RAFT to FTA's Linton 12.97

RAFT
Regional Alliance For Transit
Box 20375
Oakland 94620
Voice 510 655-4438
Fax 510 658-1425

December 21, 1997

Mr Gordon G. Linton
Administrator
Federal Transit Administration
400 Seventh Street SW
Washington, DC 20590

Re: San Francisco Airport Extension

Dear Administrator Linton:

The Regional Alliance for Transit has followed the progress of the above-referenced Project for the past six years. RAFT is seriously concerned about events that have happened recently:

1) In May 1996 the Regional Administrator of FTA Region IX signed off on the Final EIR/EIS for the project. The cost per new ride is given in the document as $26.12;

2) In November 1996 an agreement was reached between DOT and our region’s MPO calling for four fixed guideway extension projects (including the Airport Extension) to be considered a regional program, apparently for purposes of exempting the Airport Extension from the scrutiny of U.S.C. 49 § 5309 (e)(2);

3) In December 1996 one of the four railroad extensions opened for revenue service;

4) In June 1997 the FTA issued a Full Funding Grant Agreement for the Airport Extension;

5) In July 1997 the second extension opened for revenue service;

6) In October 1997 the environmental review of the fourth component (the Caltrain extension to downtown San Francisco) of the fixed guideway regional program was stopped; and

7) In November 1997 the MPO programmed funds away from the Caltrain downtown San Francisco extension to other projects.

Thus, within the space of one year, the regional program was altered materially. The Airport Extension by itself was to have had 64% of its cost financed with federal New Starts funds, and would therefore be subject to the rigors of U.S.C. 49 § 5309 (e)(2). However, by creating a “regional program” with other projects not financed with New Starts funds, the New Starts funds for the Program suddenly fell below the 33% ratio of News Starts to other funds that provides exemption from (e)(2).

Moreover, five months after the issuance of the FFGA for the Airport Extension, the basis for that Project’s exemption from the straightforward scrutiny afforded by U.S.C. 49 § 5309 (e)(2) was eliminated.

RAFT believes the following issues have arisen because of the events of the past few months:

1) that the San Francisco Airport Extension Project may no longer be exempt from the requirements of U.S.C. 49 § 5309 (e)(2);

2) that the Project likely cannot meet the requirements of (e)(2); and therefore

3) that federal review is warranted to determine if additional federal funds may be advanced to the project.

RAFT believes the remaining balance of the Project’s FFGA exceeds $635 million.

Within the Report of the Secretary of Transportation to the United States Congress (March 1997) is the November 1996 justification for exempting the Airport Extension from standard requirements:

The BART Airport extension is part of the Federally-assisted portion of a much larger regional program of transit expansion, including significant BART extensions in the East Bay area (to Pittsburg and Pleasanton) and relocation of the Caltrain terminal in downtown San Francisco. The regional plan calls for 100 percent non-Federal funding of the East Bay extensions and no use of New Starts funds for the Caltrain terminal relocation. Thus, the Federal share in New Starts funding for the region's entire program of fixed guideway extensions is only 27 percent. This is a significant indication of local financial support for transit in a very transit-intensive region and is a major reason for the Department's support of this project. Projects requiring a Federal share of less than 33 percent in 5309 (Section 3) funds are exempt from the project justification requirements of 5309(e)(2)-(7)(Section 3(i)).

Had the Airport Extension not been exempted from U.S.C. 49 § 5309 (e)(2), it would have had been subject to these requirements:

The Secretary of Transportation may approve a grant or loan under this section for a capital project for a new fixed guideway system or extension of an existing fixed guideway only if the Secretary decides that the proposed project is—

(A) based on the results of an alternatives analysis and preliminary engineering;

(B) justified based on a comprehensive review of its mobility improvements, environmental benefits, cost effectiveness, and operating efficiencies; and

(C) supported by an acceptable degree of local financial commitment, including evidence of stable and dependable financing sources to construct, maintain, and operate the system or extension.

Does the Airport Extension pass standard federal tests of cost-effectiveness as required in U.S.C. 49 § 5309 (e)(2)(B)? The Final Environmental Impact Report/Final Environmental Impact Statement for the BART project was approved by FTA’s Regional Administrator of Region IX on May 31, 1996. Page 6-9 of the document gives the cost-effectiveness of the extension as $26.12 for each new transit rider.

