It's About the Money: Yale on Metro's Plans and Priorities

As Metro’s Managing Executive Officer of Countywide Planning and Development, give us your informed take on the scale of investment in public mobility since MIR last interviewed you in 2004, years before the passage of Measure R’s sales tax.  

David Yale: The last 10 years at Metro, of course, have been a transformative experience. In 2004, we were coming off the end of the consent decree years. That resulted in probably the largest bus expansion ever accomplished in the United States. We’re still running the added service we built up then.

Between 2004 and Measure R, we worked with the Board for four years to bring a long-range plan action to them. When we finally did circulate it for public comment, there was almost nothing new in it.  The projects under construction (Eastside Gold Line and Expo Phase I) were to be completed, and then only Expo Phase II in the first decade and Crenshaw/LAX in the third. That was it.  There were no other projects possible. The Gold Line Foothill project, the Regional Connector, the subway extension, and the Green Line extension were not in the draft plan. This frustrated the Board. 

The election of Mayor Villaraigosa brought a “think big” strategy to Metro. He was aggressive about putting together a plan for the county that included a one-half-cent sales tax—Measure R.

Since Measure R passed, this county will never be the same. We have five extensions under construction. The Gold Line Foothill project will reach Azusa. The Expo project all the way to Santa Monica is already open to Culver City and will soon open to Santa Monica. The Crenshaw project now under construction will go from the Expo Line down to the Green Line and provide the first connection to LAX. The Board is currently working on that LAX connection. We got a full-funding grant agreement and a TIFIA loan for the Regional Connector through Downtown—close to $900 million in federal funding to help us build it. This month, the Board authorized the award of a contract of about $1.6 billion for the construction of the subway from Wilshire and Western to La Cienega, subject to the resolution of bid protests. We already inked a full-funding grant agreement for that project—another $2 billion in federal grants and loans.

Those grants and loans were the lynchpin of the debate between the Regional Connector and Crenshaw in the 2009 Long Range Plan process. We brought two long-range plans to the Board. One had Crenshaw in the first decade and the Regional Connector later. The other had the reverse. The Board rejected both and wanted to go for a New Starts program that was larger than we had ever been able to get from the federal government. We pulled it off.

I’ve never had a dull moment at Metro in the last 10 years. Given the transformation that we’re bringing to Los Angeles, I can’t think of a more exciting job. 

Many view you as Metro’s budget wizard. With that credential, could you summarize for our readers both the county’s assessment of transportation need and Metro’s current priorities for investment?

We’ve done a countywide inventory of all transportation needs that easily surpasses $100 billion. LA County contains 10 million people, as many as the state of Michigan. It shouldn’t surprise us that our transportation needs are extraordinary. The issue now will be determining the priority projects within that $100 billion inventory.

This is an all-in inventory, with street resurfacing, traffic system management, rail extensions, bus rapid transit, conversion of the Orange Line, active transportation, and highway improvements, including the freeway system. We are grappling right now with mobility matrices, under Renee Berlin’s leadership, to determine short, medium, and long-term priorities within those projects.

Some examples include getting Crenshaw up to the Red Line and taking the Gold Line Foothill project out to the county line. From there, San Bernardino could perhaps get it as far as the Ontario airport. Another is the Green Line extension into the South Bay, since the funding in Measure R could only take it partway. The LAX connection funding is later in time than we would like. We’re working on a way to accelerate building the station, and the airport is going to look at how to fund the People Mover into the airport.

There are bigger ideas: the Sepulveda Pass; major truck routes out of the ports to separate cars and trucks on the 710; the 710 gap closure, which is still under study. Whatever comes out of those studies could potentially be part of a new ballot measure. The High Desert Multipurpose Corridor needs a compliment of funding to complete the ideas up there. There are a host of other projects, as well. 

What is Metro’s current capital budget? 

