How is CATS going to fund the next $8 billion light rail expansion?
A year after the Blue Line extension opened, there’s an $8 billion question looming: As the city embarks on an ambitious expansion plan over the next decade, how will Charlotte pay for the next rail line?
In its first year, the $1.2 billion light rail from uptown to UNC Charlotte has proven to be a tremendous draw for developers, with some $800 million worth of new projects completed or underway.
But ridership has remained consistently below the initial projection of 38,300 average weekday riders in the first year, generally hovering between 24,000 and 27,000 a month.
Charlotte Area Transit System CEO John Lewis said the first year of the Blue Line extension’s operation has been largely successful. The transit agency has dealt with challenges including storm damage that shut down much of the train system for two weeks last fall and ongoing construction that limited access to the 36th Street and Sugar Creek stations, expected to be two of the most popular on the new line.
“Our ridership is trending up,” Lewis told the Observer. Over the past three months, average ridership has increased from 22,720 to about 27,500, beating the previous high point of 27,109 average riders in August 2018.
But he said the number of riders isn’t the only measure CATS uses to evaluate the line. “You don’t spend $1.2 billion just to move 30,000 people ... Just as important is the amount of development that goes on. We are literally transforming that corridor.”
Lewis acknowledged that building the next phase of transit will “absolutely” require more local funding, possibly through an increase in the current half-cent sales tax in Mecklenburg County, or through new allocations of property taxes along transit corridors.
“We have to make sure we have local financial support for these corridors,” he said. “We’re going to have to have a conversation with voters in Mecklenburg and maybe the region.”
City Council member Ed Driggs called how to pay for the Silver Line “the $8 billion elephant in the room” at a recent budget meeting.
The Metropolitan Transit Commission last month approved an update to CATS’ 2030 plan, allowing the agency to move forward with the Silver Line. The centerpiece of the next phase of rail, it’s planned to run from Matthews to uptown, skirting the city’s center along I-277 and 11th Street before running west to Charlotte Douglas International Airport and across the river to Belmont. In a first for the system, CATS plans to talk with neighboring counties such as Union and Gaston about chipping in funds.
The agency’s plans also include:
▪ Bus rapid transit north to Mooresville instead of the commuter rail that was earlier planned for the Red Line. Commuter rail still remains CATS’ long-term plan, but the agency needs to complete an agreement with Norfolk Southern to share the freight company’s tracks.
▪ The expansion of the Gold Line streetcar to 10 miles, running west to I-85 and east to the former Eastland Mall site.
▪ Bringing Amtrak service to the planned Gateway Station uptown.
▪ Extending the Blue Line over I-485 to Pineville and Ballantyne.
The current estimate for expanding the transit system of up to $8 billion is based on “back of the envelope” math, Lewis said. Now that CATS can start planning the exact Silver Line route, more clarity should emerge on the total cost in the next several years. If all went according to plan, construction could begin in the late 2020s, with the line opening by 2030.
But CATS officials admit that’s an ambitious timeline. And CATS is counting on the federal government to pick up 50 percent of the cost through the Federal Transit Administration program that funds new transit lines. The FTA paid for about half of both the $462 million original Blue Line and the $1.2 billion extension.
But under the Trump administration, federal dollars for new transit have been in doubt. The administration proposed cutting all new funds in its first two budgets, though Congress continued funding the FTA grants. Jeff Davis, senior fellow at the Washington, D.C.-based Eno Center for Transportation, said the FTA has also been slow to approve new projects and disburse the money it does have.
“The Capital Investment Grant program is in flux right now because the Trump administration has not been interested in administering the program in the way Congress wants it to be administered,” he said. “The current administration is not particularly enthusiastic.”
It will be several years before CATS is in a position to apply for the needed billions in federal funding. By then, there could be a new administration, or a new position toward funding transit.
“There’s a good deal of uncertainty around the federal role,” Lewis acknowledged. “We’ll continue to go as if the rules have not changed.”
