Global economic uncertainty and rising cost pressures are affecting almost every aspect of life these days, from your family’s grocery bill to community and government services.
And Sound Transit, in the midst of delivering the nation’s largest transit expansion program, isn’t immune to these same headwinds and uncertainty.
For example, normal construction inflation over the years has typically been around 3.5-4%, and this was reflected in the assumed rates for the Sound Transit 3 plan approved by voters in 2016. But during the COVID crisis, regional construction costs inflation was over 7% both in 2021 and 2022.
Altogether, from 2016 to 2024, that's resulted in an extraordinary increase in the compounded annual rate — more than 20% higher than original projections.
And in addition to much higher base estimate construction costs at present, other inflation estimates, including the consumer price index and the property acquisition index, have experienced similar trends above the original ST3 model predictions. We’re also navigating a rapidly changing federal funding landscape and bracing for potential impacts from tariffs and trade wars in the years ahead.
These challenges — as well as the agency’s unique opportunities — were the primary conversation point at the Sound Transit Board’s recent retreat with staff leadership on May 29.
“The whole reason for doing this was to bring the board together and level-set on our history, where we’ve come from, and where we’re headed — because we have some decisions in front of us to make to respond to changing economic conditions,” said Board Chair and Snohomish County Executive Dave Somers.
“It’s very important that the Board is cohesive, that we work well together, we understand the challenges and the opportunities, so we can work on a plan for moving forward,” he said.
Right now our financial modeling shows that, if we do nothing in the face of these pressures, by the 2040s, we won’t be able to both operate and finish building out the system we are creating.
“So complacency is not an option. The surest way to fail is by admiring the problem and wringing our hands,” Sound Transit CEO Dow Constantine shared at the public meeting. “But we’ve repeatedly faced uncertainty and unpredictable times, from Sound Transit’s difficult beginnings in the 1990s, to the Great Recession, to COVID. And through all of it, we’ve succeeded in driving the mission forward.”
“We have a strong cash balance, a top-tier credit rating, and very substantial capacity to undertake future expansions of the system,” he added. “The challenge we face is down the road, and the decisions we make over the next two to four years will set the course for the decades ahead.”
Starting from position of strength
For capital programs at the scale of what our region’s voters have approved, long-term affordability will always be a moving target, because they require setting budgets and making cost estimates based on what we think will occur decades down the road.
That’s the nature of transformational investments that span generations.
The good news is that, as a maturing agency, we’re getting better — not only when it comes estimating and projecting outcomes, but also when it comes to making use of our current financial capacity.
“Our financial foundation is solid and stands out among our peers around the country,” noted Deputy CEO of Finance and Business Administration Victoria Wassmer.
“There are a number of tools and technologies available to us, combined with the best practices for mega-capital expansion projects, for operating a service of our size and scale,” she continued. “With the guidance and oversight of our Board and leadership from our CEO, we can deliver for the region.”
The work ahead
This work will be fundamentally different than past efforts focused on program affordability, which the Board also undertook in 2000 and 2010.
Instead of throwing on the brakes, delaying projects and reducing the scope of the projects being built, Sound Transit staff and Board members will begin deeper dives into all aspects of the agency’s work, like capital project delivery, operations and maintenance, finance, and more.
The world is different than it was in 2016, when the region’s voters passed the ST3 ballot measure, and even since 2021, when the Sound Transit Board realigned the agency’s capital program to solve for a future affordability gap.
In 2025, our approaches need to match the current context and holistically consider both operations and expansion, so we can make use of all the tools and options available.
Together we’re already thinking about how we can innovate and do things differently and more creatively, so that we can identify common-sense improvements that will deliver the system people want, more efficiently, with better performance.
There will be some difficult decisions, trade-offs, and opportunities ahead. But our aim is to ensure the Board has excellent options and information, with many levers to pull and dials to turn. And along the way we’re going to identify plenty of things we can simply do better, to be able to deliver more efficiently, and to deliver a better product — no obfuscation, no shortcuts, and no nonsense.
The result will be an affordable program – where we can confidently build, operate and maintain a world-class, truly regional transit system.
We will continue delivering on our mission, and we commit to keeping you informed.