FasTracks costs have dropped, but so have funds for project, RTD says
Published by Denver Business Journal
— January 12, 2010 — The recession has lowered the cost of building Denver's financially troubled FasTracks rail-transit project, but it's also cut the amount of sales tax revenues that the Regional Transportation District expects to get to help pay for it, transit agency officials said Tuesday.
FasTracks’ latest estimated construction costs dropped to $6.5 billion, from $6.9 billion in 2009, but projected sales tax revenues for the project also dropped—to about $4.1 billion, down from $4.7 billion a year ago.
The result: the gap between total project costs and forecast revenues is now pegged at about $2.4 billion—up from $2.2 billion a year ago, RTD officials said.
But if voters approve a 0.4 percent tax increase in 2010, a second tax increase to help pay for FasTracks, RTD would have enough money to finish FasTracks by 2017 and also to operate it, according to the review.
“With a 0.4 percent tax increase you can afford to complete it by 2017, and you can afford to operate it immediately,” said Tim Romer, managing director for Goldman Sachs’ public sector an infrastructure group, which was hired to give RTD financial advice on FasTracks.
RTD officials took the numbers, its annual evaluation of FasTrack’s budget and revenue forecast, to the agency’s board of directors Tuesday. That presentation kicks off 35 days of presentations to business and political leaders as well as other groups throughout Denver, said Phil Washington, RTD’s general manager.
Washington, and RTD Board Chairman Lee Kemp, said Tuesday during a mid-afternoon briefing on the evaluation that RTD remains committed to finishing Fastracks.
“This board is 100 percent together on making sure this whole FasTracks project gets done,” Kemp said. “That’s board members in the south, in the east, in the north and west—because that’s what voters told us they wanted in 2004.”
The Denver Metro Chamber of Commerce was getting a presentation on the evaluation’s results Wednesday.
“We’re looking forward to seeing the numbers, reviewing them and seeing what the plan is,” said chamber spokeswoman Kate Horle.
RTD’s latest figures represent an assumption that FasTracks will stay on its original construction schedule, with completion slated for 2017, and remain at its original scope. Voters in 2004 approved a 0.4 percent sales tax increase, four pennies per $10 spent, for the project.
FasTracks then was billed as a 12-year construction project, to be finished in 2017, to lay more than 100 miles of mass transit rail throughout Denver, encompassing six new rail lines and extensions of three others.
Costs were originally estimated at $4.7 billion, but ballooned as high as $7.9 billion in 2008.
The drop in estimated construction costs announced Tuesday, to $6.5 billion from $6.9 billion a year ago, is due to several factors, RTD officials said.
More engineering has been done, giving officials a better idea of what’s needed to build the project, and materials costs are lower, according to the agency.
But the global recession also dropped forecasted revenues.
In 2004, RTD forecast a year-over-year growth in sales tax revenues of 6.06 percent. In 2009, the revenue forecast was cut to 4.8 year year-over-year growth.
Now, after a review by a metro-wide group of economists, RTD cut the forecast again—to a 3.7 percent year-over-year growth rate. That’s the middle range of high, medium and conservative estimates put together by the panel of economists.
The bottom line is that the agency doesn’t have enough money to build all of FasTracks by 2017, and even if it did, the projected sales tax revenues wouldn’t cover the operating and maintenance costs anyway, Romer said.
And RTD’s options remain the same: Cut FasTracks’ originally proposed lines to fit the budget, push the completion date from 2017 out beyond 2035 to allow more money to come in over time, or get more money more quickly via a second, voter-approved tax increase to keep FasTracks’ scope and timeline intact.
