Seattle Economics Council February 1, 2017
Sound Transit District
Sound Transit Ballot Measures 1996 2008 2016 Sound Move Key Projects 16 Miles of Central Link Light Rail 75 Miles of Sounder Commuter Rail 18 Express Bus Routes Operations & Maintenance Facility ST2 Key Projects 35 Miles of New Link Light Rail Sounder Expansion Express Bus Expansion System Access Improvements Operations & Maintenance Satellite Facility Plans for ST3 ST3 Key Projects Ballard West Seattle Tacoma Everett Kirkland-Issaquah BRT 405 Sounder improvements
176-218M More riders every year In Millions 42M University Link & Angle Lake Station open 47M 50M Northgate Link opens 75M East Link, Lynnwood Link and Kent/ Des Moines open 30.3M 34.9M 18.8M 2009 2011 2013 2015 2016 2017 2019 2021 2023 2040 Source: Sound Transit ridership reports, service implementation plan and financial plan.
Regional Link light rail expansion By 2041: 116+ miles 80+ stations 16 cities connected
2016 Light rail Downtown Seattle to SeaTac University of Washington Capitol Hill Angle Lake
2021 Light rail U District Roosevelt Northgate
2023 Light rail Shoreline Mountlake Terrace Lynnwood Mercer Island Bellevue Redmond (Overlake) Tacoma Hilltop
2024 Light rail SE Redmond Downtown Redmond Kent/Des Moines S. 272nd Federal Way TC BRT I-405/SR 518 (Lynnwood to Burien) SR 522/NE 145 th (N Lake Washington) Other bus investments in Seattle and Pierce County
2030 Light rail Alaska Junction Avalon Delridge S. Federal Way Fife East Tacoma Tacoma Dome
2035 Light rail and new downtown tunnel Ballard Interbay Smith Cove Seattle Center S. Lake Union Denny Midtown
2036 Light rail West Alderwood Mall Ash Way Mariner SW Everett Industrial Center SR 526/Evergreen & Everett Station Sounder Sounder south capacity & access improvements completed
2039 Light rail Tacoma Link Hilltop to Tacoma Community College
2041 Light rail South Kirkland Richards Road Eastgate/Bellevue College Issaquah
ST2 vs ST3 Total Capital Spending
ST Spending vs Regional Transportation Spending WSDOT Municipalities ST2 ST3 ST Percent of Total $4,500 50% $4,000 45% Total Spending (all phases) in Millions (2014$) $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 40% 35% 30% 25% 20% 15% 10% ST Percent of Total Transportation Spending $500 5% $- 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 0% WSDOT and Municipality Spending: Annual average of planned spending from 2015-2025, extended to 2041. Source: PSCR 2015, The Project List 2015-2025.
ST3 Construction Jobs vs Regional Construction Jobs Remaining Jobs (after private sector development and ST3) Total Private Sector Construction Jobs Jobs Generated by ST3 Construction Spending Regional Construction Jobs (King, Kitsap, Pierce, and Snohomish Counties) 140,000 ST3 2029: 9% of regional construction jobs 120,000 Construction Jobs 100,000 80,000 60,000 40,000 **86% of regional construction jobs are assumed to be from private sector development. Source: Community Attributes, 2014. 20,000-2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 Regional Construction Jobs: Forecast from PSRC. Construction jobs refers to NAICS Code 23: Construction. Jobs generated by ST3 Construction Spending: Assumes each million in spending results in 8.34 direct jobs. Source: IMPLAN methodology, TriMet. Private Sector Construction Jobs: City of Seattle Construction Industry Labor Market Assessment, prepared by Community Attributes, 2014.
