DATE: May 9, 2014
TO: Chris Ruffini, SDOT Finance Manager
FROM: Ethan Melone
SUBJECT: 2015 Budget Issue Paper--SLU Streetcar Operations – King County MOA
This budget issue paper (BIP) recaps the current status of revenues, expenditures and interfund loans associated with the operations, maintenance and initial capital cost of the Seattle Streetcar--South Lake Union Line. The City’s annual operating obligations and revenue sources are each subject to variability as the underlying variables are ridership and sponsorship revenues. Underlying economic conditions, both in the South Lake Union area and in the general economy, impact the ridership and sponsorship revenues.
The BIP identifies forecasted operating results; options to introduce new revenue streams and/or increase the Interfund loan to create to stabilize the operating finances; and options to address potential Metro funding reductions. The BIP also discusses fare policy and the fiscal implications of different fare options, and makes a fare recommendation.
Pursuant to City Council direction, the South Lake Union Streetcar was constructed and operates with no support from the City’s General Fund.
2007-2014 Interlocal Agreement & Operations Finances
Through 2014, most operating costs (75%) are funded by King County Metro, using a portion of the West Subarea transit funds that were made available for re-allocation as a result of implementation of Link Light Rail Service. However, the City is responsible for 25% of the net operating cost (after farebox recovery), and was responsible for all operating costs incurred prior to the light rail service changes. The City authorized an interfund loan to cover these costs on a cash basis, with the loan to be repaid with revenues from streetcar sponsorships. A portion of the City’s annual allocation of Federal preventative maintenance funds also covers some of the City’s costs. However, the interfund loan is substantially greater than initially forecasted, and sponsorship revenues have fallen short of projections. An additional fund source to re-pay the loan for the initial City outlay, and to supplement the Federal support and sponsorship revenues, would strengthen the operating finances of the South Lake Union line.
2015-2019 Interlocal Agreement, Amazon.Com Agreement & Operations Finances
The City and County have negotiated an agreement that would change the financial relationship between the parties. The County would make fixed annual payments from 2015 through 2019; the City would set fares, retain fare revenues and pay O&M costs. The County also has the option to reduce its fixed annual payments, in the event of a major service reduction, such as that proposed in Proposition 1 is not approved.
Through 2014, the Interlocal agreement has provided that Streetcar fares would be equivalent to Metro’s peak hour fares. Beginning in 2015, the City may set the fare at Metro’s fare, or at Sound Transit’s one-zone fare. Metro plans to raise its fares to $2.75 in February 2015, while Sound Transit’s one-zone fare remains $2. The financial projections with each of these adult fare options are attached. These projections assume that average fare per rider will be higher if the lower fare is selected, as this will likely increase the percentage of full-fare, streetcar-only riders. The revenue projection with the lower fare is lower, but still allows for a positive annual cash flow. SDOT Major Projects believes that Metro’s planned $2.75 fare is too high for short urban circulator trips, and may present more risk of impact to ridership and revenue than the lower ($2) fare. Additionally, it would be very confusing to establish different fares for the South Lake Union and First Hill lines, so this fare policy decision will likely impact both lines. The $2 fare is recommended.
Separately, the City approved a planned community development in the Denny Triangle for Amazon.com, and Amazon.com committed, as a public benefit, to provide funding for the marginal cost of adding a third vehicle to operation from 7AM to 7PM weekdays. This is estimated to be approximately $150,000 per year in 2014 dollars.
The Seattle Streetcar Fund-Projected Shortfall
Currently, all streetcar revenues and expenditures flow through an independent Streetcar Fund, which does not share the cash balances of the Transportation Operating Fund or General Fund. As a result, any adverse variances from operating forecasts are exacerbated, because they increase the balance and interest costs of the interfund loan to the Streetcar Fund. As of May 8, 2014, the balance of the Interfund loan was ($3.42M) and is projected to exceed the maximum amount ($3.65 M) for periods of time in 2015. To continue to make payments on obligations, it will be necessary to increase the maximum amount of the Interfund loan with 2015 Budget legislation, or to provide additional revenue to the fund.
Revenue Stabilization Options
Option A: Increase Interfund Loan to Create Revenue Stabilization Fund
To address the uncertainties in flows of revenue from ridership and sponsorships, as well as uncertainty associated with periodic costs for accident repairs or equipment replacement, the City could increase the Interfund loan so that the maximum outstanding loan balance would be significantly greater than the projected loan balance for any given year. SDOT proposes to increase the Interfund loan maximum by $450,000, to $4.2 M.
