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Redlands Passenger Rail Project (RPRP) Costs

May 7, 2015

Redlands Passenger Rail Project (RPRP) Costs:

Bonds are debt obligations issued by public entities to fund public projects. In this case the bonds are called municipal bonds and are issued by the State of California. Public entities go to the commercial markets to sell these bonds to investors (usually investment houses that have the mechanisms to do this) to raise money. These bonds are purchased by investors who get interest payments over the term of the bond. Usually the investor then receives back the full amount of the original investment. These investments are attractive as the interest payments are state and federal tax free to the investor. This works well if the California economy is sound and the taxpayer supports the debt. SANBAG documents warn that the economy goes through good and bad cycles affecting the value of these bonds.

Measure I: Was voted in twice by the citizens of San Bernardino County. It is a ½ % sales tax to be used for transportation projects. This money is collected (do not know how) by SANBAG and parceled to cities with in San Bernardino County in proportion to what they contributed. 76% of this money goes to the Valley Cities (Redlands, San Bernardino, Yucaipa, etc.) and 8% of this 76% goes to the RPRP.
We know that SANBAG has estimated how much Measure I will contribute to the rail. We were told it is approximately $9.4 million/year on average.

SANBAG states that the RPRP costs $242 million which includes preliminary engineering and environmental study, design contract, construction of track, structures, stations and DMUs. We know that $77 million of this is borrowed from Measure I future tax receipts. We also know that the debt service on this loan is equal to the loan of $77 million. SANBAG has already borrowed $26 million of this $77 million to pay for the San Bernardino Rail Project (Old San Bernardino Station to the New Transit Center) and part of the RPRP. What project received what portion of this money we do not know.

After construction of the RPRP the 8% allocation will be used for yearly operating costs. The operating cost is stated by SANBAG to be $8 million. If the estimated ridership holds true at 820 for the first year times a generous fare of $12.00 for a one way ticket (SANBAG has no idea what the ticket cost will be) to San Bernardino Station that equals $9840 per day. That translates to $3.59 million/year leaving a $4.41 million operating deficit. The Measure I moneys must also pay for the principal and interest on the $77 million. According to SANBAG the total interest over the term of the bond is estimated at $77 million. Therefore, $154 million in principal and interest must be paid over the remaining 25 years of the bond. Presumably it will be amortized over that term with yearly payments of approximately $6.16 million.

If our information is correct we have $9.4 million Measure I moneys to work with. Subtract the $4.41 operating deficit and the loan payments of $6.16 million and the result is a yearly deficit of $1.17 million until the bond is paid off. The 8% from Measure I sales tax will undoubtedly be subsidized with additional tax moneys from somewhere.

We do not want to forget the $104 million for the first mile from the San Bernardino Station to the Transit Center. Some of this money came from Measure I but where the rest originated we do not know but it must have some debt service attached to it.

According to Mitch Alderman the moneys to fund the RPRP comes from “10 different buckets”. The project cost $242 million of which $77 million is paid by Measure I loans. That leaves $165 million to borrow through bonding. Where is this coming from?
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Here the list from SANBAG that is in their Bonding Analysis for the San Bernardino Metrolink Program:
– CMAQ Congestion Mitigation and Air Quality Improvement Program (US DEPT of Transportation –Federal Highway Administration fhwa.dot.gov)
– LTF Local Transportation Funds
– STA State Transit Assistance Fund (Mike Silvera (916) 323-0704)Funds come from PTA or Public Transportation Account (gets money from gas taxes).
– PTMISEA Public Transportation Modernization, Improvement and Service Enhancement Account (part of Prop 1B)
– CTSGP California Transit Security Grant Program(part of Proposition 1B)
– SEC 5307 and 5309 (these are grants from the US Dept of Transportation) www.fta.dot.gov/grants/13093_3561.html
– Measure I

Wendy King from the State Department of Transportation manages a portion of Prop 1B funds that are allocated to transit operators. She said that revenue bonds add approximately 80% to the cost to fund a project. She said this is a good rule of thumb and that every bond sale has different interest rates. She also confirmed that SANBAG has been allocated $15 million of Prop 1B funds to buy the DMUs. If the borrowing costs are 80% of the $15 million that is $12million making the cost of the DMUs $27 million of a depreciating asset that will most likely be worth nothing is 25 years and then the loans must be paid back to the investors.

There is something strange here. SANBAG said the $242 million covered the cost of the DMUs but apparently Prop 1B has paid for them?

Wendy King (916) 651-8239 or (916) 654-8811
Strategic Growth Plan Bond Accountability www.bondaccountability.dot.ca.gov/bondacc/projectlist

The California State Transit Assistance Fund (STA) is managed for SANBAG by McGladery, a private accounting firm.

Known Costs:
-$242 million for infrastructure, planning, DMU’s, etc.
– 77 million for debt service on Measure I loan
– 77 million principle to be paid back on the loan
– 10 million for right of way from BNSF
– 104 million for 1st mile from San Bernardino Station to the Transit Center
$510 million

Unverified costs:
-$12 million bonding cost to borrow Prop 1B $15 million for DMUs?
– 104 million – What is the origination of this amount and the borrowing cost?
– 165 million – This is the $242 million minus the $77 million contribution from Measure I. We know this
money is coming from the “10 buckets”. The questions here is, how much of this is from
direct taxation and how much is borrowed/bonded from funds like Proposition 1B?

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