When Sound Transit unveiled a $54 billion tax measure in 2016, even its most tenacious critics said the rail and bus budgets were so larded with financial cushions the agency couldn’t possibly run short on cash.

Only five years later, Sound Transit faces an $11.5 billion budget shortfall caused by soaring land costs, alignments in sloppy soils, community requests for add-ons and a projected $6 billion reduction in tax revenue due to the COVID-19 recession.

The shortage was revealed last month in the midst of environmental studies of the voter-approved Sound Transit 3 projects. Transit board members face difficult decisions to close the budget gap, such as delaying lines or stations, raising taxes within Seattle or amassing more debt for a half-century.

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There’s no need for austerity, some transit supporters argue, because the voter-approved program won’t fall into the red until 2029.

But Sound Transit CEO Peter Rogoff — a former federal executive who knows the glacial pace of U.S. megaprojects — urges the board to identify both new money and cost reductions this year.

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“We cannot wait until we can no longer make payments for capital projects or operations to start making decisions,” he wrote in Seattle Transit Blog. “If you know you are going to bounce checks by the third week of the month, you don’t write the same checks you might have during the first and second weeks.”

How to find more money

The quickest and easiest remedy might be more money from the federal government.

The inauguration of “Amtrak Joe” Biden as the 46th U.S. president has created more opportunities for Seattle to rake in federal transit dollars.

Sound Transit’s board last week asked Pete Buttigieg, the new federal transportation secretary, to provide an extra 30% Federal Transit Administration (FTA) contribution to major projects in progress. That would translate into a $1.9 billion windfall for the Lynnwood and Federal Way extensions — on top of $2 billion the Trump administration previously awarded.

U.S. Sen. Maria Cantwell, D-Wash., encouraged Buttigieg to boost FTA capital grants at his confirmation hearing. Such language appeared last year in a House economic-stimulus bill.

“I’ll certainly want to take a look at this,” Buttigieg said. “I think often we have not created as much predictability in capital planning as we have on the operational side, and I’d be here to look at how we could better fund that.”

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The first new cash might arrive as operating subsidies, if Congress passes another round of COVID-19 relief money. Sound Transit received $346 million in 2020. Whatever operating money arrives would ease stress on the long-term finance plan.

In addition, the U.S. government is sitting on $70 billion Congress already approved for low-interest, deferred-payment loans through the Transportation Infrastructure Finance and Innovation Act (TIFIA), a federally funded research report says.

Sound Transit is the biggest TIFIA client, borrowing $3.3 billion for five projects. Rogoff has requested another $581 million loan to help finance the 2024 downtown Redmond extension, and a refinance of old loans at a cheap 1.9% interest rate.

Roger Millar, the Washington state transportation secretary, has suggested the Biden administration convert Sound Transit’s loans into outright grants.

The agency’s chief financial officer, Tracy Butler, has already erased $3.2 billion of the budget gap by assuming success to win federal aid. Otherwise, the shortfall would be nearly $15 billion, not $11.5 billion.

Rogoff warned there’s a political limit to what the feds will give any single region. Sound Transit already soaks up $200 million a year, or one-tenth of the huge FTA grants nationally.

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Whenever dollars seem tight, leaders discuss public-private partnerships as solutions for roads, ferries and transit. While those arrangements rarely happen here, could Sound Transit find partners to exploit land values around future stations and generate money?

Sound Transit favors this site on southwest Queen Anne Hill for a future light-rail station, where tracks will continue north toward Ballard. But environmental studies found a need to build elevated tracks on columns, because the hillside soils are too soft to support a cheaper surface path. (Steve Ringman / The Seattle Times)

The most aggressive path, needing new laws, would be a full dive into the real estate business. Hong Kong’s profitable MTR transit corporation develops towers near stations and leases subway space to retail shops.

Sound Transit follows the opposite path, buying only what land it needs for construction. That prevents speculation and the steamrolling of neighborhoods.

After stations open, 80% of surplus lands are sold or donated for subsidized housing. The transit board this month handed 1.6 acres worth $9.4 million to Seattle to create 150 units in Rainier Valley. Some 2,100 units have been built or planned across the three-county region on leftover parcels, with 1,500 deemed affordable.

Oregon has dabbled in tax increment financing. A share of property tax collected near stations, where land values increase, could be siphoned to defray rail construction costs. An amendment to the Washington state Constitution would likely be needed, Rogoff said. The usual objection is that property taxes on growth should go to education and human services.

It’s already legal to form local improvement districts, where property owners vote to pay fees to support projects. The South Lake Union streetcar raised $25 million that way, and downtown landowners are providing $160 million toward waterfront parks and walkways.

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Washington state contributes little to mass transit because the gasoline tax is reserved for roads, under the state constitution’s 18th Amendment.

But House Democrats have floated a $27 billion transportation package that includes carbon fees, which can be used for many purposes. (New gas taxes plus carbon fees might total 30 cents per gallon.) Sound Transit wants some of that money.

Also, the volunteer group Seattle Subway has pushed for city-only taxes to help bail out ST3 expansions there and build seed money for crosstown subways.