Option B: $250K Annual General Fund Support, Backed by Streetcar Sponsorship Revenues
Sponsorship revenues were originally forecast to generate upwards of $500,000 per year, but continue to be difficult to predict and to fall short of this target. After several years of relatively strong performance of station sponsorships and weak performance of vehicle sponsorships, the situation is now reversed. To stabilize streetcar finances, the City could fund the Streetcar Fund with an annual allocation of $250K in General Fund revenues, and any sponsorship revenues in excess of $250K would be transferred from the Streetcar Fund to the General Fund. Effectively, this option would transfer the entrepreneurial revenue risk of the streetcar sponsorship program from the tiny Streetcar Fund to the much larger General Fund. The General Fund has a greater ability to absorb forecasting risk than the Streetcar Fund.
Options to Address King County Metro Service Cuts
Since Proposition 1 was not approved, King County Metro will likely propose to reduce their annual contributions to the Streetcar by approximately $400,000. Three options to address this reduction in streetcar operating revenue are presented below.
Option A Reallocate Existing Transit Funding Sources
The City currently funds additional service hours, ride-free area shuttle service, and transit speed and reliability improvements for Metro, primarily through Bridging the Gap sources. The City could choose to reallocate some of this funding to the streetcar on an interim basis in response to reduced support from Metro.
Option B Provide General Fund Support to Offset Metro Funding Reduction
The City could choose to offset the potential Metro funding with General Fund, on an interim basis in 2015 in anticipation of a future revenue source for Metro.
Option C Service Reductions
If no funding is added, it would be necessary to cut service. Weekday service, 6AM to 7PM, is recommended as the priority for preservation, given the ridership demand during this period and the Amazon.com funding for more frequent service during this period. The lowest priority for preservation would be Sunday service, which has low ridership most of the year. Even if all Sunday service were eliminated, some additional cuts would be necessary. Options might include ending weekday service at 7 PM, or reducing a portion of Saturday service.
 The lower fare will not adversely affect the First Hill line operating projection, because under the current agreement, ST retains all FHS fare revenues. The ST agreement may be revised, but the proposed revision would credit ST for actual fare revenues up to 3,000 average weekday riders.
memo ends here
Outside City Hall: City Light's 2015-2020 CIP includes $464 million
to accommodate development in South Lake Union
"We pay while developers benefit"
By golly, there already is Socialism in Seattle. And I don't mean the Kshama Sawant kind It's Socialism for the rich meaning we foot the bill while the benefits go to an exclusive few - in this case Paul Allen and Jeff Bezos. It's what city planners and most of our Council call a "public-private partnership".
The City 2015-2020 CIP Plan for City Light contains over $464 million in added energy infrastructure for South Lake Union. See list below I've attached - all in order to accommodate development (and developers - two in particular Amazon and Paul Allen). Most of the cost of adding this infrastructure I've listed below - is being passed on to the rest of us primarily in the form of higher utility rates. There also is an impact on the city's general fund and/or other finite local dollars. City Light's budget narrative doesn't exactly brake these costs out or provide specific information on rate impacts but a memo we obtained from a disclosure request a few years ago indicated that the cost of providing additional electrical generating capacity in SLU would raise our rates by about 3 percent. And that was when cost estimates were considerably lower than now.
Publicly City Light may tell you that since they are adding capacity to an entire neighborhood with "broader benefits for all", that the costs of adding capacity due to growth should be spread to all the ratepayers. But City Light over the last decade has seriously considered a range of options that would require larger benefiting property owners and developers to foot most of the bill for the infrastructure demanded by their projects, including requiring them to pay extra surcharges, special rates, via local overlay or improvement districts, and/or growth related fees allowed under SEPA so that ratepayers don't have to absorb these costs. Biotech development is particularly energy consumptive and accounts for a lot of the additional SLU capacity requirements. Unfortunately successive administrations since Greg Nickels and our City Council have shelved any options to ensure developers pay their fair share. .
Vulcan owns about 40 to 45 percent of the developable land in South Lake Union (SLU) and then there's Amazon's properties and it's plans in the Denny Triangle. These areas have been upzoned twice in recent years to Vulcan and Amazon's benefit. They're reaping tens of millions from it. Parenthetically since 2000 we've tracked how much the City has given away of our tax dollars in South Lake Union and it now totals over a billion in city subsidies - essentially infrastructure serving Vulcan (and now Amazon). Click here for a list we compiled in 2009 that included projects for SLU costed out to 2014. http://zipcon.net/~jvf4119/SLU09cost.htm The 2009 list includes some of these City Light Projects only now getting underway but not all and not at 2014 cost estimates.
