Sound Transit and King County Metro, along with agencies in other major cities, are making a concerted effort for more federal assistance in the upcoming COVID-19 relief package. Yesterday, the leaders of 27 major agencies joined in calling for up to $36 billion in aid for transit to cover COVID-related expenses and replacing depleted local tax revenues in 2020 and 2021.
Transit operators face a variety of needs. For legacy systems, decreased farebox revenues have put extraordinary pressure on operations while costs related to COVID mitigation have increased. For newer systems that are growing, the recession will reduce local tax revenues for years, imperiling expansion timelines.
While King County Metro is reducing operations, Sound Transit is facing a delay to planned rail and BRT extensions. Current operations are a relative small part of the Sound Transit budget, but the long-term loss of sales tax revenues combines with statutory limits on debt to put the current planned system expansion timeline out of reach.
Among the various assistance measures being debated, the most valuable to Sound Transit could increase the federal share of existing Full Funding Grant Agreements (FFGA) by 30%. A similar provision is in the Investing in America Act recently passed by the House.
In the current FFGAs, Lynnwood Link received a federal match of 36% or $1.17 billion. Federal Way Link received a 25% match for $790 million. A 30% increment to those FFGAs would mean $1.9 billion of additional federal support for Sound Transit.
The assistance might not speed Link to Federal Way and Lynnwood much. Those projects are already in active construction. But it would materially reduce the delays to every project that follows. Currently, Sound Transit is projecting a $1 billion revenue loss through 2021, and up to $12 billion through 2041.
$1.9 billion in extra federal assistance would go some ways in offsetting that, and would have a more than proportionate benefit to project timelines because the assistance would come earlier in the program. Currently, Sound Transit estimates a five-year average delay to ST3 projects not already in construction. Additional funding for Federal Way and Lynnwood might shave those delays by two years.
The CARES Act delivered $25 billion in aid to transit operators nationally, with $166 million of that eventually delivered to Sound Transit and $243 million to King County Metro. That money largely went to current operations and COVID-related expenses. The next package, focused more on the recovery, could be more significant for Sound Transit if it focuses more on capital programs.
All other things being equal including the pandemic, how much worse off will Sound Transit be if the incumbent stays in the White House this fall?
Mark Dublin
It doesn’t appear to have mattered the last four years. The White House has an occasional budget proposal to cut transit support, but Congress routinely ignores it, and it’s not high enough on the White House radar that anybody presses the issue.
Not much, as long as interest rates remain low. The existing FFGAs and TIFIAs should continue to draw, and ST can tap the bond market for funding until there is another round of FFGA-esque funding from Congress. The past two multi-billion FFGAs were approved under Trump, which underscores that federal funding has far more to do with our congressional delegation than our president.
Free money from the government always helps, but ST’s ability to deliver the ST2 commitments have little to do with financial constraints, and the ST3 projects’ timelines are likely more dependent on a recovering economy (locally and nationally) than the outcome of this election (though the economy probably also depends on the election, but that’s a 2nd order effect)
Yeah, I’m just going to second Dan’s response above. Team Trump has put forth annual budget proposals essentially seeking to ignore the spending authorized under the FAST Act, an Obama-era transportation measure (hence Trump’s true motivation), and kill the CIG program with some help from Moscow Mitch’s wife, DOT Sec. Chao. Congress has ignored all of this and has included funding for the program consistently through the Trump-era appropriations sausage-making. Congressional Dems haven’t gotten the level of funding they’ve wanted for the CIG program, but the minimum committments from the FAST Act have made it through the THUD portion of these most recent omnibus appropriation bills. The damage that Chao has been able to inflict mostly stems from delaying moving specific projects forward and holding back their funding. There is a significant backlog of FAST Act funding authorization from previous years’ appropriations that the DOT is just sitting on. A change in the administration come Jan 20, 2021 should remedy that.
