With revenue declining and costs increasing, Sound Transit lobbies for state and federal aid

On the sur­face, Sound Tran­sit has much to cel­e­brate over the next three years.

By 2024, ST’s light rail net­work will almost triple in size to six­ty-two miles. Exten­sions to Fed­er­al Way, Lyn­nwood, and Red­mond are near­ing completion.

These accom­plish­ments, set in motion with vot­er approval of the ground­break­ing Sound Tran­sit 2 pack­age in 2008, will fun­da­men­tal­ly change the Puget Sound region’s tran­sit infra­struc­ture for the bet­ter. But beyond 2024, the out­look for the next set of Sound Tran­sit expan­sion projects gets murky fast.

In the months ahead, Sound Tran­sit will have to make some impor­tant deci­sions about its ST3 projects, which were approved by vot­ers in 2016.

With many impor­tant Sound Tran­sit board meet­ings loom­ing this spring and sum­mer, let’s take a moment to assess the chal­lenges the agency is facing.

The odd pandemic economy: pandemic plunge, creeping costs

Rough­ly a year ago, I remem­ber head­ing to King Street Sta­tion on a Thurs­day after­noon for a Sound Tran­sit board meeting.

On the agen­da that sun­ny Feb­ru­ary after­noon was the poten­tial open­ing of a light rail sta­tion at NE 130th St in North Seat­tle six years ahead of sched­ule, which I cov­ered for NPI’s Cas­ca­dia Advo­cate. At that moment, Sound Tran­sit enough finan­cial breath­ing room to con­sid­er accel­er­at­ing projects.

One year lat­er, the agency faces an “afford­abil­i­ty gap” total­ing $11.5 bil­lion through 2041. For con­text, the entire ST3 pack­age came in at $53.8 billion.

How’d the agency end up in this sit­u­a­tion? There’s more to it than the pandemic.

Over the first nine months of 2020, over­all agency rev­enue was down by 7.3%, or $106 mllion. This was dri­ven by major reduc­tions in rental car tax col­lec­tions, fare rev­enue, local and state con­tri­bu­tions, and sales tax col­lec­tions. (Note these fig­ures cov­er loss­es only until Sep­tem­ber, sev­en months into the pandemic.)

Fed­er­al dol­lars, through the CARES Act and else­where, com­plete­ly cov­ered Sound Tran­sit’s loss­es dur­ing that peri­od. That helped. But those one-time mea­sures can­not be relied on for long-term planning.

The oth­er major squeeze: our region­al hous­ing short­age and increas­ing land val­ues are dri­ving up project costs, bigtime.

For the light rail projects cur­rent­ly in the pipeline ― includ­ing light rail to West Seat­tle and Bal­lard, the con­nec­tion from Fed­er­al Way to the Taco­ma Dome, and a new main­te­nance facil­i­ty in the South Sound ― right-of-way cost and asso­ci­at­ed design costs have risen by between $4.8 bil­lion and $6.2 billion.

That’s close to 50%. And that fig­ure does­n’t direct­ly fac­tor in oth­er projects cur­rent­ly in more pre­lim­i­nary design phas­es, like Link to Issaquah. (Future project cost ranges are already scaled up when cur­rent project cost ranges increase.)

The news is not all disconcerting.

Cost esti­mates for bus rapid tran­sit (BRT) along the exist­ing I‑405 and State Route 522 cor­ri­dors have remained rel­a­tive­ly stable. 

The I‑405 project, con­nect­ing Burien to Belle­vue to Lyn­nwood, has stayed at around $1 bil­lion ever since it was pre­sent­ed to vot­ers in 2015.

Since Stride bus rapid tran­sit will make heavy use of exist­ing trans­porta­tion infra­struc­ture, it is not sub­ject to land val­u­a­tion fluctuations.

The Sound Tran­sit board issued a state­ment in Feb­ru­ary call­ing on law­mak­ers in Olympia to help ease the loom­ing $11.5 bil­lion project fund­ing gap.

The call comes at a moment when the Leg­is­la­ture is con­sid­er­ing mul­ti­ple large trans­porta­tion out­lays that will last through the end of this decade.

Alarm­ing­ly, these pack­ages do not con­tain fund­ing for Sound Transit.

A pro­pos­al advanced by Sen­ate Trans­porta­tion Chair Steve Hobbs (D‑44th Dis­trict: Sno­homish Coun­ty) would raise almost $8 bil­lion through a tax on pol­lu­tion over the next ten years. A price on pol­lu­tion is a log­i­cal means of fund­ing mul­ti­modal trans­porta­tion infra­struc­ture giv­en that the 18th Amend­ment to the Con­sti­tu­tion stip­u­lates that gas tax rev­enues must be devot­ed to highways.

