South Lake Union Streetcar needs a third bailout

by Carolee Colter and John V. Fox, Seattle Displacement Coalition – October 15, 2014

We’ll put this one in the “I told you so” file. The South Lake Union Streetcar — affectionately called the SLUT, after it was briefly called the South Lake Union Trolley — continues to fall short of ridership and revenue expectations.

According to a memo from the Seattle Department of Transportation (SDOT), Seattle City Council members are being asked to bail out SLUT for a third time. Only now, SDOT may ask for a continuing allocation of more than a quarter million dollars from the general fund to cover SLUT shortfalls. Click here to read the full city memo and for a full list of city funded projects/subsidies for South Lake Union totaling nearly one billion dollars.

The mayor’s budget describes it this way: “Ridership levels and sponsorship revenues have been less than the forecasted amounts at the start of operations, resulting in cash flow challenges.” That’s putting it mildly!

Exaggerated projections

In 2004, when the council first authorized building the SLUT, we warned council members they were lowballing construction costs. We were assured it would cost no more than $45 million. But when completed three years later, the actual cost came to more than $56 million.

In 2007, the City Council extended a “temporary” inter-fund loan of $2.2 million for the streetcar. Once the streetcar became fully operational, we were assured that ridership would grow so large and so many sponsorships (ad space on the cars and at stops) would be sold, the SLUT would easily generate enough to cover operations and pay off the loan.

It turns out, costs continued to outpace revenues. In 2009, the City Council raised the loan to $3.6 million. Instead of scaling back earlier projections to reflect reality, streetcar planners pointed to Amazon’s move into South Lake Union (SLU) and nearly doubled their estimates of future ridership.

In 2004, 2007 and again in 2009, we warned council members that ridership projections were exaggerated, and revenues never would cover operations. Today, ridership has increased to about 800,000 per year, but it has not risen to the 1.4 million riders SDOT promised back in 2009. Furthermore, sales of ad space will bring in about $200,000 yearly, far less than the projected half-million dollars.

Moreover, the annual cost of operating the streetcar has risen $300,000 above 2009 projections. As a result, SLUT deficits now are so high, they’ll exhaust the loan later this year. SDOT has suggested raising it to $4.2 million, but it appears the preferred option is a permanent annual quarter-million-dollar drain on the general fund. Remember, general-fund monies pay for a backlog of road, street and bridge repairs and other real needs in ourcity.

To top it off, this same SDOT memo alerts the City Council to a pending loss of $400,000 in Metro Transit funds used to cover a portion of streetcar costs. This may require an additional “interim” hit on the general fund at least until Metro’s budget picture improves.  (Since the writing of this memo, Metro’s revenue picture is brighter so at least for this year, any cut in Metro funding for the SLUT may have been averted)

Better spent on buses

Now wait a minute! Under a signed interlocal agreement from 2004, city leaders gave up 9,500 hours of bus service, and in return, Metro said that it would pay 75 percent of any of SLUT’s yearly operating costs that fare-box revenues did not cover. So how could Metro even consider reducing payments to the SLUT below that amount?

For some reason, our not-so-astute city leaders earlier this year renegotiated the inter-local agreement allowing Metro to reduce its payments to the SLUT if the county-wide Proposition 1 aimed at preventing bus-service cuts was voted down. What prompted such a change only weeks before voters torpedoed Prop. 1, the memo does not say. Even though Metro now may not cut its share of payments to the city for SLUT operations, the door is open in future years for such cuts.

If you thought city leaders learned a lesson from this, you’d be wrong. The mayor’s budget includes $4 million to plan for a new Center City Connector Streetcar and more than $500,000 more to plan routes from SLU to the University District and one to Ballard. And what’s the price tag for this expanded streetcar network? Nearly a billion dollars.

We’re left in disbelief here. City leaders have absolutely no idea where they’ll find a billion dollars; yet, they’re merrily committing millions from the city’s current budget to plan for such a system. Meanwhile, a permanent annual drawdown of the city’s general fund is required just to keep the existing 1.3-mile-long SLUT from going bankrupt.

And do we need to remind anyone we’re facing crippling bus-service cuts? Buses carry three to four times the passengers per day compared to streetcars, cost 30 to 40 percent less to operate and don’t require $50 million to $75 million per mile of track laid to get them up and running.

Money may be growing on trees for streetcars, but somehow, city leaders can’t find funding for buses — not without asking voters to approve a colossally regressive hike in our car-tab fees.

Why are we considering bailing out the SLUT at all, let alone spending millions to plan for an expansion of streetcars while bus riders suffer? If city leaders bail this thing out again and move forward with new streetcar systems, it’s time for new city leaders.

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