Financial Crisis Forces Sound Transit to Consider Tough, Complicated Choices

By Erica C. Barnett

Over the past few months, Sound Transit, the regional agency tasked with building light rail to Ballard and West Seattle lines as well as extending the main light-rail “spine” to Everett and Tacoma, has been dealt a double blow of bad news. Last June, agency staff estimated that total revenues could fall short by $8 billion to $12 billion by 2041, the original end date of the Sound Transit 3 program voters approved in 2016. (More recent projections have adjusted that projection down slightly, to a range of $6.1 billion to $11.5 billion, but the numbers remain grim).

Then, earlier this month, Sound Transit announced that the cost to build the ST3 package, which includes elevated lines to West Seattle and Ballard, had increased by about $8 billion. The combination of the shortfall and cost inflation has created an “affordability gap” of about $11.5 billion.

Referring to the chart above, which shows a green line marked “ending balance” plummeting below zero beginning in 2029, Sound Transit board chair Kent Keel said last week, “I’ve never seen a chart where the budget dropped off the chart … so that’s pretty sobering for me.”

Keel made his comments during a board workshop on Sound Transit 3 “realignment” last Thursday, where the general outlines of two broad options emerged.

The first, which staff have dubbed the “expanded capacity” approach, would involve finding additional resources, such as grants, federal dollars, or new taxes, to boost Sound Transit’s revenues and make the newly inflated project possible. The second, called the “plan-required” approach, would involve some combination of delaying elements of the project, permanently reducing the scope of projects, and eliminating some projects altogether. According to a lengthy report on the options, this alternative would only come into play “in the event that new financial resources are not secured.”

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Presented with these conflicting options, several board members insisted that the solution was doing “both.” Seattle Mayor Jenny Durkan, for example, said, “We have to be working hard at what the resources we have, but [we also] have to look at what are other potential sources of revenues,” she said, adding, “Every time we pull the covers over ourselves, we fail ourselves. We have to be thinking of the future.”

To that end, the options Sound Transit CEO Peter Rogoff presented last week included: New federal funding; direct grants from the state; increasing the agency’s debt capacity; raising the rental car tax rate; purchasing lower-cost debt through federal loan programs; and increasing fares.

Most of these options come with significant caveats and downsides. For example, Sound Transit is already the nation’s largest Transportation Infrastructure Finance and Innovation Act borrower, making it less likely the agency will be approved for additional debt. Rental-car tax revenues are currently negligible because of the COVID-related decline in travel. And any increase to the agency’s debt capacity would require either 60 percent voter approval or a change to the Washington State Constitution (and would lower the agency’s credit rating, resulting in higher interest payments.)

Finally, Rogoff said, the likelihood of more federal grant funding is dampened somewhat by the fact that Sound Transit already receives one-tenth of the Federal Transit Agency’s grant funding nationwide; “We would certainly love to get a higher percentage of that program, and we certainly would love to get an additional program funded, but there is certainly a limit to what one transit agency can call on from that program, or at least there has been to date,” Rogoff said on Thursday.

Complicating matters are some of the six factors the board will use to decide how to prioritize voter-approved projects in light of the budget gap. For Seattle residents, two factors could end up working against the city’s projects, including light rail to Ballard and West Seattle.

The first is whether a project serves to “complete the spine” of regional light rail, meaning the central line that will eventually extend from Tacoma to Everett.  This portion of the plan requires the construction of a second downtown transit tunnel, but Sound Transit does not consider that tunnel part of the “spine.” Instead, the tunnel—which will also connect downtown to West Seattle and Ballard—is considered a Seattle-only project for planning purposes. (Sound Transit spokesman Geoff Patrick said the tunnel is funded regionally, the costs split between the three “subareas” within the Sound Transit taxing district). The upshot could be that when Sound Transit gets around to picking projects to delay or cut, West Seattle and Ballard could be first in line because Seattle already got a “Seattle” project in the form of a second downtown tunnel.

The second issue is equity—defined, for Sound Transit’s purposes, as how well a project serves low-income people, people of color, and people with disabilities within a one-mile radius of a project, such as a station. Although many ST3 projects scored low on equity, some of the worst were in Seattle. They included the West Seattle line (which scored medium-low), the downtown tunnel (medium-low) and the Ballard extension (low). This could bump these projects lower down the priority list.

Some board members argued that the definition of “equity” Sound Transit uses is narrow and self-defeating, since stations tend to raise property values (and prompt gentrification) in their immediate vicinity, driving down their equity scores even if they serve people from less-affluent, more diverse parts of town. For example, an infill station at NE 130th Street, in board member Debora Juarez’s Seattle City Council district, ranked low on the list, despite the fact that the station will serve people commuting into the area from elsewhere.

“I have a real problem with the equity” metric, because of the way it narrowly defines a station’s service area, Juarez said. “The whole point of having these stations is to get people to work, to the hospital,” Juarez said, referring to the UW Medical Center hospital near the station. “Taking three buses to get to the north end is ridiculous.”

The board isn’t expected to adopt a realignment plan until next summer, at the soonest. Although board chair Keel began a blue-sky discussion last week about how Sound Transit could cut costs or raise money—beginning with the rental-car tax, which would raise a negligible amount—board member Claudia Balducci, a King County Council member from Bellevue, cautioned against coming up with lists of cuts or new taxes before a thorough discussion.

“When we did this ten-plus years ago”—in the wake of the 2008-2010 recession—”we had a very deeply researched piece of documentation that was given to us with a lot of backup behind it,” Balducci, who first joined the Sound Transit board as Bellevue mayor in 2020, said. “I feel like we’re at that early stage of maybe trying to provide high-level feedback about the parameters around additional study that we want to see. … It feels like we’re rushing toward a solution when we haven’t identified the problems.”

 

One thought on “Financial Crisis Forces Sound Transit to Consider Tough, Complicated Choices”

  1. Please check your ST equity analysis. The RCW enabling legislation required ST (nee RTA) to consider equity for the counties; ST gave themselves a five subarea system, breaking King County into East, South, and West. The discussion of equity among households seems to lack sophistication and data; there are low income households in all five subareas and along all the corridors. Historically, ST has used delay as its main tactic to address such shortfalls. but both Sound Move and ST2 had projects dropped. In Sound Move, the NE 85th Street center access project and the I-90 busway were dropped; Link stations at NE 45th Street, First Hill, South Graham Street, Boeing Access were dropped. Sounder North became one-way and anemic. In ST2, Bothell parking and a Renton ramp were dropped and some bus service was reduced. For Councilmember Juarez, routes 65, 71, 73-373, 75, and 372 connect the UWMC and the north end directly. With Link, ever more riders will transfer, but transit mobility will improve as long as the agencies keep waits short.

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