Program Realignment

Sound Transit Board Workshop

June 3, 2020
Financial outlook
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%.

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 Economic and financial update
What we do not know

• Actual tax receipts beyond one month.

• Recession duration and depth.
• What recovery will look like.

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

• Tax revenues fund 67% of Debt

the program. 18%

• Fares fund 7%. Fares

7% Sales Tax
Recessions directly reduce Grants 53%
tax and fare revenue. 8%

Property MVET
5% 9%

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Revenue loss projections
Moderate recession scenario

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

• $7.8 billion (-12%) through 2041.

2020-2021 2020 - 2041

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%

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Revenue loss projections
Severe recession scenario

• $1 billion (-27%) in 2020 and 2021.

• $12 billion (-18%) through 2041.
2020-2021 2020 - 2041
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%

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Revenue may not recover to prior projections
Sales tax comparison
$3,500,000

$3,000,000
-23%
-14%
$2,500,000

$2,000,000

$1,500,000
Blue: Fall 2019 plan
$1,000,000 Gold: Moderate recession (-14%)
Gray: Severe recession (-23%)
$500,000
2027
2019
2020
2021
2022
2023
2024
2025
2026

2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
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 Sales tax recovery example
ST2: permanent revenue loss despite recovery
$1,400,000
$1,300,000
$1,200,000
$1,100,000
ST2 Plan ST2 Actual Taxes
$1,000,000
-24%
$900,000
$800,000
$700,000
$600,000
$500,000
$400,000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

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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.

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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 .

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Program affordability – severe recession
$6

Excess
Capacity
$5 Available
debt
$4 Unaffordable
expenditures
Billions

$3 Debt-funded expenses

$2

Available Expenditures funded by available

$1 revenue 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

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Tools to manage affordability
• Increase debt capacity.
• Increase revenue.
• Reduce costs.
• Extend project timelines.

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Available tools: increase debt capacity
• Increase debt limit with 60% voter approval from 1.5% to
5% of assessed property value.

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Available tools: increase revenue
• Increase rental car tax rate.
• Increase fares.
• Find alternative revenue sources.
• Increase grants by ensuring project readiness and
competitiveness.

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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.

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Available tools: extend project schedules
• Delay projects.
• Utilize capacity in years beyond 2041.

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Program phasing options
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

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“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.

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Environmental/PE costs relatively small
300
Construction: 70%

250 Final Design/RoW: 20% Award

Environmental/PE: 10% construction
contracts
200
Current $ Millions

150 Select
project to
build Open for
Baseline service
100

Initiate
50 project

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Year

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 Project readiness for delayed projects
Protective ROW acquisition, permits, etc
$300
Construction: 70%
$250 Final Design/RoW: 20%
Environmental/PE: 10%
$200
Current $ Millions

$150 Award
construction Open for
Select contracts
$100 project to service
build
Initiate Baseline
$50 project

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

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24
YOE $ Billions

$-
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10

I-405 BRT

SR 522/NE 145th BRT

Construction

Link OMF South

Environmental/PE
Final Design/RoW

Tacoma Dome Link

West Seattle Link

Ballard Link

Link OMF North

Everett Link
Cost per phase of major ST3 projects

TCC Tacoma Link

S Kirkland – Issaquah Link

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

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 High capacity extension - delayed

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

Project 1

Planning
Design
Construction

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 Break projects into phases
Build partial projects in segments or with interim termini

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

Project 1

Planning
Design
Construction

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Realignment criteria
Program affordability

Criterion Concept
System affordability Is the full program affordable at the system level?
Subarea affordability Is the full program affordable at the subarea level?

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ST3 development core principles
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?
How well does the project expand mobility for transit-
Socio-economic equity
dependent, low-income, and/or diverse populations?
Advancing logically Can the project be included financially once projects
beyond the spine that advance the spine are included?

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Other project considerations
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?

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Next steps
Week of June 8 Executive Committee (criteria).
June 25 Board meeting (scenario & criteria).
Summer Direction on projects paused pending realignment.

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Thank you.

soundtransit.org
 Projected sales tax recovery

• ST2 tax growth recovered to 4% annual growth vs. 4.7% projected without
replacing revenue lost in the recession.
Sales Tax Growth Rates: ST3 Plan vs Recession Scenarios
20%

10%

0%

-10%

-20% Original ST3 Plan

Moderate Scenario
-30%
Severe Scenario
-40%

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