But instead of invest­ing the rev­enue raised from putting a price on pol­lu­tion to tran­sit, one of the most effec­tive ways to curb emis­sions that dam­age the cli­mate, Hobbs’ plan calls for bil­lions in high­way capac­i­ty upgrades and oth­er invest­ments, and has vir­tu­al­ly no mon­ey for tran­sit expansion.

Rep­re­sen­ta­tive Jake Fey (D‑Tacoma), the House Trans­porta­tion Chair, pro­posed a $26 bil­lion, six­teen year pack­age that would give Sound Tran­sit more wig­gle room. Out of the $7.5 bil­lion pro­ject­ed to be raised (less per annum than the Hobbs pro­pos­al), $333 mil­lion is des­ig­nat­ed for to-be-deter­mined tran­sit projects.

Yet over the course of six­teen years, and with high-speed rail one of the many tran­sit invest­ments that mon­ey could be slat­ed for, there’s not much mon­ey in that pro­pos­al that could go to the already-approved set of ST3 projects.

In the oth­er Wash­ing­ton, U.S. Rep­re­sen­ta­tive Rick Larsen, who sits on the House Trans­porta­tion Com­mit­tee, announced that Wash­ing­ton will receive around $867 mil­lion in one-time grants through the Fed­er­al Tran­sit Administration.

This total includes funds for Sound Tran­sit, as well as oth­er agencies.

CEO Peter Rogoff is cer­tain to aggres­sive­ly pur­sue these funds.

Details are murki­er regard­ing the poten­tial fed­er­al infra­struc­ture pack­age Demo­c­ra­t­ic lead­er­ship wish­es to advance after the Amer­i­can Res­cue Plan is (hope­ful­ly) sent to Pres­i­dent Joe Biden’s desk for signing.

For­tu­nate­ly, Wash­ing­ton’s con­gres­sion­al del­e­ga­tion holds sig­nif­i­cant sway in the com­mit­tees that will be instru­men­tal in craft­ing infra­struc­ture legislation.

In addi­tion to Rep­re­sen­ta­tive Larsen, Mar­i­lyn Strick­land (D‑Tacoma) sits on the House Trans­porta­tion Com­mit­tee. (It is also chaired by Rep­re­sen­ta­tive Peter DeFazio of Ore­gon, who rep­re­sents Eugene, Lane Coun­ty, and sur­round­ing areas.)

Wash­ing­ton’s junior Unit­ed States Sen­a­tor, Maria Cantwell, now chairs the Sen­ate Com­mit­tee on Com­merce, Sci­ence, and Trans­porta­tion, while Wash­ing­ton’s senior Unit­ed States Sen­a­tor Pat­ty Mur­ray, a vet­er­an appro­pri­a­tor and ally of Sound Tran­sit, sits on the Appro­pri­a­tions Com­mit­tee’s Trans­porta­tion, Hous­ing and Urban Devel­op­ment, and Relat­ed Agen­cies Subcommittee.

Rogoff, who was the head of the Fed­er­al Tran­sit Admin­is­tra­tion before becom­ing CEO, often tells Sound Tran­sit’s board that there is a lim­it to how much mon­ey Con­gress will spend on projects in any region. And it is true that Sound Tran­sit bor­rows much more from the fed­er­al gov­ern­ment com­pared to peer agencies.

With all that influ­ence, and with the pos­si­bil­i­ty of a infra­struc­ture bill lat­er this year, an infu­sion of fed­er­al cash in 2021 does not seem out of the question.

State and fed­er­al finan­cial assis­tance now would be par­tic­u­lar­ly use­ful and effec­tive. Giv­en the nature of Sound Tran­sit’s finances, a dol­lar today is much more use­ful than a dol­lar tomor­row. Bor­row­ing costs are low right now.

On the oth­er hand, with less cash com­ing in, the agency will have less capac­i­ty to issue debt. This will lead to project delays, which then height­en the risk for increas­es in land acqui­si­tion costs, bor­row­ing costs, cre­at­ing a vicious cycle.

Realignment: A spring/summer of options and uncertainty

Sound Tran­sit is almost cer­tain to receive some funds from the Leg­is­la­ture or Con­gress in 2021. But they prob­a­bly won’t add up to $11.5 billion.

Inter­est­ing­ly, the agency is not slat­ed to run out of mon­ey until 2029, when the amount of cash on hand will decrease dras­ti­cal­ly. There­fore, it is plan­ning for next steps, so that its costs won’t exceed how much mon­ey it has in any giv­en year.

