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Re: Phase 2 streetcar to UMKC

Posted: Tue Jun 12, 2018 1:29 pm
by DaveKCMO
Correct. The ballot language does not specify that the remaining capital be federal or "in hand".

Re: Phase 2 streetcar to UMKC

Posted: Tue Jun 12, 2018 3:26 pm
by beautyfromashes
DaveKCMO wrote:Correct. The ballot language does not specify that the remaining capital be federal or "in hand".
So, would just have to come from some other source outside of the district, correct? This couldn’t be from a loan based on fare revenue though as this would be considered in district, right?

Re: Phase 2 streetcar to UMKC

Posted: Tue Jun 12, 2018 3:43 pm
by flyingember
beautyfromashes wrote:
DaveKCMO wrote:Correct. The ballot language does not specify that the remaining capital be federal or "in hand".
So, would just have to come from some other source outside of the district, correct? This couldn’t be from a loan based on fare revenue though as this would be considered in district, right?
A fare could be used to supplement the amount as it's not an approved tax already used as a revenue source. It doesn't matter where the extra revenue comes from as long as it's a new and unique source legally backing the bond debt.
1 million rides at $2 each, with 25% overhead over 30 years could raise $45 million. Not quite enough to bridge the gap as I understand but not insignificant.

I missed two key words and it's the smartest term put into the ballot. Obviously the goal is to build it all but there's not a requirement to wait for 100% of money to build, just need a "substantial portion" to be constructed. (whatever that means practically) It's smart that there's a way forward for contingencies so the board can decide to build something if procuring financing gets stuck at like 85%

The political fallout might not make it not worth it, but at the end of the day if we could build sooner and end at Cleaver or build three years later and make it to UMKC, I would say construction should be started sooner.

Re: Phase 2 streetcar to UMKC

Posted: Tue Jun 12, 2018 3:54 pm
by beautyfromashes
^ I understand what you’re saying about flexibility, but it also totally changes what you are asking residents to approve with elections like the one we are currently in. What is being communicated is that there is every intention that there would be no fare and would be significantly funded by federal matching funds. But, my concern all along is this huge power to totally change what the extension will be. That fares could be added, a city tax, that stops could be wholesale changed or eliminated outright, that the line could be shortened, etc is sloppy at the least, especially in the middle of the election cycle. This should have all been laid out before asking for funds or even determining officers. We don’t even know whether tracks will be center running or side running. It just says, “Hurry up and give me the money so I can determine what is best for “you”.”

Re: Phase 2 streetcar to UMKC

Posted: Tue Jun 12, 2018 8:56 pm
by DaveKCMO
It would have to be an amazing equity offer that completely eschews federal funding and bests the 2023 opening date for me to support a fare on the extension(s).

Re: Phase 2 streetcar to UMKC

Posted: Tue Jun 12, 2018 8:58 pm
by DaveKCMO
beautyfromashes wrote:
DaveKCMO wrote:Correct. The ballot language does not specify that the remaining capital be federal or "in hand".
So, would just have to come from some other source outside of the district, correct? This couldn’t be from a loan based on fare revenue though as this would be considered in district, right?
A loan is not funding, it's financing.

Re: Phase 2 streetcar to UMKC

Posted: Tue Jun 12, 2018 9:35 pm
by beautyfromashes
DaveKCMO wrote: A loan is not funding, it's financing.
Yep. Sorry if this made the post difficult to understand.

Re: Phase 2 streetcar to UMKC

Posted: Tue Jun 12, 2018 10:17 pm
by WoodDraw
DaveKCMO wrote:It would have to be an amazing equity offer that completely eschews federal funding and bests the 2023 opening date for me to support a fare on the extension(s).
I guess my question is why not do debt instead of equity?

Re: Phase 2 streetcar to UMKC

Posted: Wed Jun 13, 2018 2:52 am
by normalthings
WoodDraw wrote:
DaveKCMO wrote:It would have to be an amazing equity offer that completely eschews federal funding and bests the 2023 opening date for me to support a fare on the extension(s).
I guess my question is why not do debt instead of equity?
Equity=Ownership.
Debt=Borrow Money and eventually Pay it back.

