Back in January 2015, Sound Transit announced a $1.3B federal loan for East Link, the largest single disbursement in the history of the “TIFIA” program. Taking advantage of the continuing low cost of capital in the wake of the 2008-2009 recession, the loan provided favorable repayment terms and a rock-bottom interest rate (2.38%).
Well, here comes Round 2. At Tuesday’s Sound Transit Board meeting, the Board will vote on a TIFIA Master Credit Agreement for another $2B in low-interest (3%) loans for remaining ST2 projects. Northgate Link would get $615m, Lynnwood $658m (this after getting a $1B grant), and $629m for Federal Way. As Mike Lindblom reports, the Federal Transit Administration (FTA) notified Sound Transit of the offer the day after the election, with the FTA apparently impressed by ST3’s passage and the assurance of stable tax income.
Sound Transit’s financial modeling has consistently been conservative, assuming above-market interest rates for both ST2 and ST3. Positive financial surprises like this have tangible benefits for taxpayers and transit riders. Compared to traditional bonding, East Link’s TIFIA loan opened up $200-300m in agency capacity, and Sound Transit expects these new loans to do the same:
The TIFIA loans are expected to generate between $200-$400 million of additional financial capacity for Sound Transit compared to current assumptions for traditional fixed-rate tax exempt bonds at the current market rate. The current TIFIA borrowing rate is approximately 2.98% vs. the 5.25% rate assumed for the ST2 program.
But before you bust out the napkins and pens to armchair plan how to spend the windfall, Sound Transit cautions that the expected savings are in year of expenditure (YOE) dollars and would accrue gradually throughout the 25-year ST3 timeframe. But greater financial capacity is still great news, and with luck this is a harbinger of things to come for ST3. After all, with conservative planning you’re more likely to be pleasantly surprised than disappointed.
I imagine the decision to provide the loan was made prior to the election, but the announcement was held so as not to be seen to be influencing the voters.
This is a great example of how having so many projects in the pipeline can provide benefits as federal grants and loans become available. If federal funds come available we should have “shovel ready” projects which they can be applied to for the foreseeable future.
Exactly, but we want to get building quickly. Let’s go!
This is a win for the true believers. A good return of the ball by ST
Special TeamsFinance to put well you know who in great field position. It’s time to get loud, folks!ST3 taxation authority will be secure by 1600 Hours Tomorrow.
Glad the contract is set now, before the new administration.
This loan also further diversifies ST’s financing – a non-trivial benefit considering the volume of ST bond issuance that will be occurring for the foreseeable future.
Also, no need for bond underwriters on this $2B which should save some additional cash.
Low-interest loans for infrastructure is a great way for the federal government to help out with infrastructure projects in general. It essentially allows cities and states to benefit from the federal government’s ability to borrow money at lower rates and in larger quantities than any other entity on this planet.
Hopefully, this loan is secure enough that Donald Trump and the Republican Congress won’t be able to take it back.
It actually acts as a stopgap for the lack of a state infrastructure bank, by offering a low-interest loan.
How much is this in 2016 dollars? As we were all fond of pointing out to ST3 critics and the Seattle Times, YOE dollars are a bit abstract and misleading
I wish I knew, but I don’t.
Thanks, Zach. Still great news, just hard to know how great.
Does this free up anything for the Northgate pedestrian connection across I-5?
My understanding was that Sound Transit already kicked in $5 million, the Washington State transportation package added $10 million, and Move Seattle funded the remaining $10 million. So the bridge should be fully funded.
3/7/16 Project Status
With the passage of the Move Seattle Levy, the Northgate Pedestrian and Bicycle Bridge project has acquired full funding for the construction of the bridge. The project team will continue to refine the design of the bridge.
Source
Any chance this will allow them to remove the ridiculous “buttonhook” on several bus routes that serve both the college and Northgate TC? Or will the buses continue down by the college, across 92nd, and back up to Northgate?
@Chris: I was told years ago that the ‘buttonhook’ was to avoid congestion on Northgate Way and 1st Ave due to the freeway, so without transit improvements on both roadways, we’ll probably see the status quo in 2021.
@RapidRider
That’s terrible news. There’s no way it’s faster to get to NTC the way the routes run now that it would be going straight across Northgate Way and down 1st or even 5th Avenue, even with congestion. And what if you’re at 85th/Greenwood and want to go to Target or Best Buy? Right now it’s a ridiculous 3-seat ride to travel just a few miles.
Bus routes should not veer back and forth like that. It just makes the route longer than it needs to be.
Since the president elect wants to do a big infrastructure package, I hope he will recognize the value of the TIFIA and TIGER programs for boosting local initiatives. We can only hope that the success of many transit measures on the ballot emphasizes the need for federal support of transit.