All of these capital projects listed below are directly related to South Lake Union area development (click on the CIP for City Light and then type in the find or search line, the words "South Lake Union" "Denny" and "Broad Street" and these projects all pop up providing more detail).
It's stuff like this that explains our bemusement when Councilmembers OBrien and Clark argued against and voted down Kshama Sawants plan for a fairer electrical rate structure. What's fair about asking low income and working people to foot the bill for Vulcan/Amazon's development plans in SLU and the Denny Triangle? A huge chunk of the real costs of these projects are passed on to us while they walk away with millions! It's time for our City Council to pay more attention to our neighborhoods and less to South Lake Union or it's time to get a new City Council in 2015.
Chart below takes numbers directly from the City's 2015-2020 CIP:
2015-2020 City Light South Lake Union Related Major Capital Improvements
Most of these costs are passed on to ratepayers in the form of higher electric rates. Some of this cost comes from the general fund or other taxpayer sources?
Broadstreet Substation Networking 115,072,000
Denny Substation Networking 71,870,000
Interbay Substation Development 2,694,000
Denny Network Additions/Services 14,997,000
Broad Street Substation Network Additions 82,198,000
Denny Substation Development 173,600,000
Mercer Corridor West Relocations 4,450,000
Currently Unfunded Plans
Energy District for South Lake Union 100-200 million
The Public Cost of Subsidizing South Lake Union as of 2012 - Compare this to the Council and Mayor's support of your neighborhood
|Figures contained in '08-'12 CIP||Figures contained in '09-13 CIP||total cost comparison:|
|08 adopted||09 projected||projected total cost||allocated||Mayor's proposed for 09||projected total cost||2008-2013||2009-2014|
|Parks Budget:||2008||2009||thur 2013||2008||2009||thru 2014||thru 2013||thru 2014|
|Cascade People's Center||238,000||0||247,000||no change||no change||250,000||0.24700||0.250000|
|Denny Park Play Area||0||0||100,000||no change||100,000||0.10000||0.100000|
|Lake Union Armory Roof Repair||750,000||0||2.64||819,000||0||2.56||2.64||2.56|
|Lake Union Trail||1.0||0||1.0||1.0||600,000||1.6||1.0||1.6|
|phase II Lake Union Trail||1.0||1.0||1.0|
|Lake Union Park Development||0||0||30.98||0||0||31.05||30.98||31.049|
|Wawona Ship Preservation||40,000||0||400,000||0||0||400,000||0.400000||0.400000|
|Denny Park Lighting||0||159,000||159,000||0.15900|
|Center City Access Strategy||1.453||3.705||10.556||2.289||2.627||11.196||10.556||11.196|
|Center City TDM *||67,000||0||146,000||0||0||146,000||0.146000||0.146000|
|Mercer Corridor Project||18,000||0||15.02||17.794||82.45||200.863||15.02||200.863|
|streetcar O & M||1.593||1.554||9.554||9.554||9.554||9.554|
|Multi-Modal Hub at Westlake||470,000||0||970,000||970,000||0.970000||0.970000|
|Terry Avenue Improvements||700,000||0.700000|
|City Light Budget|
|Automated Meter Reading||1.3||1.409||8.49||1.666||1.414||8.198||8.49||8.198|
|Broad Street Substation Capacity Additions||125,000||5.179||10.691||125,000||0||145,000||10.691||0.145000|
|Broad Street Substation Network||4.6||1.563||53.365||4.7||3.246||69.135||53.365||69.135|
|Mercer Relocations (wire undergrounding)||11.5||0||11.803||11.5||7.1||42.179||11.803||42.179|
|Broad St. Network Additions and Services||8.704||9.224||161.344||8.314||9.199||79.957||161.344||79.957|
|North Downtown Network Services||1.764||1.83||11.469||430,000||633,000||11.118||11.469||11.118|
|North Downtown Substation||40.3||32.9||183.619||40.4||17.331||116.398||183.619||116.398|
|North Downtown System Network||11.062||12.072||75.256||11.062||1.271||161.398||75.256||161.398|