Re: Phase 2 streetcar to UMKC

Posted: Wed Jun 13, 2018 8:21 am
by DaveKCMO
While there may technically be a path to "pay as you go" with a non-city, non-TDD equity infusion (I would support this!), issuing debt is assumed in the financials. The debt could be issued by anyone, but leading contenders are the city, TDD, or KCATA.

Re: Phase 2 streetcar to UMKC

Posted: Wed Jun 13, 2018 8:21 am
by flyingember
normalthings wrote:
WoodDraw wrote:
DaveKCMO wrote:It would have to be an amazing equity offer that completely eschews federal funding and bests the 2023 opening date for me to support a fare on the extension(s).
I guess my question is why not do debt instead of equity?
Equity=Ownership.
Debt=Borrow Money and eventually Pay it back.
It's more complex than that.

Equity ownership means someone has the right to say what happens with the system more directly. They could be structured as a silent partner with no operational rights but being an owner they could still sell their portion of the system. It's like any business ownership, you would expect a wage comparable to your ownership stake, to be paid out dividends or the like. You would expect that if sales taxes go up 50% inside the district that any equity deal has an increasing payment being made. The upside is an equity partner doesn't necessarily need to be paid back as quickly. If they see a $75 million investment as a deal where they could make $100 million back over 20 years they may make the deal and get paid nothing for 5 years. They also could see $0 if the deal is structured right when tax revenue doesn't increase. It's a risk for them like any business investment.

A debt partner has no say. It's a loan obviously. The downside is loans come with terms and amounts are based on ability to pay back starting immediatelly. And presumably being a private loan the terms are likely to be worse than normal. The upside is if things are doing well the loan payment doesn't go up. If income goes down an equity partner has less income to be paid from, a loan will get paid. A loan also ends while an equity partner needs to be bought out to remove them.

Imagine if a large company like American Century decides they can lease out one tower at 20% higher rates with the streetcar and partnering with other big entities in the same situation they fully fund the system in exchange for a small portion of overall revenues. The public benefits because they took on some of the risk and American Century is ahead too. This is the definition of a public-private partnership where everyone benefits from the streetcar and the cost isn't just paid through taxes or fares. Functionally they're not paying the special assessment into the system but that's an acceptable tradeoff.

A good equity arrangement is better than taking on a debt but a bad equity arrangement is way worse

Re: Phase 2 streetcar to UMKC

Posted: Wed Jun 13, 2018 10:00 am
by beautyfromashes
Why would someone take an equity position in the streetcar when it doesn’t produce any revenue with no fare? How would they get their money back?

Re: Phase 2 streetcar to UMKC

Posted: Wed Jun 13, 2018 10:05 am
by DaveKCMO
beautyfromashes wrote:Why would someone take an equity position in the streetcar when it doesn’t produce any revenue with no fare? How would they get their money back?
The TDD is a stable source of revenue for 30 years. That's actually more attractive than fare revenue.

Re: Phase 2 streetcar to UMKC

Posted: Wed Jun 13, 2018 10:21 am
by beautyfromashes
DaveKCMO wrote: The TDD is a stable source of revenue for 30 years. That's actually more attractive than fare revenue.
That wouldn’t be equity then. It’d be a loan based on sales and property tax revenue.

Re: Phase 2 streetcar to UMKC

Posted: Wed Jun 13, 2018 10:44 am
by DaveKCMO
beautyfromashes wrote:
DaveKCMO wrote: The TDD is a stable source of revenue for 30 years. That's actually more attractive than fare revenue.
That wouldn’t be equity then. It’d be a loan based on sales and property tax revenue.
A fare wouldn't be equity either.

