RD629 - HB1359 – Transit Capital Project Revenue Advisory Board - Interim Report, December 2016

Executive Summary:
In 2016, the Virginia General Assembly enacted HB 1359, creating the Transit Capital Revenue Advisory Board (RAB) to examine the impacts of the forthcoming revenue reduction created by the expiration of the Transportation Capital Project Revenue (CPR) bonds in 2018. Additionally, the RAB is tasked with identifying possible sources of replacement revenue, and to develop methodologies for prioritization of transit capital funds similar to the successful HB2 (SMART SCALE) program enacted in 2015. The RAB is comprised of seven members appointed to one?year terms by the Secretary of Transportation, upon the recommendation of key stakeholders in state and local government as well as the transit industry, including: Community Transportation Association of Virginia (CTAV), DRPT, the Virginia Association of Counties (VACO), the Virginia Municipal League (VML), and the Virginia Transit Association (VTA). The Department of Rail and Public Transportation (DRPT) was directed to provide necessary administrative support to the Board.

The CPR bonds were first authorized by the General Assembly in 2007 through HB 3202 (§ 33.2?365). A total of $3.0 billion of bonds were authorized, and a minimum of 20 percent were dedicated to transit in an effort to meet the demands of a rapidly growing transportation mode. The Commonwealth Transportation Board (CTB) first allocated the CPR bonds to transit projects in Fiscal Year 2008. The CTB chose to allocate the minimum 20 percent transit share ($60 million annually) over a ten-year period which ends in 2018.

Additionally, the CTB elected to allocate an additional $50 million a year of CPR bond funds to the state of good repair on the Washington Metropolitan Area Transit Authority (WMATA) system. In light of the fact that the CPR bonds provide 40 percent of the entire transit capital program with over $110 million in annual revenues, their expiration in 2018 will leave transit systems in the Commonwealth without necessary funds for capital improvement, at a time when transit demand and needs continue to grow across Virginia.

Thus far, the RAB has focused on validating the transit capital needs and developing a transit capital prioritization process. The transit capital needs work was summarized in three ten-year (FY 18 – FY 27) funding scenarios with the conservative base case projecting a funding gap of $178M in FY27. Furthermore, analysis indicates that existing state transit capital funds are insufficient to cover just those needs associated with maintaining a state of good repair for existing transit assets. Consequently, existing state transit capital grant match rates cannot be maintained without additional revenue. Reduced state capital grant contributions will likely result in a reduction in transit capital investments by Virginia transit agencies, or will require additional funding from local, regional, or federal funding sources to make up the gap created by reductions in state funding.

For the purpose of prioritization, it is proposed that projects will be divided into two major groups that will follow separate prioritization processes: State?of?Good Repair (SGR) and Major Expansion projects. In this proposed approach, minor capital expansion projects will be evaluated and prioritized using the same criteria as the SGR projects. Both prioritization processes will use a different set of criteria and scoring process, and will ultimately lead to two separate lists of prioritized projects. Project scores would be compared against other transit projects and ranked relative to cost (i.e. cost?effectiveness) within the two categories.

Over the next few months, the RAB will be focused on evaluating potential revenue streams and finalizing the prioritization process in order to make a final recommendation to the General Assembly by August 1, 2017.