Sound Transit receives $1.3 billion U.S. Dept. of Transportation loan
January 16, 2015
Savings through TIFIA program will increase financial capacity by $200-$300 million
Sound Transit today executed a $1.3 billion federal loan under the Transportation Infrastructure Finance and Innovation Act (TIFIA). This is the largest single TIFIA loan to a transit agency in the country and the second largest TIFIA loan overall, and at the lowest rate - 2.38 percent - in the 25-year history of the program.
The low-interest loan, which offers more favorable terms than traditional bonds, will increase Sound Transit's financial capacity by an estimated $200 - $300 million. Over the coming years the capacity will enable the Sound Transit Board of Directors to potentially restore some voter-approved Sound Transit 2 projects that were suspended as a result of the recession and help reduce risks of scope reductions or delays.
"This is great news for commuters, the local economy, and Washington state taxpayers," said U.S. Senator Patty Murray. "I was proud to support this funding for Sound Transit as they continue building a world class transit system that will help our economy continue to grow and create jobs here in Washington state."
"As ridership on our trains and buses grows, more investments in our transportation infrastructure are needed to meet the demand for transit services," said Sound Transit Board Chair and King County Executive Dow Constantine. "This innovative financing allows local tax dollars to go farther in building the regional system. We are grateful to Senator Murray and Secretary Foxx for their outstanding leadership and support."
Sound Transit applied for the U.S. Department of Transportation loan after the recession wiped out $4.5 billion in projected ST2 revenues. The reduced revenues required the agency to realign the ST2 program, which included suspending some of its capital projects and transit services and reducing costs. The TIFIA loan allows the agency to borrow money at a lower cost than assumed in the current financial plan for the agency - 2.38 percent instead of 5.75 percent.
The Sound Transit Board of Directors will review unfunded portions of the ST2 program, costs increases and savings on active capital projects, contributions toward maintaining agency assets in a state of good repair, operational needs and service levels, capacity for future system expansion, and other financial commitments. Some of the projects suspended during the recession that the Board could consider moving forward include:
- ST Express bus service hours - 50,000 of 100,000 ST2 service hours still to be implemented
- Light rail between Kent/Des Moines and South 272nd Street in Federal Way
- Preliminary light rail engineering and right-of-way acquisition from South 272nd Street in Federal Way to the Tacoma Dome
- Improvements for accessing Kent Station
- Improvements for accessing Auburn Station
- Sounder platform extensions
- Preliminary light rail engineering between Redmond's Overlake and downtown areas
- A permanent multi-modal station at Edmonds
- Renton HOV improvements
The long-term tax-exempt loan by the U.S. Department of Transportation is based on one-third the budgeted costs of the East Link light rail extension and Phase 3 of the I-90 Two-Way Transit project.
Enacted by Congress to provide credit assistance for qualified regional and national transportation projects, TIFIA loans typically improve access to capital markets by offering flexible repayment terms and potentially more favorable interest rates than can be found in private capital markets. Loans are granted to agencies that have demonstrated strong credit worthiness. In response to the loan, Standard & Poor's reaffirmed its AAA rating of the agency, and Fitch Ratings, Inc. and Standard and Poor's rated the TIFIA loan in its "A" category.