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UTA may lack funds to operate expansions, audit shows

By Jasen Lee | Posted - Jan. 26, 2012 at 7:02 p.m.

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SALT LAKE CITY — The Utah Transit Authority may not have enough money to operate the light rail and commuter rail extensions that are currently under construction, according to a legislative audit that examined the agency's finances.

That could leave the agency and local cities with two painful options once the tracks are completed: Cut service or ask area residents for more money to operate the trains.

The report by the Legislative Auditor General, released Thursday morning, states that local sales tax revenue provided most of the agency's $275 million budget in 2010, but "it remains uncertain whether UTA will have the revenue to satisfactorily operate the costly system that it is building."

The transit authority is in the midst of its FrontLines 2015 project, adding 70 miles of rail service, including the planned FrontRunner South commuter rail line. That line, originally slated for a 2014 completion date, is ahead of schedule and could be operational by early December.

The south extension, which would run commuter trains between Provo and Salt Lake City, would connect with the original line that runs from downtown Salt Lake City to Ogden. In addition, UTA is currently working to complete light rail extensions to Salt Lake City International Airport and south to Draper.

It remains uncertain whether UTA will have the revenue to satisfactorily operate the costly system that it is building.

–Legislative audit

Auditors said the agency should make clear to local officials and taxpayers the full costs of continuing to expand the transit system.

UTA Board chair Greg Hughes said if funding falls short the agency would not be inclined to seek a "revenue enhancement or tax," but some municipalities could decide to implement a sales tax to generate more revenue and maintain rail service.

"We are very aware that if the revenues don't arrive, then we will be forced to cut service or live within our means," Hughes said. Thus far, UTA has not had to resort to tax increases even during the recent economic downturn, according to spokesman Gerry Carpenter.

The audit report and potential of needing more money for service is not enough to dissuade some who are anxiously waiting to park their vehicles and take the train into Salt Lake City and as far north as Ogden.

"It's so worth it!" said Pleasant Grove resident Linda Peck. "Knowing that I would not have to fight the traffic, (pay) the difference in the fuel cost, and to know I'm on a train not worrying about everything around me ... I'm all for it."

She said that even a small tax hike would not dampen her enthusiasm.

Another Pleasant Grove resident, Mark Barraclough, said he would take the train whenever it was convenient rather than make the long drive into the city and search for parking.

"It's just so much easier … and not have to worry about a car," he said. As for a possible tax increase to fund any future revenue shortfalls, he said, "Within reason, I would support it."

Among the audit findings were that transit cost-effectiveness has decreased since 2006; the agency's debt service payments would consume a large portion of future sales tax revenues; and UTA's revenue projections are optimistic and expenses may be understated.

The audit also noted that fare revenues increased 47 percent between 2006 and 2010, but still remained lower than other Western states with light rail or commuter trains. Additionally, the report stated that balancing federal subsidies and ridership would be a challenge for UTA moving forward.

In a joint letter responding to the audit findings, Hughes and general manager Mike Allegra said the economy continued to be a concern, but the agency's management "is doing an exceptional job considering the challenging economic environment of the past few years." The letter also stated that UTA has adjusted expenses to compensate for lower revenue and is still able to continue with its rail construction plans and meet its debt obligations.

UTA is currently building the most expensive rail project in the agency's history. Previous rail lines totaled $1.1 billion with 78 percent of funding coming from federal subsidies. However, the current project, which adds four light rail lines and extends the commuter rail to Provo, is estimated to cost $2.3 billion with just 24 percent covered by federal dollars.

Auditors found that light rail is more cost effective than buses, but commuter rail is less cost effective than both bus and light rail.

While auditors concluded that UTA's funding is uncertain, the agency responded that its ability to meet its commitments demonstrates "UTA's ability to monitor and adjust to changes in the external financial environment while at the same time moving ahead with the projects."

Agency officials have said that pulling together local funding sources has allowed UTA to work toward completion of all of its rail projects, while other comparable transit systems have been forced to alter or abandon their plans due to a reduction in federal support.

"I think our economy is going to rebound and … that is going to solve a myriad of challenges that governments and (agencies) have," Hughes said.

The audit was conducted at the request of the Legislative Audit Subcommittee as a follow-up to a similar audit completed in 2008.

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