ST FINANCES
FINANCIAL STRUCTURE Special purpose entity Single proprietary fund structure $8.8 billion asset 2015 AAA/AAA S&P/Moody s Key # 813 FTEs $400 m operating budget $1.4b capital 2018 Forecasted Revenues Sales Tax: $1,200 m MVET $320 m Property Tax $135 m Total $1.6 b
Financial Plan DR AFT Independent Revenue Forecasts Independent Inflation Forecasts Board-Adopted Financial Policies Financial Model 1997-2060 Program Costs From Budget & Cost Estimates Key Planning Assumptions Results 21
Key Lessons Learned Importance of long term financial plan Necessity with long duration projects/assets Value of establishing baseline Financial plan vs. budget hierarchy & alignment Value of constitutional financial policies Clear ownership/management of adequate contingencies
BUILDING THE ST3 PLAN 4 year effort Board direction Nov 2012 Legislative taxing authority Working with board/public on content/finances Developing final plan & documents Voter approval
ST3: Sound Transit receives revenue authority 0.5% Sales and Use Tax 0.8% MVET $.25* Property Tax 50 cents per $100 purchase $80 on a $10K vehicle $75 annually for a $300K home
$54 b ST3 Plan Year of Expenditure Dollars In Millions
Financial Plan - Sources & Uses Summary 2017 through 2041 (YOE Dollars in Millions) Sources of Funds Snohomish North King South King East King Pierce System-wide Total 1 ST3 Tax Revenues 3,689 7,912 3,933 6,973 5,203-27,710 2 ST3 Grants - Federal 800 1,151 601 861 661 595 4,669 3 Sound Move + ST2 Surplus 1,824 1,742 835 1,493 2,533 193 8,621 4 Bond Proceeds 2,894 4,965 2,657 174 308-10,999 5 Fares & Other Revenues 128 492 359 285 248 2 1,514 6 Interest Earnings - - - - - 333 333 Total Sources 9,334 16,264 8,385 9,786 8,953 1,122 53,845 Uses of Funds Capital Expenditures 7 Sounder Commuter Rail 50-727 - 1,453-2,230 8 Link Light Rail 6,249 8,791 3,252 5,999 3,221 4,171 31,683 9 Regional Express Bus 74 85 78 96 252-586 10 Bus Rapid Transit 42 318 257 1,195 - - 1,812 11 System-wide Activities - - - - - 374 374 Total Capital 6,414 9,194 4,315 7,290 4,926 4,545 36,683 O & M Expenditures 12 Sounder Commuter Rail - - 129-177 - 306 13 Link Light Rail 413 670 581 306 312 710 2,993 14 Regional Express Bus 73-65 177 393-708 15 Bus Rapid Transit 128 238 168 668 - - 1,203 System-wide Activities - - - - - 2,246 2,246 Total O&M 615 908 943 1,151 882 2,956 7,455 16 Debt Service 1,397 3,313 1,928 156 192-6,986 17 State of Good Repair 9 81 171 440 81-781 18 Contribution to Reserves 66 390 312 57 31 52 908 19 Contribution to System-wide 834 2,378 716 692 2,842 (6,431) 1,031 Total Uses 9,334 16,264 8,385 9,786 8,953 1,122 53,845
Sales Tax Forecast 10.00% Sales Tax Growth Rates 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 4.2% Average Growth 2020-2041 4.1% Average Growth 2020-2041 Conway 2016 Current Forecast ST/ Conway Adjusted Forecast Prior Year Conway Forecast Prior Year 2.00% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041
MVET Forecast
Debt Coverages Above Policy Targets 5.50 5.00 4.50 4.00 3.50 3.00 Bond Coverages 2.50 2.00 1.50 1.00 0.50 2.0x min gross 1.5x min net - 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 Net Gross
Risk Assessment q Initial Static Stress Tests Capital Costs: 10% increase in all capital ($3.6 billion) Sales Tax: 6% reduction in revenue 2017-2041 Recession: -4% 2017, 0% 2018, return to forecast thereafter Interest rate increase of 25% (130 basis points, 6.6%) Inflation: increase of 60 basis points q Dynamic Risk Assessment
