2010 FINANCIAL PLAN ANNUAL UPDATE

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MARYLAND TRANSPORTATION AUTHORITY INTERCOUNTY CONNECTOR PROJECT

Between Interstate 270 and U.S. Route 1

FINANCIAL PLAN ANNUAL UPDATE AS OF JUNE 30, 2010

LETTER OF CERTIFICATION

The Maryland State Highway Administration and Maryland Transportation Authority have developed a comprehensive annual update for the Intercounty Connector Project in accordance with the requirements outlined in FHWA’s January 2007 Major Project and Financial Plan Guidance.1_{This plan provides detailed} cost estimates to complete the project and the estimates of financial resources to be utilized to fully finance the Intercounty Connector Project.

The cost data in the Financial Plan Annual Update provide an accurate accounting of costs incurred as of June 30, 2010 and include a realistic estimate of future costs based on engineer’s estimates and expected construction cost escalation factors. While the estimates of financial resources rely upon assumptions regarding future economic conditions and demographic variables, they represent realistic estimates of available monies to fully fund the project.

We believe the Financial Plan Annual Update provides an accurate basis upon which to schedule and fund the Intercounty Connector Project. This document, an update of the Initial Financial Plan dated June 13, 2006 as well as the 2007 through 2009 Financial Plan Annual Updates, will be reviewed and updated on an annual basis.

To the best of our knowledge and belief, the Financial Plan Annual Update as of June 30, 2010 as

submitted herewith, fairly and accurately presents the financial position and cash flows of the Intercounty Connector Project. The financial forecasts in this document are based on our judgment of the expected project conditions and our expected course of action. We believe that the assumptions underlying the Financial Plan Annual Update are reasonable and appropriate. Further, we have made available all significant information that we believe is relevant to the Financial Plan Annual Update and, to the best of our knowledge and belief, the documents and records supporting the assumptions are appropriate.

Respectfully Submitted:

Neil J. Pedersen Date Harold M. Bartlett Date

Administrator Acting Executive Secretary

Maryland State Highway Administration Maryland Transportation Authority

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SUMMARY ... I SECTION 1 – INTRODUCTION ... 1-1

SIGNIFICANT ACTIVITIES SINCE JUNE 2009 ... 1-1

SECTION 2 – PROJECT COST ESTIMATE ... 2-1

CURRENT PROJECT ESTIMATE ... 2-1 Cost Allocation by Contract... 2-1 Cost Allocation by Project Element and Contract ... 2-3 EXPENDITURES TO DATE BY CONTRACT & COST ELEMENT ... 2-3 COST TO COMPLETE ... 2-5 BASIS OF ESTIMATE & ADJUSTMENTS TO ASSUMPTIONS ... 2-6

SECTION 3–PROJECT IMPLEMENTATION PLAN ... 3-1

PROJECT SCHEDULE ... 3-1 EXPENDITURES TO DATE BY FISCAL YEAR ... 3-2 EXPENDITURE FORECAST METHODOLOGY ... 3-3 TOTAL EXPENDITURE FORECAST ... 3-4 IMPACT OF OTHER FUTURE COST CHANGES ... 3-5

SECTION 4 – PROJECT FINANCING AND REVENUES ... 4-1

OVERALL FINANCIAL PLAN ... 4-1 COMMITTED FUNDING SOURCES - $2,462.7 Million ... 4-1 GARVEE Bonds - $750.0 Million ... 4-1 Authority Supported Toll Revenue Bonds and Cash - $715.6 Million ... 4-1 Auhtority Supported TIFIA Loan - $516.0 Million ... 4-2 State of Maryland General Fund and General Obligation Bonds- $264.9 Million... 4-2 State of Maryland Transportation Trust Fund - $180.0 Million ... 4-2 Special Federal Funds - $19.3 Million ... 4-2 Additional Funds from GARVEE Sale - $16.9 Million ... 4-3 ANTICIPATED FUNDING SOURCES - $103.2 Million ... 4-3 SUMMARY OF COMMITTED & ANTICIPATED FUNDING ... 4-3 KEY REVENUE ASSUMPTIONS, RISKS, AND MITIGATION STRATEGIES ... 4-4

SECTION 5 - PROJECT CASH FLOW ... 5-1

REVENUE TIMING BY SOURCE ... 5-1 PROJECT FUNDING VS. PLANNED EXPENDITURES ... 5-2

SECTION 6 – OTHER FACTORS ... 6-1

IMPACTS ON STATE DOT BUDGET ... 6-1 SPECIAL COST CONTAINMENT STRATEGIES ... 6-1 MAJOR RESPONSIBILITIES OF ALL PARTIES INVOLVED ... 6-1 AGREEMENTS & ISSUES RELATED TO ICC FINANCING AND CONSTRUCTION ... 6-1 SCHEDULE FOR FUTURE ANNUAL UPDATES ... 6-1

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SECTION 7 - COST & REVENUE HISTORY ... 7-1

COST & SCHEDULE HISTORY ... 7-1 2006 Initial Financial Plan ($ Millions) ... 7-1 2009 Financial Plan Update ($ Millions) ... 7-1 2010 Financial Plan Update ($ Millions) ... 7-1 REVENUE & FUNDING HISTORY ... 7-2 2006 Initial Financial Plan ($ Millions) ... 7-2 2009 Financial Plan Update ($ Millions) ... 7-2 2010 Financial Plan Update ($ Millions) ... 7-2 CURRENT EXPENDITURE PROJECTIONS VS. INITIAL PROJECTIONS ... 7-2

SECTION 8 – COST & REVENUE TRENDS ... 8-1

COST TRENDS OVER THE PAST YEAR ... 8-1 REVENUE TRENDS OVER THE PAST YEAR ... 8-1 FUTURE IMPLICATIONS OF TRENDS ... 8-1 ADJUSTMENTS IN FINANCIAL PLAN TO ACCOUNT FOR TRENDS ... 8-1

SECTION 9 - REVENUE SHORTFALL MITIGATION ... 9-1 SECTION 10 – SIGNIFICANT COST REDUCTIONS ... 10-1 SECTION 11 – SIGNIFICANT COST INCREASES ... 11-1 APPENDIX

APPENDIX A ... CURRENT PROJECT SCHEDULE APPENDIX B ... INFLATION ASSUMPTIONS APPENDIX C ... SUMMARY OF COST ESTIMATE IN STATE FY 2009$ APPENDIX D ... YEAR EXPENDITURES COMMENCE BY COST CATEGORY APPENDIX E ... CUMULATIVE ESCALATION FACTORS APPENDIX F ... SUMMARY OF COST ESTIMATE IN YEAR OF EXPENDITURE $ APPENDIX G ... HISTORICAL COMPARISON OF YEAR OF EXPENDITURE $ ESTIMATE APPENDIX H ... CURRENT QUARTERLY CASH FLOW FORECAST APPENDIX I ... PLAN OF FINANCE APPENDIX J ... PROJECT MAP

