Rail

Rail Projects Find Ways to Cope with Scarce Federal Dollars

Posted on September 25, 2014 by Cliff Henke

Portland-Milwaukie Light Rail Project
Portland-Milwaukie Light Rail Project

It’s been an ongoing story for years. Federal funding continues to set new records in funding for public transportation investment, yet demand grows even faster. Poll after poll suggests that everyone it seems — except for a significant number of members of Congress — believes that such investment is key to sustainable economic growth and to U.S. competitiveness in an increasingly globalizing economic race. This does not even mention how well high-quality public transportation can help address far bigger challenges such as climate change or far smaller ones such as growing good middle-class jobs.

Fortunately, however, a growing number of cities are finding ways to cope with the relative scarcity of federal funds. The rest of this space will showcase examples of this fiscal creativity, one for each mode of rail transportation.

This is not to say that they are going it without federal money entirely. There have been examples of such projects, to be sure: Los Angeles’ Gold Line and New Jersey’s River Line, to name just two. Rather, today’s projects are using creative financing, alternative methods of project delivery and expanded federal loan programs to knit together the funding package. Not one of these projects is identical to any other, except that the menu of options is familiar to all.

In most cases, these cities initially asked for bigger federal stakes, but yet asking the feds for a far lower share of total funding than the or statutory maximum or even the historic norm. Not merely pointing to “what ought to be,” only to be stymied by the exasperating realities in D.C., they have moved on, to “what can and will be,” and in so moving they invite other cities to get onboard as well.

Los Angeles: Expanded federal loans made difference on Westside Subway

To build the first segment of its Westside Subway Project, which is set to open in 2024, L.A. Metro put together a creative funding strategy.
To build the first segment of its Westside Subway Project, which is set to open in 2024, L.A. Metro put together a creative funding strategy.
In the city that seems to be best known for ripping out its world-class interurban network (see the movie “Roger Rabbit”), citizens have embraced arguably the most ambitious transit renaissance in the country, and have leveraged this support with expanded federal loan programs.

There is no better example of this leveraging than the Westside Subway Project, known locally as the Purple Line, a 3.92-mile, underground heavy rail transit line that will serve major parts of Los Angeles’ Westside as well as Beverly Hills. The project comprises three new underground stations, new maintenance facilities and 34 new heavy rail vehicles. This will be the first of three planned segments that will eventually extend the Purple Line to Westwood near the border of Santa Monica. The estimated additional weekday ridership once the first segment opens in 2024 is 20,700, rising to 33,700 additional daily boardings when all three segments are opened in 2035.

To build the first segment, which is estimated to cost $2.82 billion, the Los Angeles County Metropolitan Transportation Authority (Metro) put together a creative funding strategy that leveraged the strong commitment of the county through the $40 billion, 30-year Measure R program that the voters passed in 2008. Some $583.9 million of that program has been committed to the project. In addition, the agency successfully obtained a $536 million Transportation Infrastructure Finance and Innovation Act (TIFIA) loan, a federally guaranteed loan program that was recently expanded, which will be paid back with Measure R sales tax revenue. Additional funding will come from $12.2 million in federal highway program funding that has been “flexed” to the project.

The remaining funds will come from other local sources of funding. For the rest, Metro obtained a $1.24 billion Full Funding Grant Agreement (FFGA) from FTA in May 2014 through the federal New Starts program. While none of these sources represent any radically new, the TIFIA loan is part of more novel strategy by Metro to use expanded federal and local loan programs paid by with local dedicated tax sources to build their projects in Measure R and beyond much faster than would otherwise be the case with more traditional funding strategies.

Denver: Eagle commuter rail is first ‘true’ U.S. P3

<p>When completed the Denver Regional Transportation District's commuter rail project will become America's first true An even more novel strategy is being undertaken by Denver. The Mile-High City’s commuter rail project is the one among the three pilot cities that comes closest to the vision of the program, and as such is America’s first true “transit P3.”

Denver’s Regional Transportation District (RTD) is the project sponsor and owner. It selected Denver Transit Partners DTP), the Eagle project’s concessionaire consortium, to design, construct, partly finance, operate and maintaining two new electrified commuter rail lines, plus a starter segment of a third. These include the East Corridor from Denver’s newly redeveloped and modernized Union Station downtown to Denver International Airport (DIA); the Gold Line, also starting at Union Station but running westward to Ward Road in the suburb of Wheat Ridge, Colo.; a short starter segment of the Northwest line; and a new commuter rail maintenance facility for the network.

The two main lines are projected to average 57,500 boardings per weekday in 2030. The consortium will also design and construct six stations on the East Corridor and seven along the Gold Line. The consortium partner Rotem USA will also build 44 new electric multiple unit vehicles. In addition,

The total project cost under is $2.04 billion, of which $1.03 billion is paid for with a New Starts FFGA, which RTD obtained in August 2011. The rest is funded by sales-tax proceeds from Denver’s voter-approved FasTracks program as well as equity and private activity bond proceeds contributed by DTP.

