MTC Review Presentation - Sonoma Marin Area Rail Transit - Home ...

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MTC Staff Review of
the SMART Project
Presentation to SMART Board of Directors
December 15, 2010
Alix Bockelman and Randy Rentschler
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

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Project Review Background
MTC Role as Regional Planning and Funding Partner
− Recent requests for funding assistance and possible future requests
− MTC is committed to assisting SMART deliver passenger rail service
to North Bay residents
MTC administers Regional Measure 2 (RM2) toll funding
− $35 million for SMART to “Extend rail line from San Rafael to a ferry
terminal at Larkspur or San Quentin”
− $22 million remains unallocated
MTC has adopted a Transit Oriented Development (TOD) policy
− Requires at least 2,200 housing units per station, on average, along
the SMART corridor.
− Meant to position system to meet its ridership objectives, and integrate
land use and transportation investments.
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

Project Review Elements: Initial
Segment and Possible Add-ons
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1) Cost Estimates and Vehicle Bid
2) Financial Capacity
3) Cost Effectiveness (as Related to Competitiveness
for Federal Small Starts)
4) MTC Transit-Oriented Development Policy
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

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1) Cost Estimates and Vehicle Bid
MTC contracted with two independent cost reviewers – National
Constructors Group (NCG) and Parsons Brinckerhoff (PB)
Findings are that the capital costs for the initial segment and
possible add-on segments are reasonable
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

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1) Cost Estimates and Vehicle Bid
Additional peer agency review of vehicle bid
documentation
No scope reduction found; rated high technically
Reputable vendor
Likely reason for price differential is market share and vendor
relationships
Review supports bid award
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

2) Financial Capacity:
Grant and Other Funding
SMART staff identified roughly $138 million in grant funding for the
initial segment from Civic Center to Santa Rosa Railroad Square
Based on MTC staff review, grant funding could be $18 - $40
million less
RM2 toll funding ($22 million) subject to hearing process, terminus
in Downtown San Rafael and compliance with MTC’s TOD Policy
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M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

2) Financial Capacity:
Sales Tax and Financing
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Review suggests potential for up to $62 million difference in
financing capacity
Review focused on three variables: a) the base year revenue; b)
the sales tax growth rate; and c) the debt service and operating
expense relationship
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

2) Financial Capacity:
Sales Tax Base Year Revenue
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Base Year Comparison
2010: Actual /Estimate
2011: MTC Staff/ County Auditor
Projections
MTC Beacon
$ 24.8 million $ 25.4 million
$ 25.7 million $ 26.4 million
$ 24.1 million
Adjusting 2010 and 2011 from Beacon estimates to the 2010 MTC
actual and 2011 projection has the effect of reducing the 2011-2029
by $18 million due to the compounding effect
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

2) Financial Capacity:
Sales Tax Growth Rate
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Growth Rate Comparison
Growth
Rate
Total Revenue
(2011 to 2029)
Average
Annual
Revenue
Beacon 4.0% $708 million $38 million
Historical Rate (1998-2010) 1.7% $560 million $30 million
Near-Term Rate (2004-2008) 2.9% $618 million $33 million
MTC reviewed recent growth periods as possible predictor of
future sales tax growth
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

2) Financial Capacity:
Debt Financing
Bond proceeds could range from $151 million to $210 million,
based on sales tax growth and interest rate assumptions
Financing model assumes 50% of the average sales tax
revenue stream as a revenue pledge with remaining 50% for
operating expense
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M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

3) Small Starts/Cost Effectiveness:
Civic Center to Larkspur Extension
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Proposed segment of Civic Center to Larkspur would likely be
non-competitive for significant funding from the federal Small
Starts program
With varying assumptions as to cost and outcomes, the federal
cost effectiveness calculation for this segment ranged from a
low of $60 per hour of user benefit to over $350 per hour of user
benefit
The cost effectiveness index for the other two Bay Area Small
Starts candidates are between $5 and $10, and the range
nationally is from $12 to $23 and are mostly bus rapid transit
projects
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