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EXHIBIT 1-1:OVERVIEW OF CONTENTS FOR THE 2010ANNUAL FINANCIAL PLAN UPDATE ... 1-1 EXHIBIT 1-2:CURRENT CONTRACT LIMITS ... 1-2 EXHIBIT 1-3:RIGHT OF WAY PARCEL STATISTICS BY ACQUISITION STAGE ... 1-2 EXHIBIT 1-4:ACTIVE CONTRACT STATISTICS –CONTRACT A ... 1-3 EXHIBIT 1-5:ACTIVE CONTRACT STATISTICS –CONTRACT B ... 1-4 EXHIBIT 1-6:ACTIVE CONTRACT STATISTICS –CONTRACT C ... 1-5 EXHIBIT 1-7:ES/CM/CSPROJECT STATUS ... 1-6 EXHIBIT 2-1:PROJECT COST ESTIMATE BY CONTRACT (YOE$ IN MILLION) ... 2-1 EXHIBIT 2-2:TOTAL PROJECT COST ESTIMATE BY COST ELEMENT (YOE$ IN MILLION) ... 2-3 EXHIBIT 2-3:EXPENDITURES TO DATE BY CONTRACT (YOE$ IN MILLION) ... 2-4 EXHIBIT 2-4:EXPENDITURES TO DATE BY COST ELEMENT (YOE$ IN MILLION) ... 2-5 EXHIBIT 3-1:CONTRACT MILESTONES ... 3-1 EXHIBIT 3-2:TOTAL ACTUAL EXPENDITURES BY STATE FISCAL YEAR (YOE$ IN MILLION) ... 3-2 EXHIBIT 3-3:DESIGN-BUILD EXPENDITURE CURVES BY CONTRACT ... 3-3 EXHIBIT 3-4:ACTUAL AND PROJECTED EXPENDITURES BY FISCAL YEAR (YOE$ IN MILLION) ... 3-4 EXHIBIT 4-1:FUNDING SOURCES FOR THE ICCPROJECT ... 4-3 EXHIBIT 4-2:SUMMARY OF KEY RISKS ... 4-4 EXHIBIT 4-3:SUMMARY OF KEY MITIGATION STRATEGIES ... 4-5 EXHIBIT 5-1:ICCPROJECT CUMULATIVE SOURCES AND USES FORECAST (YOE$ IN MILLION) ... 5-2

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UMMARY

This financial plan serves as the fourth annual update to the Intercounty Connector Project’s Initial Financial Plan (IFP), which was approved on June 29, 2006. Contained in this document are project estimate, expenditure, funding, and schedule data as of June 30, 2010. This document serves as an addendum to the IFP as well as the 2007 through 2009 Financial Plan Updates and summarizes the following key updates:

Project Schedule Maintains FY2012 Substantial Completion for all Active Contracts Given recent activity for active Contracts A, B and C, the project schedule for completion of the 17.9 mainline miles of the Intercounty Connector from I-270/I-370 to I-95 continues to target a FY2012 substantial completion date. Although Contract D is currently delayed to begin in FY2017 and complete in FY2019, contingent on funding, the delay in completion of the improvements associated with this contract, which are along I-95, will not have a material impact on the access to/from, nor the operations of, the new east-west expressway starting in FY2012. Due to ongoing contract package refinements, the schedule for the start of the 0.9 mainline miles under Contract E has been adjusted such that NTP is now scheduled for late 2011, with an estimated completion date during the spring of 2014.1

Project Cost Estimate Remains on Budget at $2.566 Billion

As of June 30, 2010, the total cost to complete the Intercounty Connector Project of $2.566 billion has not changed since 2008. Over the next year, the project team will continue to explore opportunities to reduce costs such that Contract D can be accelerated within the six-year program period and the project can return to the original budget of $2.445 billion. Project Expenditures to Date Total $1.448 Billion

Through June 30, 2010, or the end of FY2010, the project has expended $1.448 billion since inception (FY2003), or 56% of the current project estimate. This is an increase of $565.7 million over the past year. The current cash flow forecast is below the 2009 Financial Plan Update due to lower than anticipated design-build costs to date for active contracts. All active contracts are expected to be substantially completed and open by FY2012.

Project Funding Levels Are Maintained Through the Six-Year Program Period

During the past year, the Maryland Transportation Authority successfully issued $549 million in system revenue bonds, of which $240 million has been allocated to support the project. In addition to this, the project received $55 million from the Maryland General Fund and $30 million from the Maryland Transportation Trust Fund in FY2010.

With planned contributions from the Maryland General Fund, as well as system revenue bonds and TIFIA funding during FY2011 and future years, sufficient funding is anticipated to be in place to meet project cash flow requirements. In addition, when compared to the IFP, the sources of funding and the contributions from those sources have remained relatively unchanged and will support the overall project schedule during the next six years, which is the duration of the fiscally constrained capital program. Committed funding for the project through FY2016 totals $2.463 billion, which represents 96% of the total project cost estimate of $2.566 billion.

1_{Only 17.5 of the 18.8 total mainline miles will be tolled (5.7 miles upon completion of Contract A from the I-370}

terminus to MD 97 + 10.3 miles upon completion of Contracts B and C from MD 97 to I-95 + 1.5 miles upon completion of Contract E from I-95 to US 1).

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ii Commitment to Successful Project Implementation

Through this financial plan update, the Maryland State Highway Administration and the Maryland Transportation Authority believe that the Intercounty Connector Project continues to have the structure, strategies, and commitment to successfully complete the project as approved in the Final Environmental Impact Statement and Record of Decision.

A Quality Assurance Oversight program has been developed to provide quality assurance

oversight of the various design-build projects that comprise the Intercounty Connector Project. It is designed to ensure that the design-build teams design, and construct the Intercounty

Connector in accordance with the contract performance and special provisions.

The Quality Assurance database system identifies all pertinent contract requirements organized by Work Breakdown Structure, discipline, and phase. Contract requirements are easily accessible which ensures that quality assurance reviews are thorough and based on objective criteria from the contract. Use of a database system for quality assurance provides the ability to track the Design Build Team's Conformances, monitor Non-Conformances through resolution, perform analysis by discipline, and contract phase. The analysis provides trend information that assists our assessors (quality assurance reviewers) in knowing which areas require less or more focus concerning quality assurance oversight. This ensures continuous improvement in quality resulting in a better quality project.

The Quality Assurance Oversight Database's Final Acceptance Module is in development. The Final Acceptance Module for Contract A is completed and covers all current contractual requirements for acceptance in a checklist fashion that will be used for final close-out. The module is integrated with the Quality Acceptance Oversight Database such that

non-conformances still open can be assessed and closed within either application. The Contract A Final Acceptance Module, while implemented and in use, will be continually updated as change orders are approved that modify or affect the contractual requirements for project acceptance. It is anticipated that the Final Acceptance Module for Contract C will be ready for trial use and testing in late 2010/early 2011. The Contract B Final Acceptance Module is expected to be ready for testing in early 2011.

All aspects of the design-build teams' efforts are evaluated including the safety programs, design, construction, environmental commitments, and management processes. The safety, design, construction, and environmental efforts are reviewed on an on-going basis and the management processes are reviewed periodically to ensure that the Intercounty Connector meets all quality requirements.

