Completing Projects With Less Funding: Sound Transit’s Success Story

Completing Projects With Less Funding: Sound Transit’s Success Story

January 20, 2014  | Carter Templeton

BY JONI EARL
Chief Executive Officer
Sound Transit

Many transit agencies were hit hard by the recession; what added dimension to Sound Transit’s experience was passing a $17.8 billion expansion measure on November 4, 2008, literally the eve of the financial chaos.

Today, Sound Transit’s sales tax revenues that make up 90 percent of our revenue base still haven’t recovered to 2007 levels. This translates to a $4.6 billion lower funding forecast through 2023 to build the Sound Transit 2 package. And yet we still plan to complete more than 30 miles of the light rail extensions that were the centerpiece of the package — all but two miles of what voters approved. This incredible experience is what I would like to share: Sound Transit’s strategy for completing more than 90 percent of the extensions with 29 percent less funding.

High Stakes

More than 40 percent of Washington State’s population lives in the Central Puget Sound region that Sound Transit was formed 17 years ago to serve. The citizens of the more than 50 cities enjoy a beautiful landscape and a local economy fueled by world-class companies spanning fields including technology, aviation, healthcare, biotech and coffee. They also face traffic that consistently ranks among the nation’s worst.

When voters considered the Sound Transit 2 measure, Sound Transit was in the final stages of completing the first light rail segment that voters approved in 1996. We had secured federal funding for a 3.2-mile tunnel northward to Seattle’s Capitol Hill and University of Washington areas and moved the project into final design.

Although light rail trains were not yet carrying passengers, a buzz of excitement grew as test trains began gliding past traffic jams. Meanwhile, our commuter rail and express bus ridership continued their strong growth, building support. Commuters also took stock of the fact our population will continue growing. Even after the recession, our region is bracing for nearly 30 percent population growth by 2035.

In 2007 regional voters resoundingly rejected a combined Roads & Transit ballot measure. But the next year during the historic presidential election, more than 57 percent of voters supported a vision for a future that included more than 30 additional miles of light rail extending further north, east and south. They entrusted us with a critical mission for our mobility, environmental sustainability, economic prosperity and livability.

Defining Priorities and Setting Aggressive Goals in a Recession

Both state law and Sound Transit’s commitment to transparency require maintaining a financial plan that realistically balances our plans with projected funding. In 2010, two years into the recession, we embarked on a process of realigning the Sound Transit 2 measure to match financial reality.

Our greatest saving grace was that we had taken a consciously conservative approach in shaping the Sound Transit 2 measure. On the revenue side, we adopted more cautious forecasts than many local governments. We also made downward adjustments in mid- 2008 when economists saw what everyone would later recognize as the first signs of the recession.

On the cost side, our experience with the Puget Sound region’s challenging geography, development density and political dynamics led us to establish both a low-range and high-range conceptual cost estimate for each project, and to set our budget for the high range. Both the low and high cost estimates included contingencies, which we bolstered by adding financial reserves of 15 percent with the encouragement of our independent Expert Review Panel.

As the realignment process got underway, the 18-member Sound Transit Board of Directors made the decision to prioritize completing as many miles as possible of the light rail expansions that made up more than 90 percent of the capital investments in the ballot measure. They put indefinite holds on a number of other projects and services, including parking and other access improvements at existing stations, plans for lengthening commuter rail platforms and trains, and about half of the additional express bus service approved in the measure.

The path forward with the remaining projects would require setting extremely aggressive budgets. The Board shifted the budget for each project to the low-range estimate. Then it stripped the 15-percent project reserves, leaving much more modest cushions for uncertainty.

Financial Tightrope Act

Instituting the project cuts and delays combined with lowering the project budgets meant that if everything went right, it could fall within our financial capacity to complete the majority of the light rail expansions voters approved. Staff began calibrating their efforts and expectations to planning, designing and building projects within dramatically lower budgets. It means spending the next decade in a world of dramatically higher risks than any project manager would ever choose.

There was only one instance where we knew we would not have sufficient funding to deliver voter-approved light rail extension. The recession hit our South King County subarea the hardest. Our finances are tracked separately in each of five geographic subareas, leaving our funding two miles short of reaching Federal Way’s northern border. Our Board responded to this setback by directing staff to move forward with establishing a shovel-ready plan all the way to the heart of Federal Way for completion when funding becomes available.

Under the ongoing realignment process, staff reports to the Sound Transit Board at least quarterly, providing risk reports on each of the below six goals:

  1. Seek cost reductions and build efficiencies in capital programs
  2. Tightly manage operating cost growth
  3. Closely monitor economy and tax revenue
  4. Communicate openly and transparently
  5. Maximize federal grants
  6. Pursue innovative financing and contracting practices

Outcomes in each of these areas will determine whether we can successfully deliver the plan by 2023 or need to take further realignment actions. In essence, our plan relies on a dogged determination to stretch tax dollars to create the absolute maximum benefits possible, while establishing a framework to closely track our success and make further adjustments if necessary. To gird for that possibility, we have been publicly emphasizing the high risks we face.

With the depth of the financial hole we’re climbing out of, not even the best imaginable economic conditions can roll back most of our past cuts and delays. Victory going forward is defined as avoiding further impacts. The good news is that so far, things are looking better than I would have dreamed in 2009 or 2010. The current forecast through 2023 represents an approximately $100 million improvement over the previous year’s. The lines on the forecast are sloped in the right direction.

Positioned for Success

If we succeed in delivering the package without further cuts or delays, it will be in major part due to the leadership of the Sound Transit Board. The Board’s regional leadership is supported by the effective operating framework under state law for our governance and operations as a Regional Transit Authority.

Rather than direct elections for Board members, 17 out of 18 members are appointed by the executives of the three counties whose urban areas we serve, and are confirmed by the respective county councils. The appointments are drawn from elected officials with the counties and cities whose land use decisions must tie in with the development of an effective regional transit system. Our federated board creates huge advantages for forging local collaboration on project permits, which is crucial to advancing projects on tight budgets and schedules.

Another benefit of this federated framework is that half of the locally appointed members must also sit on the boards of the three local transit agencies that Sound Transit partners with very closely. The presence of the state Secretary of Transportation, the only non-elected member, supports our intense collaboration with the Washington State Department of Transportation.

Under a more politically volatile structure, the Board might not have built the Sound Transit 2 package with the conservative assumptions that today position us to weather the recession. The financial strife of the recession might have sent representatives to parochial corners. Instead, the recession brought the Board together as a regional body that has shown readiness to set ambitious goals and make hard decisions to reach them.

Today, more than 100,000 riders take advantage of Sound Transit trains and buses each weekday. By 2023 we are determined to expand our regional light rail system to more than 50 miles, enabling our system to serve more than 350,000 riders by 2030. With our Board’s leadership and our staff’s enthusiasm for this challenging mission I am confident we will succeed.

About the author: Joni Earl is CEO of Sound Transit, which plans, builds and operates light rail, commuter rail and express bus transit systems and services to improve mobility for the more than 40 percent of Washington residents who live in the Central Puget Sound region.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of The Eno Center for Transportation.

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