BRT Awaits State Funding Match

March 30, 2008
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This is the third story in a three-part series about the bus rapid transit project and transit funding.

GRAND RAPIDS — The Federal Transit Administration is prepared to pay its 80 percent share of the $40.1 million bus rapid transit line it has authorized The Rapid to develop along the nine-mile Division Avenue corridor that runs through Grand Rapids, Wyoming and Kentwood. But the money won’t remain on the table indefinitely: It will take a 20 percent state match to secure, and The Rapid still needs assurance that the state will be forthcoming with its share. 

“The deadline is ‘as soon as we can,’” said Peter Varga, CEO of The Rapid transit system. “The earlier we can get the assurance, the earlier we can frame the issue for the public about what we need to do to raise the operating cost. If we were to know by May of 2009, for example, we could appropriately address public questions about it and still get into the U.S. president’s budget for fiscal 2010.” 

That’s a tight timeframe, Varga acknowledged, but the sooner the transit authority completes the environmental review requested by the FTA and resolves the issue of the 20 percent state match and how it will pay for the system’s operation, the sooner it can negotiate a project construction grant agreement with the FTA, Varga said.

The agreement is like a contract between The Rapid and the federal government to supply — over a period of time — the money needed to build the BRT line, Varga explained. Once such an agreement is entered into, the funds can come out of a later presidential fiscal budget. But until the matter of the state match is resolved, the project can’t get into a presidential budget.

If a 20 percent match can’t be promised, at some point the Fed will take the money off the table. It depends on what other projects are in the pipeline: Other projects may come on later in the cycle but might get funded because they’ve cleared all the hurdles while The Rapid’s BRT project hasn’t, Varga explained. The project is one of the first Small Starts BRT projects the FTA has approved. The next Small Starts annual report is due out in November 2009. The report rates each project against FTA’s various criteria and provides a snapshot of where each project stands in its development process.

“There’s always some time, but you don’t want to start slipping on the project because other ones in the pipeline move along, then they take precedence over yours. Then at some point, the Fed says the project is not rated anymore because it can’t meet the financial plan.”

Up until now, the 20 percent match on any bus or capital facility project has always come from the state, Varga pointed out. It’s immaterial to the federal government where the match comes from, but the issue is that the state has historically used state funds to match transit capital projects at a 20 percent level, he said. In more recent times, the state has matched certain projects with toll revenue credits, providing a soft match for things such as equipment, planning funds, service vehicles, radios and so forth.

Toll revenue credits can’t be used for the BRT; it requires hard cash. So far, The Rapid has never had trouble getting the state match, so if the state is unable to come up with a match for the BRT, it would mark a break with historical precedent, Varga said. The state doesn’t think it has enough money in the Comprehensive Transportation Fund to bond for the project, but it’s currently using those funds to bond for road projects, he pointed out.

The total cost of the BRT line is estimated at slightly more than $40.1 million, of which the state would need to provide a total capital match of $8.02 million over a four-year period. The FTA simply needs assurance that the $8 million match will be achievable within that timeframe.  

“Our argument to the state is that it has always done the match,” Varga said. “That state says we have to put in an annual request and application for funding like we do for all the projects, but they can’t guarantee us how we’ll get the money, and they can’t assure us that they’ll meet the match. That kind of response doesn’t answer the FTA’s request to guarantee the match. Why risk the $4-to-$1 return from federal money on a major infrastructure project?

“We think it’s just a question of how the state prioritizes what it funds and how it views road projects versus transit projects. We’re still talking to them and making the economic case for why the BRT should be treated uniquely.”

The match could be raised through a public-private partnership, or The Rapid could bond for it and pay it back with revenues from the BRT over time, but that’s not the way the transit authority planned it, he said.

Varga believes the BRT will have an initial ridership base that will grow steadily over time. What he foresees is that as the U.S. 131 corridor becomes more congested, as gas prices increase, and as less and less parking is available due to continued development of the “Medical Mile,” more and more people will choose to park in a park-and-ride lot on Division Avenue and take the bus to work.

As planned, the BRT line will run along Division Avenue from 60th Street north to Wealthy Street, through downtown to Michigan Street and on to Rapid Central Station. It will feature a dedicated traffic lane, hybrid electric busses, 19 station stops and 10-minute service frequency during peak hours.

The 19 station stops will be the “sweet spots” for development. Varga said two potential station stops are at Cathedral Square and at Saint Mary’s Health Care campus. He said The Rapid has to sit down with officials in Grand Rapids, Wyoming and Kentwood to figure out what developments they may have on the horizon so the right zoning plan can be developed for the stations. Kentwood and Wyoming have already held joint charrettes to identify a cross-border plan for development of the corridor, Varga noted.  

“It will be a discussion between us, the cities, and planners and developers to see how those would work,” Varga concluded.

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