House Bill 1304 would let Seattle voters increase car-tab taxes a maximum $250 per $10,000 of value, tripling the regional rate paid to Sound Transit. The City Council would write the referendum and control the money.

Prime sponsor Rep. David Hackney, D-Tukwila, said his bill would not only help relieve the financial gap for ST3 but also stretch light rail from South Park to Renton.

“There’s a real need to get cars off the road and expand rail,” Hackney said. “Making sure the air is clean so we can have environmental justice, all of these are key priorities of mine.”

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However, tracks stretching beyond Seattle into Renton would also require a regional ST4 ballot measure.

Where to save money

Sound Transit is raising a previously taboo topic: Divide Snohomish County light-rail construction into phases.

Rather than wait past 2036 to go from Lynnwood to Paine Field and Everett in one fell swoop, the board could approve a cheaper intermediate segment earlier, to the densely populated Mariner area, or to Highway 99 at Airport Road.

“I’d rather phase than chop, frankly,” Snohomish County Executive Dave Somers told the Sound Transit board last month. “I’d like to deliver the projects the voters passed.”

Back in 2016, transit officials insisted they must promise a single 16-mile project to complete Everett’s half of the light-rail “spine” devised a quarter-century ago. Otherwise, voters would assume the Everett segment was expendable and vote no, leaders thought.

The latest financial crunch made Somers change his tune. Nonetheless, the entire line must ultimately be delivered, he said.

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“I am not interested in changing the alignment,” Somers said in an interview.

Board members could scrap some of the 8,560 proposed parking spaces, as done before. Back in the 2008 recession, they delayed Sounder commuter-train parking structures in Kent, Auburn and Puyallup, now scheduled for the early 2020s.

One savings opportunity is Midway Landfill, a toxic Superfund site along I-5 that South King County officials favor for a new train base, instead of condemning homes or businesses. A public backlash in 2019 knocked out an option to put the base where Dick’s Drive-In is located in Kent.

But the landfill must be covered with a concrete cap or excavated to remove the garbage — driving the cost to $2.4 billion, or $1.2 billion more than using other land.

“Maybe we don’t build a maintenance facility on top of a landfill,” Somers said.

Board member Dave Upthegrove, a Metropolitan King County Council member from Des Moines, suggests trimming ST3’s $2.2 billion plan to create midday Sounder commuter train trips. That would conserve money for the Federal Way-Tacoma part of the light-rail spine, he said.

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Within Seattle, the board could seek simpler alignments. The projected cost for West Seattle, downtown and Ballard soared from $7.1 billion in 2016 to $12.6 billion now.

The board’s preferred route, where a new downtown tunnel would end in Sodo, passes through weak fill soils that need expensive support pillars underground.

Property costs in Seattle have blown $2.13 billion past 2019 estimates. But if tracks follow a tight curve above or on Fauntleroy Way Southwest, using West Seattle’s public right-of-way, the agency might avoid demolishing 306 apartments worth more than $252 million.

Another tactic, requiring federal permission, is “protective acquisition” to buy land early before prices rise. The Ballard Safeway property on 14th Avenue Northwest, a leading station site, is $95 million already.

With all the inflation, leaders might pivot harder toward neighborhood tunnels, rather than cram aerial tracks over expensive land.

Seattle Mayor Jenny Durkan emphasized that in the latest engineering figures, a high bridge over Salmon Bay is about as expensive as tracks underground. Therefore, regional transit officials should tackle a Ballard tunnel as a fundamental ST3 piece, rather than require the city to find independent tunnel money, she argues.

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“We don’t have to talk about third-party funding. What people assumed wasn’t necessarily the case,” she said.

One light-rail route option for West Seattle would demolish the 306-unit Legacy at Fauntleroy Apartments, expected to be finished in early 2021, costing taxpayers more than $250 million. That’s triple the initial estimate for three corner lots. (Ken Lambert / The Seattle Times)

In West Seattle, elevated lines are considered $200 million to $400 million cheaper than underground.

Durkan said she isn’t supporting a tax hike, because more engineering is needed to make cutting or spending choices. “Right now, everyone’s just speculating about what things might and might not cost.”

Decisions by July?

The shortfall casts doubts on whether ST3 will be delivered within the promised 25 years, said Kevin Wallace, a Bellevue-based developer who opposed ST3 in 2016.

“Any time they have a decline, it’s a compounding problem all the way out to 2060. So you can get into trouble pretty quickly,” he said.

Wallace still suggests that for less than half the cost for tracks to Issaquah in 2041, buses could travel all the way uphill to Sammamish years sooner. “Doing bus-rapid transit, instead of light-rail transit, should be on the table,” he said.

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Rogoff’s staff is scheduled to take public feedback by April about how to respond to the budget shortfall, followed by a board decision by July to set priorities.

Board member David Baker, the Kenmore mayor, said he wants to see what dollars flow from Washington, D.C., or locally, before talking about trims.

“We don’t want to spread a lot of fear and panic. It’s totally unnecessary,” Baker said. “We all want to complete the spine. We all want to deliver what the voters approved.”

Staff reporter Heidi Groover contributed to this story.