|N. Downtown Transmission Lines||0||1.882||89.684||89.684|
|Streetcar Relocations (undergrounding)||6,000||1.637||1.637||1.637||1.637|
|Warren Street Crossing||52,000||1.293||52,000||23,000||134,000||1.293||0.13400|
|Capitol Hill Water Quality Project||1.963||1.127||5.804||1.963||1.589||9.791||5.804||9.791|
|South Lake Union DWF **||144,000||8000||289,000||144,000||1.614||4.96||0.289000||4.96|
|South Lake Union WF ***||139,000||16,000||305,000||139,000||1.03||3.2||0.305000||3.2|
|* TDM means transportation demand management|
|** DWF means Drainage Wastewater Funding|
|*** WF means water fund|
|Budget Comparisons||Last year||This year|
|South Lake Union Totals:||total cost comparison:|
|Parks Budget:||thru 2013||thru 2014||change|
|Cascade People's Center||0.24700||0.250000||1.21%|
|Denny Park Play Area||0.10000||0.100000||0.00%|
|Lake Union Armory Roof Repair||2.64||2.56||-3.03%|
|Lake Union Trail||1.0||1.6||60.00%|
|phase II Lake Union Trail||1.0|
|Lake Union Park Development||30.98||31.049||0.22%|
|Wawona Ship Preservation||0.400000||0.400000||0.00%|
|Denny Park Lighting||0.15900|
|Center City Access Strategy||10.556||11.196||6.06%|
|Center City TDM *||0.146000||0.146000||0.00%|
|Mercer Corridor Project||15.02||200.863||1237.30%|
|streetcar O & M||9.554||9.554||0.00%|
|Multi-Modal Hub at Westlake||0.970000||0.970000||0.00%|
|Terry Avenue Improvements||0.700000|
|City Light Budget|
|Automated Meter Reading||8.49||8.198||-3.44%|
|Broad Street Substation Capacity Additions||10.691||0.145000||-98.64%|
|Broad Street Substation Network||53.365||69.135||29.55%|
|Mercer Relocations (wire undergrounding)||11.803||42.179||257.36%|
|Broad St. Network Additions and Services||161.344||79.957||-50.44%|
|North Downtown Network Services||11.469||11.118||-3.06%|
|North Downtown Substation||183.619||116.398||-36.61%|
|North Downtown System Network||75.256||161.398||114.47%|
|N. Downtown Transmission Lines||89.684|
|Streetcar Relocations (undergrounding)||1.637||1.637||0.00%|
|Warren Street Crossing||1.293||0.13400||-89.64%|
|Capitol Hill Water Quality Project||5.804||9.791||68.69%|
|South Lake Union DWF **||0.289000||4.96||1616.26%|
|South Lake Union WF ***||0.305000||3.2||949.18%|
|Totals in CIP (in millions)||663.931||925.432||39.39%|
|Last year Mercer's full cost was estimated to be 120 million as of 8/07|
|assume this figure in budget|
|Total in CIP for SLU Projects||08-'13 CIP||09-'14 CIP||percent change|
|South Lake Union||768.911||925.432||20.36%|
|Figures contained in '09-13 CIP (in millions)|
|South Lake Union||allocated||Mayor's proposed for 09|
|Cascade People's Center||no change||no change|
|Denny Park Play Area||no change|
|Lake Union Armory Roof Repair||0.819||0|
|Lake Union Trail||1.0||0.600|
|phase II Lake Union Trail||1.0|
|Lake Union Park Development||0||0|
|Wawona Ship Preservation||0||0|
|Denny Park Lighting||0||0.159|
|Center City Access Strategy||2.289||2.627|
|Center City TDM *||0||0|
|Mercer Corridor Project||17.794||82.45|
|streetcar O & M|
|Multi-Modal Hub at Westlake|
|Terry Avenue Improvements|
|City Light Budget|
|Automated Meter Reading||1.666||1.414|
|Broad Street Substation Capacity Additions||0.125||0|
|Broad Street Substation Network||4.7||3.246|
|Mercer Relocations (wire undergrounding)||11.5||7.1|
|Broad St. Network Additions and Services||8.314||9.199|
|North Downtown Network Services||0.430||0.633|
|North Downtown Substation||40.4||17.331|
|North Downtown System Network||11.062||1.271|
|N. Downtown Transmission Lines||0||1.882|
|Streetcar Relocations (undergrounding)|
|Warren Street Crossing||0.052||0.023|
|Capitol Hill Water Quality Project||1.963||1.589|
|South Lake Union DWF **||0.144||1.614|
|South Lake Union WF ***||0.139||1.03|
|Yearly total in millions||102.397||133.168|