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ST’s total predicted revenue through 2023 dropped another 5%, as predicted 3.4% revenue growth for last year turned out to be 2.2%. South King was hit the hardest.

Here’s a handy table summarizing how total projected revenue picture has evolved since our 2010 report:

Subarea 2010 2012
North King -16.1% -19.6%
East King -26.3% -33.0%
South King -30.9% -40.7%
Snohomish -28.5% -32.4%
Pierce -25.8% -26.6%

The staff slide presentation identifies few risks to bond funding, but moderate risks to grants (thanks to the attitude of current congressional Republicans) and continued risks to tax receipts due to the still-fragile economy.

Unfortunately, the primary casualty of the revenue losses has been project reserves, so the plans aren’t terribly robust to further bad news. One option to close the gap is bonding. If the board decided to do this, it would bring the debt ratio above self-imposed agency policy, but still below many peer agencies. Other options are cutting system features, delaying completion, or going back to the legislature and voters for more money. However, at the moment there is no tangible impact on Sound Transit’s plans.

For the dreamers, though, this slide gives a little hope, below the jump:

That yellow band is the cushion that Sound Transit still has — or, if you like, the first chunk of capital that can be used for new projects. $100m a year in 2020s dollars is not a lot in the scheme of things, but it’s something.

63 Replies to “ST’s Budget Picture Worsens”

  1. This is all on the Legislature now. CT, PT, Metro, and ST are all in these massive holes because the State doesn’t have the fortitude to provide adequate taxing authority, let alone a direct funding stream.

  2. As long as revenue increases though, over time it should catch up to the predictions.

    Therefore, as long as costs are justified, it’s not unthinkable even to use deficit spending (as long as the increases in revenue continue).

  3. I dont’t understand their unwillingness to use more debt financing to get the system up and running sooner. Seems very conservative.

    1. Yes, this is exactly what the current low, low interest rates should be used for!

      If you can get 1% prime loans for expected future gains in ridership, capital improvement, then do so. You don’t even need to tax or float bonds, just borrow.

      1. This is an intruguing point, but is it really wise to sell a lot of bonds to raise money that may not be spent for a few more years? I can see utility up to a point for shovel-ready projects, but just to have extra money lying around seems like it would actually lose money. I also assume the financial gurus at ST know the best ways to refinance existing debt.

        If this can kick-start every step of U-Link and North Link that is ready to go and just waiting for funding, why not sell bonds?

      2. That’s how I see it. Don’t let financing slow down new projects. Build anything shovel ready, and design full speed to make more projects shovel ready. If/when interest rates creep up, then you slow down.

        Of course, we should fix the tax side now even if we don’t use the authority right away. Our economy will improve someday, and we should be ready for that recovery (and associated higher interest rates).

      3. The current plan seems pretty reasonable to me. The revenue absolutely must cover the debt service (red section of the graph). If it doesn’t also reliably cover operational costs (blue section), service cuts have to be made.

        Borrowing more now would increase the size of both of those segments: it would add more debt that would have to begin repayment now, and it would add more operational cost faster as new service is brought online more quickly than was originally planned.

        If there is another downturn in tax revenue, I would much rather see some cushion in the projection (like there is now) so that Sound Transit can just scale back on new capital expenditures instead of being forced to cut back on operations like Metro and other agencies have had to do.

        Of course the right long-term solution is for the legislature to allow higher levels of transit taxes for communities that support them, but until that happens I think Sound Transit is right to be somewhat conservative in their budget projections.

    2. You want debt financing? Look at the big green hump. Everything above the revenue line is debt-financed in order to get things done on a reasonable schedule.

      Cashflow is not the impediment to faster progress. It’s all the hoops that ST has to jump through, and all the myriad ways the Bellevues and Federal Ways and — yes — Seattles of the region can slow them down by levereaging public process. The East Link EIS took SIX years. Preliminary Engineering takes 3 years. Final Design takes 3 years. Construction, once approved, takes what it takes.

      1. 2.95% interest loan.

        So get one of these and you don’t need taxes or bonds.

        Pay it off from the projected future revenue.

      2. John, the future revenue to pay off the loans (or the bonds) comes from the taxes we imposed on ourselves. Operating the system doesn’t generate a surplus, nor is it expected to.

        So yes, you need taxes.