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NTRODUCTION

As the fourth annual update to the 2006 Initial Financial Plan (IFP), this document builds off of the baseline information presented in the IFP and the 2007 through 2009 Financial Plan Updates by presenting a revised cost estimate, schedule, cash flow and funding forecast, as well as specific discussions regarding any significant changes to that data. This annual update is presented as follows:

Exhibit 1-1: Overview of Contents for the 2010 Annual Financial Plan Update

SECTION CONTENTS

Section 1 – Introduction • Significant Activities Since the Last Update

Section 2 – Project Cost Estimate

• Current Cost Estimate by Contract & Cost Element

• Expenditures to Date by Contract & Cost Element

• Cost to Complete

• Basis of Estimate & Adjustments to Assumptions

Section 3 – Project Implementation Plan

• Project Schedule

• Expenditures to Date by Fiscal Year

• Expenditure Forecast Methodology

• Total Expenditure Forecast

• Impact of Future Cost Changes

Section 4 – Project Financing & Revenues

• Overall Financial Plan

• Committed Funding Sources

• Anticipated Funding Sources

• Key Revenue Assumptions, Risks & Mitigations

Section 5 – Project Cash Flow • Revenue Timing by Source

• Project Funding Compared to Planned Expenditures

Section 6 – Other Factors

• Impacts on State DOT Budget

• Special Cost Containment Strategies

• Major Responsibilities of All Parties Involved

• Agreements & Issues Related to ICC Financing & Construction

• Schedule for Future Annual Updates Section 7 – Cost and Revenue History • _•Cost & Schedule History _{Revenue & Funding History}

Section 8 – Cost and Revenue Trends

• Cost Trends Over the Past Year

• Revenue Trends Over the Past Year

• Future Implications of Trends

• Adjustments in Financial Plan to Account for Trends Section 9 – Revenue Shortfall Mitigation • Recent Mitigation Strategies to Meet Funding Needs Section 10 – Significant Cost Reductions • Budget components that decreased in cost more than $10M Section 11 – Significant Cost Increases • Budget components that increased in cost more than $10M

SIGNIFICANT ACTIVITIES SINCE JUNE 2009

Over the past year, the ICC Project has significantly progressed with the continued refinement of contract packaging and procurement plans, the acquisition of right of way parcels necessary to support design-build contract activities, the successful issuance of system revenue bonds for the project, disbursement of Maryland General Funds and Transportation Trust Funds, and the continued construction of the three active design-build contracts. With Contracts A, B and C

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active, which comprise approximately 95% of the construction value for the ICC Project, a total of 17.9 of the 18.8 mainline facility miles are currently under construction.2

Contract Packaging Remains Consistent with 2009 Financial Plan Update

The current contract limits remain unchanged from those presented in the 2009 Financial Plan Update. A larger version of the current project map and contract limits is in Appendix J.

Exhibit 1-2: Current Contract Limits

Right of Way Activity Continues in Preparation of Design-Build Activities

Beginning in advance of the design-build procurement process, and consistent with the project’s NEPA approvals, right of way acquisitions have been completed beginning with Contracts A and C and more recently with Contracts B, D and E. As of June 30, 2010, 300 out of 313 parcels that are affected have either been acquired or have commenced the condemnation process. All right of way activities continue to meet or exceed overall project schedule requirements.

Exhibit 1-3: Right of Way Parcel Statistics by Acquisition Stage RIGHT OF WAY PARCEL STATISTICS

Contract A B C D E Other Total Settled or Optioned 137 55 42 1 14 19 268 Condemned 9 1 10 0 12 0 32 Appraised 0 0 1 11 0 0 12 Estimated 0 0 0 1 0 0 1 Total 146 56 53 13 26 19 313

Acquisition Stage Definitions:

Settled or Optioned: Both SHA and the property owner have come to an agreement.

Condemned: Agreement could not be reached and resolution will occur either via continuing negotiations or legal proceedings. Appraised: Independently appraised based on the plats, concept plans and site visits.

Estimated: Original district estimates, based on zoning, tax records and knowledge of the area.

Acquisition Stage

2_{Only 17.5 of the 18.8 total mainline miles will be tolled (5.7 miles upon completion of Contract A from the I-370}

terminus to MD 97 + 10.3 miles upon completion of Contracts B and C from MD 97 to I-95 + 1.5 miles upon completion of Contract E from I-95 to US 1).

ICC Contracts

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Page 1-3 Contract A Nears Opening

Construction activities have continued to advance over the past year along the first 7.2 mainline miles of the ICC. Earthwork operations are ongoing from Redland Road to the eastern terminus of Contract A, paving is occurring at the Metro Access Road Interchange ramps, the MD 97 ramps, and along the ICC mainline. Electronic toll collection equipment is being installed and overhead sign structures are being erected project wide. Intercounty Constructors (IC) also continues to make significant progress on the ICC bridges and structures throughout the contract.

Ongoing activities include additional earthwork operations, paving the remainder of the ICC mainline and interchanges, sound barrier construction, installation of tolling and ITS equipment, and bridge work. In 2009/early 2010, the project experienced significant weather impacts. There was an extremely rainy spring and fall and early winter, which impacted earthwork operations. Efforts are underway to have Contract A open to traffic by early 2011.

The following summary provides the key budget and schedule statistics for Contract A.

Exhibit 1-4: Active Contract Statistics – Contract A

ACTIVE CONTRACT STATISTICS - CONTRACT A ($ Millions)

Budget Schedule

Base Contract Amount* $478.7 Limited Notice to Proceed Jun-2007 Change Order Budget / Contingency $28.4 Full Notice to Proceed Nov-2007 Change Orders to Date ($) $2.0 Projected Completion Dec-2010 Change Orders to Date (% of Base) 0.4%

Change Orders to Date (% of Contingency) 7.0%

Current % Expended 74.1% Current % Time Expended 85.9%

* - includes budget for environmental incentives

* - does not include design-build stipends that were paid to the bidders not selected

The Western Operations Facility (WOF) is nearing completion in preparation of the opening of Contract A. Masonry wall and brick installation is complete and work on the interior finishes of the building has begun. Site utility installations continue and construction of the salt dome is nearing completion. The facility will serve as the temporary headquarters for the Authority Police on the ICC until the Eastern Operations Center is completed. Substantial completion of the WOF is scheduled for fall 2010.

Mainline Paving West of Redland Road

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Page 1-4 Contract B Construction Continues

MD 200 Constructors (MD 200) has completed design work and continues its efforts with construction of the middle 7.0 mainline miles of the project. Recent work includes

installation of sound barriers between Norbeck Road and Layhill Road, placing reinforcing steel for the Layhill Road Bridge deck, and setting of girders and concrete bridge decks for the New Hampshire Avenue Bridge and structures in the Northwest Branch area. Additional ongoing and future activities includes earthwork operations, bike path installation, landscaping, mainline paving,

installation of drainage pipes, and associated maintenance of traffic and quality control activities related to construction. Substantial completion of Contract B is expected in late 2011/early 2012. The following summary provides the key budget and schedule statistics for Contract B.

Exhibit 1-5: Active Contract Statistics – Contract B

ACTIVE CONTRACT STATISTICS - CONTRACT B ($ Millions)

Base Contract Amount* $559.7 Limited Notice to Proceed Oct-2008 Change Order Budget / Contingency $34.6 Full Notice to Proceed Jan-2009 Change Orders to Date ($) $1.7 Projected Completion Dec-2011 Change Orders to Date (% of Base) 0.3%

Contract C Construction Continues

ICC Constructors (IC3) continues with construction activities for the 3.7 mainline miles extending from west of US 29 to I-95, as well as 4.5 miles along US 29 and I-95 within proximity to the ICC. IC3 has recently

completed paving the mainline

between Old Columbia Pike and US 29 and placing concrete for bridge decks on the eastbound ICC bridges over US 29 and I-95. Ongoing work includes foundation and substructure work for ramp bridges around the US 29 Interchange, setting concrete girders for the mainline bridges over

Northwest Branch Bridge

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Little Paint Branch, excavation and embankment work project wide, and installation of drainage, sign structures, lighting and ITS/electronic toll collection conduits. Substantial completion of Contract C is on schedule for late 2011/early 2012.