RTD will pay the DTP consortium through a series of availability payments are designing and constructing the project, helping to finance the project, and providing an equity stake.

RTD officials believe there are several advantages of this approach. First, the public owner and the taxpayers and residents it services will enjoy a new network of commuter rail service several years faster and at less cost to the taxpayer than it would be the case if delivered and funded with traditional means. In addition, the project aims to showcase additional innovations and a level of quality that are incentivized by the concession agreement. Because of the efficiencies and synergies that a private consortium of companies are able to provide, including financial equity and loans made possible by this method of contracting, the private companies are able to earn a higher profit—but only if they make good on their contractual promises of delivery speed, cost-effectiveness and service innovation and quality.

Revenue operations are scheduled for opening throughout 2016, opening each line separately with the final one by December of that year.

Portland-Vancouver: Acting when the LRT coalition falls apart

The Oregon Columbia River Crossing project serves as a case study in how to rebuild a coalition in the wake of changing politics.
The Oregon Columbia River Crossing project serves as a case study in how to rebuild a coalition in the wake of changing politics.
A case study in how to re-build a coalition — and revise the previously agreed-upon funding plan accordingly — in the wake of changed politics is what has happened to the Columbia River Crossing. Previously, the Oregon Department of Transportation (ODOT) and the Tri-County Metropolitan Transportation District (Tri-Met) along with the Washington State Department of Transportation (WDOT) obtained federal funding to construct the multimodal project that includes replacement of Interstate 5 (I-5) bridges spanning the Columbia River, installation of variable electronic tolls across the new bridges, park-and-ride lots, bike and pedestrian improvements, and an extension of Portland’s existing light rail transit (LRT) system. Tri-Met will operate and maintain the LRT extension.

All had been proceeding roughly as planned; the FTA approved the project into preliminary engineering in December 2009. The project published the final environmental document in September 2011, and the FTA issued its Record of Decision in December of the same year. The project sponsors anticipated receiving a FFGA sometime this year.

Then In June of last year, the Washington State Legislature tabled the bill providing its funding commitment, which forced ODOT and Tri-Met to remove WDOT as a project sponsor and to rework the funding plan for the project. ODOT and Tri-Met then closed the gap left by Washington’s exit by making several changes to both the project’s scope and financial plan. Several highway interchanges on the Washington State of the Columbia River were taken out of the project, which decreased the project’s cost by $85 million, to $2.712 billion. The sources of funds in the project financial plan were revised include nearly $230 million in pre-completion toll revenue and $45 million in shifted local Tri-Met funding. The USDOT also in increased the TIFIA loan amount by $50 million to $900 million. Significantly, the revenue opening year was preserved, remaining at 2019.

Tucson: How TIGER changed the streetcar equation

The City of Tucson completed its $196 million, 3.9 mile Sun Link streetcar system in July. Construction of the streetcar project began in early 2012.
The City of Tucson completed its $196 million, 3.9 mile Sun Link streetcar system in July. Construction of the streetcar project began in early 2012.
Another significant source of funding beyond traditional federal Major Capital Investment programs has been the Transportation Investments Generating Economic Recovery (TIGER) program administered by the Office of the Secretary of Transportation. While TIGER has helped to fund a variety of rail transit projects, it has been particularly helpful for streetcar lines, which traditionally have not “scored” well in the evaluation criteria established by law for the traditional FTA program.

TIGER is designed to a) help fund projects that could help generate economic development, and b) serve as the “last dollars” to help a project get funded that otherwise would struggle to find the last source of funding. The City of Tucson’s streetcar project in that context is a classic example of TIGER-funded projects. This 3.9-mile line, called Sun Link, connects the region’s two largest activity centers (Downtown and the University of Arizona) to commercial districts and a redevelopment area, improves transit service in the corridor and helps to catalyze create economic development.

The USDOT signed a Grant Agreement with the City of Tucson in December 2010. Construction for the streetcar project began in early 2012. The revenue opening date for the 3.9-mile line was scheduled for October 2013, but delays in car deliveries contributed to in a service opening delay. It finally began service this past July.

The project’s capital cost is $196 million. The Regional Transportation Authority provided $75 million.

From the county’s sales tax revenues dedicated for public transportation improvements as part of the $2.1 billion Regional Transportation Plan approved by Pima County voters in May 2006. In addition, the FTA awarded $25 million in Major Capital Investment Grant funds under the “exempt” category of the New Starts program that has since been repealed. Financing of the vehicles was obtained through certificates of participation, and $3.2 million in capital funding was contributed by the Gadsden Company, a private developer in Tucson, and $11 million from the local utilities.

However, the project became much more real when the USDOT awarded the city $63 million in the second round of the TIGER program in February 2010. That enabled the City of Tucson and the Regional Transit Authority, which co-managed the project, to complete design and construction, and hire RATP Dev McDonald Transit Inc. as the contract operator and maintainer of the line.

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