Thanks, guys. But isn’t there also some chance that since its inception, ST has been earning the money it’s getting from every governmental agency it answers to? The money our taxpayers have given the government for a lifetime of needless wars, and to the very bankers who destroyed our financial industries leading up to 2008…..”free” to its recipients, but not to the rest of us.
Mark Dublin
“In the current FFGAs, Lynnwood Link received a federal match of 36% or $1.17 billion.”
When the Lynnwood Link extension project initially went into the CIG (New Starts) pipeline, the federal match was at the maximum (50%). The decrease to the match portion is the result solely of ST’s poor cost estimation and the project’s cost escalation issues. It has nothing to do with FTA program changes.
Can we have some examples of transit systems whose cost-estimation skills we can emulate? Current pandemic is definitely an escalation issue that cannot be blamed on either ST or anybody else affected by it.
Mark Dublin
Ridership is down, and it’s not likely to rebound to pre-pandemic levels due to the unexpectedly hastened discovery of the cost and convenience advantages of telecommuting. The new world may include routes with fewer stops and perhaps smaller vehicles operating at or near capacity most of the day vs. at peak hours. In addition, money-strapped governments may finally dictate transparency from transit agencies in order to continue the funding they presently get so that voters know what they’re paying for vs. giving a blank check and taking leaps of faith.
Amazon just announced that work from home will continue until January 8, 2021 – and likely will be extended. Downtown business are permanently closing and ridership will likely be down for a good chunk of the 2020s. It’s the new reality. Ironically, new link light rail lines might open at a time when demand will be the lowest. We’ve waited decades for these lines, only to have a historic pandemic erase most of the demand that warranted them in the first place.
A city of 750K in a county of 2 million in a region of 4.5 million needs a robust trunk-and-feeder transit network. Even if a lot of people are teleworking, a lot of others are commuting, and everybody has to go to the store and do other errands. Three-quarters of people’s trips are not work commutes. I-5 is congested again: the typical midafternoon slowdown between Northgate and downtown has returned. I got caught in it on the 41 a week ago, and yesterday I saw it from Lakeview Blvd. That’s one of the reasons we’re building Link, so that there’s a transit alternative that’s immune to congestion. Driving is back to 65% of normal.
Amazon seems big but tech companies are only a small fraction of jobs. Most jobs are hands-on: retail, doctors and nurses, loading trucks, construction workers, etc. I had a dental cleaning today. Both the hygenist and I went to the clinic, as did the dentist and secretary and assistants and other patients. The janitors come in the evening. All of them might have taken transit to it.
“Downtown business are permanently closing”
Who’s closing? Some companies are going bankrupt in the pandemic, both downtown and in the rest of the region. The aforementioned dental clinic is downtown, and as I passed Nordstrom it looked open. In Pike Place Market the produce stands, meat markets, Market Spice, the gyro stand, etc, are open. Macy’s closed in February due to corporate overbuilding.
“ridership will likely be down for a good chunk of the 2020s”
That’s a huge assumption. Even if it only returns to 80% in 2022, you can’t cut the transit network in half. Metro is the one that has the best handle on current and future ridership, and it doesn’t need you to tell it how much to reduce. Buying smaller vehicles would cost tens of thousands of dollars per vehicle. Metro has been gradually stop-dieting and is getting closer to its 1/4 mile goal. If you cut it down to 1/2 mile without a local overlay, you leave gaps where it’s excessively far from the bus stop, especially for people coming diagonally to the stop.
What blank check? Thousands of buses are running every day, as are dozens of trains, and projects are under construction. That’s what you’re paying for.
I agree. The idea that “downtown is closing” is ridiculous, as is the idea that our transit needs have fundamentally changed. Let me just address each point:
1) Downtown is not closing. Let’s assume that in a couple years the pandemic is over. My guess is vacancy rates at downtown offices will be close to what it is was before the pandemic — around 10%. But let’s say it is worse — close to what the suburbs were, at 20%. Better yet, let’s say it is at 30%, much higher than it has been in a very long time.
