Unveiling the $2.2 billion 2018 proposed budget, Sound Transit CEO Peter Rogoff told the board the potential elimination of federal grants, specifically a $1.17 billion grant for the Lynnwood Link extension, is one “key challenge” to Sound Transit’s future financial plan.
Other funding in peril includes
$3.3 $3.7 billion in grant money for various Full Funding Grant Agreements and $500 million for the Federal Way Extension. Federal uncertainty aggravates proposals by State legislators to revise the motor vehicle excise tax (MVET) rate. ST Executive Director of Finance and IT Brian McCartan said new legislation could eliminate $2-12 billion from Sound Transit’s budget.
Despite federal and state concerns, 2018 marks the agency’s strongest revenue year, as a full year of ST3 taxes is combined with ST2 taxes in a strong economy. Sales and use tax will account for 62% of the $2 billion of revenue to be collected in 2018, by far the largest source. 16% of revenues are predicted to come from MVET, 9% from federal grants, 7% from property taxes, and passenger fares contribute 5% or $93 million. In 2018 passenger fare revenues are projected to be 6.2% higher next year than in 2017.
A drawdown in the agency’s $1 billion cash reserve will be necessary, as Sound Transit predicts spending $200 million more than the agency is collecting in revenue in 2018.
“This how we have intended to fund the program all along. We go out to the capital markets, we build up our cash balance. We draw that down as the capital projects build, then we go back out and issue more bonds,” McCartan said.
Almost 80%, or $1.7 billion, of the $2.2 billion spent next year will go toward expanding the system with capital projects. $318m will pay for operating expenses and $146m is reserved for debt service. According to the agency, as of July 2017, Sound Transit’s current debt totaled $2.3 billion. According to the proposed 2018 budget, Sound Transit plans on spending 20% more than in the previous year.
The proposed budget also reflects higher maintenance costs required to maintain the growing fleet and facilities, and an increase in security costs as the agency transitions into taking over full control of the Downtown Seattle Transit Tunnel. Sound Transit also plans on hiring 123 full-time staff between 2017 and 2018: 79 to support increasing construction activity, 23 to aid the growing operations side, and 21 for administrative needs, said McCartan.
The budget for operations increases 8.6% to fund service added in 2017 and now in operation for a full year — 15,000 hours of ST Express, two additional Sounder round trips, and an increase in train car capacity on Link.
The budget will reflect the largest capital spending ever, with $1.7 billion estimated to be spent on new projects, including, SR 522 bus rapid transit, Sounder parking, ORCA Next Generation, programs to develop transit-oriented development and improve system access, and five Link corridors:
- East Link – $575 million
- Northgate Link – $331 million
- Federal Way Link – $123 million
- Lynnwood Link – $148 million
- Tacoma Link – $20 million
“You are seeing the agency really gear up for both build of projects in the construction phase but also the early planning and engineering on the ST3 projects,” McCartan said.
The budget will be presented in more detail to the Citizen’s Oversight Panel and the Operations and Administration Committee, both on November 2, and at the Capital Committee meeting November 9. The budget will be back in front of the full board December 21 for final approval.