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City Finance Committee compares notes with CapMetro on rail costs

Wednesday, July 2, 2014 by Elizabeth Pagano

With an upcoming rail bond election almost certainly on the horizon, the city continues to take a closer look at what a new urban rail system might mean. A special called meeting gave the Austin City Council’s Audit and Finance Committee a chance to meet with the Capital Metro Finance Committee Monday and go over the agency’s finances, as well as the projected costs of continued operation of urban rail.

Initial projections put those ongoing costs at about $22 million annually. Capital Metro will handle a sizable chunk of it, with the city lending support. The level of the city’s financial support remains undetermined.

“We are going to potentially be partners in the Project Connect endeavor,” said Audit and Finance Chair Mayor Pro Tem Sheryl Cole. “If we are going to be partners, we need to take some time to understand Capital Metro financing, long-term planning and, in particular, operating costs related to urban rail.”

Capital Metro compared the relative costs of operations and maintenance for other cities’ rail systems. While that data showed Austin was on the low end of cost per rider, it compared future estimated costs for Austin with current costs in other cities. Moreover, as noted by Council Member Laura Morrison, the chart calculated that figure based on projected 2022 costs and projected 2030 ridership.

“It’s a little bit mixed bag,” said Austin Transportation Department’s Scott Gross. He explained they selected 2022 because it was the opening year. As for ridership, Gross said they chose 2030 because determining future ridership is a complicated process. The city had those horizon figures on hand for the Federal Transit Administration.

That time-traveling scenario calculated that with annual operating costs of $15.50 million and annual ridership at 5.9 million, the annual Operations and Maintenance cost would be $2.65 per rider.

Austin Urban Rail Action’s Dan Keshet questioned whether those predictions would prove accurate.

“Projections are an art, more than a science,” said Keshet. “It’s hard enough to figure out some of these numbers for the past.”

Keshet points to Capital Metro’s MetroRail, which cost much more to build than initially projected. Operations and Maintenance costs have also proved to be about double original estimates, with annual costs at about $13 million instead of the promised $6 million.

That has led to a high cost per rider for the MetroRail, which Keshet puts at about $18.50. He compares that to the per rider cost for buses, which he says is at about $3.50.

Though people may question the figures, there is no one questioning whether a new rail line will cost something. The meeting was also a chance to look into where that future money might come from.

On their end, Capital Metro is planning to finance the central corridor rail operation through a combination of new fare revenue, 5307 federal grants and operational savings.

Capital Metro officials explained that the city could contribute through a combination of parking revenue and Capital Metro’s “1/4 cent funds.” Those funds are a holdover from the failure of a previous rail bond failure. Capital Metro has about $20 million to pay back of that amount, and suggested it could be rerouted back to a successful rail package. Currently, the city finances other transportation-related projects with that money.

Parking revenue, which brings in about $10 million in gross revenue for the city, was another source of funding identified in the discussion. Though Transportation Director Robert Spillar was unable to provide a hard number for how much of that money the city nets, he did explain that the revenue currently goes toward downtown improvements, investments in the Downtown Austin Alliance and debt service toward the parking meters.

The joint committee also discussed the possibility of naming rights and advertising on the rail and value capture, in the form of a Public Improvement District or another funding mechanism that would finance the rail through its beneficiaries.

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