FTA rates Durham-Orange light-rail project ‘medium,’ calls financials ‘optimistic’

A Federal Transit Administration report posted Friday rated the Durham-Orange light-rail project “low” for its cost-effectiveness as GoTriangle and elected leaders wrestle with a growing construction budget and reluctant partners.

The project’s overall rating — for a second time — was “medium.”

The FTA rating scale has five levels, with “low” at the bottom. The FTA uses the ratings to judge whether a transit project is feasible and ready to be built. The ratings also will be used to determine whether the light-rail project gets $1.24 billion in federal grant money.

The FTA’s fiscal year 2020 Annual Report on Funding Recommendations said GoTriangle was being “optimistic” about how much money car registration and rental fees in Durham and Orange counties would generate for construction. The project also relies on a half-cent dedicated sales tax in the two counties.

The project’s estimated construction cost, which has risen to $2.7 billion since the FTA’s November review, also is optimistic, it said.

The financial outlook was a mixed bag: “medium high” overall, but “medium low” for its “reasonableness” and “medium” for its commitment of local funds. Besides sale taxes and fees, the local funding includes $102.5 million in land and cash donations. A nonprofit fundraising group has raised only $15 million so far.

GoTriangle officials did not respond to requests for comment.

The latest rating does not appear to reflect Duke University’s opposition to the light-rail line’s planned route along Erwin Road or the addition of bridges, underpasses and a tunnel in downtown Durham.

The GoTriangle Board of Trustees, which includes elected officials from Durham, Orange and Wake counties, will consider next steps for the light-rail project March 27.

“The path forward requires additional money,” interim project director John Tallmadge said in an interview Monday after a Coalition for Affordable Housing and Transit meeting in Durham.

“As of today this still appears to be a viable project,” he said. “I know the word out there is Duke has killed it. We’re not dead yet.”

New Starts grant

A medium rating is the lowest score a project can earn and still receive a federal New Starts transit grant. Most projects that have won federal grants were rated “medium high.” Charlotte’s LYNX Blue Line and Blue Line Extension projects were rated “medium” for project criteria when submitted, but their financial plans were upgraded to “medium high” before being funded in 2002 and 2012.

FTA officials do not comment publicly about proposed projects, but the ratings are based on several factors, including a project’s financial plan, congestion and environmental benefits, and how well it addresses economic development, housing and mobility goals.

FTA officials could update the project score before an April 30 state deadline for submitting a federal grant application and having the local money in place. The state also set a Nov. 30 for having the federal funding.

Missing either deadline could cost the project $190 million in state funding.

Additional risk

Duke’s decision, N.C. Railroad Company’s hesitation in signing its cooperative agreement and the additional costs will create additional risk for the project and require GoTriangle to set more money aside for contingencies. An FTA draft risk report sent Feb. 26 warned the N.C. Railroad agreement is critical.

The report also encouraged GoTriangle to add more people who can “build and sustain a more effective working relationship” with its partners and secure land needed for the project. It’s important that the project stay on schedule, FTA officials said.

The project’s previous rating — issued in July 2017 — included a medium-high score for the capital and operations at that time, medium score for the amount of local and state money that had been committed, and a medium-low score for the project’s financial estimates.

The project’s cost-effectiveness was not rated in 2017.

Project staff is working on several details as the deadline nears, including a revised environmental study for the downtown corridor and new financial plans and cost-sharing agreements for Durham and Orange counties.

Both updates will require public comment periods. An FTA review of the final project budget may not be done until April, Tallmadge has said. Orange and Durham commissioners will have to approve the new financial plan and cost-sharing agreement.

Orange County has capped its construction cost at $149.5 million; Durham County’s share is about $1 billion. Neither figure includes interest on short- and long-term debt.

Durham officials are deciding whether to pay the new costs and any costs for acquiring Duke’s land. Durham took on $57.6 million last year to cover a shortfall in expected state funding.

If the project gets an FTA grant, half of the $135 million that already has been spent will be reimbursed. If not, that money is gone.

GoTriangle could buy Duke’s land through eminent domain, but that could involve a court battle lasting well past the April 30 deadline for submitting a grant application.

Staff writer Mark Schultz contributed to this story.

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Tammy Grubb has written about Orange County’s politics, people and government since 2010. She is a UNC-Chapel Hill alumna and has lived and worked in the Triangle for over 25 years.