March 21, 2017
MEMORANDUM
To:

Sustainability & Transportation Committee

From:

Calvin Chow, Analyst; and Dan Eder, Deputy Director

Subject:

Adequacy of Funds - Consolidated Streetcar Construction and System Operations

During budget deliberations last fall, Central Staff (CS) raised concerns about the lack of a longterm financial plan to pay for the Operating and Maintenance (O&M) costs of the future
Consolidated Streetcar System (“System”). SDOT has since provided a two-page response dated
1/11/17 (attached) in which SDOT identified $16.7 million in revenues that cover the System’s
$16 million per year O&M costs. While SDOT’s response is appreciated, it raises the following
CS analyst questions:
1. How realistic are SDOT’s operating revenue assumptions in projecting $16.7 million to
fully cover the System’s anticipated annual costs?
2. Will the $152 million in projected revenues fully cover the Construction of the City
Center Connector Project costs?
BACKGROUND
As shown in Figure 1 the System will consolidate the existing South Lake Union and First Hill
streetcar lines, with the yet to be constructed Center City Connector line. Figure 2 shows the
operating plan for the consolidated System.
Figure 1: Streetcar Alignments

Figure 2: Consolidated Streetcar Operating Plan

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 The System is scheduled to be fully operational by 2020. SDOT intends to proceed with utility
relocation along 1st Avenue and start the procurement process for the purchase of new street
cars in 2017. The actual construction of the Center City Connector is scheduled to begin in
2018.
Table 1: System’s O&M Cost Summary per SDOT
Item
Item Detail
Streetcar
46 operators, 10 electro mechanics, 10 O&M supervisors, and 1 each
Operations
train controller, maintenance chief, superintendent, + management /
admin staff.
Power Systems
Cost-allocated staffing for maintenance of overhead contact system,
O&M
traction power, substations, etc.
Admin support
Financial management, training, insurance, etc.
Op materials &
supplies
Direct Costs
Subtotal
Grand Total

Office consumables; vehicle consumables; essential equipment,
uniforms, gear, etc.
City costs for fare inspections, platform and facility maintenance,
utilities, program management, etc.
With conversion to year 2020 and a contingency of +/-10%

Table 2: Revenue Sources to Pay System’s O&M Costs
Description
1 Fare Box Revenues - ORCA, Pay Stations and Passes
2 Federal Transit Authority (FTA) Fixed Guideway Funding
3 Vehicle and Station Sponsorship
4 Sound Transit Funding and Carry Forward for First Hill Streetcar
5 Metro and Amazon Contribution for SLU Operations
Grand Total

Annual Cost
$8,150,000

$920,000
$1,770,000
$290,000
$900,000
$12,030,000
$16,060,000

Annual Revenue
$9,000,000
$600,000
$1,000,000
$5,000,000
$1,055,000
$16,655,000

QUESTIONS/CONCERNS
1. How realistic are SDOT’s operating revenue assumptions in projecting $16.7 million to
fully cover the System’s anticipated annual costs? The revenue sources listed in Table 2
may not fully cover the System’s annual O&M costs (Table 1) because:
a. Sound Transit currently provides a defined $5 million per year payment to the City to
operate the First Hill Streetcar1 that continues only through 2023. Item 4 in Table 2
assumes the $5 million per year payment provided by Sound Transit for the First Hill
streetcar (in lieu of pursuing a First Hill light rail station) will continue indefinitely.
However, Sound Transit’s obligation for annual operations funding terminates at the

1

Sound Transit provided funding for the First Hill streetcar in lieu of pursuing a First Hill light rail station.
Amendments to this agreement were authorized in 2014 by Ordinance 124601.
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 end of 2023.2 Unless Sound Transit agrees otherwise, the City would need to allocate at
least $5 million in additional annual resources to continue operating the First Hill
Streetcar whether as a separate streetcar line or as part of the consolidated streetcar
system beginning in 2024.
b. SDOT’s plan for funding transit operations anticipates the System will achieve a 56% fare
box recovery rate. SDOT further estimates that the combined streetcar system will carry
30,000 weekday riders, and generate $9 million of fare revenue to support operations.
For comparison, the South Lake Union Streetcar carries approximately 2,300 weekday
riders and generated $892,365 of fare revenue in 2015.3
Item 1 in Table 2 anticipates $9 million in annual revenues from “Fare Box Revenues.”
As shown in Table 3 below, this assumption is significantly higher than the fare box
recovery of other comparable transit services, as well as higher than both the actual fare
box recovery on the South Lake Union streetcar and the estimated fare box recovery on
the First Hill Streetcar.4 Since both streetcar segments would become part of the
consolidated streetcar system, that means the 1.2 mile Center City Connector would
need to achieve an extraordinary fare box recovery rate to achieve its 56% recovery
rate.
Table 3: Fare Box Recovery Summary

