Program Realignment Sound Transit Board Workshop June 3, 2020 1? 3' SOUNDTRANSIT Financial outlook WEE Economic and financial update What we know • • • • • • • 3 16.4% April national retail sales decline. 43% in WA work in high job loss industries. WA unemployment rate reached historic high of 15.4%. March sales tax down 25% over 2019. April MVET down 25%. Rental Car Tax down 87%. ST Ridership down 86%. Economic and financial update What we do not know • Actual tax receipts beyond one month. • Recession duration and depth. • What recovery will look like. 4 Projected program funding in fall 2019 $97.9 billion from 2017-2041 • Tax revenues fund 67% of the program. • Fares fund 7%. Recessions directly reduce tax and fare revenue. 5 Fares; 18.46% Grants; $6,717 ; 6.92% Property; 8.28% MVET; 4.99% Sources of Funds; 52.64% Sales Tax; 8.70% 5 Revenue loss projections Moderate recession scenario • • 6 $743 million (-22%) in 2020 and 2021. $7.8 billion (-12%) through 2041. Revenue loss projections Severe recession scenario • • 7 $1 billion (-27%) in 2020 and 2021. $12 billion (-18%) through 2041. Revenue may not recover to prior Sales tax comparison projections $3,500,000 $3,000,000 $2,500,000 -14% -23% $2,000,000 $1,500,000 $1,000,000 $500,000 8 Blue: Fall 2019 plan Gold: Moderate recession (-14%) Gray: Severe recession (-23%) Sales tax recovery example ST2: permanent revenue loss despite recovery $1,400,000 $1,300,000 $1,200,000 $1,100,000 $1,000,000 $900,000 ST2 Plan ST2 Actual Taxes -24% $800,000 $700,000 $600,000 $500,000 $400,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 9 Revenue, debt and affordability • As revenues decrease, more debt needs to be issued to pay for expenditures. • When revenue loss exceeds available debt, the program becomes unaffordable. • Therefore, revenue and debt limit determine program affordability. 10 1 Statutory debt limits and program affordability Fall 2019 projections vs. severe recession scenario Program cuts and delays required *In addition to legal debt capacity, debt capacity constraints also include financial policy and debt covenants . 11 Program affordability – severe recession $6,000,000 $5,000,000 Available debt Unaffordable expenditures $4,000,000 $3,000,000 Excess Capacit y Debt-funded expenses $2,000,000 $1,000,000 Available revenue Expenditures funded by available revenues $2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 12 Tools to manage affordability • Increase debt capacity. • Increase revenue. • Reduce costs. • Extend project timelines. 13 Available tools: increase debt capacity • Increase debt limit with 60% voter approval from 1.5% to 5% of assessed property value. 14 Available tools: increase revenue 15 • Increase rental car tax rate. • Increase fares. • Find alternative revenue sources. • Increase grants by ensuring project readiness and competitiveness. Available tools: reduce costs • Contain operating cost growth. • Pursue lower-cost debt such as TIFIA. • Reduce borrowing cost by leveraging financial market tools. • Reduce capital costs by reducing project scope or eliminating/reducing certain programs. 16 Available tools: extend project schedules 17 • Delay projects. • Utilize capacity in years beyond 2041. Program phasin 0 ions Spending decisions happen over time '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40 '41 '42 I-405 BRT SR 522/NE 145th BRT Link OMF South West Seattle Link Tacoma Dome Link Ballard Link Link OMF North Everett Link TCC Tacoma Link S Kirkland–Issaquah Link 19 Planning Design Construction Select project to build Baseline “Selecting the project to build” • Selects station locations, alignment profile, access and other significant project elements. • Makes projects eligible for design, ROW, and construction grants. • Occurs at the end of environmental review and preliminary engineering. • Does not commit construction budget or spending. Program cuts and delays required 20 “Baselining” commits schedule and full budget • Commits the agency to a construction schedule and service opening date. • Commits construction and start-up budget. • Builds upon the “project to be built” definition. • Enables staff to advertise construction contracts. 21 Current $ Millions Environmental/PE costs relatively small 300 Construction: 70% #REF! Final Design/RoW: 20% Environmental/PE: 10% #REF! 250 Award construction contracts 200 150 Select project to build 100 50 0 Open for service Baseline Initiate project 1 2 3 4 5 6 7 8 Year 22 9 10 11 12 13 14 15 Project readiness for delayed projects Current $ Millions Protective ROW acquisition, permits, etc $300 Construction: 70% Final Design/RoW: 20% Environmental/PE: 10% $250 $200 $150 $100 $50 $- Select project to build Initiate project 1 Award construction contracts Baseline 2 3 4 5 6 7 Year 23 Open for service 8 9 10 11 12 13 14 15 YOE $ Billions $8 $7 24 $6 $5 $4 $3 $2 $1 $- Construction Final Design/RoW Environmental/PE S Kirkland – Issaquah Link TCC Tacoma Link Everett Link Link OMF North Ballard Link West Seattle Link Tacoma Dome Link Link OMF South $9 SR 522/NE 145th BRT $10 I-405 BRT Cost per phase of major ST3 projects Baseline decisions as originally scheduled '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35 '36 '37 '38 '39 '40 '41 '42 I-405 BRT SR 522/NE 145th BRT Link OMF South West Seattle Link Tacoma Dome Link Ballard Link Link OMF North Everett Link TCC Tacoma Link S Kirkland–Issaquah Link 25 Planning Design Construction Select project to build Baseline Examples of extended timelines Types of extended timelines • Delay all projects equally. • Delay some projects more than others. • Phase projects by opening in segments or with some elements deferred to a later date. Program cuts and delays required 27 High capacity extension - delayed '20 Project 1 Planning Design Construction 28 '21 '22 '23 '24 '25 '30 '35 '40 '45 '50 Break projects into phases Build partial projects in segments or with interim termini '20 Project 1 Planning Design Construction 29 '21 '22 '23 '24 '25 '30 '35 '40 '45 '50 Realignment criteria Program affordability Criterion Concept System Is the full program affordable at the system level? affordability Subarea Is the full program affordable at the subarea affordability level? 31 ST3 development core principles Criterion Concept Completing the spine Connecting centers Ridership potential Socio-economic equity Does the project advance the regional HCT spine? Does the project connect designated regional centers? How many daily riders is the project projected to serve? How well does the project expand mobility for transit-dependent, low-income, and/or diverse populations? Advancing logically Can the project be included financially once beyond the spine projects that advance the spine are included? 32 Other project considerations Criterion Concept Operability Sequencing Constructability Readiness Tenure Equity How important is the project to operating current or new service? Must the project be completed for other projects to happen? Can the project be built in increments? How close is the project to opening for service? How long have voters been waiting for the project? Do communities the project serves have other transit options? Outside funding Are other funding sources available or secured? 33 Next steps Week of June 8 Executive Committee (criteria). June 25 Board meeting (scenario & criteria). Summer Direction on projects paused pending realignment. 34 Thank you. 1? 3' SOUNDTRANSIT sauna/transit. org