Friday, July 18, 2008

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.

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