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Analysis sees Pinellas transit plans on solid ground

As they travel around Pinellas County talking about their plans to vastly expand the mass transit system, transportation officials often get the same question. What if the federal government doesn't come through with funding for light rail?

To answer that what-if scenario and many others like it, county transit officials commissioned a study by Ernst & Young and a Kansas City. Mo., engineering company called HNTB. For $270,000, the consultants examined the financial assumptions undergirding the county's plans, which depend on voters approving a 1-cent increase to the sales tax in 2014.

They also put Pinellas' proposal through a series of stress tests to see how the system would fare under recessionlike conditions or if operating costs outpaced tax revenues.

In their report, the consultants said that even if federal funding came in much lower than expected or sales tax revenues dipped, construction of a light rail line connecting Clearwater, the Gateway area and St. Petersburg could still be completed on time.

But without any federal or state support, the project would have to be radically scaled back.

"We couldn't eliminate the federal funding altogether … without there being a need for some significant changes," said Rob Bannister, a managing director of Ernst & Young Infrastructure Advisors.

Instead, the consultants looked at a scenario in which the Federal Transit Administration covered 25 percent of the project's cost, less than the 37 percent anticipated. In this case, Pinellas would have to plug the gap with more local funding and increased borrowing, Bannister said, adding, "We think you would be fine in this scenario as well."

Pinellas Suncoast Transit Authority chief executive Brad Miller said the consultants' numbers are "quite conservative."

Nationally, almost all rail projects that are approved for federal funding have had at least 37 percent of their costs covered by the FTA, he said. If voters approve the sales tax referendum, Pinellas' odds of getting some level of federal funding are good, he said, as no project with a voter-backed funding source has ever been rejected.

Ernst & Young's report is unlikely to change the minds of people who already oppose PSTA's plans, Miller said, but it may help convince people who are on the fence, particularly members of the region's business community.

Speaking after the consultants' presentation earlier this month, Barbara Haselden, a vocal opponent of light rail in Pinellas, remained concerned about the project's cost.

"Cost overruns are really common in these types of projects," she said, adding that Charlotte, N.C., which has also turned to Ernst & Young for help with its transit projects, experienced major setbacks during the recession.

Charlotte's system, called the LYNX Blue Line, is the product of a 1998 voter referendum to increase the sales tax by a half cent to pay for rail. In November 2007, the first branch of the Lynx opened.

Then the recession came along, shrinking tax revenues and postponing plans to extend the light rail line. Last summer, years after it was originally planned, the city broke ground on a light rail extension that's estimated to cost $1.1 billion. Service is expected to begin in 2017.

Similar problems befell Denver, where voters approved a sales tax increase in 2004 to pay for six new rail lines connecting the city to its surrounding suburbs, as well as extensions to three existing light rail routes. The city called the project FasTracks.

Then the recession sent tax revenues tumbling. By 2009, the transit authority was short $2.2 billion needed to complete FasTracks by 2017, so planners extended the deadline. The city opened a new light rail line last April, but farther north, a commuter line that was scheduled to open in 2020 has been delayed.

"Transit systems have been hit hard," Bannister acknowledged in his presentation to Pinellas officials.

As part of their financial analysis for PSTA, the consultants looked at what would happen if a similar recession began in the middle of rail construction, when the county's capital costs would be at their highest.

The report proposed several ways for PSTA to protect itself against a sudden financial downturn. If the ballot measure passes, PSTA could set up a reserve fund to draw from in years when sales tax revenues are low. In boom years, when revenues increase by more than 3 percent, officials could put money in reserves. If tax revenues fall short of that bar, the transit agency could dip into its reserves.

The report also suggested that the agency increase its existing reserve fund from two months of operating expenses to three.

Anna M. Phillips can be reached at aphillips@tampabay.com or (727) 893-8779.

Analysis sees Pinellas transit plans on solid ground 11/30/13 [Last modified: Saturday, November 30, 2013 8:59pm]
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