Distribution Fitting Risk Register # Uncertain Variable Variable Type Historical Data Series Distribution Curve Min 5 th %ile 95 th %ile Max Mode (Most Likely) Mean Std Dev 1 General Inflation (CPI) Growth Rate Annual 1966-2015 LogLogistic -0.30% 0.99% 10.52% 10.52% 2.53% 4.37% 4.43% 2 Construction Cost Inflation (CCI) Growth Rate Annual 1997-2014 Normal -1.13% 1.48% 6.3% 7.58% 3.23% 3.23% 1.86% 3 Right of Way Cost Inflation (ROWI) Growth Rate Annual 1997-2014 Logistic -11.07% -4.96% 16.87% 22.99% 5.96% 5.96% 6.72% 4 Sales Tax Base Real Growth Rate 1 Annual 1979-2014 Logistic -11.36% -6.51% 10.78% 15.62% 2.13% 2.13% 5.33% 5 Motor Vehicle Excise Tax (MVET) Base Real Growth Rate Annual 1978-2014 ExtValue -7.17% -7.17% 17.67% 17.67% -0.47% 3.05% 7.83% 6 Property Assessed Valuation (AV) Nominal Growth Rate Annual 1992-2015 ExtValueMin -16.19% -7.22% 15.16% 17.53% 9.12% 5.95% 7.06% 7 New Property Tax Revenue Growth Rate Annual - Triangular 0% - - 0.80% 0.50% - - 8 Federal New Starts Grant Revenues 2 Annual - Triangular - - - - - - - 9 Borrowing Interest Rate 3 Annual 1966-2016 LogNormal 2.63% 3.79% 9.68% 12.78% 4.80% 5.98% 1.96% 10 Construction Cost Adjustment Factor Uniform - Pert -10% - - 15% 0% 0.83% - 11 Right of Way Cost Adjustment Factor Uniform - Pert -10% - - 15% 0% 0.83% - 12 Other Capital Cost Adjustment Factor Uniform - Pert -10% - - 15% 0% 0.83% - 13 Ridership Forecast Adjustment Factor Uniform - Uniform -10% - - 10% 0% 0% - 1 To reflect the positively-skewed shape of the historic data histogram, the Logistic distribution (which is by definition symmetrical) is truncated at the 95 th percentile value, equal to 10.81%. The maximum value observed in the data series considered is 10.43% in the year 1983. 2 Annual probability distributions for Federal New Starts Grant Receipts are defined by minimum, maximum, and most likely forecast values provided by Sound Transit for forecast years between 2019 and 2044. 3 The fitted distribution was re-adjusted to achieve a mode equal to the forecasted interest rate of 5.3%. This was to account for the fact that the historical data is not a perfect proxy for Sound Transit s AAA-credit rating based interest rate.
Dynamic Risk Assessment (Monte Carlo) CPI Growth Rate Base Ridership Forecast Ridership Adjustment Factor Tax Base Real Growth Rate Tax Base Weighted Average Fare Ridership Gross Proceeds 2014 Tax Base Tax Rate Tax Revenue Fare Revenue Gross DSCR Debt Service Interest Rate Debt Service Period
Net Coverage Threshold Probabilities Probability Net DSCR below 1.1x Probability Net DSCR below 1.5x 20% Probability 15% 10% 5% 0% Year
Legal Debt Capacity Threshold Probabilities Probability % of Debt Capacity above 95% Probability % of Debt Capacity above 80% 25% 20% Probability 15% 10% 5% 0% Year
Risk Threshold Probabilities Key risks below 20% probability in all cases Probability in the Least Favorable Year Probability Across Forecast 14.5% 18.4% 16.1% 20.0% 6.7% 7.5% Net DSCR < 1.5x Gross DSCR < 2.0x Share of Debt Capacity > 80% Minimum Net DSCR < 1.5x Minimum Gross DSCR < 2.0x Maximum Share of Debt Capacity > 80%
Monte Carlo Lessons Learned Allows identification of key variables, key time periods Fosters internal/external conversation about risks and risk management Need to recognize limits of approach
Other ST2/ST3 items of interest Green bonds TIFIA/Master Credit Agreement P3