The following summary provides the key budget and schedule statistics for Contract C.

Exhibit 1-6: Active Contract Statistics – Contract C

ACTIVE CONTRACT STATISTICS - CONTRACT C ($ Millions)

Base Contract Amount* $514.0 Limited Notice to Proceed Jan-2008 Change Order Budget / Contingency $30.8 Full Notice to Proceed Apr-2008 Change Orders to Date ($) $1.6 Projected Completion Dec-2011 Change Orders to Date (% of Base) 0.3%

Contract D Delayed until FY2017

In consultation with sponsor agencies and contingent on funding, SHA has deferred Contract D such that construction should commence in FY2017. However,

construction of Contract D will be moved forward if determined necessary at a later date. Since this contract is the I-95 collector/distributor system located to the north of the ICC, it does not impact toll revenues or system capacity for the ICC Project. Thus, this delay will not impact the opening of the 18.8 mainline miles of the facility.

As a result of this delay, SHA will maintain the cumulative funding level through the end of the six-year capital program, which is FY2016. The costs associated with

Contract D are deferred to beyond the six-year capital program and the requisite funding sources to support the additional cost outside the program will be discussed further in Section 4. In addition, the project sponsors will continue to seek cost saving opportunities via value engineering and/or scope adjustments wherever possible such that this contract can be completed as soon as financially possible.

Contract E RFP Work Continues

Work on the Request for Proposal (RFP) continues, including review of advertisement schedules and industry notifications. Due to ongoing contract package refinements, the schedule for the start of Contract E has been adjusted such that NTP is now scheduled for late 2011, with an estimated completion date during the spring of 2014.

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The Eastern Operation Center (EOC) will serve as the maintenance facility on the eastern end of the project as well as be the permanent headquarters for the ICC Authority Police. The EOC is scheduled for a fall 2010 NTP, with completion anticipated in late 2011/early 2012.

Stewardship & Mitigation

Throughout the past year, stewardship and mitigation projects have continued to advance in concept and design. These projects are categorized by one of the following three classifications:

• Compensatory Mitigation (CM) – Replacement of affected aquatic resource functions in addition to the acreage affected.

• Environmental Stewardship (ES) – Restoration efforts and enhancements to improve and restore the natural resources and water quality of the watersheds that the project is located within.

• Community Stewardship (CS) – Enhancement or replacement of community resources within the affected area, including renovating a historic structure or constructing bike trails.

Exhibit 1-7: ES/CM/CS Project Status

Total Contracts Under Design Under Construction Completed 48 40 1 7

Through the end of June, all 48 of the stewardship and mitigation projects had at least reached the design phase. Of these 48 projects, one is under active construction and seven have been completed. As the ICC project progresses, ES/CM/CS activities will continue to advance through design, construction, and then ultimately the monitoring phase to support project schedule requirements.

Over the next two fiscal years, the NTP will be issued for the majority of remaining projects. All ES/CM/CS projects are currently on schedule.

Funding and Financing

During the past year, the Authority successfully issued $549 million in system revenue bonds, of which $240 million was made available to the ICC project for design, right of way and

construction activities. In addition to this successful issuance, $55 million in Maryland General Funds and $30 million in Maryland Transportation Trust Funds were received to support project cash flow requirements in FY2010. The Authority anticipates beginning to draw on the $516 million TIFIA loan this fall to fund construction activities. There have been no draws against the TIFIA vehicle as of June 30, 2010.

Legal Actions Related to the Intercounty Connector Project

There are currently no outstanding legal issues.

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STIMATE

As of June 30, 2010, the total cost to complete the Intercounty Connector Project is estimated at $2.566 billion, which is consistent with the 2009 Financial Plan Update. As detailed below, there have been budget reallocations between costs elements or amongst individual contracts and projectwide costs, however the overall project cost remains unchanged relative to last year.

CURRENT PROJECT ESTIMATE

The project cost estimate is summarized using two different methods based on the year of expenditure dollar (YOE$) summary provided in Appendix F and the comparison with the IFP and 2009 Financial Plan Update in Appendix G. The first summary allocates the project costs by contract. The second method apportions the cost estimate by the major cost elements.

Cost Allocation by Contract

The following table and chart summarizes the current cost estimate by contract in YOE$ and compares it with the IFP and 2009 Financial Plan Update. The majority of changes amongst individual contracts and non-contract costs were due the reallocation of engineering & program management and right of way costs.

Exhibit 2-1: Project Cost Estimate by Contract (YOE$ in million)

Contract Project Component IFP Estimate 2009 Estimate 2010 Estimate Change from 2009 Estimate A I-270 to MD-97 $ 660.3 $ 649.8 $ 656.9 $ 7.0 B MD-97 interchange to US-29 $ 670.2 $ 666.3 $ 669.0 $ 2.7 C US-29 to I-95 $ 320.6 $ 646.8 $ 642.8 $ (4.0) D I-95 C-D Roads $ 472.3 $ 107.6 $ 107.6 $ - E I-95 to US-1 $ 134.4 $ 145.1 $ 144.8 $ (0.3)

Other Non-Contract Costs* $ 188.1 $ 350.3 $ 344.9 $ (5.4) TOTALS $ 2,445.9 $ 2,566.0 $ 2,566.0 $ - * - SHA Projectwide Planning, Preliminary Engineering & Right of Way Costs, as well as Transit, Park & Ride, and Mitigation Costs

$0 $100 $200 $300 $400 $500 $600 $700 $800 A B C D E Other Co st E st im a te (m ill io ns )

Total Cost by Contract

IFP Estimate 2009 Estimate 2010 Estimate

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Based on the exhibit above, the detailed comparison provided in Appendix G, and the

expenditure detail provided in Appendix F for FY2010, the primary causes for the changes in the contract costs relative to the 2009 Financial Plan Update estimate are briefly described below. Contract A: Increase of $7.0 million – This increase was the net of the following:

1. Engineering and program management increase of $6.0 million due to reallocation of overall project costs amongst individual contracts and projectwide expenditures. 2. Right of way and administration increase of $1.8 million due to refined appraisals. 3. Neat construction and additives associated with MdTA tolling and facilities decrease of

$0.8 million.

Contract B: Increase of $2.7 million – This increase was the net of the following: 1. Right of way and administration increase of $2.0 million due to refined appraisals. 2. Engineering and program management increase of $0.4 million due to reallocation of

overall project costs amongst individual contracts and projectwide expenditures. 3. Neat construction and additives associated with MdTA tolling and facilities increase of

$0.4 million.

4. Neat construction and additives associated with utilities decrease of $0.1 million. Contract C: Decrease of $4.0 million – This decrease was the net of the following:

1. Right of way and administration decrease of $3.7 million due to refined appraisals. 2. Engineering and program management decrease of $0.4 million due to reallocation of

overall project costs amongst individual contracts and projectwide expenditures. 3. Neat construction and additives associated with MdTA tolling and facilities increase of

$0.2 million.

4. Neat construction and additives associated with utilities decrease of $0.1 million. Contract D: No Change

Contract E: Decrease of $0.3 million – This decrease was the net of the following: 1. Right of way and administration decrease of $0.6 million due to refined appraisals. 2. Neat construction and additives associated with MdTA tolling and facilities increase of

$0.3 million.

