Utah Transit Authority board member Brent Taylor raised red flags Wednesday about agency plans to borrow $88.5 million next year, adding to its $2 billion debt that already makes UTA spend $1 of every $3 in its budget for finance payments.
Taylor, the mayor of North Ogden who often acts as a maverick on the board, said the bulk of that new borrowing is for facility maintenance, which most local governments handle through normal operating budgets without borrowing — akin to not going into debt to pay for groceries.
“That raises a red flag,” he said. “I’m very concerned.”
But UTA administrators said the borrowing is for expensive replacement facilities that will last 20 to 50 years — not daily maintenance items — so they consider it a proper use of bonding.
UTA President and CEO Jerry Benson said an example use of the borrowed money would be to replace a 20-year-old rail switch and TRAX rails at 400 South and Main Street in downtown Salt Lake City. It is now at the end of its life span.
“We’re basically buying a new 20-year asset,” Benson said. He added that some transit agencies have gotten into trouble by choosing not do such maintenance or facility replacement when they don’t have the money in hand.
“They say, ‘We don’t have the money now. We’ll wait until it fails.’ Well, if the switch on Main Street and 400 South fails, it affects the Blue Line, the Red Line and the Green Line. And it affects 70,000 people a day who use that, so it’s not really a viable option,” he said.
The discussion came as the full UTA board tentatively approved the agency’s 2018 budget on a 13-1 vote, with only Taylor dissenting. The vote was a step needed to open public comment on the budget before final adoption, expected in December.
While Taylor was the only board member to vote against plans for more borrowing, he isn’t alone in his opposition.
Sen. Wayne Harper, R-Taylorsville, co-chairman of a legislative task force looking at possible reforms of UTA, also criticized the borrowing for maintenance this week during a meeting in which his group said it favors reforming the scandal-tainted UTA but hasn’t agreed on exactly how to do it.
That task force has considered a state takeover of UTA, but Utah Treasurer David Damschen warned last week that such a move could force the state to assume UTA’s $2 billion in debt — amassed to build its TRAX and FrontRunner train systems — which could ruin the state’s credit rating.
Taylor also raised other concerns about UTA’s budget Wednesday.
He said the agency has beefed up its budget and programs by $238 million since 2013 — but it has not increased ridership.
In fact, passenger-fare contributions to UTA’s operating revenues are expected to fall to 12 percent in 2018, he said. They were 16 percent in 2013.
Benson said ridership has remained flat and is projected to drop next year, in part because of low gasoline prices that have many people choosing to drive their cars instead of using transit. But he said many other transit agencies nationwide have seen ridership decrease much more than UTA.
Taylor questioned whether UTA is spending money wisely if its ridership is dropping despite big investments.
He noted that UTA’s operating budget will exceed $400 million for the first time next year — but a third of that money will go toward its debt. He added that UTA has structured its debt so payments will actually increase in coming years.
Taylor questioned some of the reasons why UTA plans to borrow next year, which include spending $20 million to relocate its TRAX station at Salt Lake City International Airport and $10 million to help cover cost overruns for a controversial Provo-Orem bus rapid transit, or BRT, project.
UTA was caught by surprise at the cost of the airport terminal relocation, which it had expected to be much less. It says the Provo-Orem project also had cost overruns because of unexpectedly high property and construction costs. Taylor said UTA should ask partners such as Provo and Orem to contribute to the overruns.
Benson said UTA plans to issue bonds twice more in coming years — once to build a new maintenance garage and once to pay back Utah County for bonds it issues for the Provo-Orem BRT project. He said it has no other plans for borrowing, including for large maintenance projects.
The board scheduled a public hearing on the budget for Nov. 15 at 1:30 p.m. in the Golden Spike Rooms of UTA headquarters at 669 W. 200 South in Salt Lake City. Comments may also be submitted on the agency’s website, rideuta.com, or by mail and phone, 801-743-3882.