Measure R brought to the table $36 billion over the life of the tax, which ends in 2039. Each year, three sales tax measures—Proposition A, Proposition C, and Measure R—bring in $2.1 billion to transportation services and improvements in Los Angeles County. We are transforming this place with our self-help taxes. They are super important to Los Angeles County’s future, and without them, we’d be in a world of hurt.

State and federal funds are necessary, too, providing a third of our money. However, they have been declining. I’ll tell you why: The gas tax is flat. It does not grow with inflation, and in fact, loses value through fuel efficiency, as well.

We bring in about $900 million from the feds. That includes $200 million per year we just notched up when we got the federal Full-Funding Grant Agreements. For the next seven years, we’re looking at about $900 million a year, if the federal government keeps their contributions static. After that, it will drop to $800 million when the grant agreement expires for the Regional Connector. Then, when the subway opens up, it will drop back to $700 million unless we queue up other projects for New Starts funding. 

How is Metro’s budget allocated between capital and operations? And given the spending discipline imbedded in Measure R, what allows Metro to begin to draw down Measure R funds for projects—to actually tap 30-year bond funds for immediate investment? 

Half of all public transportation funding in Los Angeles County through 2024 goes to operating, maintaining, and improving transit. About a quarter is necessary just to operate the bus systems. No transit system in the United States operates without a subsidy, and we have a large subsidy from our sales taxes for transit purposes, keeping fares very low. Going forward, the other half of all the funding includes formula funds to Caltrans and to the cities for highways.  This includes the declining gas tax and local return funds from our sales taxes for local improvements.

Measure R does have a discipline on the transit side with a very specific schedule. The interpretation of the ordinance is that you cannot tap into Measure R for your project until you’ve hit the start date for that project in the expenditure plan found in the ordinance.

We’re pursuing the mayor’s—and now the Board’s—30/10 Plan, which would build all the rail projects in Measure R in 10 years instead of 30. On the theory we would find a way to get that done, we’ve been doing advanced environmental clearance for several projects. The eastside extension of the Gold Line is scheduled for the third decade, but we’re proceeding as if it were in the first.

These projects can’t get money until we achieve a finance plan that will work. We need our America Fast Forward tax credit bonds—a proposed interest-free loan from the federal government for transportation—before we would be able to accelerate them.

On the highway side, it’s all to-be-determined schedules in the Measure R expenditure plan. We’re working with our city and Caltrans partners to deliver a fairly detailed list of improvements. The TBD nature of the schedule seems to be slowing down what’s getting done on highways, because there’s no sacrosanct promise to the voters in the ordinance. In any new tax proposal, I think that’s one of the things we’ve got to fix. 

You referred to the declining role of federal transportation funding. The House of Representatives and the Senate are currently trying to address the Federal Highway Trust Fund’s underfunding. Your thoughts on how Congress is approaching this challenge, and your expectations going forward, would be welcome.

I’m of two minds. Before Congress started a flip-floppy approach to the Highway Trust Fund—where instead of raising the gas tax to keep up with inflation, they were going to backfill it with the general fund and other funds from the federal budget—we had a great deal. The Congestion Mitigation and Air Quality Improvement program was an odd formula that gave those areas dealing with the worst air pollution the most money.

This approach to the CMAQ program has been locked in by Congress’s continual re-upping every year or so. I think there have been over 20 of these actions by Congress since the HTF has been running out of the gas tax. A long-term fix to the HTF is going to include some new policies that may not be as favorable to us as the old ones. On the one hand, I like what we have.

On the other hand, I know a long-term fix is necessary for infrastructure going forward nationwide, including in LA County. We can’t plan for a program with one of the funding silos coming up empty every so often. The only way to make that work is for Metro to step in with its sales tax and backfill those projects, sometimes in the middle of construction when the silo goes empty.