That process is known as “realign­ment.”

Last sum­mer, the board decid­ed that it would not take any final deci­sions on realign­ment until this summer.

This gave the board more time to see how the COVID-19 pan­dem­ic would play out before mak­ing deci­sions that will impact how we move around the Puget Sound region for the next century.

The fun­da­men­tal cal­cu­lus has always been straight­for­ward: Sound Tran­sit needs more mon­ey to fund its vot­er-approved mandate.

If it can­not afford to build every­thing in the ST3 plan, the board has the author­i­ty to delay or even can­cel projects beyond the cur­rent 2041 end-date.

For a detailed look at what realign­ment could look like, and the cri­te­ria being used to make deci­sions, The Urban­ist has a thor­ough piece describ­ing the Board­’s recent con­ver­sa­tions here.

Some key points to bear in mind:

• The agency believes it could receive between $2.2 bil­lion and $7.8 bil­lion from the fed­er­al gov­ern­ment through var­i­ous pro­grams to fill the gap.
• Vot­ers liv­ing with­in Sound Tran­sit’s region­al dis­trict (cov­er­ing most of Sno­homish, King, and Pierce coun­ties) could approve mea­sures to increase the agen­cy’s debt capac­i­ty lim­it and help it bor­row more with­out tax increase. 
  • This could free up between $1 bil­lion and $3 billion
  • Vot­ers could also approve a busi­ness head tax of $24 per year to raise $865 million.
• Sub­stan­tial delays are like­ly for projects that are not part of the “spine” — the envi­sioned light rail links con­nect­ing com­mu­ni­ties from Everett to Tacoma.
• Pri­or­i­tiz­ing equi­ty, max­i­miz­ing rid­er­ship, com­plet­ing the spine, and adher­ing to tech­ni­cal require­ments for the sequenc­ing of projects are the four main cri­te­ria being used to make decisions.

It is also pos­si­ble that cer­tain expan­sions — such as light rail to Everett and Taco­ma — will be opened in seg­ments (at Mariner and Fife, respectively).

Sno­homish and Pierce Coun­ty offi­cials were very resis­tant to this idea dur­ing the 2016 cam­paign, since they feared the board would short­en the exten­sions in the event of a down­turn. Now, Sno­homish Coun­ty Exec­u­tive Dave Somers is cau­tious­ly behind the pro­pos­al — though he made a point of stress­ing to his fel­low board­mem­bers that light rail to Everett must be even­tu­al­ly com­plet­ed.

There is also con­sid­er­able uncer­tain­ty around the ulti­mate size of the hole.

Board­mem­ber Clau­dia Bal­duc­ci, who chairs the Met­ro­pol­i­tan King Coun­ty Coun­cil, made clear dur­ing the Sound Tran­sit board­’s recent meet­ing that course out of the pan­dem­ic is still high­ly uncertain.

This “pro­gram realign­ment” item is too com­pli­cat­ed for tweets but just my own inter­ests are: I would like to see more infor­ma­tion, which may take more time than we are giv­ing this process, and a broad­er set of mean­ing­ful sce­nar­ios to consider.

— Clau­dia Bal­duc­ci (@KccClaudia) Feb­ru­ary 25, 2021

Bal­duc­ci is one of the most influ­en­tial mem­bers of the Sound Tran­sit Board. As a Belle­vue City Coun­cilmem­ber, she was heav­i­ly involved in choos­ing the align­ment for East Link, from Seat­tle to Mer­cer Island through Belle­vue to Redmond.

Her words under­score just how much uncer­tain­ty there is in the whole process, and how much uncer­tain­ty there still might be when the board is like­ly to make a deci­sion on realign­ment this summer.

Despite that, the board will most like­ly press on in the com­ing months. 

We hope Sound Tran­sit will pur­sue all pos­si­ble avenues to max­i­mize fund­ing oppor­tu­ni­ties and min­i­mize delays in deliv­er­ing the ST3 projects.

The past year has under­scored just how impor­tant an acces­si­ble, cli­mate-friend­ly region­al trans­porta­tion sys­tem is for the future of our region. 

And while com­ing up with a time­ly realign­ment plan is impor­tant, the long-term integri­ty of the sys­tem can­not be sacrificed.

This sys­tem will like­ly out­live us all — much like how the Lon­don Under­ground, the New York City Sub­way, and the oth­er ear­li­est urban rail net­works con­tin­ue to pow­er their cities more than one hun­dred years after their creation.