Other Non-Contract Costs: Decrease of $5.4 million – This decrease was the net of the following:

1. Engineering and program management decrease of $6.0 million due to the reallocation of overall project costs amongst individual contracts and projectwide expenditures.

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Page 2-3 Cost Allocation by Project Cost Element and Contract

The following cost estimate is organized by the eight standard project cost elements for each contract. Details are presented in Appendix F, with a comparison with the IFP and 2009 Financial Plan Update estimate in Appendix G.

Exhibit 2-2: Total Project Cost Estimate by Cost Element (YOE$ in million)

2006 2009 IFP

Estimate

Fin Plan

Estimate Cont. A Cont. B Cont. C Cont. D Cont. E Other Costs

2010 Total Estimate

Engineering & Prog. Mgmt. $ 239.9 $ 238.9 $ 25.6 $ 12.7 $ 16.8 $ 11.1 $ 11.4 $ 167.3 $ 244.9 $ 6.0 Right of Way $ 390.7 $ 263.7 $ 81.7 $ 45.7 $ 62.7 $ 3.9 $ 29.3 $ 40.5 $ 263.7 $ - Right of Way Administration $ 50.8 $ 34.3 $ 10.6 $ 5.9 $ 8.1 $ 0.5 $ 3.8 $ 5.3 $ 34.3 $ - Active D/B Base Contract $ - $ 1,555.6 $ 480.1 $ 560.6 $ 514.9 $ - $ - $ - $ 1,555.6 $ - Neat Construction $ 1,322.3 $ 212.8 $ 27.1 $ 7.6 $ 7.6 $ 80.3 $ 86.0 $ 2.0 $ 210.6 $ (2.2)

Construction Overhead $ 216.5 $ 15.9 $ 2.4 $ 1.5 $ 1.5 $ 6.2 $ 8.3 $ 0.3 $ 20.3 $ 4.4 Neat Construction Contingency $ 92.6 $ 109.9 $ 29.4 $ 34.9 $ 31.2 $ 5.6 $ 6.1 $ 0.1 $ 107.3 $ (2.6)

Mitigation/Transit/Park & Ride $ 133.2 $ 134.9 $ - $ - $ - $ - $ - $ 129.3 $ 129.3 $ (5.6)

TOTALS $ 2,445.9 $ 2,566.0 $ 656.9 $ 669.0 $ 642.8 $107.6 $ 144.8 $ 344.9 $ 2,566.0 $ - 2010 UPDATE

Cost Element _{2009 Estimate}Change from

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800

Engineering & Prog. Mgmt. Right of Way Right of Way Administration Active D/B Base Contract Neat Construction Construction Overhead Neat Construction Contingency Mitigation/Transit/Park & Ride

Cost Estimate (millions)

C o st E lemen t IFP Estimate 2008 Estimate 2009 Estimate

The primary cost estimate changes between the 2009 and the 2010 Financial Plan Update are due to the reallocation of engineering and program management costs and estimate refinements associated with MdTA tolling and facilities costs.

EXPENDITURES TO DATE BY CONTRACT & COST ELEMENT

As noted in the following exhibit, the ICC Project has expended $1.448 billion from FY2003 through June 30, 2010, out of a total estimated project cost of $2.556 billion, or 56.4% of the total budget. Expenditures have been primarily focused on Contracts A, B and C and the engineering, program management and right of way activities associated with the other non-contract costs category.

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Page 2-4 Exhibit 2-3: Expenditures to Date by Contract (YOE$ in million)

2010 Estimate Expended to Date % Expended

A $ 656.9 $ 529.1 80.5% B $ 669.0 $ 332.1 49.6% C $ 642.8 $ 430.5 67.0% D $ 107.6 $ 0.2 0.2% E $ 144.8 $ 29.1 20.1% Other* $ 344.9 $ 199.2 57.8% TOTALS $ 2,566.0 $ 1,520.1 59.2%

* - SHA Planning, PE & ROW Costs, as well as Transit, Mitigation, and Park & Ride Costs 2010 UPDATE Contract $0 $100 $200 $300 $400 $500 $600 $700 $800 A B C D E Other* Co st E st im a te (m ill io ns ) Contract 2010 Estimate Expended to Date

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When examining the expenditures by cost element, engineering and program management, right of way and administration, and active design-build contracts are furthest along, with

approximately 56%, 90%, and 62% budget completion, respectively. Neat construction expenditures are progressing due to the construction activities associated with the Western Operations Facility and Eastern Operations Center.

Exhibit 2-4: Expenditures to Date by Cost Element (YOE$ in million)

2010 Estimate Expended to Date % Expended

Engineering & Prog. Mgmt. $ 244.9 $ 137.8 56.2% Right of Way & Admin $ 298.0 $ 272.1 91.3% Active D/B Base Contract $ 1,555.6 $ 1,032.6 66.4% Neat Construction $ 210.6 $ 61.9 29.4% Construction Overhead $ 20.3 $ - 0.0% Construction Contingency $ 107.3 $ - 0.0% Mitigation/Transit/Park & Ride $ 129.3 $ 15.7 12.2%

TOTALS $ 2,566.0 $ 1,520.1 59.2%

2010 UPDATE

Cost Element

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800

Engineering & Prog. Mgmt.

Right of Way & Admin

Active D/B Base Contract

Neat Construction

Construction Overhead

Construction Contingency

Mitigation/Transit/Park & Ride

Cost Estimate (millions)

C o st E lemen t 2010 Estimate Expended to Date COST TO COMPLETE

The remaining cost to complete the ICC project is $1.118 billion. The forecast of remaining annual expenditures through project completion will be summarized within the following section.

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BASIS OF ESTIMATE & ADJUSTMENTS TO ASSUMPTIONS

The method for preparing the current cost estimate is similar to the method described in the IFP and 2007 through 2009 Financial Plan Updates. In summary, the following steps were completed to arrive at the current cost estimate:

1. FY2009$ Cost Estimate: see Appendix C

a. Based on detailed cost estimates for each of the design-build contracts, right of way, engineering and program management, and MdTA tolling and facilities costs, plus the multipliers as noted to determine preliminary engineering, right of way administration, construction overhead, and construction contingency. b. Given that there are 48 sub-projects, Environmental Stewardship (ES),

Compensatory Mitigation (CM), and Community Stewardship (CS) budgets are provided in year of expenditure dollars as calculated within the detailed estimates and as noted on Table 1-A in Appendix C. These summarized estimates roll up in Table 1 in Appendix C accordingly.

c. Transit Capital Costs are budgeted for a $20 million year of expenditure estimate based on project commitments.

d. Relative to the 2009 Financial Plan Update methodology, the multipliers for preliminary engineering, right of way administration, construction overhead, and construction contingency have remained unchanged.

2. Year of Expenditure $ Cost Estimate: see Appendix F

a. This process follows the “Basis for Escalation” process as described in the IFP. b. Escalation forecasts were updated per the Maryland Department of

Transportation’s forecast and as summarized in Appendix B. These escalation factors are consistent with MDOT guidelines issued annually for all capital planning projects. The last update was in May 2010.

c. For each cost element contained in the FY2009$ cost estimate (per Appendix C, Table 1), identify the year expenditures will commence (see Appendix D). d. Identify the cumulative escalation rates (per Appendix B) from the fiscal year

expenditures commence (per Appendix D) and derive cumulative escalation factors (presented in Appendix E).

e. For each cost element contained in the FY2009$ cost estimate (per Appendix C, Table 1), multiply the cost estimate by the appropriate cumulative escalation factor (per Appendix E) to calculate the year of expenditure cost estimate (see Appendix F).