  4. A couple of trajectories jump off the graph.
    1. Debt service after 2023 will be growing after ST2 project spending is essentially complete. Not only is it growing instead of being paid down, but the rate of growth through 2030 is rising higher than operating costs do. It’s also larger than all the annual operating costs of all services provided. If a rider cost 6 bucks of direct operating per trip, then the annual debt payment will be more than that, more than doubling the annual cost to operate the service. That’s not a sustainable business model, even for government.
    Looking at a graph prepared prior to the election, the projected revenue line (blue)is nearly identical to the CETA document carried through 2053. Here’s the link. http://www.bettertransport.info/pitf/taxes.htm
    2. Revenues on the blue line, if compared to CETA show the trend will continue to the 5 Bil/yr level had revenues been met, which obviously is not the case now. Debt will continue, and may increase, exacerbating an already bad situation through at least the life of the bonds (2053) or longer if projects are extended in time. Clearly, growing their way out of the problem is not goint to work, so a smaller project scope, extended timelines, and fewer services become the obvious choice.
    3. Expecting a sympathetic public to raise taxes significantly to make all the bad ‘go away’ is highly unlikely district wide. Guns, butter, education, health, and then more for ST’s problems as a long list as priorities go. Seattle may be able to muster something locally to go it alone on expansion, but I think the luxury of $32 train rides and other unproductive services days are very limited.
    It’s time to put on our big boy pants and make some hard mid course corrections.

    1. Depending on the terms of the debt instrument, it’s quite common for debt service to grow during the early period. You need a graph which goes out a lot longer to really see what’s going on.

      This graph does *not* answer the question of whether the debt service will be sustainable-and-declining or not.

      So before talking nonsense about “hard mid course corrections”, “smaller project scope”, “fewer services”, and “extended timelines”, you need to get a *much* more complete set of numbers. Maybe there’s an issue; maybe there isn’t.

      1. I agree there isn’t enough information to have a definitive answer to the question of sustainability, but dismissing the growing debt service line after construction is complete in 2023 is teletale of other shoes to drop. You can’t lose 30-40% of your planned funding sources for very long before the hard choices become reality. Suggestions of more and more debt, or more and more taxes is the ‘head in the sand’, ‘kick the can down the road’ style of financial management our politicians are so fond of.
        Another huge component NOT shown on the graph is depreciation. Spending 13.2 bil through 2023 comes with it’s own baggage. Things wear out and have to be replaced. Just ask BART how that works. Depreciate the assets over 30 years adds another 440 million per year after 2023, or as much as O&M costs are.
        Now, your $6 ride is $18, if you add debt service and depreciation.
        I have no idea if my number is close, but it’s a question worth asking of the financial managers who do have those projections.

      2. Here’s a link to BART’s 2013 budget.
        Debt certainly doesn’t go away and they built a relatively cheap system preceding us by a generation. Look at the capital side of things. Over 400 million a year to replace things that are wearing out. Bart carries 375k/riders/day against Link that will carry 290k in 2030 (yeah, right)
        We have a right to be skeptical of those viewing the transit world through rose colored glasses. Hope for the best and prepare for the worst.

      3. More taxes is almost certainly the main answer — when you have an underprovided public service, it’s usually the only answer. Of course, Washington State’s lack of income tax makes it hard to have “more taxes” in any rational way.

        Of course, you’re totally right that “kick the can down the road” isn’t the way to do it; if you’re going to have more taxes, you should grit your teeth and raise taxes enough to pay the debt off early.

        BART is actually in an exceptionally bad situation due partly to the fact that they built *everything* with nonstandard parts (the story of this attitude is an interesting one) and so replacement parts are stupidly expensive. That’s one mistake you didn’t make in Seattle; if you want to look at parts replacement costs, look at a standard gauge system with standard parts. San Diego might be more comparable (and yes, they have to spend quite a lot).

  5. Why is Seattle doing so much better than everyone else? Were the projections for the suburbs just too rosey to begin with? Are we weathering the storm better? Or some combination of the 2?

    Considering MAP-21 basically froze New Starts but did greatly increase TIFIA, what would the possibility be of doing something like Denver did and take a TIFIA loan to expand ahead of schedule? Yeah, grant money is better, but not having to start repaying the Feds until 5 years AFTER ‘major completion’ of the project is something worth studying.

