Sound Transit faces $8-12 billion revenue shortfall

Most savings will require extending the construction window over several more years than originally planned (slide: Sound Transit)

Over the lifetime of the ST3 program, Sound Transit now expects a revenue shortfall on the order of $8-12 billion. Without adjusting expenditures, the agency will run out of available debt capacity by 2028. On Wednesday afternoon, a Board workshop learned more about the depth of the financial crisis and began to review options for responding. On average, according to one board member, the financial outlook suggests a five-year delay to projects not already in construction.

Generally, staff are suggesting extended project timelines. (They were careful not to couch this as a recommendation). In this scenario, environmental and preliminary engineering (E/PE) work might begin on the original schedule, but detailed design and construction work would follow over a longer window than currently projected. E/PE work is relatively inexpensive, typically about 10% of project costs. Getting it done on schedule preserves flexibility in case new revenue or grant options present themselves.

A number of board members raised the possibility of asking voters to raise the debt limit. Similar to municipalities, Sound Transit can borrow up to 1.5% of the assessed value of properties within the RTA. That could be raised to 5% of assessed value with the approval of 60% of voters. There was interest too among some board members in raising taxes or changing the mix of taxes supporting the agency. For now it would be unsafe to rely on that. Any such ballot measure is further in the future than Sound Transit should wait before acting.

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Sound Transit to decide evaluation criteria for program realignment

Projects already in construction will be prioritized. Others go in the realignment process (slide: Sound Transit)

A series of meetings this week will select criteria for Sound Transit’s program realignment. A Board workshop will be held on Wednesday. On Thursday the Executive Committee expects to recommend evaluation criteria for projects to be altered or delayed. On June 25, the full Board is to approve those criteria before a further series of meetings evaluates what is to be done with each project.

The most current recession scenarios, shared with the Board last Thursday, predict a sales tax loss of 26%-31% this year and 27%-35% in 2021. That’s compounded by lost fare revenue, but also offset partly by $166 million in CARES Act assistance.

Added up, the current revenue loss expectation is for $743-$953 million through the end of next year alone. The model appears to anticipate a long recession with revenues persistently below past projections after the pandemic has passed.

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