FAQ on Sound Transit finances

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Frequently asked questions on Sound Transit's revenue forecast

Have Sound Transit's finances been affected by the recession?

• Short answer: Yes, just like every agency that relies on sales tax revenue.

• Under Sound Transit's enabling legislation, most of its tax revenues come through local sales taxes. A second source of revenue is the motor vehicle excise tax. People aren't spending as much money or buying as many cars. As a result, Sound Transit is experiencing reduced revenues.

What is the extent of the likely impact on the Sound Transit 2 measure that voters approved in November 2008?

• Short answer: The latest forecast shows the cumulative effect on tax revenues over the 15-year period for implementing the Sound Transit 2 ballot measure could be $3.1 billion. This is 20 percent below the level forecasted in the summer of 2008 when the ST2 plan was put on the ballot.

• Sound Transit uses independent economic consultants to help the agency regularly update long range economic forecasts. Normally we do this once each year. In light of the extraordinary circumstances, we have updated our forecast three times since ST2 was adopted in November 2008, most recently last month.

• Inflation and lower borrowing costs associated with recessions are a silver lining of the recession, as are a favorable bidding climate for construction projects. However, these factors won't come anywhere near to erasing the impacts of the recession, even if the region's economy performs better than the current forecast.

• It's important to note that the $3.1 billion estimate extends a decade and a half into the future and is likely to move up or down every time Sound Transit's revenue forecasts are updated.

What will Sound Transit do to absorb the impact?

• Short answer: Concentrate on controlling costs, since the recession has eliminated the financial cushion known as the project reserve that was included in the ST2 ballot measure.

• Fortunately, the ST2 plan included provisions for responding to an economic downturn. In addition to the project reserve, those elements included policies giving the elected officials on the Sound Transit Board flexibility in implementing the projects and services.

• The Sound Transit Board has directed staff to do everything possible to keep the project delivery schedules that were targeted in the ballot measure. To do that, staff presented a plan to the Board on Oct. 8 that focuses on four key implementation strategies:

1. Save operating dollars whenever and wherever possible. Strategies include prioritizing capital projects that save operating dollars, refining long-term fleet and maintenance plans, and implementing the cost-saving recommendations of the agency's Transit Operations Task Force.

2. Gain knowledge early by expediting alternatives analysis, environmental studies and preliminary engineering work for ST2 projects in order to identify strategies for reducing and managing risks, and to increase competitiveness for grants.

3. Strictly adhere to base cost estimates, and identify opportunities during the design and engineering process to reduce capital costs by 15 percent. Other approaches include conserving the contingency funds identified for projects and strengthening the agency's policy for preventing project scopes from creeping.

4. Optimize project phasing to save dollars. Examples include combining projects to expand Sounder commuter rail station access and platforms in the south corridor rather than putting each project out to bid separately; accelerating projects that are prerequisites for other projects; and rephasing projects when partners are not ready to proceed yet.

• Despite the 20 percent revenue hit, the proposed strategies give Sound Transit a fighting chance to deliver the ST projects on the schedule targeted in the ballot measure. The strategies are outlined in a white paper that staff discussed with the Board on Oct. 8.

How many jobs will Sound Transit 2 create?

• Short answer: According to a U.S. Department of Commerce model, ST2 will generate about 8,800 direct construction jobs and about 69,000 jobs across all sectors of the economy.

• Transit and infrastructure projects are a proven path for economic stimulus because they create jobs now and offer long-term benefits. A good regional mass transit system efficiently moves people and goods which promotes local economic development.

• In addition, federal economic stimulus funding Sound Transit may receive offers the potential to speed up project delivery and free up local funding for other transit projects, increasing the amount of stimulus to the local economy.


For more information contact Geoff Patrick at geoff.patrick@soundtransit.org