Expert panel failed its duties with light rail funds study
Sunday, July 22, 2012
On Nov. 6, Clark County voters will decide whether to approve a sales tax increase to fund operations of a Columbia River Crossing light rail line and a bus rapid transit line on Fourth Plain Boulevard. Before making an expensive investment, you should know the risks. That's why Washington law wisely requires a careful study, called "system plan," before high-capacity projects can go ahead.
The system plan has to include "a financing plan describing capital and operating costs and expected revenues." (RCW 81.104.100) As an added safeguard, the law requires the plan be scrutinized by independent experts because "the process cannot guarantee appropriate decisions unless key study assumptions are reasonable." RCW 81.104.110).
Over the past four months, and at a cost of more than $300,000, C-Tran hired a consultant and five outside experts for this panel. In June, the panel produced its 17-page report, which The Columbian described as concluding that the transit financial plan was "mostly sound." But in fact, the panel completely missed the biggest financial risk confronting the project: the likelihood that the federal government will contribute much less than $850 million for light rail.
The light rail finance plan assumes that the federal government will pay nearly all construction costs and C-Tran won't have to contribute a dime. The expert panel did nothing to investigate whether this assumption is reasonable.
It's actually very likely that the federal government will contribute far less than the hoped-for $850 million. It's customary for the federal government to provide only about half of the cost of light rail projects. CRC advocates are pinning their hopes on an obscure and untested proviso Sen. Patty Murray, D-Wash., inserted in a 2009 appropriations bill that would effectively allow C-Tran to count the highway bridge funding as "match" for light rail costs. If this stealth earmark doesn't work perfectly, it blows a multihundred-million hole in the light rail finance plan.
And even if the federal government may legally contribute up to $850 million, it is under no obligation to do so. It routinely provides a lot less. Consider the experience of Tri-Met's Portland-Milwaukie light rail project. For years, Tri-Met planners assumed that the federal government would pay 60 percent of project costs. But when funding allocations were actually made, the feds only paid 50 percent, forcing Tri-Met to come up with $150 million in additional revenue and cost savings. The agency borrowed heavily against future payroll tax revenues, a move that has worsened the very difficult financial situation that is now forcing Tri-Met to raise fares and slash bus routes.
Experts were aware
Ironically, the possibility of a cut in the federal contribution is something the C-Tran experts knew about. In another part of their report, they specifically warned about the risk that the federal government would pay only 70 percent of the cost of bus rapid transit, not the 80 percent C-Tran planned for. If -- and more likely, when -- there is a similar shortfall in federal money for CRC light rail, who will make up the difference? C-Tran's financial plan doesn't say.
By omitting any mention of this key risk, the expert panel failed in its legal responsibility to flag questionable assumptions. It's a failure that could end up costing somebody -- most likely C-Tran and local taxpayers -- hundreds of millions of dollars, which will be plenty to make people forget the $300,000 wasted on this expert panel.
Joe Cortright is an economist with the Portland-based firm Impresa.