FISCAL NOTE FOR NON-CAPITAL PROJECTS
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Department: |
Contact
Person/Phone: |
DOF Analyst/Phone: |
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Legislative |
Christa Valles/684-5336 |
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Summary of the Legislation:
This legislation
releases $2,392,000 to the Seattle Department of Transportation (SDOT) to
undertake activities related to preliminary design and engineering for a
potential streetcar in South Lake Union (SLU) and to investigate the
feasibility of extending the proposed SLU streetcar route to the University
District and the feasibility of extending the existing waterfront streetcar
along the South Jackson Street corridor.
Of the $2,392,000 appropriated, $2,032,000 is appropriated for
activities related to the SLU streetcar, $195,000 is appropriated for
activities related to the University District, and $160,000 is appropriated for
activities related to the Waterfront streetcar extension (see Attachment A for
more detail).
The legislation also
outlines the conditions under which Council will approve moving forward on the
SLU streetcar, beyond the preliminary design and engineering allowed under this
ordinance. These conditions are:
Background:
During last year’s budget deliberations, the Seattle City Council restricted the Executive’s use of $6 million in grant funds obtained by the Seattle Department of Transportation (SDOT) for a potential South Lake Union (SLU) streetcar line. The Council raised several questions that needed answered before it could consider proceeding with the proposed project (see Attachment A). The budget proviso restricted SDOT to $295,000 in expenditures, which SDOT could use to hire a consultant to help respond to Councilmember questions. Based on the responses provided by the Executive, Council expected to make a “threshold” decision about whether the City should proceed with the proposed streetcar project in SLU.
On July 13, 2004, the Executive presented a report prepared by Parsons Brinckerhoff (“Parsons report”) that responds to some of the City Council’s questions regarding the proposed SLU streetcar project. While the Parsons report provides some useful information, several key questions remain outstanding. These are:
1. How will the full construction of the streetcar be financed?
2. Who will pay for the operations and maintenance costs of the SLU streetcar?
3. Who will operate and maintain the streetcar?
What follows are some outstanding issues associated with SLU streetcar costs and funding:
Constructions cost estimates are not firm. The Parsons report provides “Order of Magnitude” cost estimates (essentially, a “best guess”) that are still considered preliminary and are based on Portland’s construction costs (it is not clear if Portland’s costs reflect the recent substantial increases in steel and concrete). Until SDOT conducts some amount of preliminary design and engineering, it will not be able to firm up project costs.
Construction costs do not appear to include all associated project costs. There are no line items for interim financing costs, bond underwriting costs, a LID guarantee fund (City must guarantee payment of outstanding assessments), and LID administration costs (typically 10-15% of LID).
The estimated costs for a streetcar maintenance base do not include the cost of land. SDOT is proposing to lease land for a maintenance base. Leasing costs are not addressed in the O&M projections provided in the Parsons report. However, SDOT believes it may be possible to construct a maintenance base on city-owned property, in which case, leasing costs would not be a factor. SDOT should attempt to determine potential locations earlier rather than later so that this potential cost can be taken into account if necessary.
It is uncertain how the projected gap in construction cost funding will be addressed. The gap is $2.5 million if project cost estimates are correct and $9 million in pending grant applications are approved.
It is uncertain who will be responsible for potential project cost overruns. If preliminary engineering and design indicates a SLU streetcar project would cost more than is currently estimated or unexpected costs arise once construction commences that exceed the budgeted contingency, it is not clear who would be responsible for covering these additional costs should they arise.
It is uncertain how the operation and maintenance costs will be addressed. Metro and Sound Transit have indicated an interest in operating a SLU streetcar, but it is unlikely that these agencies will pay for the operation of the streetcar out of their existing budgets. Metro will likely require its operation costs related to the proposed SLU streetcar to be funded through Seattle’s share of any new transit hours that might be available during the next 6-year planning cycle. (The current planning cycle runs through 2007 and Metro has already allocated Seattle’s share of new transit hours --20,000 hours-- for this period).
Even assuming that a SLU streetcar can recover 35% of its O&M costs through fare box and advertising revenues (Portland only recovered 9% of its O&M costs through fare and advertising revenues in 2002-2003) and that $1.4 million in projected O&M costs is accurate, a $910,000 gap in operating costs would remain. This is equivalent to 9,300 Metro bus hours (budgeted at $98 per hour), or almost half of the additional bus service hours that Seattle received during Metro’s 2002-2007 planning cycle.