At the time the EIR/EIS was approved the Project was exempt from the justification requirements, so cost-effectiveness was not relevant.
With the exemption still in place, FTA awarded a Full Funding Grant Agreement ($750 million; Grant No. CA-03-0394-03) for the Airport Extension on June 30, 1997.

Just three months after the award of the BART FFGA, the Caltrain downtown extension environmental analysis was terminated before being completed and certified by the Peninsula Corridor Joint Powers Board, the project’s sponsor. Last month, the region’s MPO, the Metropolitan Transportation Commission, removed the Caltrain extension project from its list of active regional projects and programmed funds that had been set aside for the fixed guideway extension to downtown for other Caltrain projects such as parking lot improvements in other counties.

The abandonment of the Caltrain extension means that the “major reason” given by the Department of Transportation for supporting the Airport Extension is no longer valid. This is because the 27% calculation contained in the March 1997 Report of the Secretary of Transportation to the United States Congress now is incorrect. Instead of a “regional” fixed guideway extension program consisting of three BART extensions (Pleasanton, Pittsburg and San Francisco Airport) plus the Caltrain extension, the regional program now consists of two BART extensions that have been completed within the past year and the Airport Extension.
Here are the costs of the three fixed guideway extensions of the regional program:

Pleasanton $517 million
Pittsburg $506 million
Airport $1,167 million
Total $2,190 million

The Airport Extension FFGA asks the Congress for $750 million in New Starts funds. The federal share now exceeds one third of the cost of the three extension regional program, fn1 nullifying the November 1996 justification exemption. Furthermore, if the Pittsburg extension project is removed for the purposes of calculation (because it was open for revenue service before the Airport Extension FFGA was awarded), then the federal share of the total cost of the regional program is much greater—45%.

U.S.C. 49 § 5309 (e)(2)(C) is also an issue with the Airport Extension. Grantee BART has asked the MPO for authority for a joint powers agency (comprised of Grantee and the MPO) to issue more than $100 million in commercial paper to help pay for the Airport Extension. Here is a section from a memorandum written by the MPO’s staff earlier this month:

BART is now requesting that the purpose for the JPA be expanded to allow for the borrowing of money for other projects beyond the East Bay extensions. The change will permit BART to provide interim funding for the SFO extension and other projects when revenue sources committed may not be available concurrent with actual project expenditures. This will allow BART to borrow temporary funds to meet expenditures pending receipt of committed cash.

Grantee’s budget for the project, at the time the FFGA was issued, envisioned debt service payments for the entire project totalling $24 million. Given both the tremendous cost overrun on the “line trackwork” section project segment earlier this month, fn2 and the federal appropriation for fiscal year 1998 that is 53% of the award projected by Grantee, fn3 the financing costs will be much greater than anticipated both by Grantee and the MPO.

In such a situation, is commercial paper a “stable” financing vehicle? Upward revisions in short-term rates could materially increase the cost of borrowing, and thus, of the project itself. The MPO has not identified a source of funding to pay debt service in excess of $24 million, nor has it ruled out reducing funding of other Grantee operating subsidies or capital projects to cover the additional financing costs.

Is FTA able to determine whether the Airport Extension project continues to remain exempt from U.S.C. 49 § 5309 (e)(2)? If the Project is not exempt, have the conditions in (B) and (C) been satisfied? If not, are further federal awards to the project justifiable?

For RAFT,

M. Kiesling

cc:
Senator Richard C. Shelby

US Senate Appropriations Subcommittee on Transportation and Related Agencies

House of Representatives Appropriations Subcommittee onTransportation and Related Agencies

California Transportation Commission

enclosures

footnote 1
The FFGA figure of $750 million is 34.2% of the three project fixed guideway extension “program” total of $2,190 million.

footnote 2
Please see the enclosed copy of the front page of the San Francisco Independent showing the low bid submitted was $522 million and the copy of a page from the FFGA that shows the second phase line trackwork section with a forecasted cost of $410 million.

footnote 3
Please see the enclosed copy of a page from the FFGA showing a forecasted federal award of $56.4 million during fiscal year 1998. The actual award was $29.9 million.