That still means that there are a ton of people working downtown. Given the huge growth over the last few years, that would mean more people in offices downtown than five years ago, despite very high vacancy rates.
2) We aren’t build light rail because of tech workers. We are building light rail so that people can get around. A large number of those trips don’t involve commuting. A large number of the commuting trips don’t involve tech work.
Nothing much has changed. At most you will have small changes in peak hour use, but that is a minor part of the transit picture. You don’t build a subway, or spend millions of dollars improving your bus network because of of rush hour traffic (or rush hour ridership). That would be silly. You build it because of all-day demand that will still exist.
Here’s some actual data regarding the region’s office supply and vacancy rates from Colliers for Q4 2019 and Q2 2020:
Dec 31, 2019 (Q4) – all classes of office space – overall vacancy rate
Seattle, 6.1%
Eastside, 3.9%
Northend, 7.9%
Pierce Co/Tacoma, 10.1%
S King Co, 16.1%
Puget Sound Region, 7.0%
Jun 30, 2020 (Q2) – same data group
Seattle, 7.0%
Eastside, 5.5%
Northend, 8.4%
Pierce Co/Tacoma, 7.6%
S King Co, 21.3%
Puget Sound Region, 8.0%
Notably….
“Vacancy climbed across the region, though Class A space has remained tight or even further tightened. Class B and C space have experienced the brunt of the pandemic, with only the Eastside bucking this trend.”
Of course, it’s still too early to draw any conclusions from the data regarding longer term trends in this sector of the commercial properties market. It will be interesting to see where things stand at the end of the year. I think the data presented then will give us a better overall picture of the local office space environment. Until then, I think prognostications are simply premature.
Historically speaking, the region as a whole has seen a steady downward trend in office space (classes A, B and C combined) vacancy rates over the last decade, after hitting a peak of around 16% in the first quarter of 2010.
https://www2.colliers.com/en/research/puget-sound/q2-2020-office-market-report
https://www2.colliers.com/en/research/puget-sound/q4-2019-office-market-report
Interesting. The numbers are slightly different than this article (http://seattlebusinessmag.com/commercial-real-estate/seattle-office-space-high-demand-tech-company-leasing-activity-remains-heated) but the idea is the same. Vacancy rates in downtown Seattle are low, and likely to remain low. More to the point, even if lots of companies leave (and vacancy rates climb) there will still be more people working in offices than ten years ago, simply because we built so much new office space over the years.
If there is a crash due to people working at home, I expect the suburban office space (outside Renton and downtown Bellevue of course) to be hit hardest. A lot of those companies moved to the suburbs because they can’t afford to pay the very high prices in Seattle and downtown Bellevue. If Seattle drops their prices, they will move back (or someone else will move in).
One caveat on the vacancy increase being only 1%: that probably doesn’t include companies that are teleworking or closed but their lease is still active. Some of these may may turn into lease non-renewals or terminations, and then they would add to the vacancy rate. But we can’t predict how much it would be, and it would probably happen across the region, not just downtown.
“A lot of those companies moved to the suburbs because they can’t afford to pay the very high prices in Seattle and downtown Bellevue.”
Erm, I think that applies more to residents than companies. Microsoft built its campus in Redmond (and earlier near the South Kirkland P&R) because that was a popular trend then. Other tech companies concentrated around them to be near the big cheese and because it was still a popular trend. Amazon — and earlier Aldus — located downtown as a countertrend that later became mainstream.
Many people live in the suburbs because they can’t afford Seattle. But I think with companies it’s more that they want to be in the suburbs, or their target workforce or customer base is in the suburbs. Average companies can’t afford a prestigious downtown address, but there are lower-cost places like Fremont, Northgate, SODO, and other parts of Seattle within walking distance of amenities and trunk transit and could be suitable. And if you say, “What? Fremont is too expensive.”, it wasn’t fifteen years ago when these companies could have opened their offices there. Other companies have found more creative places in Seattle like southern Ballard, Interbay, Northgate (as mentioned), Lake City, Georgetown, Rainier Valley, etc.