Farebox revenue projections may be overly optimistic. The Parsons report estimates between $330,000 and $380,000 in potential farebox revenues in the initial years of operation. This estimate appears to “double count” riders who will have previously used the bus. It is also not clear whether a fare for the streetcar would impact projected ridership or if the fare would be integrated with Metro’s fare system. In terms of fare collection, there could be costs associated with enforcement. Portland employs an honor system after determining that the costs associated with fare boxes and enforcement personnel were not worthwhile.
____ This legislation does
not have any financial implications. (Stop here and delete the remainder of this document prior to saving and
printing.)
__X__ This legislation has financial implications. (Please complete all relevant sections that follow.)
Appropriations:
SDOT has obtained approximately $8.5 million
in state and federal grants that can be used for the planning and construction
of the SLU streetcar. The City Council
appropriated $6 million in grants for 2004 but a budget proviso restricted the
use of these grants until SDOT returned with more information about the
proposed streetcar project. This
legislation would release $2,392,000 in grant monies for the purposes outlined
in Attachment A.
Spending/Cash Flow: It is not clear how quickly SDOT will spend the funds released by the City Council but it is likely that some of the released funds will not be expended until 2005.
What is the
financial cost of not implementing the legislation?
There would not be a financial cost to the City, per se, but it is possible that the grant monies may need to be returned at some point if they are not expended, though the Executive has not indicated that there is a deadline for spending the grants.
What are the possible alternatives to the legislation that could achieve the same or similar objectives? Transportation needs in SLU could be met with increased bus service to SLU. In fact, a streetcar in SLU is not likely to obviate the need for improved bus service in SLU in the future. Another alternative to a streetcar is a trolley bus, though critics of this option argue that it does not have the same sense of permanence as fixed rails. Given that the funding for the capital and O&M costs for the proposed SLU streetcar remain uncertain, another option is to require more information and certainty about how these costs would be funded before proceeding with preliminary design and engineering.
Is the legislation
subject to public hearing requirements:
No
Other Issues (including long-term implications of the legislation):
Capital Costs and
Funding for the Proposed SLU Streetcar
In addition to
releasing grant funds obtained for the planning and construction of a possible
SLU streetcar, this legislation outlines the conditions under which Council
would consider approving the construction of a SLU streetcar.
The Executive
estimates that the SLU streetcar will cost $45 million to construct, but this
is only a planning estimate and the actual costs could be greater depending on
what is found during the preliminary design and engineering. This estimate does
not include the cost of purchasing land for a maintenance base.
The Executive has
obtained $8.5 million in state and federal grants and has submitted additional
grant applications that total $9 million.
If the planning estimates for the SLU streetcar remain at $45 million
and the City receives $9 million in requested grants, the funding gap for
construction is $2.5 million.
This legislation
says that the City will contribute to the construction costs of the SLU
streetcar to the extent that it is assessed as a property owner within a
potential Local Improvement District (LID) for a SLU streetcar. Under the Executive’s proposed assessment
methodology for a LID, property owners within the proposed LID boundaries would
be charged based on the square feet of their property and proximity to the
streetcar. The Executive is proposing
to cap the LID at $25 million. Under
this proposal, the City’s share of the LID would be $2.5 million.
However, this legislation requires that a
market based appraisal method for a LID be conducted, referred to as a Special
Benefit Study. This is a market-based
analysis of each parcel within the potential LID boundaries to determine the
special benefits that would accrue to property owners. Under this appraisal method, the City’s share
of the LID could vary from the amount that would be levied under the
Executive’s proposal. The amount by
which it would vary would depend on the outcome of a market analysis of the
City’s property.
Operations and Maintenance Costs and Funding
for the Proposed SLU Streetcar
The Executive has estimated that it will cost ~$1.4 million to operate two streetcars at 15 minute headways and $2.1 million to operate three streetcars at 10 minute headways. The Executive has not proposed how these O&M costs will be covered. These O&M costs do not includes costs associated with enforcement of fares, should fares be charged, and the costs associated with leasing land for a maintenance base.
This legislation requires the Executive to develop and submit a business plan that proposes how the O&M costs of the proposed SLU streetcar will be funded. The legislation also states that General Fund revenues cannot be used to pay for the streetcar’s O&M costs. However, this does not prohibit the development of new revenue sources that could be used to pay for O&M associated with the streetcar.
This legislation allows for the operation and maintenance costs of the SLU streetcar to be potentially funded using future Metro bus service hours that the City of Seattle may be entitled to, so long as it is demonstrated that the use of those hours for the SLU Streetcar represent a responsible, effective, and efficient allocation of the City’s share of Metro bus service
This legislation does not allow for the use of proceeds from
property sales in South Lake Union for
O&M costs associated with the streetcar but Council has allowed for the
possibility of using these funds for the construction.