(Originally sent to the Winter Park City Commission September 18, 2008)
(Commissioner Beth Dillaha attempted to terminate the commuter rail agreement with Orange County on January 26, 2009 (pg 10). The vote failed 3 to 2.)
The facts and circumstances included here relating to the commuter rail agreement between the City of Winter Park and Orange County have been reviewed for accuracy with the Winter Park City Manager. The opinions expressed here are of course mine and mine alone.
Commissioner Beth Dillaha’s commuter rail presentation at the September 8, 2008 City Commission meeting re-addressed known risks and possible costs associated with the commuter rail system as they impact the City of Winter Park and its citizens. Beth’s stated goal is to seek a renegotiation of the existing commuter rail agreement with Orange County so we get a better deal.
Given no material changes in commuter rail circumstances at either the County or City level since the agreement was entered into, it is certain that Orange County will not renegotiate. It is of interest to note that the people instigating, supporting, and encouraging Beth’s call for a renegotiation are those with the stated desire, and continuous, strident intention to kill Winter Park’s participation in the commuter rail system, not to “renegotiate” that participation. I can easily presume these people intend to use the County’s certain refusal to renegotiate as fodder to call for the City’s withdrawal from the existing commitment. All this makes me wonder whom Beth believes she was elected to represent.
While this effort at “renegotiation” is a painfully transparent political charade to undermine the City’s commitment to participation in the commuter rail system it is nonetheless always useful to review the substance of the existing agreement as it impacts the City of Winter Park and its residents.
The entire central Florida community has agreed to take on the challenges and risks of creating a commuter rail service. This includes the governments of Orange County, Osceola County, Seminole County, County of Volusia, and the City of Orlando; with the cities of Maitland and Winter Park having agreed to share responsibilities assumed by Orange County. The Maitland and Winter Park commuter rail agreements with Orange County are identical in all material respects, including cost sharing and the opt out clause effective seven years from the date fare paying service begins.
To my knowledge the City of Winter Park is the only party to these agreements that asked its citizens to provide permission to construct a station and pay for the construction and operating costs. A majority of Winter Park voters said, “yes” with full involvement of activists on both sides of the issue delineating the possible costs and risks, benefits and opportunities. Winter Park is the only community that exercised the full democratic process on this issue and the voters said, “yes.”
Let’s get some important context out of the way.
· The City of Winter Park has no control over whether this regional commuter rail system is built and operated on tracks and right of ways running through our city.
· Commuter rail trains will be coming through Winter Park.
· Orange County has executed an agreement that commits all Orange County residents to assume responsibility for certain capital and net operating costs of the commuter rail system whether trains stop in Winter Park, or not.
· The City of Winter Park has no control over commuter rail obligations assumed by Orange County.
Beth’s presentation emphasized the possibility the City will be bearing uncertain high levels of costs and risks in support of its participation in the commuter rail system. Let’s looks more closely at these costs and risks (paragraphs 5.2 a, b, and c of the agreement between Orange County and the City of Winter Park).
Capital Costs:
Winter Park is obligated to pay all capital costs related to the development of the Winter Park station. The City has been proceeding with FDOT on plans to construct the Winter Park commuter rail station based on prior assurances that $3,000,000 in federal funds will be available to the City for this purpose. (The $4,300,000 number Beth used in her presentation represents the total funding request made by the City in case more dollars may be available for improvements outside the commuter rail right of way.) The City expects to provide $375,000 in matching funds. All information to date indicates that station plans approved by the City Commission can be completed within the minimum $3,000,000 in expected federal funds. The FDOT Winter Park project update dated August 11, 2008 states that FDOT expects to secure a “full funding grant agreement” from the Federal Transit Administration by “mid 2009.”
Like Beth, I am concerned that we do not yet understand whether federal funds will be forthcoming or whether FDOT will assume costs expended up to the time that availability or unavailability of such funds is known for certain. Accordingly, as a citizen I would like to see:
· Confirmation that FDOT intends to negotiate a “full funding grant agreement” from the Federal Transit Administration by “mid 2009” that includes a commitment of at least $3,000,000 to be available to defray design and construction costs for the Winter Park commuter rail station, among other possible and permitted Winter Park uses.
· Confirmation that the City of Winter Park is not responsible for costs expended by FDOT on planning for construction of the Winter Park commuter rail station whether or not a funding agreement is eventually secured, beyond those FDOT costs that may be covered under a funding agreement.
In any event, the Termination paragraph 6.2(b) in the commuter rail agreement with Orange County allows the City to terminate if sufficient funding to construct the station is not forthcoming from either federal or state government. (There are some timing issues here that may warrant clarification from counsel and city management.)
In her presentation Beth raised the question of whether the City would be obligated to refund any or all funds used to pay for Capital cost obligations in the event the City exercises its “opt-out” clause with Orange County. (This is the $3,000,000 in expected federal money to come through FDOT to fund construction of the Winter Park station.) I understand there has also been formal public mention of a possible reserve in anticipation of some type of refunding requirement. I suggest this is a slippery slope to go down and that it is counter to the interests of the City to do so. I suggest the City Commission seek opinion of counsel on this issue. It would be counter to City interests to execute any agreement with a Capital refunding requirement in the absence of similar pre-existing Capital refunding agreements involving all other entities receiving federal funds related to the commuter rail system. It would also be counter to City interests to presume such a liability exists in the absence of pre-existing agreements with Capital refunding requirements involving all other entities receiving federal funds related to the commuter rail system.
