Steve Atnip alerted me to the existence of the SMART "Project Funding Plan Update" Memorandum, attached as a PDF file below. I've pasted the text of the memorandum into this message but the PDF file is available from SMART via the following URL:
Following is the text of the memorandum (and the message appears more dire/desperate than current news coverage would seem to indicate):
M E M O R A N D U M
: January 20, 2010
: SMART Board of Directors
: Lillian Hames, General Manager; Erin McGrath, Chief Financial Officer
: AGENDA ITEM XV
: Project Funding Plan Update
For the last 6 months, staff has been investigating ways of solving the $155 million deficit in the project budget and monitoring the economic situation for signs of improvement. We have not seen enough improvement in revenues or the bond market to significantly lessen the problem. In addition, our efforts to obtain federal earmarks through the reauthorization bill have been slowed by Congress’s inaction on that legislation.
The risks to building the entire 71-mile project with existing revenues by 2014 continue to be serious. The best-case scenario for completing the project in its entirety using Measure Q and other available revenues involves waiting until 2018 to begin construction for full commuter rail service in 2021. However, this strategy is extremely risky since nearly $51 million in state and local revenue could disappear as a result of the delay. Further, construction escalation and other regulatory changes could actually increase the funding gap and result in building less than 71 miles before the end of the sales tax measure in 2029.
Staff believes that there is a potential solution to the problem at hand. Seeking FTA Section 5309 New Starts funding for the project would present a way to deliver the entire 71-mile commuter rail and pathway project. Although the federal process is complex and time-consuming, the end result would be far better than waiting an additional 7 years to deliver the project using only local funds.
Section 5309 New Starts funding is a federal grant program that provides significant funding to transit projects with a minimum 20% local match required. It is a multiyear application process requiring several approvals by FTA along the way. New Starts is the only feasibile federal grant program capable of providing SMART with significant assistance to complete the SMART rail and pathway project. Unfortunately, the FTA approval process can add years to a project’s timeline. In addition, in the past decade, the New Starts program has favored more urban transit programs, as well as a preference for funding extensions to projects rather than brand new rail programs.
In order to avoid delaying the entire project (and avoid losing other funding sources) and to increase SMART’s chances of a successful New Starts application, staff is investigating splitting the project into two sections, a locally-funded first section, to be delivered in 2014, and a second, federally-funded section to begin construction immediately thereafter with service by 2016.
In our consultations with local FTA officials and other New Starts experts, we believe this two-section approach would lead to a successful New Starts application process. First, SMART demonstrates its ability to manage and implement a project, thus building confidence in the overall project. Second, this allows us reserve the most competitive section of the project to compete for federal funding. The evaluation criteria favors higher ridership, congestion relief, economic development potential and greenhouse gas reduction impacts, therefore SMART would spend the next few months updating ridership and other metrics in order to propose a section that does well in all of those categories.
Because there are operating, cost and revenue implications of this strategy, it will take some time for staff to work through a proposal to refine it and to define what that federal section would encompass. As part of this effort SMART must complete the Advanced Conceptual Engineering (ACE) design work currently underway on the whole project to better inform our decision on which part of the SMART corridor will best compete for funds. Final definition of the locally built section will occur at the end of the ACE phase – probably around the end of the summer.
Finally, this strategy will only work if the MTC agrees to include SMART on its regional list of priorities for New Starts funding. The FTA will not work with SMART without this regional endorsement. MTC currently has only two projects on its priority list for New Starts: The Central Subway project in San Francisco and the BART to Warm Springs/Silicon Valley Project. If SMART intends to pursue this funding strategy, work must begin immediately on convincing MTC staff and Commissioners to put SMART on that priority list.
Staff recommends that the Board direct staff to prepare the details needed for a federal application for New Starts funding. Because this will fill the $155 million funding gap in the project, SMART should develop a more detailed project definition of a section of the SMART line that would best compete for New Starts. The Board of Directors should make every effort to seek MTC endorsement of a federal New Starts application prior to submittal of a federal application.