4) MTC Transit-Oriented
Development (TOD) Policy
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Background:
Adopted to promote cost-effective transit, ease regional housing
shortages, create vibrant communities and preserve open space
Applies to Bay Area transit extension projects that are seeking
regional discretionary funds
Research shows that residents living within half a mile of transit are
much more likely to use it
Based on a November 2009 review, the entire SMART corridor does
not currently meet MTC’s required thresholds for housing units – at
roughly 80% of the required units
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

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4) Options for Meeting TOD Policy
Options
Revised
Estimated
Housing
Units
Required TOD
Units/Station
(Deficit)/
Excess
Units
% of
Threshold
Achieved
Ridership
Entire SMART Corridor 24,376 30,800 (6,424) 79% 4,900
Base Case. SMART Initial Segment from Civic
Center to Santa Rosa Railroad Square
Scenario 1. Initial segment w/o two stations
(Petaluma-Corona/Novato North)
Scenario 2. Extend to Downtown San Rafael
w/o two stations (Petaluma-Corona/Novato
North)
14,66 17,600 (3,134) 82% 2,790
12,615 13,200 (585) 96% 2,412
15,251 15,400 (149) 99% 2,624
Scenario 3. Extend to Santa Rosa North (w/o
Novato North)
17,295 17,600 (305) 98% 3,204
Initial segment extended to Downtown San Rafael with the
deferral of two stations is most advantageous from the TOD
policy perspective
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

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MTC Staff Findings
Overall Approach: Phasing of the SMART project is prudent given the
bidding climate and bond market
Cost Review:
Cost estimates appear reasonable
Vehicle bid is sound as basis for award
Revenue:
Up to $40 million in grant funding at risk
MTC staff will support hearing process for $22 million in RM2 toll funds if
rail terminus is Downtown San Rafael with connection to the Transit
Center and bridge corridors
Risk in sales tax revenue estimates affects ability to meet debt service
and operating cost requirements
MTC staff recommends that SMART work with their financial advisor to
revise its financing plan as soon as possible
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

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MTC Staff Findings
Future Funding and Initial Segment:
The SMART project is likely not a viable candidate for significant federal
Small Starts funding
Initial segment may be the only operable segment in the near-term
Strongest initial segment would be one that connects the downtowns of the
two largest cities along the SMART corridor – San Rafael and Santa Rosa
Transit Oriented Development Policy:
Current station plans do not meet housing thresholds
SMART should consider revising station locations to meet MTC’s TOD
policy for regional discretionary funding
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

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Project Funding Plan and Next Steps
Possible shortfall of $62 million - $125 million to build initial
segment from Downtown San Rafael to Santa Rosa
Ranges illustrate the cost and revenue risk described earlier
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

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Possible Funding Strategy
MTC has identified three broad potential strategies to
close the possible funding gap:
1. Direct uncommitted fund sources that may be available in the
near-term from Marin, Sonoma, and MTC to the SMART project.
2. Redirect funding from stalled Marin and Sonoma projects to
jumpstart the SMART project in the near-term and possibly
replenish these projects with future federal or state sources.
3. Explore scope changes and cost deferrals in more depth such as
in the areas of station relocation and/or deferral and additional
phasing of the multi-use path.
MTC is committed to assisting SMART deliver
passenger rail service to North Bay residents
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

Possible Four-Month
Milestone Schedule
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December
2010
January
2011
February
2011
March
2011
Direct staff to work with PFM on a revised capital and operating financial
plan
Authorize award of the rail car contract
Receive report from PFM on financial capacity using new ridership
forecasts
Consider whether to revise initial segment to include downtown San Rafael
Receive report on funding plan from SMART, after working with MTC,
SCTA, and TAM on possible strategies
Authorize debt issuance
Release construction bid documents
M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N

M E T R O P O L I T A N T R A N S P O R T A T I O N C O M M I S S I O N
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