Las Vegas Sun

May 27, 2016

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How does Southern Nevada pay for a new mass transit system?


Genna Martin / via AP

Construction is underway at the Roosevelt Light Rail Station site Wednesday, Jan. 13, 2016, in Seattle. Seattle’s light rail currently runs through downtown Seattle to Seattle-Tacoma International Airport. The new stretch of rail lines will travel across Capitol Hill and to the University District carrying passengers through subway tunnels.

Mass transit Across U.S.

Bay Area Rapid Transit passengers wait for a train in this Oct. 22, 2013 file photo taken in Oakland, Calif. Launch slideshow »

Building 1 mile of light rail costs from $25 million to more than $100 million, depending on whether it’s built above, at or below ground level. That means constructing a 10-mile light rail system from, say, McCarran International Airport to North Las Vegas City Hall would cost from $250 million to more than $1 billion. That doesn’t include the cost of a transit center at McCarran to connect the system to the airport or the construction of transit centers or hubs along the line.

The Regional Transportation Commission of Southern Nevada proposes a more extensive line wrapping around McCarran to the Bonneville Transit Center in downtown Las Vegas. Transportation officials say building that system could cost $600 million to $5.7 billion, depending on whether the system travels above, at or below ground level.

The cost of free transit

While some people argue that mass transit in Las Vegas would be a public service and therefore should be free, the RTC isn’t considering free light rail because fares could provide important funding for the project, both to back revenue bonds and to entice a private company to invest in the system.

That said, if there were a way to build light rail and provide free rides, Quigley would be open to hear it.

“If the community supported free transit and we could find a funding mechanism for it, we certainly could see exploring that conversation,” Quigley said.

Denver, Colo., and Trenton, N.J., experimented with fare-free transit in the late 1970s, as did Austin, Texas, in 1989, and all were considered unsuccessful. Fare-free systems, however, have succeeded for smaller transit systems in Commerce, Calif., and Amherst, Mass.

Because free mass transit hasn’t been attempted many places, it’s difficult to know how much making a Las Vegas system free would cost. Fares typically pay for all or some of the costs of operation and maintenance.

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RTC officials also propose running a bus rapid transit or a light rail line down Maryland Parkway from downtown to the airport. That project doesn’t have a cost estimate yet, but a light rail route would need to be at least six miles long to span the parkway, which means it would cost roughly $150 million to more than $600 million just to lay the rail.

Expanding the Bonneville Transit Center is expected to cost $5 million to $11 million, and a light rail extension to Cashman Center would cost $128 million to $200 million. Building a new transit center at McCarran to link the light rail system to the airport is expected to cost $300 million to $360 million.

The plan likely would require a patchwork of funding approaches, cobbled together from a number of local, state and federal sources.

Here’s a look at some of the possibilities.

Option 1: Room tax

• What is it? Since the late 1950s, visitors to Las Vegas have been charged a tax on top of the cost of their hotel rooms. Although initially intended to pay for efforts to boost tourism, a decreasing percentage of the money has been reinvested in tourism, from almost 100 percent to about 35 percent. Portions of the money, for instance, now pay for education. One percent goes toward transportation projects.

• How much is it? It used to be 5 percent for resorts; today, it’s 12 percent on the Strip and 13 percent downtown.

• Who pays it? Anyone staying in a hotel room in the state. The amount varies by jurisdiction, with the bulk coming from Southern Nevada.

• How much money does it generate? In fiscal year 2014, Southern Nevada brought in $565 million in room tax. Of that, $179 million went to the Las Vegas Convention and Visitors Authority, $139 million to the State Distributive School Account and $78 million to the Clark County School District.

• How could it benefit light rail? The 1 percent of room tax that goes to transportation projects could be used to pay for a light rail system. But RTC officials aren’t considering that for now. “It’s certainly a potential funding source, it’s just not one we’re talking about actively right now,” General Manager Tina Quigley said.

• Can it be increased? Yes, but it would need approval by two-thirds of the Nevada Legislature. State lawmakers also could choose to change the laws that specify where money generated by the tax goes.