    1. All the one-way express service is turning downtown Seattle into a black hole, sucking the business and economic vitality out of the ‘burbs. A chunk of the population won’t go out to the burbs if they aren’t easily accessible by transit. A chunk of the population won’t even apply for jobs they can’t get to easily by transit. Businesses are forced to move to the city to find customers and employees. Take trips to Northgate and the Auburn Supermall. See how busy Northgate is, and how deadly quiet the supermall is.

      That of course doesn’t explain why Seattle is also below projections. I think that is more a reflection of our national economy (which we are still doing better than). We’ve run out of markets to buy our trinkets, tobacco, defective software, terminatory-technology seeds, and arms. Is there anything else we export, besides jobs and waste products?

      1. I see (said the proverbial blind man). Fuel oil is America’s fastest growing export. Say WA? I thought our leaders were telling us we needed to drill more to reduce our dependence on foreign oil.

        It seems one of our most wasteful expenditures is free naval escort for all the tankers bringing oil here, and taking oil elsewhere. Am I missing something?

      2. Am I missing something?

        Yes, we are exporting refined petroleum goods (gasoline, heating oil, jet fuel). We’re still a huge importer of crude oil but some of it comes here and then is exported with “added value”. This is because developing countries experience increased demand for these products long before they can build the infrastructure to produce them. The fertilizer industries and plastics are also exporting products made in large part from petroleum.

      3. “A chunk of the population won’t go out to the burbs if they aren’t easily accessible by transit. A chunk of the population won’t even apply for jobs they can’t get to easily by transit.”

        Yes, but the chunk isn’t large enough to do something this dramatic this quickly. Some 75% of King County residents live in the burbs and would not choose a downtown Seattle job over an equivalent closer job simply because of the express buses. One statistic that stuck in my mind is that 70% of ballgame-goers drive to the game, even though they face a guaranteed horrendous traffic jam and P&Rs are readily available. If that many people aren’t willing to take transit to a ballgame, it’s hard to see that they’d be much more inclined to take transit to work.

        “All the one-way express service is turning downtown Seattle into a black hole, sucking the business and economic vitality out of the ‘burbs.”

        That overstates the picture. A large percentage of downtown workers take transit, but that doesn’t conversely mean a large percentage of suburbanites work downtown. That’s the problem with the peak-express buses to downtown. They don’t go to where most suburbanites work.

        “See how busy Northgate is, and how deadly quiet the [Auburn] supermall is.”

        The Auburn supermall has been singularly failing ever since it opened. The reason seems to be that the market is saturated with malls, and the supermall was not “super” enough to attract people from other malls.

        As for malls in general, we can divide them into those near pedestrian-oriented transit centers (Northgate and Bellevue Square), and those that are not (Southcenter, Tacoma Mall, Everett Mall, Federal Way Commons). It’s not clear that the latter malls are doing worse than the former malls.

        By the way, the Supermall is now an outlet store park like the one in North Bend. That’s probably a better fit, given that customers are more willing to go to new outlet store parks in places where ordinary malls are non-viable.

      4. Bernie is spot on regarding the oil question.

        We are a massive importer of crude, but also a massive exporter of refined petroleum products. We’re kind of the world’s refinery, and it’s a huge boon to our economy (or at least for the people who own stock in oil companies).

        This is what the Keystone XL pipeline expansion was about, to get (more) crude from the Canadian tar sands down to American refineries. Instead it looks like they’re going to ship the excess crude directly to China and have it refined there. But if we were to build it, we’d end up with a new giant cross-country environmental gash and nothing to show for it once the tar sands production starts to taper off.

      5. Once could make the opposite case.

        Those numbers reflect the increasing vacancy of downtown office space, so less need to travel far into “the City” when jobs are more easily had closer to the person’s suburban home.

      6. “This is what the Keystone XL pipeline expansion was about, to get (more) crude from the Canadian tar sands down to American refineries. Instead it looks like they’re going to ship the excess crude directly to China and have it refined there.”

        Actually, there’s increasing opposition in BC to a pipeline to the coast, both by environmentalists and by native tribes whose land it would cross. Canadian tribes have more land rights than American tribes do, so they have a bigger say. Also, Canadians are starting to question why they would want to export low-profit crude rather than made-in-Canada refined oil. And with the US awash in shale gas, the pipelines may be obsolete before they’re built.

    2. There’s a general trend nationwide (worldwide, actually) for suburbs to decline economically while center cities improve.