The state did that to us already—it was the first body to lock up like Congress is doing now. Their program went belly-up one day. We had to go back and pay for projects that would typically be covered by Caltrans without our involvement. Otherwise, they were going to have to button them up and leave the contractors out there with K-rail everywhere. We said “No, we’ll pay the contractor until you can pay us back.” The state has since done so, but before they did, the private placement bonds we got were the best performing investments we had. We are ready to do the same thing with the federal government, but the stakes are bigger and the problems that can result from deferred projects are serious—plus the feds don’t pay interest on the loans. They’ve got to come up with a long-term fix.

Moving to specific transportation projects under consideration, a bill signed by California Governor Brown this month makes it legal once again to build above-ground rail in North Hollywood and Van Nuys. How will that action affect Metro’s plans and budgeting priorities?

The deal for the Valley in Measure R was to get the Orange Line done quickly, which we did. We did not use Measure R money that the Valley was promised to do so, because the project was ready to go even faster than the Measure R money was available. Now, the Valley’s owed a payback project per the Measure R ordinance that must occur by the end of the tax in 2039.

Are we going to do it in 2038, 2028, or 2018? The problem with the Orange Line’s success is the question of when it becomes absolutely imperative to switch to a higher-capacity mode like light rail. With the ban lifted, we could engage in that discussion right away, though the Valley’s funding for the Orange Line payback is nowhere near enough to do a light rail project. After all, we’d need a light rail yard to maintain whatever we build, a fleet of light rail cars, overhead catenaries, and the rail. All of it adds to easily well over $1 billion in need, and we’ve got maybe $170 million for this payback project.

The silver lining here is that on the November 2016 ballot we can provide the Valley an opportunity to move this conversion, and the shortfall in the north-south corridor of the Valley, up in time with a new sales-tax proposal. This is part of that $100 billion problem. I think the Valley is taking the right approach by saying, “Don’t forget about us. We’re already talking about this and we want to do it.”

I go pretty far back, being at Metro for some 25 years. One of the first Valley experiences I had was the no-carpool-lane-on-the-101 fight (the first fight, not the second widening fight). After that, it was the no-light-rail-on-the-Burbank-Chandler-alignment fight. The Valley has really grown up. They’ve seen what these projects mean for their economy and for their people. It’s time to work with them on their priorities to get what they want done.

Metro’s Board of Directors recently approved a new Crenshaw/LAX Line station. How does rail access to LAX mesh with current funding priorities?

Measure R included $200 million for Metro’s part of the connection to the airport. We added escalation to that in our long-range plan and showed the project happening in the middle of the next decade—a commitment of $330 million out in the year 2025.

Now, we want to build the station right away so that the People Mover can connect to us as soon as possible. “As soon as possible” for major public infrastructure is hugely complicated, and the airport is indicating that they can get out to us with their people mover in 2022. We’re going to get our line and station ready for that connection. We have the money in place from Measure R. We stand ready to figure out how to move that money forward in time and get our contribution to the big-picture project done. It’s now on LAX to get the People Mover moving, and they know that. If you live everyday with the LAX loop, you understand that this is an urgent problem. Our Board is super-focused on getting this done once and for all. 

You referenced the High Desert Corridor—a green-by-design project that environmentalists would support, as it would generate its own power to run the train, would stimulate excess rooftop solar and small-scale solar farms adjacent to the HDC by offering them a connection to the grid, and would provide natural gas pipelines for fueling stations.  Is there willingness at Metro to seek financing for this corridor, with a focus on innovation? 

I really have to hand it to the JPA working on this. They have been very creative in approaching the whole project. The concept behind a multipurpose corridor is to jam-pack the thing with all manner of fresh ideas. These include solar energy, transmission lines built into the corridor, high-speed rail, truck ways, and toll ways for cars that offer a route around the LA Metro area if you’re going from, say, a NAFTA farm in Mexico to Oregon with your product.

The concept they’ve been pursuing is super important. We hope to work with them to partner on the toll aspects of the project. They’ve got a shortfall and we need to work through how it’s going to get done. They got enough money out of Measure R to conceptualize these ideas in a mature way. Now, we need to look again at a transportation ballot measure. That would help us see if it is a priority for the north county to fully fund the project, along with the toll, solar, and high-speed rail features already built into the finance plan. 

