Yesterday, the Chronicle brought us news that Metro has been granted $12 million in federal funding:
Houston’s Metropolitan Transit Authority will receive $12 million for two future transit corridors, thanks to a Transportation Department spending bill that the House and Senate approved Friday.
The money will help pay for preliminary engineering on Metro’s planned North and Southeast lines, which will connect to the present Main Street line. The agency plans to initially use buses running on their own guideways in the two corridors, then convert to light rail after ridership increases.
All three lines are part of the Metro Solutions plan approved by voters in November 2003, which includes light rail and commuter rail projects as well as bus rapid transit. Congress also approved $2 million to improve the bus system.
The Metro Solutions that voters approved in November 2003 hardly resembles the Metro Solutions being touted now. The new, living and breathing Metro Solutions was not approved by voters — Metro just changed it, and through Mayor White’s enabling, Metro is off on a new, not-voter-approved course. It would be nice if the Chronicle did not regurgitate Metro’s version of reality.
Also, here’s a Houston Business Journal story talking about all the new debt Metro is taking on:
In conjunction with the light rail expansion, Metro will for the first time in history issue debt to cover future projects. During its Oct. 27 board meeting, Metro approved the issuance of up to $400 million worth of commercial paper through DEPFA Bank Plc, a Dublin-based bank specializing in financing government public projects.
“We’re not borrowing because we don’t have the money,” Wilson says. “We’re borrowing because we have to put all this infrastructure in the ground in a short period of time.”
According to Metro figures, the total cost of implementing the five new Metro rail lines will be $1.23 billion, with an estimated completion date of 2011. Metro is estimating that $616 million of the cost will come from federal grants, while $616 million will stem from bonds.
“We’re building a lot of infrastructure in a short period of time so that causes a cash flow gap, but not a funding or financial gap,” Wilson says. “Metro is pretty sound financially, so when we go to the market we’re going to wind up with good interest rates because we are a good risk.”
The decision by Metro to issue debt didn’t come as much of a surprise to most agency-watchers.
Late last year, Metro Chairman David Wolff said, “I hate debt. I have no personal debt. I have no mortgages on my houses, no corporate debt. I have no debt. I don’t like debt. But sometimes I guess you have to have it.”
Ahhh, but it’s not Chairman Wolff’s personal debt, now is it? It’s debt the taxpayers will be stuck with, so it’s no biggie.
Metro’s Wilson likens the transit agency’s decision to issue debt to purchasing a home.
“It’s the same as a person’s decision to buy a home,” he says. “Eventually you will pay off the mortgage, but when do you want to move in? When you’re 55 years old or 25 years old? We’ve got enough fund flow over the years to pay the mortgage, but we’ll never be able to build the system if we want to collect all the money (first).”
Collect what money? Metro’s fare recovery ratio (15%) is considered low by industry standards! It’s a good thing Metro collects sales tax revenue from most of Harris County, so it’ll have something to pay for all its inner-loop projects.
As for Metro being financially sound, well, maybe that depends on your definition of sound. The recently completed state audit of Metro found that most “key performance indicators” demonstrate a “declining performance trend,” including a 36% increase in per passenger operating cost, a 19% increase in operating cost per revenue hour, a 17% increase in operating cost per revenue mile, and a 29% drop in its fare recovery rate.