    3. Oh, to be more specific: this trend shows up early in sales tax collections (businesses downtown are preferred), then in property tax collections (properties downtown are more valuable), *well* before it starts showing up noticeably in population movement.

  6. The Snohomish subarea politicians should face the reality that Lynnwood Link may be delayed noticeably if a hard choice isn’t made to stop throwing good money after bad on North Sounder. Several years of having the CT commuter routes transfer at Northgate won’t be the end of the world.

    In the meantime, it seems ridiculous to be running 510 and 511 hourly runs instead of 512s. Even midday, turning every other 511 into a 512, instead of running half-hourly 510s, would be both a service improvement and an operational savings. I understand there are people who travel between Lynnwood and Everett.

    For the south subarea, One can hope this report is the nail in the coffin of the underutilized and almost completely duplicative 560.

    1. Please, fergawdssake, somehow ensure that North Link can at least be extended to N 130th. That station will open up cross-town bus service that will serve northeast and northwest Seattle far better than continuing to force service through the Northgate mess.

      Northgate would still probably be best to terminate CT service at as it’s a destination in its own right, but Lake City and Bitter Lake—both places with considerable room for growth and relatively few NIMBYs—would be far better served by expediting that 130th station much as was done at Airport station.

      1. Deffer East Link and loan the money back to the North Sub Area. It’s a win win. Central Link gets the ridership to hopefully pencil out whereas East Link is the worst ridership projection of any segment. One reason East Sub Area revenue is below projections is because it was projected Bel-Red would be well on it’s way to redevelopment when in fact it’s still muffler shops, self storage and boarded up factories. The East Sub Area saves by banking money instead of racking up debt and by not having to cover huge operational costs for a system with immense wasted capacity.

      2. 130th is in Seattle, thus, along with all the “Segment A” of Lynnwood Link, it will most likely be paid with North King dollars. Sounder North comes entirely out of SnoCo dollars.

      3. Fully agree. Imagine how much faster the 75 or 345/346 could get people to Link if they sped along 125th/130th straight to the station before heading to Northgate.

      4. Some Lake City neighborhood groups have been fighting bike lanes mightily, with wierd ideas like bikers should carry their bikes up the stairs at 15th. Eventually, though, I think bus lanes would be in order.

      5. Deferring East Link would be moronic. I don’t actually trust any of the fancy ridership projections which have been made — they come from overly complicated models and few of them “smell right”. Simple models are better. A simple back-of-the-envelope projection based on core human transportation principles says “yes, for God’s sake run Link to Mercer Island, Bellevue, and Microsoft”.

        Now, if you want to defer the intermediate stations along Bel-Red — run express from Overlake to Hospital — that would probably actually make sense, if it was politically viable. If you think Microsoft is going to shrink, then it might even make sense to simply stop at Bellevue. But crossing Lake Washington is really a guaranteed success.

      6. “Now, if you want to defer the intermediate stations along Bel-Red — run express from Overlake to Hospital — that would probably actually make sense”

        There are two stations at 130th and 132nd — two blocks apart! At least one of them should definitely be deferred. When I asked an ST rep at a Bellevue open house why there were so many stations, he said 132th was ST’s preferred one, but 130th was being pushed by Bellevue as part of the Spring District project. So I asked what 132nd would be in the interim. He said a small P&R. I couldn’t believe it. We’re building a temporary P&R to justify a station?? What happens when people start asking for the P&R to be permanent? Just defer the station until development in Bel-Red catches up.

      7. Deferring only one or two stations doesn’t save diddle squat. Operational costs will be almost identical and you’ll have less ridership. The whole project needs to be mothballed. The failure to correctly project revenue and ridership means huge cuts to eastside service will be required to pay for the White (elephant) Line. By the time ridership ever justifies light rail capacity the I-90 sinking bridge will be needing replacement.

      8. Actually, deferring stations saves a few million dollars. If it means faster trains, and it skips areas with no riders, it means INCREASED RIDERSHIP. Bernie, you just don’t know what you’re talkinga bout.

      9. FYI, ridership levels on the buses *already* justify light rail.

        When it’s built, the only sensible thing to do is to truncate all eastside routes which currently cross I-90 at the nearest rail station. Some of the routes crossing 520, too, and possibly even some of the ones going around the south end of the lake. So yeah, in a certain sense there will be a cut in eastside bus service, but people will actually find that the cut improves service.

