Program Realignment

Sound Transit Board Workshop

June 3, 2020

Financial outlook

3

Economic and financial update What we know

• 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%.

4

Economic and financial update What we do not know

• Actual tax receipts beyond one month.

• Recession duration and depth.

• What recovery will look like.

5

Projected program funding in fall 2019$97.9 billion from 2017-2041

5

Sales Tax53%

MVET9%

Property

5%

Grants8%

Fares7%

Debt18%

• Tax revenues fund 67% of

the program.

• Fares fund 7%.

Recessions directly reduce

tax and fare revenue.

6

Revenue loss projectionsModerate recession scenario

• $743 million (-22%) in 2020 and 2021.

• $7.8 billion (-12%) through 2041.

2020-2021

Sales Tax (766,210,083)$ (6,757,232,887)$

All tax and fare revenues (908,870,557)$ (8,006,059,532)$

Net loss after CARES ACT (742,870,557)$ (7,840,059,532)$ -12%

2020 - 2041

7

Revenue loss projectionsSevere recession scenario

• $1 billion (-27%) in 2020 and 2021.

• $12 billion (-18%) through 2041.

2020-2021

sales tax (975,969,211)$ (10,895,525,326)$

All tax and fare revenues (1,118,629,685)$ (12,144,351,971)$

Net loss after CARES ACT (952,629,685)$ (11,978,351,971)$ -18%

2020 - 2041

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Revenue may not recover to prior projections

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

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Sales tax comparison

Blue: Fall 2019 plan

Gold: Moderate recession (-14%)

Gray: Severe recession (-23%)

-14% -23%

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Sales tax recovery exampleST2: permanent revenue loss despite recovery

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

$1,100,000

$1,200,000

$1,300,000

$1,400,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

ST2 Plan ST2 Actual Taxes

-24%

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Revenue, debt and affordability

1

0

• 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.

11

Statutory debt limits and program affordabilityFall 2019 projections vs. severe recession scenario

*In addition to legal debt capacity, debt capacity constraints also include financial policy and debt covenants .Program cuts and delays required

12

$-

$1

$2

$3

$4

$5

$6

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

Bill

ions

Program affordability – severe recession

Debt-funded expenses

Available

debt

Unaffordable

expenditures

Expenditures funded by available

revenues

Available

revenue

Excess

Capacity

13

Tools to manage affordability

• Increase debt capacity.

• Increase revenue.

• Reduce costs.

• Extend project timelines.

14

Available tools: increase debt capacity

• Increase debt limit with 60% voter approval from 1.5% to

5% of assessed property value.

15

Available tools: increase revenue

• Increase rental car tax rate.

• Increase fares.

• Find alternative revenue sources.

• Increase grants by ensuring project readiness and

competitiveness.

16

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.

17

Available tools: extend project schedules

• Delay projects.

• Utilize capacity in years beyond 2041.

Program phasing options

19

'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

Spending decisions happen over time

Planning Design Construction Select project to build Baseline

20

“Selecting the project to build”

Program cuts and delays required

• 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.

21

“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.

22

0

50

100

150

200

250

300

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Cu

rren

t $ M

illi

on

s

Year

Construction: 70%

Final Design/RoW: 20%

Environmental/PE: 10%

Initiate

project

Select

project to

buildBaseline

Open for

service

Award

construction

contracts

Environmental/PE costs relatively small

23

$-

$50

$100

$150

$200

$250

$300

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Cu

rren

t $ M

illi

on

s

Year

Construction: 70%

Final Design/RoW: 20%

Environmental/PE: 10%

Initiate

project

Select

project to

buildBaseline

Award

construction

contractsOpen for

service

Project readiness for delayed projectsProtective ROW acquisition, permits, etc

24

Cost per phase of major ST3 projects

$-

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

YO

E $

Bil

lio

ns

Environmental/PE

Final Design/RoW

ConstructionI-

405

BR

T

SR

522

/NE

145

th B

RT

Lin

k O

MF

So

uth

Ta

co

ma D

om

e L

ink

We

st

Se

att

le L

ink

Ba

llard

Lin

k

Lin

k O

MF

No

rth Ev

ere

tt L

ink

TC

C T

aco

ma L

ink

S K

irk

lan

d –

Issa

qu

ah

Lin

k

25

'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

Baseline decisions as originally scheduled

Planning Design Construction Select project to build Baseline

Examples of

extended timelines

27

Types of extended timelines

Program cuts and delays required

• 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.

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'20 '21 '22 '23 '24 '25 '30 '35 '40 '45 '50

Project 1

Planning

DesignConstruction

High capacity extension - delayed

29

'20 '21 '22 '23 '24 '25 '30 '35 '40 '45 '50

Project 1

Planning

DesignConstruction

Break projects into phasesBuild partial projects in segments or with interim termini

Realignment criteria

31

Criterion Concept

System affordability Is the full program affordable at the system level?

Subarea affordability Is the full program affordable at the subarea level?

Program affordability

32

Criterion Concept

Completing the spine Does the project advance the regional HCT spine?

Connecting centers Does the project connect designated regional centers?

Ridership potential How many daily riders is the project projected to serve?

Socio-economic equityHow well does the project expand mobility for transit-

dependent, low-income, and/or diverse populations?

Advancing logically

beyond the spine

Can the project be included financially once projects

that advance the spine are included?

ST3 development core principles

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Criterion Concept

Operability How important is the project to operating current or new service?

Sequencing Must the project be completed for other projects to happen?

Constructability Can the project be built in increments?

Readiness How close is the project to opening for service?

Tenure How long have voters been waiting for the project?

Equity Do communities the project serves have other transit options?

Outside funding Are other funding sources available or secured?

Other project considerations

34

Next steps

Week of June 8 Executive Committee (criteria).

June 25 Board meeting (scenario & criteria).

Summer Direction on projects paused pending realignment.

Thank you.

soundtransit.org