San Francisco Needs $137 million for Subway Plan to Pass

Full federal funding hinges on an okay of the financial blueprint for the $1.6 billion project.

With a critical deadline for San Francisco's Central Subway just three months away, transportation officials are searching for hundreds of millions of dollars in order to ensure federal funding for the bulk of the $1.6 billion project.

Federal officials have committed $942 million and have already delivered $72 million. But to ensure that the rest of the funding for the 1.7-mile subway comes through, the San Francisco Municipal Transportation Agency needs to come up with at least $137 million, and possibly as much as $225 million, to cover its share. The agency faces a February deadline to tell the Federal Transportation Administration how it will get that money.

The hunt for funds comes at a bad time. Not only has the struggling economy dried up much transportation funding and forced Muni, like other transit agencies, to cut service and raise fares, but both the city and Congress are in the midst of turbulent political transitions. All of that could combine to complicate, delay or possibly even derail the effort to build a new subway from downtown to Chinatown - if Muni has trouble finding the funds.

Adding to the uncertainty are new Muni ridership projections that show about 14 percent fewer trips on the Central Subway than initially forecast if the agency is able to fully implement an ongoing program to improve the efficiency of the transit system.

"We are extremely concerned that there not be any hiccups that would turn off the FTA," said Supervisor Ross Mirkarimi, chairman of the San Francisco County Transportation Authority, which is a partner with Muni on the project. "All trains need to come in on time. Nobody can risk being off track."

Fighting for funding

Assembling enough money to build a major transportation project often involves more work than the actual construction. Funding is collected from several sources, but on large projects like the Central Subway, winning federal New Starts funding is important - and very competitive.

To be selected, a project must make the case that potential ridership and economic development benefits justify the investment, that the project won't negatively affect the rest of the transit system, and that the state and local governments are contributing.

Project sponsors submit annual reports and are rated, with those who receive better ratings continuing in the competition to win what's known as a Full Funding Grant Agreement, essentially a guarantee of funding. The Central Subway's 2010 "medium-high" rating is considered strong, and project officials hope to get the coveted full-funding agreement by the end of 2011.

To do that, the transportation agency needs to convince the FTA it has met all the requirements. John Funghi, project manager, said the agency has been completing what is essentially a checklist, sending the FTA a stream of reports.

Finding the financing

But the big challenge is completing the financial plan. Muni has committed to provide $137 million, but it's not clear where that money will come from. Agency officials met with the Metropolitan Transportation Commission, the Bay Area's transportation planning and financing agency, on Friday to discuss the problem, and they plan to update the agency's Board of Directors at its Tuesday meeting.

Funghi said the agency is looking at securing money from two state transportation bond measures - including the high-speed rail bond, which includes funds for connecting transportation - as well as other grant and bond programs to come up with the $137 million.

Cash-flow problems

But it may also need to cover $88 million in state transportation funds that have been promised but will be delayed due to state budget troubles, creating a cash-flow problem. The agency will likely use a financing arrangement, essentially a loan, to keep money flowing to the project until the state sends its check, Funghi said.

Randy Rentschler, a spokesman for the transportation commission, said the Central Subway situation is neither unusual nor unsolvable.

"Having a big project and finding yourself with a funding shortfall is par for the course," he said, noting that BART's Warm Springs extension, now under construction, needed to twice revise its funding plan.

The commission made no funding promises, he said, but will work with Muni to help solve the shortfall.

"We are fully committed to this project," he said. 'We've committed money in the past, and we want to make sure this project gets built."


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