SDOT has released its November 2018 Semi-Annual Streetcar Report for the South Lake Union and First Hill Streetcar Lines. This is the first report since the June 2017 Semi-Annual Report was developed under a previous Mayor and previous SDOT leadership.
Streetcar operations are funded by fares, federal grants, and advertising sponsorships. The SLU line also receives operating contributions of $1.55 million from King County Metro and $229,000 from Amazon; the First Hill line receives $5 million from Sound Transit.
The new report shows that revenues have been insufficient to operate the lines in recent years. While projections for future years appear more realistic, it appears operations will require ongoing subsidies that were not originally contemplated.
Three key reasons explain the deficit: ridership is lower than projected; and farebox recovery (fares collected divided by operating costs) has been lower, and operating costs have increased;
Ridership on the SLU line decreased by 17% in 2016. 2017 ridership was 17% below projections included in the June 2017 report, and 39% below original estimates. For First Hill, ridership in 2017 was 882,000; the original forecast was 1.3 million.
For SLU, farebox recovery was projected for 35% in 2017, but was only 23%. For First Hill, farebox recovery was 10%, well below the projection of 29% included in the June 2017.
The result of fewer riders and lower farebox recovery is less revenue: for the SLU line, fare collection revenue was 31% below projections in 2016, 30% in 2017, and estimated at 34% in 2018. For First Hill, fare collections were 39% below estimates in 2016, 36% in 2017, and projected at 54% in 2018.
Operations costs have increased as well. 2018 SLU operation costs are projected to be 8% above projections. For First Hill, the increase from the King County/City agreement has been 15% in 2016, to 21% in 2017, and projected at 30% for 2018.
Less revenue and higher operations costs have resulted in an operations funding gap for the two lines of $1.4 million in 2016, $1.8 million in 2017, and $3.3 million in 2019.
Looking ahead, the report projects 3% ridership increases in future years. Farebox recovery projections are more in line with current collections (22% for SLU, 10% for First Hill), though they increase slightly with time.
The operations funding gap is projected to continue in future years: the 2019 budget includes an additional $4 million for operations costs. The original forecast that streetcar operations would not require additional subsidies has proven inaccurate.
The June 2017 Semi-Annual Report showed no operations deficits—it’s clear this was inaccurate. For example, for 2016 it showed $3.2 million in revenues for the SLU line; the updated report shows $2.8 million in revenues. Fare collections were overstated by $271,000, and federal grant contributions by $123,000. The 2017 report said the figures listed for 2016 were “Actual amounts,” but this doesn’t appear to be the case.
I appreciate the commitment of SDOT’s new interim leadership to more realistic, accurate projections. However, the figures do raise the question of how operations of the current streetcars will be funded in the long run: it’s clear there is a structural funding gap.
No long-term funding source has been proposed to cover the funding gap. The deficits from 2016 through 2018, and projected for 2019, are currently funded with street use fees and the commercial parking tax. We’ll need more if King County’s $1.55 million operations subsidy of the SLU Line runs out in 2019; negotiations with King County are ongoing. Sound Transit’s $5 million subsidy for First Hill expires after 2023. These compounded gaps in funding could mean an annual deficit of more than $10 million after 2023.
During the just-concluded budget process, the Council adopted my proposal that any operations agreement for a Center City Streetcar must include performance measures and operations funding sources for the first six years, as well as identified funding sources for construction—currently $60 million short—and contingency strategies if federal funds are not received.
In August the Mayor released an Initial Summary consultant report about the operations and construction cost problems regarding the Center City Streetcar.
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