I can’t think of any company that has located outside Seattle solely or primarily because of cost. If “Seattle” really means “central Seattle”, that might be the case. But Fremont and Northgate are more pleasant locations than Factoria, Totem Lake, Northup Way, or Crossroads. So it can’t be just because of cost. It’s probably mostly because the company owner prefers the burbs, or the target customer base or workforce lives there. Crossing the bridge is a significant deterrent to employees, as is getting from the Eastside to Fremont, Lake City, Georgetown, etc. That’s harder than getting from the Eastside to central Seattle or U Village, because you’re traversing both the bridge traffic and the I-5 traffic (or going through downtown to avoid I-5). In a Link future, commuting from the suburbs to Northgate or Ballard (via U-District + 44 in ST2) will be easier, but we’re not there yet.
“One caveat on the vacancy increase being only 1%….”
That’s a fair point, Mike Orr. The vacancy rate is only one of the metrics that folks who work in this field pay attention to. The net absorption metric, imo, is probably a better indicator of local, regional and/or national trends. The Collier reports I linked to in my comment above highlight these other metrics as well. My larger point was that it’s just too early to make any prognostications about what the future leased office space market will look like (an assertion you appear to agree with).
If telecommuting remains big, the main difference is a smaller peak-hour surge. Metro is already anticipating that: it has suspended most peak expresses and extra peak runs, and if it lasts longer-term Metro will shift the hours to the all-day network. That will have efficiency benefits because peak service is the most expensive to provide: drivers working a split shift, buses leaving the base for only a few hours, long reverse-direction deadheads on express routes, hours lost to the worst traffic congestion, greater need for standby buses due to said congestion, crowding problems, etc.
One problem Metro has had since the 2015 recovery is a max-out of articulated buses peak hours. Off-peak there are plenty of articulated buses to go around for any run that needs it. If the peak surge reduces, then there will be plenty of articulated buses to go around during peak hours too.
Yeah, exactly. If peak demand drops, then it could actually work out well for Metro, as long as they have the same level of funding. Peak demand is more expensive, and a bad value. You need more buses (or bigger buses, as you mentioned) that may sit idle the rest of the day. You have deadheading, which is expensive. You add additional buses to handle demand, but there is no benefit from a frequency standpoint (there is often bus bunching). Eliminate the biggest peak, and you actually have a more cost effective, better system.
Of course, that assumes the same level of funding. That is the bigger issue. The hit to ridership won’t hurt Metro that much, because so little of their funds come from fares. Sound Transit would take a bigger hit. They could see the same level of savings from bus service, but there won’t be a change in the frequency of the trains. They are also more dependent on fare revenue.
But the big hit comes from lower sales tax revenue, or ignorant politicians who simply don’t understand transit, and apply elite projection to think that “we need less transit” and thus make additional cuts.
Within the Lynnwood-Redmond-Federal Way extent we need the Link+Bus network outlined by ST2 and Metro Connects. Beyond it, looking out toward Everett and Tacoma and Issaquah, in a world of more telecommuting and higher unemployment, the plans were already straining credibility, and this will just exacerbate them, and the outer-ring cities may struggle more overall.
Of course, some predict a mass exodus from the cities to the exurbs and rural areas. But where would they find a job there? Would they have an extra-long commute? Many jobs can’t be done by telecommuting. And don’t expect the housing supply to increase dramatically there: those are the areas that are most anti-density. If thousands of people try to move to the exurbs, the cost of housing will rise faster than closer in, as it’s already doing in Pierce and Snohomish Counties. That will make it impossible for lower-income people to move there. A few well-off tech workers can live in the exurbs and work remotely, but that’s not the average person.
With the virus rampant in places like Texas and Florida similar to Yakima and the Tri-cities, the impetus to “leave cities” is much less than it was.
I could see work-at-home people moving within a region into housing where they can have a home office, but leaving a region completely seems to not be advantageous or attractive as it was two months ago.