Local Operating Support Costs and Debt Service Costs
The City of Winter Park is not responsible for Local Operating Support Costs during the FDOT funding period, which is seven years from the date of the first fare paying service. After that time, the City of Winter Park is responsible for 100% of the Local Operating Support Costs. These costs are shared based on relative passenger boarding by station under a formula set in the Master Interlocal Agreement to which Orange County is a party. For example, if the Winter Park station has 5% of boardings as defined then the City of Winter Park would be responsible for roughly 5% of the total costs of operating the entire system net of fare and other revenues. Orange County has agreed to refund 30% of these costs to the City.
The City of Winter Park is not responsible for Debt Service costs during the FDOT funding period. After that time, the City of Winter Park is responsible for 100% of the Debt Service costs. These costs pay off debt undertaken to construct the system and are shared based on track mileage within each entities boundaries as a portion of total track mileage of the entire system. The formula is set in the Master Interlocal Agreement to which Orange County is a party. Orange County has agreed to refund 30% of these costs to the City.
Beth brought up the issue of double taxation (paying as both Winter Park and Orange County residents). I too was concerned about this issue but find the reality is subtler than the point made in Beth’s presentation. Under the existing agreement Orange County is picking up 30% of the operating and debt service costs allocated to Winter Park based on boardings and track mileage as defined in the Master Agreement. This 30% and all the other costs assumed by Orange County will be spread across all Orange County taxpayers, including Winter Park taxpayers. The right issue to focus on is whether or not the actual operating and debt service costs directly assumed by Winter Park combined with remaining Orange County costs assumed by Winter Park taxpayers represents a fair value for the City and its residents.
This fair value assessment must include consideration of the costs and risks as well as the benefits and opportunities, a necessary dynamic not included in Beth’s considerations. Beth’s focus on costs is a canard, and an old argument the voters rejected. Projecting numbers for costs and risks in a vacuum that excludes the benefits and opportunities does not serve the interests of the City and its residents (buts certainly bolsters the ambitions of those intent to kill the Winter Park commuter rail station). Beth’s cost projections are irrelevant as uncertainties about actual costs are addressed in the existing commuter rail agreement through the opt-out clause.
The Opt-Out Clause
Beth’s September 8 presentation questioned the strength of the opt-out clause language. This clause is the lynchpin protecting the interests of the City and its residents. As such, it is productive to re-address the implications of this language with counsel to reassure us that the City has the right to withdraw from the commuter rail system with protection from Local Operating Support Costs and Debt Service cost obligations beyond any opt-out date should a dedicated funding source not be secured.
It is important to note that we would not entirely escape Local Operating Support Costs and Debt Service costs related to the Winter Park station in the event of an opt-out, even though the station would cease to operate. Orange County would still need to pay for costs formerly paid by the City to the extent such costs are not allocated to other station partners. A portion of this burden would continue to be borne by Winter Park residents through additional County level taxation.
Conclusion
Beth’s stated goal in her September 8th presentation is to renegotiate the commuter rail agreement with Orange County in a way that results in a better and more secure financial position for the City. However, it is clear (and should be clear to Beth and the other members of the City Commission) that we already have what we need to protect the City’s financial position.
Let’s summarize where the City stands today (which is fundamentally the same place the City stood when the commuter rail agreement was signed with Orange County in 2007).
· The City committed $375,000 and has assurances for funding of at least $3,000,000 to pay the capital costs of planning and constructing a Winter Park commuter rail station.
· The City has the right to terminate the agreement if full capital funding for the Winter Park station does not materialize. (It is clear to me the agreement would be and should be terminated under such a circumstance.)
· The City has rights to follow and understand the operating details of the commuter rail system for seven years during which time it has no responsibility for any Local Operating Support Costs or Debt Service Costs.
· If a dedicated funding source is secured after seven years of commuter rail operation the City of Winter Park will not have to pay Local Operating Support Costs or Debt Service Costs related to the Winter Park commuter rail station.
· If a dedicated funding source is not secured we will have had seven years of free experience with the commuter rail system, its rider ship, costs, and impact on our community available to access whether or not to exercise the opt-out clause.
· If a dedicated funding source is not secured after seven years of operation the opt-out clause gives the City negotiating leverage to change the agreement with Orange County in ways that reflect the then current realities and needs, and to do so based on measurable experience to assure the City is receiving fair value.
The existing agreement affords the City full capital funding for a commuter rail station, a free ride on operating the station and debt service for seven years, leverage through the opt-out clause to renegotiate based on detailed experience should a dedicated funding source not be secured, and the right to shut down the station after seven years with little or no future City obligations (but certainly costs on Winter Park taxpayers through more County level taxation) should a dedicated funding source not be secured. We receive this flexibility and financial protection in exchange for a total expected commitment of $375,000 in matching funds.
Subject to clarifications requested above, I conclude the existing agreement affords the City flexibility as well as financial protection and security. Further, I know of no events since the City entered into the commuter rail agreement that materially change the costs and risks, benefits and opportunities from those argued at the time the people of Winter Park voted on this matter. As Beth Dillaha stated during her election campaign, “In March [2007], the citizens approved a commuter-rail stop in Winter Park, and I fully support the citizens.” I do too.
I ask the City Commission to affirm support for the existing commuter rail agreement and move forward.