Even if CATS wins funding from the federal government, the agency will need to raise more money locally to complete its plans. While the state picked up 25 percent of the cost of both the original Blue Line through South End and then extension to UNC Charlotte, the Republican-controlled legislature has since capped spending on new light rail projects at no more than 10 percent of the total.
That would leave CATS looking to find funding to replace hundreds of millions of dollars worth of state contributions the transit agency can no longer count on. That could leave Charlotte on the hook for a local share of around 40 percent of the total, or around $3 billion.
Lewis said CATS could ask the General Assembly to increase the half-cent sales tax, possibly by another half-cent or even a full cent, to help fund expansion. The current half-cent sales tax brought in $103 million last year. Lewis said CATS will work to nail down an exact total cost for the Silver Line before deciding how much of an increase they would need.
Voters would ultimately have to approve such a proposal, though they have backed the half-cent tax when it’s been brought to the ballot.
Another proposal: Allocating some of the increased property taxes collected from developments along the Blue Line and other future transit corridors toward CATS.
“There’s a lot of increase in the real estate value in the vicinity of the stations,” said Jean-Claude Thill, a UNC Charlotte professor who studies transit. “The current situation is such that CATS really doesn’t benefit from this.”
Called “value capture,” this strategy is increasingly being used by transit systems to generate local money to pay for more projects.
“Trying to recapture some of the windfall that will come to local real estate interests from the taxpayers putting this at their doorstep is generally considered a good practice,” said Davis.
Lewis said that there has been $2.7 billion worth of development along the original Blue Line, and the pace of development along the northern extension is even faster, with $800 million underway already, according to the agency’s calculations. To be sure, it’s difficult to separate development that would have happened anyway in fast-growing areas like NoDa, but developers have often cited the Blue Line extension as a major reason they’re building at a furious pace in the corridor.
Lewis said he will propose not increasing property taxes, but getting a piece of the higher taxes collected from property along transit corridors earmarked for transit.
“I’ve got my eye on a portion of that,” said Lewis. “Should not a portion of those new tax revenues that are coming in the city and the county go into the system that’s catalyzed that?”
He emphasized, however, that the revenue from new development alone won’t cover the cost of the next phases.
“This is not a silver bullet,” Lewis said. “All of that development is not going to build us another corridor.”
The best route?
Last month, the Metropolitan Transit Commission, which oversees CATS, decided on a final route for the Silver Line. It voted to go around the edge of uptown rather than tunneling under the city center via Trade Street.
CATS has faced criticism about the route. Taking riders straight to the city’s center, rather than to a northern edge still largely dominated by surface parking lots, would draw more riders, groups such as transit and environmental advocate Sustain Charlotte argued.
“A network is only as good as the connectivity between all the different nodes on the system,” said Thill. “The route that’s been selected really will not be the best for the ridership.”
Ben Fried, of the New York-based nonprofit TransitCenter, agreed.
“We think the CATS board made a mistake choosing that alignment,” he said. “Even if it costs more money, it would have been worth it to take that line directly to the downtown.”
Lewis, however, said the determination to go along uptown’s northern and western edges was made to maximize economic development potential of the new line.
“I think this is just an area where we’re going to agree to disagree,” he said. Lewis predicted that by the time the Silver Line is complete in more than a decade, the northern edge of uptown will look very different, akin to how Stonewall Street has boomed with thousands of new apartments, a Whole Foods and new office towers and hotels over the past five years.
“We’re building not for today’s geography. We’re building for the city of 2030,” he said. He also said he doubts a tunnel, which could add a billion dollars or more to the project’s cost, would be cost-effective.
“Spending an extra few billion for a one-mile track under the city, I think would make it hard for us to compete at the federal level,” he said. Lewis said the Gold Line streetcar running along Trade Street will also fulfill much of the same role. The second phase of the streetcar, running from Johnson C. Smith University to Central Avenue, is expected to open next August.
“Bringing the alignment through center city today would be a worthwhile goal,” he said. “But we already have an alignment on Trade Street with our Gold Line, which is under construction today.”