In summary, based on the above methodology and assumptions, Appendix F contains the total year of expenditure dollar cost estimate for the ICC Project.

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PROJECT SCHEDULE

The summary schedule for the Intercounty Connector Project illustrates the project’s tasks by overarching project activities as well as by contract. Please refer to Appendix A for the latest project summary schedule.

Construction activities are ongoing for Contracts A, B and C. For the project as a whole, Exhibit 3-1 summarizes the actual or forecast NTP for each contract as well as the estimated completion dates. Relative to the 2009 Financial Plan Update, the scheduled start dates for Contracts D and E have been deferred by approximately one year. Contract D has been deferred to remain outside the current six-year capital program period. The schedule for Contract E has been adjusted due to ongoing contract package refinements. The completion date for Contract A has been extended by three months due to severe weather delays experienced in FY2010.

Exhibit 3-1: Contract Milestones

NTP _CompletionEstimated NTP _CompletionEstimated NTP _CompletionEstimated NTP _CompletionEstimated A Dec-06 Dec-09 Jun-07 Sep-10 Jun-07 Dec-10 0 3

B Aug-07 Mar-12 Dec-08 Dec-11 Dec-08 Dec-11 0 0

C Mar-07 Dec-12 Jan-08 Dec-11 Jan-08 Dec-11 0 0

D Jun-09 Dec-11 Jul-15 Dec-17 Jul-16 Dec-18 12 12

E Jun-09 Dec-11 Oct-10 Apr-13 Dec-11 Jun-14 14 14

* Relative to 2009 Update Schedule

IFP SCHEDULE 2010 UPDATE

SCHEDULE Change by # of Months* Contract 2009 UPDATE SCHEDULE

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EXPENDITURES TO DATE BY FISCAL YEAR

As noted in Section 2, the project has expended $1.448 billion from the start of project planning in FY2003 through the end of FY2010. These expenditures are summarized by fiscal year in the following exhibit.

Exhibit 3-2: Total Actual Expenditures by State Fiscal Year (YOE$ in million)

Engineering &

Prog. Mgmt. Right of Way Construction Total

2003 $ 1.4 $ - $ - $ 1.4 2004 $ 17.0 $ 3.2 $ - $ 20.2 2005 $ 20.1 $ 3.1 $ - $ 23.3 2006 $ 23.3 $ 6.4 $ 0.1 $ 29.8 2007 $ 21.1 $ 111.1 $ 13.5 $ 145.7 2008 $ 21.1 $ 94.0 $ 161.9 $ 277.0 2009 $ 16.7 $ 33.7 $ 334.6 $ 385.0 2010 $ 17.4 $ 17.1 $ 531.2 $ 565.7 TOTALS $ 138.1 $ 268.5 $ 1,041.4 $ 1,448.1 2010 UPDATE State FY $0 $100 $200 $300 $400 $500 $600 2003 2004 2005 2006 2007 2008 2009 2010 Ex p end it ur es (m ill io ns )

State Fiscal Year

Engineering & Prog. Mgmt. Right of Way

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EXPENDITURE FORECAST METHODOLOGY

Given the unique aspects of implementing a major design-build contract, where engineering and construction tasks occur in parallel and typically start simultaneously with the NTP, this financial plan incorporates the design-build expenditure profiles as summarized in the following exhibit. These curves are based on detailed Contract A, B and C cash flow data with minor adjustments to account for technical or incremental timing adjustments.

Exhibit 3-3: Design-Build Expenditure Curves by Contract

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 6 12 18 24 30 36 42 48 54 Cu m u la ti ve % E x p e n d e d Months from NTP A B C D E B E AC D

Based on these contract expenditure profiles and the schedule shown in Appendix A, monthly and quarterly expenditure forecasts were developed for each major design-build contract. Right of way and engineering and program management expenditure forecasts were developed based on estimated schedules developed by SHA. Expenditures related to utility, park and ride, transit and MdTA tolling and facility costs were estimated on a straight-line basis by fiscal year using the start and end dates identified in the project schedule. Cash flows for mitigation activities are based on individual cash flow schedules for each of the sub-projects. The resulting quarterly cash flow summary is provided in Appendix H.

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TOTAL EXPENDITURE FORECAST

The following exhibit summarizes the combined actual and forecast expenditures for the ICC through project completion (as detailed on a quarterly basis in Appendix H).

Exhibit 3-4: Actual and Projected Expenditures by Fiscal Year (YOE$ in million)

IFP 2009 UPDATE 2010 UPDATE CHANGE FROM ₂₀₀₉

A nnua l Fo re ca st Cu m u la ti v e Fo rec a st A nnua l Fo re ca st Cu m u la ti v e Fo rec a st Ac tu a l Exp e n d e d Ex p e n d it u re Fo rec a st A nnua l Fo re ca st Cu m u la ti v e Fo rec a st A nnua l Cu m u la ti v e 2003 $ 1.4 $ 1.4 $ 1.4 $ 1.4 $ 1.4 $ 1.4 $ 1.4 2004 $ 20.2 $ 21.6 $ 20.2 $ 21.6 $ 20.2 $ 20.2 $ 21.6 2005 $ 23.3 $ 44.9 $ 23.3 $ 44.9 $ 23.3 $ 23.3 $ 44.9 2006 $ 55.3 $ 100.2 $ 29.8 $ 74.7 $ 29.8 $ 29.8 $ 74.7 2007 $ 355.7 $ 455.8 $ 145.7 $ 220.5 $ 145.7 $ 145.7 $ 220.5 2008 $ 487.4 $ 943.2 $ 277.0 $ 497.4 $ 277.0 $ 277.0 $ 497.4 2009 $ 540.5 $ 1,483.7 $ 385.0 $ 882.4 $ 385.0 $ 385.0 $ 882.4 2010 $ 581.4 $ 2,065.1 $ 698.0 $ 1,580.4 $ 565.7 $ 565.7 $ 1,448.1 $ (132.3) $ (132.3) 2011 $ 210.4 $ 2,275.5 $ 597.9 $ 2,178.3 $ 644.6 $ 644.6 $ 2,092.7 $ 46.7 $ (85.6) 2012 $ 154.1 $ 2,429.7 $ 231.4 $ 2,409.8 $ 290.8 $ 290.8 $ 2,383.5 $ 59.4 $ (26.2) 2013 $ 16.3 $ 2,445.9 $ 42.4 $ 2,452.2 $ 42.7 $ 42.7 $ 2,426.2 $ 0.2 $ (26.0) 2014 $ - $ 2,445.9 $ 10.5 $ 2,462.7 $ 36.6 $ 36.6 $ 2,462.7 $ 26.0 $ - 2015 $ - $ 2,445.9 $ - $ 2,462.7 $ - $ - $ 2,462.7 $ - $ - 2016 $ - $ 2,445.9 $ - $ 2,462.7 $ - $ - $ 2,462.7 $ - $ - Subtotal $ 2,445.9 $ 2,462.7 $1,448.1 $ 1,014.7 $ 2,462.7 $ - Out Years $ - $ 2,445.9 $ 103.2 $ 2,566.0 $ 103.2 $ 103.2 $ 2,566.0 $ - $ - Total $ 2,445.9 $ 2,566.0 $1,448.1 $ 1,117.9 $ 2,566.0 $ -

Note: shaded cells represent actuals at the time forecast was developed.

