This week we’re at the 2021 Virtual Railvolution conference. Adelee Le Grand, CEO of the Hillsborough Area Regional Transit System in Tampa, moderates a panel featuring Debra Johnson, GM and CEO of RTD in Denver, and Peter Rogoff, CEO of Sound Transit in Seattle. Johnson and Rogoff discuss transit-expansion plans and progress in their respective regions as well as how they kept things going during the pandemic.
For those of you who get your news through your eyes and not your ears, there’s an edited transcript below the audio player. If you want a full, unedited transcript (with some typos!), click here. If you want to listen, here you go:
Adelee Le Grand: So I thought this out to just ask the next question to you, both of you, the impacts of COVID and the changes and the challenges that we face. Deborah, you stated that even before the pandemic, you had some challenges, right? You were over committed, you know, how do we advance a program that the community supported? Now you’re telling them that within the next couple of decades, it’ll take us to get the money and be able to, as you said, "take care of our plumbing, making sure we’re doing everything we can do with the resources recurrently have before we can put on our addition," if you will.
Then Peter for you, since you’re moving forward, like gangbusters, how do you look at the future, the tax space, as a pandemic in any way challenging the dollars that you’re calculating that you’ll have, or have you seen that the economy, your tax base has remained the same during this pandemic period. So I’ll start with you Debra, and then we’ll go to you Peter.
Debra Johnson: Okay. So thank you very much, Adelee, very good questions. So if anything, as we talk about where we are currently and the expectation of voters, it’s, it’s being highly communicative and showcasing what we’re able to do going forward, and nobody could foresee the pandemic in a sense. What I mean by that is the residual impacts that we have all suffered as transit leaders in the industry holistically. Now at this juncture, we have to step back and ensure that we’re communicating in such a way that we really can garner a better understanding from our customers [their] pain points, as well as ours, as relates to what we can deliver.
So with that as a backdrop, recognizing that we made this commitment as relates to projects, there’s one in particular, in which there appears to be this high level of interest, and it is a commuter rail line going up to Boulder County. That one project was never fleshed out in the sense of having a clear-cut understanding about what it may appear to be relative to boardings, how we could work with the freight railroad in reference to leasing the track and things along those lines. So when I first came into the organization and I was doing my listening tour, I heard that constantly, that we’d been paying into the system and we have not received what it is that we should.
That basically took the opportunity to garner a better understanding by meeting with elected officials along that project alignment, and then more so as well with staff along that project alignment, coupled with individuals on my team, both in planning and capital programs. What we have decided to do with the support of the board is basically get a common set of facts. So as we move forward, what will be the cost? What could we do for just peak rail service along that corridor? The board just authorized us to do that in April so we can make informed decisions as we go forward. More specifically, as we talk about where we are post pandemic, one thing’s for certain that we learned here: Our bus network really was the work horse of our transportation network outside of our commuter rail line.
That goes from one intermodal hub to another specifically speaking Denver Union Station, which is our flagship intermodal hub here in downtown Denver. The A Line runs directly to the airport .... Denver International is one of the busiest airports in the entire world. We saw ridership more or less remain constant. We only saw ridership reductions on that route or that line, I would say probably about 30 to 40 percent in comparison to our other routes. So as we go forward, what we’re really trying to do is leverage our core system, the bus network, investing and then also stepping back and recognizing that a lot of our capital programs came on all around the same time.
Getting back to my analogy I used earlier, we need to ensure that we are keeping our assets in the state of good repair. So that’s where we have landed at this juncture, recognizing that our core service, our service levels had been reduced during the course of the pandemic, so we could shore up our bottom line, and we’re seeing a gradual increase and service. Right now we’re about 70 percent service delivery levels. However, we’re only about 50 percent ridership levels. So we still have an opportunity going forward. I think basically as we look to see what people are doing with telecommuting, we want to ensure that we’re able to pivot. But needless to say, now we’re facing labor shortages as well.
So while we do have some of these constraints, we have partnered from a capital perspective with a couple of jurisdictions, specifically, as we look at bus rapid transit, and we do have a partnership with the city and county of Denver, and we have a project that is coming full circle. It’s on the largest contiguous business corridor in the country. And it’s our most heavily used ridership line, which is the Colfax corridor. What we were able to do is have the city and county of Denver provide the local match in reference to FTA small stars. So that’s something that we’re focused on right now, in addition to another project in the northern part of our region, which is a bus-rapid-transit line, connecting Boulder and the city of Longmont in Boulder County.
Le Grand: Thank you, Debra and Peter, has the tax base has that been impacted at all by COVID and if not, you know, what impacts have you seen if any coming out of this pandemic?
