Revenues for transit construction down sharply
The COVID-19 crisis is greatly reducing the revenues Sound Transit relies on to expand our regional transit system. As businesses remain closed and people stay home, sales tax revenues critical to funding transit construction have declined rapidly.
We don't know how long or damaging the current recession will be. Economists are projecting a recession that could be worse than the Great Recession of 2008-2009. We estimate that cumulative fiscal impacts over the next two decades will range between $8 billion and $12 billion, or 12% to 18% less revenue than previously assumed.
Realigning project schedules to meet lower revenues
With greatly depleted revenues, Sound Transit will not be able to deliver many expansion projects on their original timelines unless we receive alternative revenue from federal or state sources.
Through a process called realignment, the Sound Transit Board of Directors is working to determine which plans and timelines for voter-approved projects will need to change due to lower revenue projections, absent receiving alternative revenue.
The Board set a process for this capital program realignment that will move forward between now and summer 2021, providing time for the financial impacts of the recession to become clearer while we pursue additional funding opportunities. The Board will establish clear expectations about project delivery timelines by summer 2021 after gaining input from the public and partner organizations.
Key strategies and principles for the realignment include:
- While Sound Transit staff responded to COVID-19 by pausing some projects until they could be considered by the Sound Transit Board, during the remainder of 2020 the Board will consider unpausing some projects in order to give the Board more information to consider during realignment decisions, and/or to advance projects' shovel readiness and eligibility for efforts to secure additional funding.
- The Sound Transit Board directed has staff to examine what negative impacts might be avoided by identifying additional tools which could include but are not limited to securing additional federal funds, state funds, and/or increased debt capacity.
- The Board adopted criteria to use as a framework to assist in making realignment decisions. These include the criteria the Board used in shaping the Sound Transit 3 measure that voters adopted in 2016.
- During the upcoming months we will engage contractors, consultants, and project stakeholders to help identify cost savings opportunities.
- Potential realignment scenarios for consideration by the Board and public will illustrate potential schedule and other project adjustments doable within the agency’s finances. We will engage with the public, key stakeholders and our agency partners to gain input on these scenarios for Board consideration, including scenarios that seek to avoid delays through identifying additional funding options.
Based on agency contractual commitments already in place, the realignment will focus only on projects that are not already in construction or under contract.
Major projects that are currently under way that will continue on schedule include:
- 2021 Northgate Link Extension
- 2022 Hilltop Tacoma Link Extension
- 2022 Puyallup Sounder Station Parking and Access Improvements
- 2023 East Link Extension and Operations and Maintenance Facility East
- 2024 Lynnwood, Federal Way and Redmond Link Extensions
While the Sound Transit Board has emphasized intent to complete all voter-approved projects, the schedules for remaining projects are subject to the Board’s realignment decisions in summer 2021.
September 24, 2020: Board considers advancing projects with paused actions
At the request of the Sound Transit Board, in early September staff provided recommendations regarding which projects with paused actions should advance for consideration by the Sound Transit Board this fall. At its September 24 meeting the Board adopted a motion sponsored by Chair Kent Keel identifying proposed actions that will move forward to the Board’s System Expansion Committee for consideration.
These actions don't determine what changes to a project's timeline may ultimately be necessary based on COVID-19 fiscal impacts. Those changes will be determined by the Board’s summer 2021 realignment decisions.
Helping to shape the adopted motion was staff analysis that focused on:
- Which near-term actions help inform the Board in making realignment choices next year;
- Which projects could benefit from waiting for updated information to yield better informed decisions next year;
- Avoiding any presupposing of decisions the Board might make next year; and
- Ensuring that none of the recommended Board actions this fall would lock the Board into any decision next year.
Transit construction will help our economy recover
Sound Transit is currently building more than 40 miles of new light rail track and 28 new stations. This construction as well as future advancement of other major projects under the realignment plans that take shape will help our region's economy recover from the COVID-19 recession, just as transit construction fueled our recovery from the Great Recession.
When most of construction went dormant a decade ago, Sound Transit was one of the few players hiring tradespeople off the bench. In advancing projects Sound Transit puts particular focus on equity considerations in creating opportunities for local residents.
Family-wage jobs offered by Sound Transit's construction projects will help thousands return to the workforce, and in turn will support even more retail and service jobs in the community. As the economy recovers, investments in these new transit infrastructure projects could help deliver tens of thousands of daily riders to work.
Sound Transit will join other agencies and allies in urging that federal recovery efforts and potential actions at the state level provide funding support for transit infrastructure so we can deliver our planned projects on schedule and maintain our place at the center of our economic recovery.