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Sound Transit's Updated 2001 Financial Plan Reveals 71% Budget Increase Since Voter Approval in 1996

Analysis and Commentary by Jim MacIsaac

Summary:  In late January 2001 Sound Transit released an updated financial plan for its regional transit projects. Because of the 85% increase since 1996 in Sound Transit's expense budget for Link Light Rail construction, the requirement for future Federal grant funds has almost doubled. Budgeted future borrowing of funds through municipal bonds is up 56 percent over the 1996 plan with resulting interest payments up by 150 percent over the voter approved plan just through the year 2009, not taking into account interest payments after that. 

Not surprisingly, Sound Transit's latest financial plan shows that most of the Federal grant revenue and borrowed money that Sound Transit will collect is going to be spent in the North King County area to pay for Link Light Rail. (North King County is mostly equivalent to City of Seattle but also includes Shoreline and Lake Forest Park; click for map of subareas). In other words, the Subarea Equity Financial Policy requiring local taxes to be spent in the jurisdictions where collected does not appear to apply to the public money raised through Federal grants and the bond market. 

Furthermore, even though the Sounder Commuter Train exists mostly to serve downtown Seattle, none of Sound Transit's spending on Sounder is assigned there. Also, none of the ST Express Bus cost is assigned to City of Seattle, even though 80 percent of the patronage is riding to or from Seattle.

All told, these findings mean that Sound Transit spending to serve City of Seattle is significantly subsidized by taxpayers throughout the Sound Transit service area, despite the lip service given to "subarea equity" in the 1996 campaign that caused Sound Transit to be funded. This lip service continues today, as seen in the printed words of Sound Transit's Denny Fleenor on February 11, 2001: "A fundamental principle in the regional transit plan approved by voters in 1996 is that revenues raised within a given subarea of the Sound Transit district, such as East King County, will be spent on improvements within that area."  This statement is untrue with respect to borrowing and grant funding that is leveraged through local tax collections, and untrue to the degree that commuter rail and express bus costs are unreasonably allocated across the subareas of the region.

The above chart is mostly derived from the Sound Transit "Updated 2001 Financial Plan" issued 2/2/01.  It is in year of expenditure dollars (YOE$) with revenue collections extended to 2009. The original Sound Move budgets are also provided in 1995$, together with estimates of 2006 YOE$.

Sources of Funds.  Note that Federal Grants are now pegged at $1,687m, 21% of revenue vs 19% in the original budget, but 102% greater than the original YOE$ estimate.   If the fed optimistically commits $100m/year, it will take us out to 2017 in fed funding.  Bonding has increased to $1,904, 25% of revenue vs 27% in original budget, but 56% more than the original YOE$ budget.  Bonding capacity was estimated at $2,600m in 1995$, perhaps $3,300m in 2009 YOE$.  So new bonding estimates = about 58% of total ST service area bonding capacity.  Local tax revenue is now estimated at $3,813, 49% of revenue vs 50% in original budget.  It now represents a 60% increase over original YOE$ budget, partially due to higher than expected tax revenue yield, and partially due to the extra 3 years of collection.

Uses of Funds.  Commuter rail is now estimated at YOE$ 1,027 -- 51% over budget.  Bus/HOV/ Connections has likely escalated by 100% in the East Subarea as a result of actions to "spend the revenues".  Also the express bus costs have been escalated due to ST taking over funding of the Seattle Express services formerly provided by Pierce and Community Transits.  It is difficult to determine if that was part of the Sound Move program or not.  Overall that program is 43% over budget.   Light rail is 85% over budget, more likely 100% for MOS-1 -- and it still does not get to Northgate.  The entire ST Phase 1 program is 71% over the original Sound Move Budget extended to YOE$ through 2006.

Subarea Equity.  Perhaps the most significant finding of all is how the non-rail subareas come up short on the return for their tax dollars.  Note the line labeled "Local Tax Leverage".  East King is projected to get a 99% return on its tax dollar, whereas North King will get a 316% return -- the vast majority of fed and bond dollars added to its account.  South King with both Commuter Rail as well as Link Rail fares out next best with 246% return on its tax dollars.  Snohomish County comes out second worst with 118% return.  If all subsidy moneys were spread equally, each subarea should receive a 206% return on its tax dollars.  However, that portion associated with bonded debt must be repaid.

North King is assessed zero dollars for Commuter Rail, even though one end of almost every trip carried will be in Seattle.  Likewise, no Regional Express Bus route costs have been allocated to North King, even though up to 80% of the passengers carried on those routes will have one trip end in Seattle.  Certainly one must question just how much Seattle transit deserves to be subsidized by the outlying districts of the region.

Rail supporters have a good point that transportation projects (probably all public works projects) always seem to escalate well over original cost estimates.  However, the big difference in the case of Light Rail and Commuter Rail is that they achieve virtually no reduction in the cost of congestion.  Road projects all tend to net reductions in congestion costs greater than their construction costs.  The mammoth I-405 Corridor Program is a good example.

Least cost planning is still the key issue.  Both Puget Sound Regional Council (PSRC) and Sound Transit refuse to carry out such analyses on a modal basis.  ST can play all kinds of games with its financial analyses to show its rail programs may be affordable.  But the bottom line is that it is devoting huge proportions of our local and federal tax dollars into projects that cause minimal reduction in traffic congestion and in the cost of traffic congestion.

The PSRC Draft Metropolitan Transportation Plan states that the cost of congestion over the next 30 years would be $95 billion under its Current Law scenario.  Congestion costs would be reduced by $39 billion under the planning scenario that invests an additional $12.4 billion in transit, nearly all in rail investments, and an increment of $13.1 billion in road improvements.  This spending yields only a 0.3% increase in transit use compared to Current Law.  The $12.4b investment in rail transit yields about a $2b reduction in congestion cost, and the $13.1b investment in roads yields the $37b balance in reduction of congestion costs.

If we are unwilling to invest in highway capacity expansion to reduce congestion costs, then certainly we must devise some new alternatives. Certainly rail transit is not that alternative by any stretch of the numbers.

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Last modified: October 21, 2008