Sound Transit is in the midst of its budget season when agency policymakers decide on priorities for next year and manage the agency’s long-term financial plan.
By and large, the proposed budget is sticking to the nuts and bolts of running a transit agency. That means funding transit service, reinvesting in facilities and assets, and putting dollars toward capital expansions and new programs. The opening of some big light rail projects next year and emerging priorities and projects are also embedded in the budget. Total revenues next year are forecasted to come in around $2.9 billion with expenditures just under $3 billion — $1.9 billion of which will be dedicated to capital expansion.
The agency is forecasting some headwinds in the long-range financial plan. Tax receipts seem to be on the up and up, but the agency is seeing significant financial pressures from higher program costs and lower-than-projected fare revenue.
Tax and grant revenue is up
Through 2046, Sound Transit projects modest growth in the sales tax revenue, which it projects will rise by $2.1 billion (2.6%) while the motor vehicle excise tax ($250 million) and rental car tax ($26 million) are projected to bring in a bit more than originally expected. Interest earnings have risen by a healthy $333 million.
Grants, Sound Transit’s third biggest source of funding, are also projected to slightly increase. Since the spring update, the agency is now projecting an additional $117 million from the funding source. That’s mostly due to higher federal appropriations for the Lynnwood and Federal Way Link Extensions. Grants have been a relative bright spot for the agency’s financial picture. Sound Transit has already secured about 25% of grants expected during the life of the financial plan.
Big ticket grants that the agency has already received include Federal Full Funding Agreement grants totaling about $1.2 billion for the Lynnwood Link Extension and $790 million for the Federal Way Link Extension. Other special formula grants during the pandemic reached $895 million.
Overall, Sound Transit’s financial plan anticipates $148.1 billion in revenues between 2017 and 2046. The funding mix is broken up as follows:
| Revenue Source | $ of Plan | % of Plan |
|---|---|---|
| Taxes | $93.7 billion | 63.3% |
| Grants | $15.3 billion | 10.3% |
| Fares | $5.5 billion | 3.7% |
| Bonds and Loans | $31.9 billion | 21.5% |
| Interest | $1.1 billion | 0.7% |
| Other | $0.6 billion | 0.4% |
| Total | $148.1 billion | 100% |
Fare revenue is trending down
In contrast, fares are an area of the financial plan that has seen big decreases.
Since the spring update, projected fare revenues have fallen another 14.5%. That’s a reduction of $931 million from $6.4 billion $5.5 billion over a relatively short period. The agency assumed in 2019 that fares would make up $9.5 billion over the life of the financial plan, however, the combination of pandemic era ridership impacts and persistently low fare payment rates on Link (assumed at around 55% right now) in the post-pandemic era have greatly reduced fare revenue assumptions. Sound Transit hopes to increase fare payment rates on Link by 5% per year until reaching 75% in 2029.
But other factors may also influence how fares perform as a revenue source. Sound Transit has been studying fare gates, which, if implemented, could improve finances. Meanwhile, the agency is considering Link fare changes, which could increase or decrease revenues, depending upon what fare strategy is selected.
Revenues are falling in several other ways, too. The agency expects to contribute $270 million less (15.9%) to reserve funds because of a change in practices, and other revenues are projected to fall by $100 million because of a change in ORCA transit pass reimbursements.
Numerous cost drivers are straining the financial plan
Various expenditure categories have seen ballooning costs, which is adding financial stress to the plan.
Operations and maintenance costs are projected to rise $210 million (0.5%) due to enhanced cleaning services, service restoration, higher insurance costs, and impacts from inflation and labor costs. State of good repair costs are projected to increase $174 million (1.8%) mostly due to asset replacement assumptions ($133 million) and inflation ($41 million). Capital expenditures are projected to increase by $1.9 billion (2.6%) primarily due to inflation ($1.2 billion), though longer project timelines are adding financial pressure ($437 million) and Stride bus rapid transit costs have continued to skyrocket ($288 million) beyond spring estimates.
| Use of Funds | $ of Plan | % of Plan |
|---|---|---|
| Operations and Maintenance | $40.5 billion | 27.3% |
| State of Good Repair | $9.9 billion | 6.7% |
| Capital | $74.9 billion | 50.6% |
| Debt Service | $21.4 billion | 14.4% |
| Reserves | $1.4 billion | 0.9% |
| Total | $148.1 billion | 100% |
Projects funded in the year ahead
Some budget highlights of new and ongoing projects that will be funded next year include:
- Design and permitting work for restrooms at Downtown Bellevue Station will be completed. The cost is about $215,000.
- The second phase of fare paid zones at Link stations. The work will focus on making changes at 12 stations outside the Downtown Seattle Transit Tunnel with construction to be completed early next year. The cost is pegged at $1.5 million.
- Platform edge coatings will be added to three stations to reduce the potential for electric arcs from trains. A further 10 stations will get coatings in 2025. The cost is about $600,000 in 2024.
- An ST Express bus safety study will be carried out with potential implementation. This will involve a pilot program using external cameras to alert bus operators of potential dangers and evaluating potential changes at transit centers to keep pedestrians safe. The cost is about $340,000.
- Bike parking investments will continue with additional installation of secure bike lockers. $1.2 million is proposed for the program.
- Upgrades to Third Avenue will support King County Metro’s RapidRide C and D Lines. This should involve some signal and reliability improvements as well as rider enhancements. $12.5 million is earmarked for the project.
- Improvements to the Downtown Seattle Transit Tunnel will continue with a wide mix of rider experience, operational, and safety enhancements. Costs for tunnel projects will be around $7.9 million.
Over the next few weeks though, the agency’s board could tweak things further to push forward new priorities.
Rider experience is an area that continues to lack sufficient resources and attention. Despite long-promised upgrades, real-time arrival information screens have been persistently spotty and often inaccurate or non-functional. Even with new contracts to increase janitorial services, complaints that stations and trains are too often untidy and unsanitary have continued. Evening and late night Link service remains sparse and needs further investment. And Link could benefit from serious infrastructure investments to keep trains running during planned and unplanned events straining the system. Whether or not these will become a higher priority in the budget remains to be seen.
Riders that have feedback for the board on budget priorities should reach out via emailtheboard@soundtransit.org and meetingcomments@soundtransit.org.
Stephen is a professional urban planner in Puget Sound with a passion for sustainable, livable, and diverse cities. He is especially interested in how policies, regulations, and programs can promote positive outcomes for communities. With stints in great cities like Bellingham and Cork, Stephen currently lives in Seattle. He primarily covers land use and transportation issues and has been with The Urbanist since 2014.