Denver Rail Expansion: Billions Over Budget

COST Comments: As discussed in the article below, Denver’s light rail extension is at least $2 billion over budget requiring major reductions in the rail expansion or doubling of the 0.4 penny sales tax levy which voters approved more than 5 years ago.

This is not an isoluted case. Essentially every rail trasit system projects costs significntly under actual experience and projects ridership significantly above actual results.

Houston has started a rail expansion which was promised for $1.2 billion and is now estimated at almost $4 billion. Meanwhile Houston’s transit ridership is 17% less today than it was 10 years ago when it had bus only transit and before it spent several hundred million dollars on a starter rail trolley.

Austin’s Capital Metro has already proven the cost side of this continuing rail transit story by spending at least three times the $60 million promised voters and projecting annual operating costs to be more than 6 times the promise to voters. This is in the face of a ten year declining trend in transit ridership. Capital Metro is essentially bankrupt due to this wasteful spending on an ineffective rail line.

FasTracks funding gap widens

RTD says that in order to get the mass-transit expansion done on time, voters will need to vote to raise taxes again.

By Jeffrey Leib
The Denver Post
Posted: 01/06/2010 01:00:00 AM MST
Updated: 01/06/2010 01:29:35 AM MST

FasTracks | The full project includes six new train lines, extensions to three existing light-rail lines and other transit elements. (Joe Amon, The Denver Post)

Related Articles

• Jan 5:
Latest FasTracks projection shows lower tax collections, construction costs

• Dec 1:
RTD dismisses FasTrack findings from North Area Transportation Alliance report

• Nov 30:
FasTracks plans could fall short in north metro area, study finds

RTD now says it will cost $6.7 billion to build all of FasTracks, but without a doubling of the existing tax this year, the agency will be short about $2.5 billion in revenues needed to complete the massive transit expansion by 2017.

Details of the 2010 FasTracks financial plan, released by Regional Transportation District officials Tuesday, show the agency expects cost savings for the project of about $300 million, compared with last year’s total cost forecast of $7 billion.

But RTD also is using a lower forecast for sales-tax collections, which are a key component of the revenue stream that will pay for FasTracks, the nation’s most ambitious mass- transit expansion program.

The agency now is forecasting that it will have about $4.2 billion available from tax collections, federal funds and other sources to build the project by 2017 unless metro Denver voters approve a doubling of the existing 0.4 percent FasTracks sales tax in November.

Last year’s revenue forecast was $4.8 billion.

Passing the tax increase this year would produce enough additional revenue to construct the entire project by 2017, and operate and maintain the expanded transit system in the coming decades, said Tim Romer, a Goldman, Sachs & Co. investment banker who is RTD’s financial adviser on FasTracks.

The full project includes six new train lines, extensions to three existing light-rail lines and other transit elements.

In a briefing Tuesday, Romer and RTD general manager Phil Washington said RTD’s new lower sales- and use-tax forecast means the agency now expects to collect only a little more than half the tax revenues projected when the original 0.4 percent FasTracks tax was presented to voters in 2004.

Six years ago, RTD predicted it would collect $13.7 billion in sales and use taxes through 2035; now the agency estimates tax collections will total $7.8 billion over that same multidecade period.

The anticipated long-term tax revenues dropped $1.3 billion from last year’s $9.1 billion forecast, officials said.

RTD officials also said a proposal offered by Aurora Mayor Ed Tauer to reserve proceeds from a 2010 tax increase for construction of FasTracks trains that are last in line for funding would likely result in delaying that construction beyond 2017.

At meetings of the FasTracks task force of the Metro Mayors Caucus, Tauer proposed isolating tax revenues collected from the increase into a separate “bucket” to ensure that the Interstate 225 rail line through Aurora, the North Metro train to Thornton/Northglenn and other endangered elements of FasTracks would get funding.

But Romer said construction delays would occur if new and existing taxes were not commingled and “cross-collateralized.”

On Tuesday night, Tauer said he had not seen RTD’s analysis of his proposal, so he couldn’t comment on the agency’s claim that it isn’t feasible.

Acknowledging the challenges that RTD faces bringing the full FasTracks project in on time, Washington said, “We’re fully committed to completing the entire investment.”

RTD’s board of directors is expected to decide in March or April whether to ask voters this year to hike the FasTracks sales tax. The agency’s advisers have suggested that 2012 might be a better year to go to voters, but Washington said delaying the vote — and thereby delaying the FasTracks construction schedule — would likely add at least $200 million to the project’s cost.

Washington presented other potential scenarios for FasTracks, including:

• If voters approve the additional 0.4 percent sales tax this year, but RTD does not get a hoped-for $1 billion from the federal government to construct the train to DIA and the Gold Line to Arvada/Wheat Ridge, then buildout of the full FasTracks program would stretch until 2025.

• If RTD waits until 2012 to take a tax hike to voters, and they approve the increase, then the entire project could be completed by 2019, assuming receipt of the $1 billion in federal funds.

Washington, who was selected as RTD’s general manager by the agency’s board last month, also said he and his staff are working on possible service reductions to some FasTracks lines that could result in a savings of about $688 million.

Among the adjustments RTD is considering:

• Reducing service frequencies on the Northwest rail line to Boulder/Longmont to four trains each at the morning and evening peak periods and no off-peak service.

• Going to 30-minute peak and off-peak service on the I-225 line from the currently planned 10-minute peak and 15-minute off-peak.

• Taking North Metro rail service from the currently planned 15-minute peak and 30-minute off-peak service possibly to 30-minute peak and 90-minute off-peak.

RTD’s board of directors still must approve any service reductions aimed at generating savings.

Click to enlarge

Chart of the history of projected costs and income from sales tax levy of 0.4%

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