        If you’re right and the I-90 bridge won’t last, that’s a different issue, but as far as I have been able to tell by research, you’re wrong.

      10. Will the rails in the I-90 express lanes allow buses to use the lanes concurrently, as in the DSTT? If not, they’ll have truncate some bus routes or they’ll be stuck in traffic.

      11. Will the rails in the I-90 express lanes allow buses to use the lanes concurrently

        No, but it’s worse than that. The HOV lanes will end at the Mt. Baker tunnel. Yes, buses and all the other HOV traffic will be gafucked. It’s like the HOV lanes on 520 today that end at the bridge except with I-90 we’re spending the billions to go backwards.

      12. FYI, ridership levels on the buses *already* justify light rail.

        Which explains why ST’s ridership projections are so pathetic (as if they ever even meet projections). Bailo comes up with some of the wall shit but it’s nothing compared to the mantra from New Urbana. Yeah, the 550 boarders on almost being a bus route that would be middle of the pack for central Seattle. That justifies putting in a railroad. Yeah, that’s the ticket.

      13. Actually WSDOT is adding a new HOV lane in each direction all the way across I-90. This has the advantage that there is now HOV access in both directions and the HOV lanes won’t simply “end” at the Mt. Baker tunnel.

    2. If there is a growing movement to redeploy the dollars currently going to Sounder North, this is another piece of ammunition. But it’s not quite a general fact yet that Sounder North is unjustified or that the ST board thinks of it that way. I hope somebody in Snohomish County spearheads both these issues and forces the Board to address them directly. The 512 won’t happen until ST is convinced that there’s more demand for 15-minute headways than nonstop expresses to Everett. The normal way around this is to make the 510 peak-only.

      1. I spent a while analyzing Sounder North a couple of postings back. My conclusion was that it needs to be reinvented as extensions of certain Sounder South trips, which will make the numbers for it a lot better in many ways.

    3. Nothing is in ST’s SIP about eliminating the route, and even given the budget woes i dont think ST is planning on wholesale route elimination yet. Of course, mabye if the route were cut back to the Airport and extended to Redmond it might actually do some good… Mabye if it were even extended to Tacoma…

    1. Can one make the argument that Sounder North actually increases traffic congestion by forcing goods that would have been moved by freight trains to be trucked along I-5 instead?

      1. Good point except BNSF had some openings for Sounder North to run. However the usefulness of this run at four trains is nil. Perhaps two runs, perhaps through to Tacoma?

        It’s time to demand some efficiency here. Many parts of many budgets are still at risk of being cut such as education and mass transit.

      2. Given the choice between transfering at King Tut Station, with a mileage reset on their fares, and a more expensive through-ride, I suspect most of the couple dozen through-riders would pick the transfer.

      3. No, one cannot (validly) make that argument.

        For what it’s worth, BNSF has made it very clear that they won’t allow passenger trains if it would actually hamper their ability to run freight — that’s why they demand laundry lists of track expansion when they agree to run passenger trains.

    2. Yeah, but did you read my comments on the post which mentioned that report?

      Before chucking it and replacing it with buses, it’s worth trying to actually run it the way you’d normally run a passenger railroad — i.e. integrated with Sounder South. As a standalone service with its own trainsets and crew, it’s implausible; as extra utilization of South trainsets and crew, it could have much more plausible operations numbers.

      1. The bus to Paine Field will be especially welcome when passenger air service starts up there. Horizon and Allegiant made requests three years ago to run some flights out of Paine Field, and the county finally got around to releasing an environmental impact statement for the terminal expansion a few weeks ago.

      2. WA has to fix the mudslide problem in order to run Cascades service to Vancouver, BC anyway. Unless you’re proposing getting rid of *that*, assume the mudslides will be dealt with using “other people’s money”. Then try again.

      3. FYI, WA is already using federal funding to address a bunch of the mudslides. As said before, this is for Cascades service.

      4. I do agree, of course, that if the mudslides aren’t addressed, the line north is doomed, for both Sounder *and* Cascades. (Heck, even the Empire Builder would probably be rerouted.)

      5. The Empire Builder can deal with the mudslides the easiest, since all they have to do is run the equipment empty to Everett, and bus the Edmonds and Seattle people up to board there. (and vice-versa for #7).

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