System

Fare Box Recovery

Future Consolidated Streetcar System
(with Center City Streetcar)

56%

Sound Transit Link Light Rail

37%

South Lake Union Streetcar

32%

King County Bus Service

31%

First Hill Streetcar

20%

Source
Projected in 2020 by SDOT in its FTA
Small Starts Grant Application
(October 2015).
Actual in 2016 from an email
communication from Sound Transit
Operations Business Manager Brian
Scott (2/16/2017).
Actual in 2015 from SDOT’s
Streetcar Biannual Report
(August 2016).
Actual in 2015 from King County
Metro’s 2015 Strategic Plan Progress
Report (June 2016).
Estimated in 2020 by SDOT in its FTA
Small Starts Grant Application
(October 2015).

Funding for the First Hill streetcar was included in Sound Transit’s voter-approved ST2 plan; the voter-approved
ST3 plan did not include funding for future streetcar operations.
3
Ridership from 3Q2016 APTA Ridership Report (reported under Light Rail-King County). Revenue from SDOT
Streetcar Biannual Report, August 2016.
4
SDOT has yet to report first-year fare box recovery on the First Hill streetcar line, but included an estimate in its
FTA grant proposal.
2

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 Fare box recovery is one of the standard metrics used in the transit industry to measure
system performance. It is a simple ratio of earned fare revenues to operating costs. It is
important to note that transit fare revenue is split between transit agencies in the
central Puget Sound region as part of a revenue sharing agreement. For example, when
a passenger pays her fare to ride on the First Hill Streetcar and then transfers to a King
County Metro bus, the fare revenue from that trip is split between the two transit
agencies. Even though the full fare is collected by the First Hill Streetcar, the City of
Seattle and King County Metro split this fare revenue since the passenger’s trip involved
more than one mode. Each agency counts only the fare revenue earned (a portion of
the total fare paid for so-called “linked trips”) towards the fare box recovery ratio.
If the combined streetcar system were only to achieve 37% fare box recovery, equal to
the rate for Sound Transit’s Link Light Rail, the consolidated streetcar system would
recover about $5.9 million. This would result in a $3.1 million shortfall in SDOT’s
operating plan.
2. Will the $152 million in projected revenues fully cover the construction of the City Center
Connector Project costs? The adopted 2017-2022 CIP anticipates the $152 million of City
Connector capital costs will be funded through a variety sources (see Table 4 below). To
date, SDOT has spent $11 million on design and environmental review of the project’s $69
million in secured funding.
The project has an additional $82 million in remaining unsecured funding. The source for $7
million has yet to be identified; and more significantly the $75 million FTA grant has not yet
been executed. While this FTA funding was included in the previous administration’s
proposed budget for Fiscal Year 2017, the President’s proposed budget for Fiscal Year 2018
(released on March 16, 2017) appears to eliminate the FTA grant program that would
provide funding for the streetcar. It remains to be seen what level of FTA funding (if any)
will be authorized by Congress for this project. Without this federal funding, it is not clear
that the project can or should move forward.
Council may wish to consider imposing a proviso mid-year (either through the 1st Quarter
Supplemental or through separate legislation) that restricts SDOT’s appropriations for utility
relocations on 1st Avenue until there is clarity on federal funding for the project.

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 Table 4: Center City Connector Capital Funding*
Total Projected Capital Cost
$152 million
Secured:
Spending to date
City Funding (Bonds)
Utility Contributions

$69 million
$11 million
$45 million
$13 million

Unsecured:
$82 million
FTA Grant Funding
$75 million
To be determined
$7 million
* Totals may not sum properly due to rounding

NEXT STEPS
Central Staff will continue to research current performance data on the existing streetcar lines
for context, and explore financial issues and questions with SDOT and the City Budget Office.
Please let us know if you have any questions.

Attachment - SDOT Response Dated 1/11/17
cc:

Kirstan Arestad, Central Staff Director

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