There’s been discussion that the High Desert Corridor could be a public-private funded partnership. This approach requires, however, that opportunities provided by the HDC—a transfer to Metrolink, rides with no transfer north beyond Bakersfield, rides with no transfer from Las Vegas to Bob Hope or Union Station, and an interstate connection to Nevada—would cover 100 percent of the right of way, engineering, and construction costs of HDC tracks. Is a rail passenger revenue study under consideration to demonstrate this? 

We’ve applied for a TIGER grant that would fully fund the traffic and revenue studies necessary to size up how much tolls and high-speed-rail fares could be brought to bear on the capital side of project construction.

In addition to looking at that cost of construction, there’s a life-cycle cost conferred. All of the project elements will have to be renewed in 20 or 30 years, for the life of the project. The P3 idea is to wrap up those life-cycle costs with the capital costs of the total bond to fully fund the thing for the foreseeable future. The traffic and revenue study is important to figuring out how we proceed because you can’t size up the scope of work for a project without knowing the budget.

Given the potential of someday linking California High-Speed Rail, a Metrolink transfer, the airports, and Nevada, would Metro consider phasing in rail before the highway? 

It’s important to the XpressWest plan to build high-speed rail into Nevada. The type of connection in Palmdale to Union Station, and how fast that connection is converted from Metrolink to actual high-speed rail, impacts their modeling on how much revenue they can raise. This TIGER grant would enable us to do scenario planning. If we’re going to be living with a Metrolink connection for 15 or 20 years, what does that do to the revenue-raising ability of the project? How does this compare to a high-speed connection through Palmdale into Union Station in Downtown LA? Those are not simple questions.

A companion interview in this issue of MIR features new LADOT General Manager Seleta Reynolds, discussing “active transportation” and opportunities to work with Metro. Is there potential for such collaboration? 

The active transportation activism in Los Angeles is very exciting. I have often been found on the wrong side of the discussion, at least on the surface, because it would appear I’m a curmudgeon about building the transit system. The left was once very supportive of transit and now they’re very demanding about active transportation. It’s almost like transit is a fait accompli to them—that it’s been taken care of. We still have to build this thing! I’ve got five transit projects to deliver funding for in the first decade.

The funds that we have for active transportation, which I think is the largest commitment to active transportation anywhere in the state, is perceived as not enough. It’s a little frustrating to deal with. But I love it. I’m glad that there is an active activist community around this issue and that the cities are taking up the charge to detail out how that system’s going to work. Metro is stepping in with first mile-last mile policies and other studies to help with the bigger-picture system.

Los Angeles County put over $700 million worth of projects into the governor’s active transportation application for the first cycle, including local matching funds. We have so many ready-to-go initiatives because Metro has been working on a very large bike program for many, many years through its call for projects. We hope to see huge success when the recommendations come out on the active transportation program on August 8—though Los Angeles has not done as well as we would have hoped when programs are decided upon in Sacramento. I think the new activism down here around active transportation could change that, which is exciting. I’m glad.

Let’s conclude with your assessment of how likely a Measure R2 will be on the November state ballot in 2016.

Each month before our Board meeting, we brief board members’ staff on the agenda. As part of that briefing in July, we laid out a schedule for our efforts to reach the November 2016 ballot with a proposal. They responded by asking us to reflect a long-range plan process in conjunction with that schedule. Measure R worked similarly. Our long-range plan process led us to show what we could do with and without the tax, which helped us provide the information voters needed.

The Board staff asked us to integrate those two processes. It feeds well into what we want to do here in the Planning Department anyway. We are going to visit the COGs in late July and August to start talking with them about the bottom-up process we have planned. Our consultants are on board with these mobility matrices to sort out the transportation ideas, and to help the COGs in that process. We’re underway. We’re going to be out there talking about a second sales tax measure for the next two years. Hopefully that will lead to more improvements for our transportation system.