» Federal commitment will move project forward, increasing prospects for Mayor Villaraigosa’s massive 30/10 transit plan. This could be a model for other cities, though the availability of more financing is unclear.
Los Angeles’ 30/10 plan, designed to shoehorn three decades’ worth of transit construction into just ten years, always seemed like a long-shot. Though backed by a voter-approved sales tax, the proposal would rely on the unlikely commitment of billions of dollars in loans from the federal government. In the process, L.A. County hoped to have by 2020 twelve new or extended fixed-route transit lines at the cost of some $14 billion.
Thanks to the ambitions of Mayor Antonio Villaraigosa and the apparent willingness of the Obama Administration’s Department of Transportation, the process has suddenly made a major jump forward with the announcement today of a $546 million low-interest loan and a $20 million grant to spearhead work on the proposed Crenshaw light rail line. That $1.4 billion project will connect the city’s existing Green Line at LAX Airport with the currently under construction Expo Line at Exposition Boulevard, running through the cities of Los Angeles and Inglewood. The funding will allow the project to be completed by 2016, rather than 2018 as expected.
Observers nationwide should be evaluating the approach L.A. has taken on this project very carefully: This method, in which local governments promise a long-term revenue stream to pay back low-interest loans from Washington, could be a model for future infrastructure creation everywhere. Or it may at least allow the nation’s second-largest city to advance the fast-paced transit expansion program it has been planning.
Two financing sources made this deal possible: Transportation Infrastructure Finance and Innovation Act (TIFIA) loans and the TIGER II grant program. The TIFIA funds, representing the $546 million loan, will be leveraged by the $20 million TIGER grant; they will be eventually repaid over the course of thirty years using Measure R sales tax revenues dedicated to transit by voters in 2008. TIFIA acts as something equivalent to a national infrastructure bank and has already been used to fund construction on Denver’s Union Station and San Francisco’s Transbay Transit Center, two of the nation’s most impressive planned intermodal transportation hubs. TIFIA credit assistance may be able to support a total of about $2 billion in TIGER projects.
Though TIGER II grants will fund a number of new infrastructure projects (I will discuss them in further detail next week when they are officially announced), this relatively small grant for Los Angeles could be the most important because of the unique financing structure it inspires. Similar arrangements could be used to fund the construction of all of the other twelve planned transit lines in the 30/10 plan. The Westside Subway extension and the Regional Connector are likely to enter the construction phase over the next few years; each could be built more quickly if they were financed under similar schemes.
Metro L.A. claims that moving the transit construction process ahead by up to twenty years could reduce project delivery costs by almost four billion dollars in year-of-delivery dollars — from $17.5 billion to $13.7 billion. Building the lines first and then paying for them later could allow the city to profit from expanded infrastructure investments over the course of the thirty year-period of sales tax collections, rather than have the new infrastructure be spread out throughout the period. It’s a win-win situation for the city and not bad at all for the federal government, since it can continue to offer loans at low interest rates — they are virtually guaranteed to be paid back thanks to the commitment of tax funds. That means these loans don’t add to the federal deficit in the long-term.
If sales tax revenues come in as expected, L.A. will be able to collect $5.8 billion to spend on transit capital projects by 2020; in order to fund all lines, it will need another $8 billion in loans from the federal government, to be returned with interest between 2020 and 2040. Thus today’s commitment represents about one-sixteenth of the total this region hopes to receive from Washington.
This funding may or may not be enough to assure the construction of the Crenshaw line; L.A. Metro has yet to make clear whether it hopes to win New Start grants from the Federal Transit Administration to cover some of the costs of the line. Almost every major transit project in the United States has been partially funded with these allocations. Over the next ten years, the agency expects to collect a total of $1.6 billion in New Start revenues, but how they will be distributed has not been enumerated so far.
The 8.5 miles of the Crenshaw Line are expected to attract between 15,200 and 21,300 daily riders, not terrible for a line of this sort, but not fantastic either considering that the shorter Expo Line Phase I is expected to move more than 40,000 daily users. A connection to Wilshire Boulevard, the primary axis of jobs in the region, could not be funded according to L.A. Metro’s financing plan, therefore limiting the use of this corridor. The future extension of the Crenshaw corridor north into Beverly Hills and south to the South Bay, however, would make it an important link in the overall regional transit system.
Whether the construction of similar projects both in L.A. and in the U.S. as a whole will be possible under such a financing schemes remains to be established. L.A. may be a special case because of the large amount of local funds it has already committed to the cause. If other cities want to speed up their transit construction programs, they may have to increase the amount of non-federal funding devoted to the projects. Moreover, Washington will have to find a way to increase its grant-making to ensure that there are enough New Start dollars to pay for a reasonable share of all of these projects.
Image above: Crenshaw Line map, from Metro LA