How to Fund Capital Transit Project in a Creative Way

We'll call this the last post in a three-part miniseries about Translink and funding. On Wednesday, I blogged on how gas tax revenue is not a sustainable source of revenue for public transit. On Thursday, I posted on funding ideas to cover Translink's operating budget shortfall. Today I will talk about creative ways to fund and build capital transit projects.

When I think of our transit infrastructure in Metro Vancouver, the word mega-project comes to mind. We have rational transit like diesel buses, trolley buses, community shuttles, and the SeaBus. But, we also have the SkyTrain/Canada Line rail network. This rail network affects Translink in many different ways. Beside providing a rapid transit network, the capital cost of this system is one of the major reasons why Translink a.) has a $1.6 billion debt and b.) doesn’t have enough buses. Now the federal and provincial government could provide 100% funding to Translink for future mega-projects (this does not happened today), but I don’t see that happening. If we are to see quality rail transit in Metro Vancouver, and especially in the South of Fraser, we’ll need to move away from our business as usual.

The first step is to use proven technology that is used throughout the world: at-grade light rail/trams/streetcars. Moving away from elevated/underground systems can cut cost substantially and allow for innovative funding solutions.


Innovative Local Funding Solution: Local Improvement Areas

People like living near streetcars, developers like building on streetcar routes. Portland is one of the first examples of modern streetcar systems in North America that comes to mind. Portland’s first $88.7 million, 3.8 kilometers of streetcar was built as a partnership between the City and the development community. Through a local improvement area, the property owners along the route paid for 39% of the cost of the system. The City paid for 32% of the system through a bond back by implementing a $.20/hour parking rate increase on City owned parking garages. The remainder of the funding came from other city source 12% and 16% from the regional transit authority. The City owns the streetcar system and contracts operation and maintenances to Tri-Met, the regional transit authority. The streetcar system to date has attracted over $2.8 billion in investment along the 3.8 kilometer streetcar corridor.

Seattle just opened up a 2.1-kilometer streetcar system in December 2007 for $50.5 million. Just like Portland, the property owners/developers paid for 50% of the system’s cost. The City sold property and development rights to cover 15% of the coast. The remaining 35% was paid for with state and federal funding.

Grand Rapids, Michigan is proposing a streetcar system like Portland and Seattle with a similar funding arrangement. This $80 million system is expected to generate $388 million in development.


Innovative Regional Funding Solution: Private Partnerships

The Interurban line, when it ran, from Vancouver to Chilliwack was as profitable business. The cities at the time basically sold road/rail rights off in exchange for transit service. This was very regulated, and I've over-simplified how it worked, but this is certainly something we could consider in a modified form today.

Right now Southern Rail of BC operates and maintains the interurban as a freight line. The provincial government could partner with Southern Rail, enter into a community rail operating agreement, and upgrade the line to passenger standards ($6 million/km). Southern Rail could be required to provide maintenance and operation of the community rail system in exchange for fare revenue for example. Melbourne, Australia, which has the largest modern streetcar network outside of Europe, runs their transit system similarly.

By building our rail transit system with rational technology, we can bring the development community and private rail operators on board to help build a world-class network that won’t break the bank.

We Have No Money

Yesterday I touched on the sticky financial situation Translink will find itself in over the next few years. According to the CBC by 2012, Translink will need an extra $150 million annually to fund existing services and another $150 million for expansions. Where will that money come from?

It should be noted that we are talking about operating expenses and not capital projects. The federal gas tax can only be used for capital projects, and one-off provincial funding is usually only for capital improvements. BTW, Translink would be required to come up with some $2.75 billion and $500 million from our local governments to fund the Province’s transit plan. This would result in more property tax. I don't see that happening, and I don’t see how Translink could come up with that kind of money without going into more debt. Anyway...

Right now Translink gets revenue from the following sources:

Fares – 39%
Fuel Tax – 29%
Property Tax - 29%
Parking Sales Tax - 1%
Hydro Levy – 2%

It would seem that in the current political climate, we will not see a major hike in any of these revenue streams. So, we most look to other sources of funding.

Translink Real Estate
According a March 19 article in the Vancouver Sun, Translink expects to take in $30 million to $150 million from their new real estate venture.

Tolling
Tolling bridges in Metro Vancouver has been talked about since before Transport 2021 in the early 1990’s. Bridge tolling is nothing new (it will be done on the Golden Ears Bridge and on the potential new Port Mann Bridge). Bridge tolling would provide a dual benefited. If done right, it would help reduce congestion and help funding Translink.

Debt Reduction
In 2007, Translink spent $126.5 million on servicing its $1.6 billion in debt. If other orders of government were to provide a one-off payment to help Translink reduce that debt load, it would free up money to fund improved transportation. For example if Translink's debt was paid off, combine with their Real Estate division, Translink could be in the black.

Federal Funding
Translink does not get any operational funding from the provincial or federal government. On June 26th, the US House passed a bill to provide funding to help with both capital and operational costs for transit systems in America. Maybe it’s time for the Canadian Federal Government to step up and provide operating funding to our transit systems. Barring that, the provincial government could also provide funding to cover Translink’s shortfall.