Re: Phase 2 streetcar to UMKC

Posted: Wed Jun 13, 2018 11:00 am
by beautyfromashes
DaveKCMO wrote: A fare wouldn't be equity either.
A fare would be revenue for someone who bought the streetcar (equity). That’s why I’ve been so confused by that term. No one is going to buy the streetcar unless they get the revenue from it, the fare, or some other form of revenue or benefit from it. So, I was trying to figure out what other benefit there could be when “equity” was mentioned. I suppose someone could get advertising revenue or a landowner could purchase equity to ensure the streetcar is built and get value through increased value. None of those made sense. So, likely dead topic. No one will own equity in the streetcar.

Re: Phase 2 streetcar to UMKC

Posted: Wed Jun 13, 2018 11:43 am
by WoodDraw
normalthings wrote:
WoodDraw wrote:
DaveKCMO wrote:It would have to be an amazing equity offer that completely eschews federal funding and bests the 2023 opening date for me to support a fare on the extension(s).
I guess my question is why not do debt instead of equity?
Equity=Ownership.
Debt=Borrow Money and eventually Pay it back.
Uhh, yes. I know that. Thank you for your services though.

Re: Phase 2 streetcar to UMKC

Posted: Wed Jun 13, 2018 2:21 pm
by flyingember
beautyfromashes wrote:
DaveKCMO wrote: The TDD is a stable source of revenue for 30 years. That's actually more attractive than fare revenue.
That wouldn’t be equity then. It’d be a loan based on sales and property tax revenue.
beautyfromashes wrote: A fare would be revenue for someone who bought the streetcar (equity). That’s why I’ve been so confused by that term. No one is going to buy the streetcar unless they get the revenue from it, the fare, or some other form of revenue or benefit from it. So, I was trying to figure out what other benefit there could be when “equity” was mentioned. I suppose someone could get advertising revenue or a landowner could purchase equity to ensure the streetcar is built and get value through increased value. None of those made sense. So, likely dead topic. No one will own equity in the streetcar.
I'm sure you've seen that revenues are way up, effectively meaning the system has a tax surplus. That's what you could pay an equity owner out of.

A loan comes with fixed payments based on the amount loaned out. A $75 million loan at 2.5% always has the same payment and it ends on a date.

An equity partner could demand Any amount of a surplus. Like imagine it's paid all surplus up to $5 million and beyond it $5 million + 10% of revenue. Imagine the bond payment is $5 million and the TDD raises $12 million. With an equity stake this third party would get a $5.2 million payment. If the This payment comes only from the existing tax revenue and nothing more. They're betting on economic growth meaning there's always a surplus. The up side is they have an incentive to help increase the surplus and make it as big as possible. A good equity plan would be way more complex than what I describe but you get the idea.

But there's another option. It takes the perfect storm of people and money to happen, so it's unlikely, but it shows that not all equity means being paid back directly. Imagine 20 business come together with $100 million in annual rental revenue from apartments and offices along the streetcar. They feel like they could raise rates an average of 10% with the streetcar and then 2% annually. Otherwise it would just be 2% annually.
That single 10% bump means they make an extra $300 million in rent over 30 years, or $10 million per year on average. In this hypothetical they might be willing to come together and back a loan for $90 million per year to make that happen. Even paying back the loan it would be a ~300% rate of return and that's the kind of return that you never get in business.

The last idea is more of a grant to be fair but it could be structured as an equity partner where the TDD promises to make 10% of payments on the loan because compound interest says they don't see much value up front. Same idea really but a different payment model.

Re: Phase 2 streetcar to UMKC

Posted: Thu Jun 14, 2018 7:38 pm
by normalthings
Will they/when will they release an RFP for third parties interested in the streetcar expansion?

Re: Phase 2 streetcar to UMKC

Posted: Fri Jun 15, 2018 6:07 pm
by DaveKCMO
3,545 is the final count for @kcstreetcar ballots accepted before the 5pm June 12 deadline... 10% of registered voters in the TDD boundary ("turnout").

4,770 ballots were mailed & 5,044 were requested.

Certified results announced at noon June 20 at Union Station!