• How much more could it generate? It’s too soon to say. But based on the $565 million generated in 2014, a 1 percent increase would net about $47 million and a 2 percent increase about $94 million.

Option 2: Passenger fees

• What is it? Every time someone boards an airplane in Las Vegas, he or she pays a small fee that goes to McCarran International Airport. The passenger facility charge, managed by the federal government, is collected by airports to fund large-scale infrastructure projects.

• How much is it? The maximum airports are allowed to charge by law is $4.50 per segment. McCarran charges $4.50.

• Who pays it? Air travelers. Airlines collect the fee when people book their airplane tickets, then pass the money along to airports.

• How much money does it generate? Nationally, the fee brings in about $3 billion each year, which airports use to finance infrastructure projects. McCarran generated almost $84 million in passenger fees during the last fiscal year.

• How could it benefit light rail? Revenue generated by the passenger fee charge can be used to finance special projects at the airport such as a new terminal or transit center at to connect the airport to a light rail system. Streamlining travel between McCarran and the Strip could make Las Vegas more competitive with other tourist destinations that already have or are building transit systems that connect to their airports. The passenger facility charge, however, couldn’t be used to fund the light rail system itself, and the money McCarran collects is allotted toward other projects. Orlando, one of Las Vegas’s biggest competitors for conventions, plans to build a maglev route between its main convention center and airport.

• Can it be increased? Increasing the fee would require congressional approval. The fee hasn’t increased in 15 years.

• How much more could it generate? In 2015, airports urged Congress to raise the fee to $8.50 per segment as part of its reauthorization of the Federal Aviation Administration funding bill. The measure failed.

Option 3: Federal funding

Money from a number of federal grants could be applied toward building light rail. Funding for the grant programs are authorized by Congress in the federal budget. Agencies that administer transportation grants:

• Federal Highway Administration

• Federal Transit Administration

• U.S. Department of Transportation

• Federal Railroad Administration

• Department of the Treasury

Option 4: BLM land sales

Southern Nevada is unusual in that much of our land is owned by the federal government. Under the Southern Nevada Public Lands Management Act, money from the sale of certain public lands designated under the act can be applied toward preservation efforts, capital improvements and conservation initiatives — and potentially building a light rail system in Las Vegas.

• What is it? It is land owned by the federal government and overseen by the Bureau of Land Management. In Southern Nevada, the bureau oversees 3.1 million acres of federal land. It is used in a number of ways but generally is open, empty space. One of the reasons land remains under BLM control is to stop urban sprawl.

• How can it be sold? In 1998, Congress enacted the Southern Nevada Public Lands Management Act to provide the federal government an organized way to sell land in Southern Nevada. Parcels of land to be sold are selected by local governments and the Bureau of Land Management. The sales take place fairly regularly.

• How could it benefit light rail? The Southern Nevada Public Lands Management Act outlines a number of projects it can fund, including capital improvements, conservation initiatives and the creation of parks, trails and natural areas. Rob Lang, director of Brookings Mountain West, believes there’s a strong case to be made that light rail would contribute to conservation by reducing urban sprawl. Therefore, revenue generated by selling public land at the edge of town could, in turn, fund a system that encourages density. Lang said a light rail system could persuade fewer people to live on the periphery of the valley and thereby fulfill the mission of land conservation and increased residential density.

• How much money could be generated? It’s not clear, but Lang estimated anywhere from a couple hundred million to a billion dollars. The amount would depend on how much land the BLM would be willing to sell and whether officials would allocate the money to a light rail project.

Other local funding options

• Tax increment financing and special assessment districts. Taxes and fees can be applied to a group of properties to fund transit construction or other improvements within a specific area.

• Public-private partnership. Public agencies can form partnerships with private entities to construct, manage or operate projects such as a light rail system. In exchange for an upfront investment, the private entity typically receives a portion of fare revenue.

• Farebox revenue. Money generated from charging fares to public transit riders can be used as collateral for revenue bonds. That type of financing was used to pay for the Bay Area Rapid Transit in San Francisco, the Metropolitan Transit Authority in Los Angeles and the Regional Transit Authority in Chicago.

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