Peter Rogoff: Well, we’ve seen a ton of impacts and they weren’t necessarily the ones that we expected. The first you’ve talked about, the tax base, to be honest, we have an obligation under state law. When we conclude that the program that we put before the voters is not affordable to deliver the projects and the timeframe in which they were laid before the voters, our board of directors, which is 17 elected officials, plus the transportation secretary for the state, they must convene and realign the program to one that they know to be affordable.
We just concluded that after a 17-month process and it was painful, and what it largely involved, there was absolutely no projects that were left on the cutting-room floor. Like I said, the expectations is that all the projects will be built, the only issue is how much time it will take to build. Therefore we had to serve up some, sobering news to the voters who, like I said, really want many of these projects tomorrow and certain projects that were slated to be delivered in 2030 are now being delivered in 2032, certain that were certain ones that were in 2035 and 2036 may could get pressed out to 2041, but the board of directors and the agency is really going to progress to plan those projects as if we’re going to build them on time.
Well, why are we doing that one just as we’ve seen an impact on revenues and government spending in this area that may not have been what we expected. It may change again. And for the better, obviously with the Biden administration talking about an infrastructure bill and some $8 billion in capital-investment-grant dollars put into that draft bill, we have been very entrepreneurial as an agency and trying to maximize federal assistance for our program. We have two full-funding grant agreements with the FTA now. We’re also the nation’s largest TIFIA borrower, not just among transit agencies, but among all transportation entities, right at the, when I first got here in 2016, I secured a master-credit agreement for four different TIFIA loans, totaling $2 billion.
And we’ve just now we finance that package and have grown our TIFIA borrowings even further. So we want to stay nimble and have the ability to deliver projects on time should the circumstances allow that. So we are progressing projects, at least through the planning phase, and getting records of decisions so we can move out on them if we can either leverage additional local money from our state capital or command additional federal money from an infrastructure bill, all of those things that keep us moving forward. I will say, in other regards, when I said things, didn’t the impacts weren’t necessarily what we expected.
We began the pandemic fearing that we were going to be losing billions of dollars in tax revenue. Actually, the opposite has happened. Revenues over the last year actually came in over budget. And we sometimes attribute this to everyone, just spending a lot of money on consumer goods while locked in at home. Sales tax is a very large portion of the largest portion of our tax base, just in terms of the economics of the region. Even during the pandemic, population route here in the greater Seattle area and tech firms continued to expand, but not just the tech economy.
Where we started fearing about lost revenues and what that was going to do to our capital program. The thing that really required us to realign our capital program and slow projects down were project costs. As we did a new and updated projections of what the projects were going to cost to get in the ground, we discovered a variety of things. The biggest and most profound impact was something that was not a surprise in that is the cost of property around here continues to skyrocket — as an agency that must pay fair-market value for every square inch of property we procure. Yeah, we have condemnation authority, but that just authorizes you to pay someone fair-market value. Well, that fair-market value continues to go and up and up. So that was a wake up call.
We also discovered [things about] the cost-estimating method [we use]. Over the course of the last year we were in construction on eight separate major capital projects at the same time, seven of them were on budget and on schedule. One was not because when we ripped up the streets of Tacoma, we discovered the utilities weren’t where they were supposed to be. But, importantly, the cost-estimating methodology that we were using actually served us well for this generation of projects, but the next generation of projects where we’re building into more intensely urbanized areas, it did not serve us well. We underestimated the cost of some projects, and that was very unpleasant news to the board and the public.
We did solve for about a six and a half billion dollar funding pull by delaying some of those projects. But the overwhelming majority of that funding pull was not about revenues, but was about costs. Part of that is related to the fact that the competitive environment here is a seller's market. We’ve still got all tons of cranes in the sky, in and around the greater Seattle area. And they extend up to up to Snohomish county, down to Pierce county. It’s not a great time to be bidding out work in terms of getting really good competitive prices. You know, no one wants a recession, but one thing that was for certain during the 2008,-2009 recession is bids were coming in very competitively because contractors wanted to keep making payments on their leased equipment and keeping their people employed.
We are in the opposite circumstance now, contractors are struggling to get skilled craftspeople, to be able to come and do the work. And that is having its impact on pricing. A lot of changes just in terms of our capital program. The other big change, obviously, that came during the pandemic was a real wake-up call, not just for Sound Transit, but for the entire industry, in terms of who continued to ride transit and who didn’t. Our obligation as a federal grantee and as a public citizen funded with public dollars to serve the transit-dependent communities first. And we, like so many other cities across the country, can look at the heat maps of who continued to ride what bus routes and what rail routes and overlay communities of color, where essential workers and low- and middle-income communities are located and see who continued to ride.
That was an important wake up call, not just for us, but the entire industry. As we grow services back, we are bringing that equity focus of what communities need us the most, in terms of how quickly we add service back and in what intensity. So that was another big change that, that COVID presented. I think a good one that also played into that realigned program when the board was deciding which projects could be slowed in which couldn’t, which communities really need the transit service the most also entered into their thinking.
