ATTACHMENT 4
FUNDING FOR TRANSIT COSTS OF THE TOWN OPERATIONS FACILITY
The Town Operations Center will be located on land purchased for this purpose on Millhouse Road, north of Eubanks Road and bounded by I-40 on the east and the railroad on the west. The Center is expected to house the Transportation, Public Works and Engineering Departments and the Housing Maintenance Division. This project is necessary because the Public Works and Transportation Departments now are sited on land leased from the University through December 31, 2006. The land must then be vacated.
Although there will be one integrated site plan and one integrated construction process, we will account for the costs separately by transit and non-transit categories. Non-transit costs will most likely be paid by long term debt issued by the Town. In contrast, transit costs are eligible for up to 80% federal funding and up to 10% State funding. The remaining 10% local share would be paid by the Town and our transit system partners, the University and the Town of Carrboro, in the same proportions as net operating costs are shared.
While the potential for federal and State funding is positive, it also provides considerable uncertainty. It is not clear that we would receive the full funding, nor is it clear in which year or years any funding would become available.
To add to the present uncertainty, we do not yet have accurate cost estimates. The Town has hired consultants to conduct a site analysis and needs assessment, and to produce a conceptual plan and cost estimates in time for the Council to make a decision on budget figures by August 25, 2003. We believe this date is the last meeting at which the Council could make decisions regarding a potential general obligation bond referendum for November 3, 2003.
The best case scenario would include grant funding for all but 10% of the costs of design and construction of the new transit facility. The costs of demolition of the present facility, as required by the University would likely not be included. We expect to have a cost estimate this summer for demolition, although demolition would not take place any sooner than late 2006. We believe that the Transportation Capital Reserve Fund could accumulate the Town’s share of the 10% local share for design and construction and its share of the demolition costs by the time those expenditures are necessary.
The worst case scenario would require the Town to fund the entire cost of design and construction of the new transit facility and demolition of the present facility. In such circumstances, we would recommend that the Council ask the voters in November 2003 to approve a general obligation bond issue for about $16,000,000, depending on the costs estimates we receive from our consultant project. Debt service for this capital would be about $1,600,000 the first year and would decline gradually for 20 years.
The most likely scenario would be for the Town to receive some, but not all of the transit funding for which it would be eligible, and for that to happen over a two- to six-year period. With the possible exception of a grant for planning and design expenses, we would not have any cash in hand by August when the Council must make decisions about any bond referendum in November. We might know by August if federal appropriations include a special project earmark in the Transportation Equity Act for the 21st Century (TEA 21) requested by the Town and the N.C. Department of Transportation in the amount of $15,200,000. If so, it would be possible, but not certain, that annual appropriations over up to six years would eventually deliver that total earmark to the Town.
We understand that the Federal Transit Administration has a process allowing a locality to use a grant to reimburse eligible expenditures previously made. Thus, we could proceed at the pace needed to finish the project by December 31, 2006, and not lose grant funding simply because it becomes available after our expenditures are made. Such a case would require that we sell short-term installment debt as cash is required, with the debt being retired as soon as we receive the grant funding.
If, as we expect, the TEA 21 funding is not sufficient, we would expect to negotiate with the NCDOT and the Metropolitan Planning Organization to direct some of the funding now allocated to highway projects to the transit facility project. The Council adopted a resolution on January 27, recommending that the Metropolitan Transportation Improvement Program give the highest priority for funding to construction of a new transit maintenance facility. It is also possible that other types of grant funding may be available.
If all sources of federal and NCDOT funding still leave a significant amount of project costs unfunded, long term debt would be the best way to fill the gap. However, because there are still several years during which grant funding could be acquired, we recommend not making any final decisions on issuing long-term financing for the transit facility before it is absolutely necessary.