GoTriangle officials now think they may not need another $175 million from Durham and Orange counties to pay for the nearly $2.5 billion light-rail transit project.
That could change if the costs increase, sales tax revenues fall short or the economy hits a snag, GoTriangle officials said, noting it’s important to keep working with the counties to build a safety net.
“Through continued work with our new financial advisor and financial modeling consultant, we are happy to report that in the ‘base case,’ the (light-rail project) debt can be restructured to allow for construction without the need for new local funds,” project manager Danny Rogers said in an email. “The ‘base case’ is a scenario in which the financial growth assumptions and cost estimates are as expected.”
The Durham-Orange Light Rail Transit Project would cover 17.7 miles and 18 stations from N.C. Central University to UNC Hospitals. The estimated cost covers the rail system, stations and potential development projects, such as affordable housing.
The Federal Transit Administration is reviewing the plan now and could let GoTriangle know by the end of February whether to start the engineering phase of the New Starts grant program. Construction could start in 2020 if the project stays on track.
Project budget revised
An updated plan presented to GoTriangle’s Board of Trustees this week still shows the FTA paying for half the project, if approved.
The plan still anticipates getting 10 percent of the money from the state. The final amount of state funding for the project won’t be decided until 2019.
That leaves a local cost of about $990 million, roughly $227 million of which could be funded with the half-cent transit sales tax in Durham and Orange counties, registration fees, car rental taxes and in-kind land donations.
GoTriangle’s plan also includes an optional $65 million local cost for development projects around the stations. Chapel Hill, Orange County, Durham and Durham County all have “expressed interest in pledging local dollars” for joint development projects, such as affordable housing, the financial plan states.
The remaining $698.6 million would be financed and spread out longer – from 2020 to 2028 – to better reflect when the dollars would be spent and avoid carrying too much debt until it’s needed, GoTriangle officials said. The plan also includes an optional $236 million in financing that could help manage the project’s cash flow until state and federal money kick in.
GoTriangle also continues working on a nonprofit that could raise money for the project and with university, business, health care and community groups to secure donated right-of-way land. Officials said they have confirmed up to $19.6 million in land donations, but still need to sign contracts.
Still some questions
The updated plan reverses an earlier request that Durham County help find an extra $135 million over 10 years and Orange County help find another $40 million. The money was expected at the time to cover a $250 million shortfall created when the state cut its expected share of project costs from 25 percent.
The request caused concern in both counties about the increasing burden on taxpayers and lack of communication from GoTriangle. The state funding gap was apparent last spring, some noted, but GoTriangle only approached the counties within weeks of its Dec. 31 deadline for federal submission.
Light-rail opponents urged Orange County to reconsider the plan. The county has hired a consultant and wants to talk with Durham about changing the local funding formula, Commissioner Barry Jacobs said.
Orange County pays 23 percent under the current formula – based on how much of the light-rail project is in each county – and Durham pays 77 percent. However, the light-rail route primarily crosses UNC land in Orange County, serving the university and the hospital but creating few opportunities for economic development or affordable housing around the stations.
It does make sense to look at the funding formula again, particularly since the stop at N.C. Central University was added, Durham County Commissioners Chairwoman Wendy Jacobs said. However, she noted, connecting all three universities will offer educational and employment benefits to both counties.
Critics also have questioned the plan’s assumptions about future sales tax revenues.
We still have a way to go to understand what we’re getting into.
Barry Jacobs, Orange County commissioner
GoTriangle continues to work with N.C. State University economist Michael Walden and sought a separate sales tax study last year from Moody’s Analytics. Both studies estimated the counties could see annual sales tax growth averaging more than 4 percent over the next 20 years.
Walden said this week his study compared the overall growth of the local and national economies and accounted for the shift from retail stores to online sales.
“The forecast for the region if you look out several decades are very ‘bullish’ in terms of population growth and development density, so down the line it may very well be that light rail makes more economic sense,” he said.
While he is not well-versed in the latest plan, Walden noted that financing a long-term project has the benefit of spreading the cost among current and future users. It also allows GoTriangle to lock in lower interest rates now, he said.
Barry Jacobs said GoTriangle has made some progress.
“It’s comforting that we weren’t being asked for money at the moment, but we still have a way to go to improve communication with the public and with the elected boards. We still have a way to go to make things clear and timely, and we still have a way to go to understand what we’re getting into,” he said.
While Durham Mayor Bill Bell and Wendy Jacobs agreed the revised plan is good news, Bell hedged his words.
“I want to make it clear, and I hope they made it clear, it doesn’t mean that we still are not going to be looking for other alternatives of funding through the local governments, because if you read the report, there are a lot of things that could cause those numbers to go down because of assumptions, in which case we still may need additional funding,” Bell said.
The true test will be the Federal Transit Administration’s response, he and Wendy Jacobs said.
“The due diligence is also going to come in the form of the federal government being the ones to evaluate it, and so we’ll see what they have to say,” Wendy Jacobs said.