The Sound Transit board kicked off the agency’s 2019 budget process yesterday with a presentation from Sound Transit’s CFO, Tracy Butler. The big takeaway: in keeping with recent trends, projected costs will be larger than expected—but so will revenues.
The board also voted to start contract extension negotiations with CEO Peter Rogoff, after some critical words from Pierce County board members.
In wonderful news for riders, the agency plans to replace the Husky Stadium station’s much maligned escalators.
Bigger revenues, higher costs
“Because of the booming economy, we have seen about a $3 billion increase in revenue projections between 2017 to 2041,” Butler said. According to Butler, only one source of Sound Transit’s revenues—the tax on car rentals—has come in under projections. Property, MVET (car tab), and sales tax revenues are all expected to increase in that period.
Sound Transit’s expanding ridership numbers are also a contributor to revenue growth. According to the slide deck that Butler presented to the board, fare revenue from 2017-2041 is expected to be 8.8 percent higher than the 2017 projection suggested, with total receipts of $529 million.
On the spending side, numbers are not so rosy. The 2017-2041 window’s capital project costs, operations, and maintenance expenditures will all wind up costing more than each category was expected to in 2017. Operating expenses increased to $2.1 billion, or 9.6 percent more than the projection from last year.
Capital project costs went up to $1.7 billion, or 3.6 percent more than the 2017 projection. The slide deck attributes most of that increase to already reported cost escalations for the Federal Way and Lynnwood Link extensions. Those projects will cost more than projected because of the region’s hot real estate market. The good news for Sound Transit is that might be changing—real estate market watchers, like the CEO of Redfin, think the market has reached a “moment of reckoning.”
The other main contributor to increased cost projections is due to pressure from the federal government. The FTA now requires more stringent modeling and levels of cost certainty for transit capital projects, meaning transit agencies must set aside more money for new infrastructure than would have been required under the Obama administration.
The agency has long projected a “pinch year,” a budget year when capital costs will be at their peak, and the agency’s bonding capacity will be very near its height. Since capital costs have grown, Sound Transit’s long-term budget modeling suggests that the “pinch year” will come three years sooner than expected, in 2032. CEO Peter Rogoff said that more than 30 different factors, including the impacts of several regional and national recession scenarios, went into the modeling behind the projections.
Board member and Mayor of University Place Kent Keel expressed concern that the parade of headlines about cost increases might create negative public perceptions about the agency’s fiscal responsibility.
“We need a more robust communication plan around all the 30 different factors,” Keel said. “I’m of the opinion that the average citizen doesn’t know that. They hear a number, $54 billion for ST3, and that’s locked into their heads. So I think going forward it would be really nice if we had some type of a deliberate program that continuously talked to people—citizens, the board, everyone—about the ebb and flow of all these numbers, because they do change.”
Contract extension negotiations for CEO Peter Rogoff
The Board will start contract extension negotiations with CEO Peter Rogoff, despite some blowback from Pierce County board members.
Most of the board praised Rogoff’s performance. Seattle Mayor Jenny Durkan was part of that group. However, Durkan requested an update on the progress of the workplace culture training the board required Rogoff to undergo, after reports emerged last year that Rogoff created a hostile work environment.
Keel and Pierce County Executive Bruce Dammeier both voted against the motion to begin negotiations with Rogoff. Keel cited regular complaints from his constituents about the MVET—and pointed out that Pierce County, taken as a separate entity from the Sound Transit area, voted against ST3.
Keel and Dammeier’s comments dovetail with complaints aired by Snohomish County officials suggesting Sound Transit favors King County and Seattle interests.
- ST staff presented plans to replace all of the Husky Stadium station’s near-useless, deeply loathed escalators. The agency will also permanently open service stairwells in Husky Stadium station and Capitol Hill station, which do not currently have stairs to their platforms. Husky Stadium’s stairways will be open by March 2019. The replacement RFP will have a project cost of about $20 million, and all escalators will be replaced by 2022.
- In heroic comments, board and County Councilmember Claudia Balducci suggested that offline escalators could be used as stairs. Balducci’s comments suggested that ST staff oppose that policy due to liability concerns.
- Before voting, with a majority, to extend fare enforcement contractor Securitas’s contract, Durkan pointed out that many fare enforcement interactions come with vulnerable people in crisis. That’s a good sign for advocates who are lobbying Sound Transit to reform current fare enforcement practices, which can shunt such people into the criminal justice system.
This post was updated to correct the timeframe of the new Sound Transit revenue and spending projections.