA by September 2018. Second,the FTA would need to include the D-O LRT Project in its Annual Report on Funding Recommendations for the CIG Program in early 2019 (typically released in February).Third, the adopted federal budget for FY 2020, scheduled to be in place by September 2019, would need to include funding for the D-O LRT Project. Finally, GoTriangle would need to apply for the federal FFGA no later than December 2019. In the event that any of these four steps is not met, pursuant to the Cost Sharing Agreement, the parties would convene within fifteen business days and decide upon a course of action. 6) Interest Rate Changes—To complete the Project by 2028, the D-O LRT Project Financial Plan assumes that GoTriangle will borrow funds to pay for the cost of construction. As described below,the interest rates assumed in the Plans are conservative(high) compared to historical experience. There is risk that interest rates will rise above the levels assumed in the Plans, increasing the cost of debt and requiring the commitment of additional funds to debt service. If actual interest rates are lower than those assumed in the Plans, the cost of borrowing will be reduced, representing a cost savings. The Plans assume three issuances of tax-exempt Limited Obligation Bonds (LOBs) during construction, with a repayment term of between four and six years.The Plans assume that the rate on these LOBs is 4 percent. Over the last 5-year, 10-year, 15-year and 20-year periods, average rates for 7-year municipal bonds have been 1.52 percent, 2.12 percent, 2.46 percent, and 2.99 percent, respectively. The Plans also assume$400 million in borrowing under the Transportation Infrastructure Finance and Innovation Act(TIFIA) loan program.The assumed interest rate for the TIFIFA loan is 5 percent. Under the statute, the interest rate of a TIFIA loan is roughly equal to the 30-year Treasury rate at the time of the loan closing. As of April 21, 2017, the TIFIA interest rate is 2.89 percent.The assumed 5 percent rate represents approximately a 200 basis point cushion from the current market. Since 1993, there have been no three-year periods in which interest rates increased by 200 basis points, which supports the reasonableness of the 200 basis points of interest rate cushion. The strategies to mitigate cost overruns beyond the project budget as described in parts B through F of the Mitigation Strategies section below would be applicable to addressing the increased cost of debt. 4