State FY $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 E x p e nd it ur es (m illio ns ) State FY IFP Forecast 2009 Forecast 2010 Forecast Expended to Date Out Years

Relative to the 2009 Financial Plan Update, forecast expenditures are approximately $132 million below forecast through FY2010, primarily due to design-build construction costs being less than anticipated. Going forward, the ICC project team has developed implementation plans for each of the design-build contracts that will enable the project to be completed on schedule.

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IMPACT OF OTHER FUTURE COST CHANGES

The project sponsors acknowledge that potential unforeseen events may result in cost increases. Potential unforeseen events that typically occur throughout the life of a project of this magnitude may include:

Changed environmental and subsurface/site conditions, including utility relocations Contractor or owner requested changes

Removal of hazardous materials Schedule delays

Unanticipated overtime costs and accelerations Changes in government rules and regulations

Unanticipated federal or state transportation budget changes Third party concerns

Disputes or litigation

If unforeseen events occur, they will be addressed in the weekly Project Management Team meeting/teleconference, which includes FHWA, SHA, MdTA and GEC project managers. In addition, the corresponding adjustments will be incorporated into the annual updates to the financial plan. Section 4 presents various mitigation strategies that can be implemented to reduce or eliminate the impact of the above changes and other risks.

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OVERALL FINANCIAL PLAN

The total funding package for the Intercounty Connector Project over the six-year program (through State FY2016) period is $2,462.7 million. This is consistent with the six-year program period amount shown in the 2009 Financial Plan Update. The current funding package is comprised of a combination of the following state and federal sources:

• $750.0 million in Grant Anticipation Revenue Vehicle (GARVEE) bonds • $715.6 million in Authority supported toll revenue bonds and cash • $516.0 million in Authority supported TIFIA loan

• $264.9 million in state General Funds and General Obligation (GO) bonds • $180.0 million in state Transportation Trust Funds

• $19.3 million in special federal funds

• $16.9 million in additional funds from GARVEE sale

Details regarding the timing of these funding sources can be found in the Plan of Finance in Appendix I.

COMMITTED FUNDING SOURCES - $2,462.7 Million

GARVEE Bonds - $750.0 Million

In June 2007, the Authority issued the first of two series of GARVEE bonds with investment grade ratings (AAA – S&P, AA – Fitch, Aa2 – Moody’s). A total of $341.9 million was successfully

deposited into the project fund with favorable financial terms ($16.9 million of which was the additional funds discussed below). In December 2008, the second series of GARVEE bonds were issued (AAA – S&P, AA – Fitch, Aa2 – Moody’s), resulting in an additional $425 million in funding. Funding requirements to support the GARVEE debt service have been incorporated into SHA financial forecasts as required. In addition, the 2005 legislation created a subordinate pledge of the Maryland Transportation Trust Fund revenues to be used for GARVEE debt service if future federal aid is insufficient to pay such debt service. Pledged taxes are levied under Section 3-215 of the Transportation Article, Title 3, Subtitle 2.

Debt service for the GARVEE Bonds is projected to peak at approximately $86 million per federal fiscal year beginning in FY2010. Given that the federal aid program at this time will be

approximately $600 million per year, GARVEE debt service of $86 million per year would use 15% of the total annual federal aid funds authorized for Maryland. This low percentage will not impact federal aid that is designated to support system preservation requirements.

Authority Supported Toll Revenue Bonds and Cash - $715.6 Million

The Authority (MdTA) will contribute $715.6 million toward the project cost in the form of toll revenue bonds and cash that will be secured by a system-wide pledge of Authority facility revenues, i.e. toll revenues from the seven existing toll facilities and from the ICC. The collective revenues from all of these facilities support this debt and cash contribution.

As planned in the Authority’s current six-year Consolidated Transportation Plan, the $715.6 million in funding will be provided to the ICC by State FY2016. Given that the six-year capital plan represents a commitment from the Authority from a budgetary and capital planning perspective, the $715.6 million is considered as committed to the project. In March 2008, the first system bond issue with funds available for the ICC was successfully issued such that $176.3 million in proceeds were provided to the project. In December 2009, a second system bond issuance was completed,

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which provided an additional $240.0 million to fund project expenditures.

Authority Supported TIFIA Loan - $516.0 Million

In December 2008, Maryland concluded its agreement with FHWA for a $516.0 million federal loan for the project under the Transportation Infrastructure Finance and Innovation Act (TIFIA). The TIFIA loan rate is 2.56% and the timing of future TIFIA loan draws will depend primarily upon the comparison of the TIFIA loan rate versus that of Authority toll revenue bonds, but are currently assumed to occur in FY2011 and FY2012 in this Financial Plan Update, as shown in Appendix I. There have been no draws against the TIFIA vehicle as of June 30, 2010.

State of Maryland General Funds and General Obligation Bonds - $264.9 Million

The State of Maryland has committed $264.9 million to the ICC Project to be paid out of the General Fund of the State Treasury and General Obligation (GO) bonds. In FY2007, $53 million was transferred to the Authority to pay for project expenditures, and an additional $55 million was transferred in FY2010. Going forward, the balance of these funds is scheduled to be provided in FY2011 through FY2013.

State of Maryland Transportation Trust Fund - $180.0 Million

The State of Maryland has committed $180.0 million to the ICC Project within its current six-year Consolidated Transportation Program to be paid from the Transportation Trust Fund. In FY2010, $30 million was transferred to the Authority to pay for project expenditures. Given that $150 million was transferred prior to FY2010, all Transportation Trust Funds have now been transferred to the ICC project.

Special Federal Funds - $19.3 Million

Currently, a total of $19.3 million of special federal funding has been authorized or appropriated by Congress for planning, preliminary engineering and design, final engineering, right of way acquisition, and construction on the ICC project. This is an increase of $0.8 million from the Initial Financial Plan resulting primarily from the addition of STP Discretionary Funds (Section 117). As noted in the Initial Financial Plan, the balance of funding is comprised of:

• $0.5 million from the FY2004 US Department of Transportation and Related Agencies Appropriations Bill National Corridor Planning and Border Infrastructure program

• $18.0 million from the Safe, Accountable, Flexible and Efficient Transportation Equity Act – A Legacy for Users (SAFETEA-LU) in earmarked funds under Section 1302 (National Corridor Improvement Program - $10 million) and Section 1702 (High Priority Earmarks - $8 million) The funding presented above is provided via Highway Trust Fund contract authority and is to remain available until fully expended.

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Page 4-3 Additional Funds from GARVEE Sale - $16.9 Million

Based on the coupon rate at the time of the first GARVEE Bond issue, investors committed to total proceeds such that $16.9 million in additional funds were made available to the project.

ANTICIPATED FUNDING SOURCES - $103.2 Million

As discussed previously, the costs associated with Contract D have been deferred outside of the current six-year program. With construction now scheduled to begin in State FY2017, contingent on funding, the total year of expenditure budget of $103.2 million is projected to be spent through FY2019. Given that this contract falls outside of the six-year program, SHA and MdTA will work together with the Maryland Department of Transportation to identify opportunities to either:

1) identify cost savings within the project to reaccelerate the project, or

2) additional funding to support up to $103.2 million in cost planned beyond the current six-year program.

In the event that future cost savings are not sufficient to cover the additional $103.2 million in cost, SHA and MdTA will review the various financial resources available to pay for Contract D as it enters into the six-year transportation program, beginning next year. Funding sources that could be utilized include, but are not limited to, regular federal aid apportionments, Maryland

Transportation Trust Funds, Authority funds, other bond proceeds or other state funding sources.

