City’s Metro Rail Costs May Go Up, Council Informed

It appears “very likely” that the burden of funding the multibillion-dollar Metro Rail project will fall more heavily on local government than previously anticipated, according to a report released Monday by Los Angeles city analysts.

Legal disputes and protests over a tax on downtown businesses have cast doubt on the marketability of $150 million to $180 million in bonds that the Southern California Rapid Transit District plans to sell to help finance the first 4.4-mile segment of the subway, the report says.

Even if the bonds can be sold, construction delays and revised cost estimates for completion of the entire line to the San Fernando Valley have left an unfunded gap in financing of $1.2 billion to $2.1 billion, the report says. And those projections assume that Congress ultimately will be able to provide $870 million for the Los Angeles project contained in a multi-year transportation bill vetoed by President Reagan this week.

Given the uncertainties and a cap on state participation in the project, “it is highly likely that the city will be asked to come up with additional dollars” to complete the project, Judith Sobject, a city administrative analyst, told the City Council’s Transportation and Traffic Committee. The city already is committed to providing $69 million for the project, plus an open-ended share of cost overruns, should they arise.

The committee took no action on the report, which was requested by Councilman Zev Yaroslavsky after the RTD recently reported that it was increasing its Metro Rail cost estimates by up to $1.5 billion.

Yaroslavsky, whose Westside district would include part of the route, said the analysis shows “we are in a lot worse shape” in ability to fully finance the project than officials believed several months ago. Yaroslavsky, who grilled RTD General Manager John Dyer about the district’s financing plans at Monday’s committee meeting, said afterward that he is becoming “more and more skeptical” about the project.

Dyer gave an optimistic view of future funding, pointing out that Congress has expressed support for the project and that the county Transportation Commission could provide additional support from the money raised by the 1-cent-per-dollar county sales tax that voters approved in 1980 for transportation projects.

Councilman Michael Woo, a strong Metro Rail supporter, said he believes that a majority of council members will continue to support the project, despite the uncertainties. However, he said the report will add to a “very turbulent time in decision-making about the future of rail transit” in Los Angeles County.

The state Legislature is considering disbanding the RTD in response to disclosures and accusations of mismanagement. In its place, a new agency would be created to plan and build commuter rail systems.

A key issue raised by the city analysts is what will happen if the RTD’s proposed Metro Rail bonds cannot be sold. The bonds were to be issued this year and raise 11% of the construction cost. They would be repaid with a new tax on downtown businesses.

In the face of protests over the tax, however, the RTD board recently deferred collection of the tax until the first leg of the subway is built in 1992. In addition, there is a legal challenge to the tax that may not be resolved for up to two years, delaying issue of the bonds.

“Failure to provide these funds may jeopardize other funding agreements for Metro Rail,” the report said.