State auditor questions whether MTA can finish light rail by 2012

By Jennifer Peebles | Monday, December 1st, 2008

A new audit by the state auditor’s office has given the Harris County Metro Transit Authority an overall good report on its financial status, but repeats concerns by federal transit authorities that 2012 might be too optimistic for finishing three more light rail projects:

The Transit Authority has adequate planning and cash flow forecasting processes for light rail expansion. In addition, the Transit Authority has made progress toward its goal of obtaining federal funding for its long-term expansion plan for light rail under the hybrid delivery system method approved by the Legislature in 2005 …

The [Federal Transit Administration] determined that the [Metro] Transit Authority’s long-term expansion plan has the financial capacity to allow two of its three federally funded light rail projects—the North Corridor and Southeast Corridor projects—to re-enter the preliminary engineering phase. However, the Transit Authority needs to achieve certain milestones before the FTA will authorize those two projects to enter the final design and construction phase. Achieving these milestones is contingent upon the completion of the Transit Authority’s negotiations with a facility provider. Once the projects are authorized to enter the final design phase, the FTA can execute full funding grant agreements with the Transit Authority.

Additional uncertainties exist for the Transit Authority’s third federally funded light rail project, the University Corridor project. That project has not progressed as far as the North Corridor and Southeast Corridor projects. Delays in that project, as well as delays in two locally funded light rail projects, may impair the Transit Authority’s ability to meet its current goal of completing all five light rail projects by December 31, 2012.

In its response to the audit, MTA took issue with that assessment, saying, “is inappropriate for the State Auditor’s Office to declare that delays will occur due to uncertainties in a project at a given moment in time.”

The state auditor’s office also repeated findings by the statement by the feds that MTA will have to borrow money beyond its debt capacity to build the North and Southeast corridors. But in its response to the audit, MTA says the feds used the wrong numbers when they made that calculation, plugging in the number for the principal and the interest over 30 years, not the initial principal payment.

MTA says it met with the Federal Transit Authority last September to set them straight:

… The net annual cash flow available for debt service on the METRO Solutions Phase 2 projects
… is more than sufficient to cover the debtservice obligations in every year through the payoff of the bonds. In fact, the net annual cash flow in the stress case (which assumes significantly reduced sales tax and farebox revenues …) is still more than sufficient to cover the debt service. In addition, the remaining cash flow available after debt service is sufficient to pay for the remainder of the METRO Solutions program with no additional debt. Including all METRO obligations through 2030 (operating costs, debt service, and METRO Solutions capital), METRO will end up with over $2.3 billion in cash reserves in 2030.

Harris County MTA audit