Folks, if there’s any truth in this Washington Policy Center op-ed, I think we need to discuss a potential option if we do not get ST3. Most of us here are not too keen on extending the spine to Everett with an expensive Paine Field detour of questionable value when a better bus network & a vastly improved marketing campaign would work wonders. Almost all of us here are of the view that Ballard needs a light rail spur.
So when I came across these Washington Policy Center allegations, I had to share so we could discuss this:
Sound Transit officials may not need any tax increase to build more light rail. How? Because of the revenue that is hidden in the way Sound Transit officials calculate their future borrowing costs.
Sound Transit officials’ most recently adopted financial plan through 2023 assumes they will borrow $7.3 billion at a 5.75% interest rate, paid off over 30 years. Their interest rate cost assumption is high, especially since they are actually issuing debt now at far-lower interest rates.
In 2012 Sound Transit officials borrowed $216 million at a rate of only 2.62%, less than half of what they assume as their future interest rate cost. Just a few months ago, they borrowed $1.3 billion as a federal TIFIA loan at a 2.38% interest rate. The TIFIA loan can be paid off over 40 years, and the first payment isn’t due until 2028! Today, Sound Transit could borrow money for 30 years at fixed interest rates between 2% to 3% (or at lower variable rates), about half of its current budget assumption.
So what does this mean?
If Sound Transit officials simply changed their financial plan to assume a more-realistic 3% interest rate, they could borrow an additional $2.2 billion without raising regressive taxes and keep their debt payments the same. That is enough public money to build light rail to downtown Redmond (approximately $800 million) and build much of the line from Ballard to U.W. (approximately $1.7 billion) without raising regressive tax rates at all.
Sound Transit’s financial report shows the agency thinks it can only borrow $7.3 billion at current tax rates, when they may actually be able to borrow closer to $9.4 billion without raising taxes. This is not fair to the taxpayers.
We agree with using conservative estimates and careful budgeting by public agencies, but in this case, the interest rate estimates Sound Transit officials are using are extreme, and come at the expense of the taxpayers.
I am of the view we do need these projects as a state. I am also of the view we need to force Snohomish County to come to reality about their transit situation. I am finally unqualified to speak of transit needs between Tacoma & Seattle – I will leave that to the comment threads. But this is something we in the STB community need to discuss and have a no-new-taxes contingency plan ready to unite behind and present to Sound Transit’s Board if necessary either if the legislature nips ST3 in the bud or the voters reject ST3.
One last thing: If you have evidence the above WPC op-ed is untrue, present it. Otherwise…