SUMMARY OF COMMITTED & ANTICIPATED FUNDING

Based on the committed and anticipated funding sources outlined above, the following chart summarizes the sources and amounts of funding required to complete the ICC Project:

Exhibit 4-1: Funding Sources for the ICC Project

IFP 2009 2010 UPDATE

Total Total Committed Planned Total

GARVEE Bonds $ 750.0 $ 750.0 $ 750.0 $ - $ 750.0 $ - MdTA Toll Revenue Bonds & Cash $ 1,232.5 $ 715.6 $ 715.6 $ - $ 715.6 $ - TIFIA Funds $ - $ 516.0 $ 516.0 $ - $ 516.0 $ - Maryland General Fund & GO Bonds $ 264.9 $ 264.9 $ 264.9 $ - $ 264.9 $ - Maryland Transportation Trust Fund $ 180.0 $ 180.0 $ 180.0 $ - $ 180.0 $ - Special Federal Funds $ 18.5 $ 19.3 $ 19.3 $ - $ 19.3 $ - Additional Funds from GARVEE Sale $ - $ 16.9 $ 16.9 $ - $ 16.9 $ - Funds Outside Current Capital Program $ - $ 103.2 $ - $ 103.2 $ 103.2 $ -

TOTAL $ 2,445.9 $ 2,566.0 $ 2,462.7 $ 103.2 $ 2,566.0 $ -

Notes: All Funding in Six-Year Plan Considered Committed. Amounts Adjusted Due to Estimate Change & Fed Fund Update

Change from 2009 Funding Source

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KEY REVENUE ASSUMPTIONS, RISKS, AND MITIGATION STRATEGIES

Based on the committed funding sources previously described, Exhibit 4-2 summarizes the potential risks associated with the funding.

Exhibit 4-2: Summary of Key Risks Risk

Category Description

Time/ Cost

Construction – costs may escalate as design and construction proceed,

however over $1.5 billion is now under construction, with final prices set.

Project Schedule and Inflation – any delays will have a ripple effect on the

overall schedule and cost.

Interest Rate Risk – if interest rates are higher than assumed, a larger

amount of federal highway funds and toll revenues would be required to service the level of debt assumed for the project.

Revenue

MD General Funds and GO Bonds – The Maryland General Fund component

of the funding plan is specified in law; however, considering that they are also appropriated on an annual basis, timing and amounts could fluctuate.

Authority Toll Revenues – Toll revenues across the Authority system,

including the ICC, may be lower than forecast. Delays to ICC completion could decrease the assumed ICC toll revenue contributing to the system wide pledge of Authority revenues.

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If the project sponsors encounter any changes to the financial profile of the project due to the risks noted above, there are one or more risk mitigation strategies that could be implemented to offset those changes. Exhibit 4-3 summarizes the risk mitigation strategies available to the project sponsors.

Exhibit 4-3: Summary of Key Mitigation Strategies Risk Mitigation Strategies

Design-Build contractors will be selected to manage and deliver discrete project segments.

This provides the contractor with the flexibility to begin designing other parts of the project while still constructing another part.

SHA has contracted with a GEC to provide program management services. With this integrated approach and perspective, the GEC can coordinate activities of contractors to

advance the project in the most cost-effective manner. The GEC also monitors project schedules and expenditures on a monthly basis and conducts monthly schedule reviews with the project management team.

The financial strength of the project is due in large measure to its multi-sourced

funding plan, using four separate funding sources (Authority funds, federal funds, Maryland

Transportation Trust Funds and General Funds). Other funding sources that could be utilized if necessary include, but are not limited to, regular federal aid apportionments, other federal funds, other bond proceeds and other state funding sources.

The financial strength of the project is also due to the use of a system-wide pledge of

revenues from the Authority. The toll revenue bonds are secured by a system-wide pledge,

including revenues from seven existing toll facilities as well as the ICC. Under its toll revenue bond Trust Agreement, the Authority is required to raise tolls if necessary to pay for debt service on outstanding bonds.

Interest rate assumptions in the finance plan are conservative, and would allow for increases above current interest rates without affecting the viability of the plan. (For example, the interest rate earlier assumed for the first tranche of GARVEEs was 5%; the actual interest rate obtained was 4%.) Additionally, the use of a TIFIA loan can mitigate this risk. A TIFIA loan rate of 2.56% was locked in during December 2008; this rate will apply to all draws against the loan. Use of various TIFIA loan provisions (deferral of debt service payments, longer maturities, etc.) offsets the effects of a slower ramp-up in ICC project revenues and provides flexibility in meeting the timing of funding requirements.

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Very similar to the analysis in the 2009 Financial Plan Update, the ICC Project will be financed with a combination of federal and state funds, GARVEE Bonds and toll-revenue secured debt. A

summary of the Authority’s funding plan for the project throughout its construction period is provided in Appendix I.

REVENUE TIMING BY SOURCE

GARVEE Bonds ($750.0 Million)

As noted in Section 4, the Authority completed the first issuance in FY2007, which resulted in net proceeds available to fund construction of $341.9 million ($16.9 million of which was the additional GARVEE funds discussed below). The second and final issuance was completed in FY2009 and resulted in the remaining $425 million of GARVEE funding for the project.

Authority Supported Toll Revenue Bonds and Cash ($715.6 Million)

The Maryland Transportation Authority will issue toll revenue bonds to cover approximately 25% of the total project cost. In addition to cash contributions that commenced in FY2004 (which were ultimately reimbursed by the GARVEE issuance), the first system bond issue with funds dedicated to the ICC was successfully issued in FY2008 such that $176.3 million in proceeds were made available to the project. In FY2010, a second system bond issuance was completed, which provided an additional $240.0 million to fund project expenditures. Subsequent system bonds will be issued throughout the remainder of the construction period from FY2011 through FY2012.

Authority Supported TIFIA Loan ($516.0 Million)

The Authority anticipates on utilizing a TIFIA loan to cover $516.0 million in project costs. The timing of future TIFIA loan draws will depend primarily upon the comparison of the TIFIA loan rate versus that of Authority toll revenue bonds, but are currently assumed to occur in FY2011 and FY2012. There have been no draws against the TIFIA vehicle as of June 30, 2010.

Maryland General Funds and General Obligation Bonds ($264.9 Million)

The State provided $53 million to the project in FY2007 and $55 million in FY2010. Under statute, the balance of the funds will be transferred to the Authority in FY2011 through FY2013.

Maryland Transportation Trust Funds ($180.0 Million)

To date, all $180 million has been made available to the project from this source.

Federal Special Funds ($19.3 Million)

As noted in Section 4, the ICC Project has received special federal funds totaling $19.3 million. To date, $18.5 million has been obligated. The balance will be funded in future fiscal years, primarily via the obligation of the STP Discretionary Funds (Section 117).

Additional Funds from GARVEE Sale ($16.9 Million)

As noted in Section 4, the ICC Project received $16.9 million in additional funds associated with the first GARVEE bond issue.

Future Funds ($103.2 Million)

As discussed, future funds required to pay for the balance of the ICC from FY2017 through FY2019 will be identified and incorporated as Contract D cash flows enter into the six-year consolidated transportation program, which will begin next year. Funding sources that could be utilized if necessary include, but are not limited to, regular federal aid apportionments, Maryland