Service Reduction
This is not an option.

At the end of the day it will take a combination of funding source (old and new) to “save” Translink.

According to an article today’s Province titled Surrey report tosses Translink plans in the trash:

Without new funding, he said, the options available to TransLink are to raise fares or property taxes, or cut service.

Surrey Mayor Dianne Watts wants to discuss the looming funding shortfall with Transportation Minister Kevin Falcon.

She expects that meeting, which was recommended by the council of mayors on transportation, to be held this week or early next week.

Well at least we'll get a new Highway 1.

U.S. cities scrambling to meet rising mass transit demands

According to CNN, some transit systems in the US are having a hard time keeping up with the demand for public transit. They are running out of money.

While the rise in ridership has been a relatively easy adjustment for some systems, others are facing difficulties in meeting operating costs, which hampers their ability to ramp up service or maintain normal levels.

Cal Marsella, the head of Denver, Colorado's transit system, calls it the "paradox of public transportation."

Denver's system, like many U.S. cities, is partly funded by revenues from sales taxes. As consumers spend less because of high fuel costs and a sour economy, the city earns less revenue. Consequently, funding for the transit system is decreasing just when their operating costs are higher than ever before.

"Just when our demand is highest, our ability to provide is being undermined by the whole crunch," Marsella said. "The last thing we want to do is curtail service but there is not a lot you can do when revenues are down and fuel prices are up."

Translink is also having the same issues. According to their annual report, gas tax accounts for about 30% of their total revue. The tax is not based on a percent, but a fixed $0.12/litre on gas. So while demand for transit is up, cost of diesel for Translink is up, and therefore the operating cost of transit is going up, their major source of funding is stagnating. This is reflected in their 2007 financials. It is ironic that as more people choose transit and leave their car, the less service Translink can provide.

Translink's other major sources of revenue are fares (38%) and property tax (28%). The mayors of Metro Vancouver will not raise property tax or transit fares beyond inflation, so that leave Translink in a really pickle. Who will step up to fund Translink in a time when good quality public transportation is so desperately needed?

TransLink to Take Care of New West Rail Bridge

Federal Transportation Minister Lawrence Cannon wrote to Mayor Kurt Alberts after Township Council wrote to him and MP Mark Warawa regarding the New Westminster Rail Bridge.

"I am aware of the issue identified in your letter related to the Fraser River Rail Bridge. I also understand that TransLink is undertaking a Pattulo Bridge Corridor Study to develop a long-term replacement and/or rehabilitation strategy for the existing bridge. Among the strategies that will be examined is a proposal to combine the Pattulo Bridge and the Fraser Rail Bridge into a single structure. Allow me to assure you that Transport Canada officials will monitor the study's progress and keep you informed of new developments."

- The Honourable Lawrence Cannon, P.C., M.P.

So, an intermodal bridge may be the end result and Metro Vancouver would finally realize a modern bridge that is similar to other inter-modal bridges around the world, but nothing like this. We hope TransLink's financial troubles won't cause this bridge program to be delayed.

While SFOT does not wish to entangle itself in the Gateway debate, we would like to point out that the replacement of the New Westminster Rail Bridge and the Pattulo Bridge, were the top two infrastructure projects needed for the wider Gateway initiative to be fully successful.

Calgary Really Loves Transit

This is a bit of oldish new, but Calgary has decided to shift their transportation spending from roads into public transit. According to the Calgary Herald:

"We know, everybody knows, people have known for 15 years, that building roads is not the way to deal with transportation in an urban centre," Ald. Brian Pincott said. "Transit is much more efficient and building a community is about walking and biking."

In this 10-year plan, spending is split 54 per cent for transit and 42 per cent for roads, with the remaining four per cent dedicated to pedestrian and cycling projects. In the previous decade, about 65 per cent of funding went to roads, with 35 per cent going to transit. Pedestrians and cyclists are now being included in transportation planning rather than recreation. In the report going to committee, it points out that the money spent on those projects will increase to $126 million from $45 million in the last list of priorities.”

The city is set to spend $3.9 billion on public transportation improvement in the next decade. That is in addition to a new $2 billion that the Government of Alberta announced on July 8th for public transit.

While many things can be said about Alberta (Calgary), they sure know how to build good public transit.

Langley Times SFOT Letter Printed

Today's Langley Times contains the South Fraser OnTrax letter referenced in our post below. We appreciate and are very thankful that our local media like the Langley Times and The Langley Advance both support light rail transit in our region. Both papers have published numerous articles, opinions and letters in favour of community rail. The staff and editors are members of our community of communities and they "get it" when it comes to understanding what we need as a community moving forward.

Download July 10 Meeting Audio

Our July 10th, 2008 meeting audio minutes are available for downloading.

Download the MP3 Audio File

(Remember to select "Save As" if you want to save it to your desktop, otherwise it will play in your browser.)