Regional Alliance For Transit
To: Supervisor S. J. Bierman
Date: 19 February 1999
Subject: BART extension to Millbrae
Another year has come and gone, and here we are again. The BART project needs more money, lots of it, and the Commission is being asked anew to be the railroads banker of last resort. It is like the touching parable of Charlie Brown, Lucy and the football. MTC looks a lot like Charlie Brown.
Past RAFT Memos on the Extension
For the past several years, the Regional Alliance For Transit has written to the Commission and to BART about our concerns with the Millbrae project. It is for your determination whether RAFT or BART has been right over the past two years in statements to the Commission about the financial impacts of this project, both on BART and on other transportation agencies.
RAFT sent one memo about the extension to members of the Commissions Work Program Committee in December 1997 and a second in April 1998. Here are five issues that were raised in them and a brief note on what happened after the memos were distributed:
1. RAFT claimed 14 months ago that the project was seriously over budget.
What happened: A cost overrun of over $300 million finally has just been admitted by BART.
2. RAFT predicted the federal appropriations would be significantly less than set forth in BARTs forecasts.
What happened: The 1999 federal appropriation was about half of what BART sought, leading to what the GAO calls a financing gap. This gap may continue to grow. Also, the General Manager of BART told his board two weeks ago that the financial forecast may have been optimistic.
3. RAFT requested that BART show MTC that it could afford to pay interest and repay principal on the debt it will have to issue to cover the cost overruns and to close the financing gap. RAFT specifically raised the issue of BART having to cut its service and delay yet again the system rehabilitation plan. Further, we cautioned that other transit systems were at risk of having their funds diverted to cover BARTs deficit.
What happened: No mention has been made (yet) about cutting service at BART. The BART rehabilitation programs financial shortfall is still large, and the unfunded cost of the seismic retrofit has more than doubled in a little over one year from $245 million to reportedly between $550 million and $600 million. And, sure enough, at least two other transit systemsMuni and samTransare going to have their funds diverted to the extension.
4. RAFT encouraged MTC to make sure BARTs financial problems do not jeopardize other transit systems.
What happened: There is still no policy about containing costs on the project. Money that could have gone to other transportation agencies or projects is simply being hurled at it in piecemeal fashion. It is too early to tell how badly transit operations and capital projects will be hurt at Caltrain, samTrans and Muni.
5. RAFT predicted that interest on the project would be significantly greater than the $24 million BART claimed, and that the amount that BART would ultimately have to borrow could exceed $300 million.
What happened: The financial information made available to Commissioners about debt service is insufficient to know just how much will be incurred in interest or how much will ultimately be borrowed. Interest to be incurred is surely a multiple of $24 million. As for the level of debt, several months after the first RAFT memo was distributed, MTC raised the level of permissible indebtedness on the MTC-BART JPA to $300 million.
RAFTs Concerns with the Situation as it Appears Today
When the extension was proposed for federal funding, detailed financial projections showing estimated revenues and expenses year by year were made readily available for review both by the public and by Commissioners. These projections allowed for an assessment to be made of the risks involved in pressing ahead. Figures showing annual detail are important, because one of this projects most vulnerable points is the amount of the annual appropriations by the Congress. Financial disclosure over the past year has been minimal, at bestfrom a document released at the last Commission meeting, it appears BART knew about this latest financial crisis months ago, but refused to acknowledge it until mid-February. What is the likelihood that the Congress will appropriate as much as BART needs for the next federal fiscal year, given all of the other outstanding, unfunded FFGAs in the nation? Why should local taxpayers be asked to put up an additional $100 million plus for this project without an adequate disclosure of financial information?
Is it just the extension project that will fall apart, as the Executive Director stated on the tenth, or is it BART itself, if future appropriations truly are low? Are there service and operational implications if BART needs to find more money to finish the extension? Should not the risks entailed by going forward with the project be known before committing more funds?
A large change to the extension project agreed to by BART earlier this month is the elimination, at a stroke, of $100 million of new rail cars. If these cars were necessary, what will happen to the service along the extension after it opens? If they were unnecessary, why did it take years for BART to come forward? Were taxpayers going to pay $100 million for unnecessary vehicles, while other regional transportation needsdesperate needsgo unmet for lack of funds? Even BART itself has other needs, such as securing $600 million for seismic retrofit and hundreds of millions more for intentionally deferring system maintenance. Of course, there are other transportation agencies besides BART, and they have unmet needs, too. If approved by the Commission, a part of the cost of the 1999 fix will be borne by samTrans and the San Francisco Municipal Railway. How will transportation agencies other than BART be affected by the funding shortfalls and chronic cost overruns of the Millbrae extension?
A part of the newly proposed budget requires BART to put up $50 million reserved for the Antioch and Warm Springs extensions. Where is this money now? Is it indeed available for use in 1999? Should not the Commission determine if these funds are in hand today or if they will require another loan from another agency?
Our understanding about Warm Springs is that capital funds have not been assigned for any specific transit project, because MTC has not identified an operator. Will the funds from the Fremont-South Bay placeholder revert to Fremont-South Bay for use once an operator is identified, or are they now just to be given to BART?
Rumors are swirling in San Mateo County that Caltrain service will no longer run north of Millbrae to San Francisco but be terminated there once the BART extension opens. The rumor continues that Caltrain passengers heading for San Francisco will be required to transfer to BART at Millbrae so that sufficient funds are collected to pay for the BART extension. If this is true, should not a disclosure be made now to determine if the proposal is politically and economically viable?
Despite claims to the contrary by BART, the budget for the project may be substantially above the latest figure of $1.51 billion. Both the $72 million bond issue by samTrans and the $80 million CAPRA bond issue are shown as revenues to the project. Is interest expense payable to bond holders shown anywhere? The Airport terminal reportedly is also over budget, and the Airport may not be willing or able to cover the higher cost. Is it possible the project today has at least another $100 million more in funding shortfalls that have not been acknowledged? Will BART come back before the Commission next year with another large request for funds?
We have seen reports that the bank that issued a letter of credit to the (MTC-BART controlled) San Francisco Bay Area Transit Financing Authority is unwilling to support the issuance of $200 million of new commercial paper. The Commission may want to ascertain if this is true, and if so, attempt to determine the reasons behind the banks action. What are the implications, financial or otherwise, to the Commission and the Bay Area if the bank has pulled the plug on $200 million?
The Millbrae extension amounts to more than one-quarter of the total discretionary transportation funding for the next fifteen years for the entire Bay Area. Can MTC, the steward of transportation funding for the region, afford to make a poorly informed decision about whether the project should go ahead or not?
Thank you for your consideration.