KING OF PRUSSIA RAIL PROJECT: POTENTIAL FUNDING SOURCES August 2016 DRAFT REPORT SUBMITTED TO: Mr. Byron S. Comati Director of Strategic Planning Southeastern Pennsylvania Transportation Authority (SEPTA) DRAFT REPORT SUBMITTED BY: Econsult Solutions 1435 Walnut Street Philadelphia, PA 19102 Econsult Solutions, Inc.| 1435 Walnut Street, 4th Floor | Philadelphia, PA 19102 | 215-717-2777 | econsultsolutions.com SEPTA| Funding the King of Prussia Norristown High Speed Line Extension | Draft Report TABLE OF CONTENTS Executive Summary .......................................................................................................................... i 1.0 Introduction ........................................................................................................................... 1 1.1 Organization of the Report......................................................................................... 1 1.2 The Funding Context ................................................................................................... 2 2.0 Federal Funding and Financing Sources ........................................................................... 5 2.1 Potential Funding Sources .......................................................................................... 5 2.2 Financing Tools ........................................................................................................... 10 2.3 Summary ..................................................................................................................... 13 3.0 State Funding Sources ........................................................................................................ 16 3.1 Potential Funding Sources ........................................................................................ 16 3.2 Summary ..................................................................................................................... 19 4.0 Regional Sources ................................................................................................................ 20 4.1 Regional Funding Sources Across the Nation ........................................................ 21 4.2 Regional Funding Sources For Greater Philadelphia ............................................ 23 4.3 Summary ..................................................................................................................... 28 5.0 Local (County/Municipality) Sources ............................................................................... 31 5.1 Potential Funding Sources ........................................................................................ 31 5.2 Summary ..................................................................................................................... 34 6.0 Value Capture Analysis ...................................................................................................... 35 6.1 Value Capture Approaches .................................................................................... 35 6.2 Potential Value Capture Yields ................................................................................ 36 6.2.1 Scenarios Evaluated ............................................................................................. 37 6.2.2 Value Capture Results........................................................................................... 37 6.3 Summary ..................................................................................................................... 38 7.0 Other Sources ...................................................................................................................... 40 7.1 EB-5 Immigrant Investor Program............................................................................. 40 7.2 Public Private Partnerships ........................................................................................ 40 7.3 Emission Trading ......................................................................................................... 41 7.3.1 NOX Trading ............................................................................................................ 41 7.3.2 Carbon Offset Trading .......................................................................................... 42 7.3.3 RIN Trading .............................................................................................................. 42 7.4 Private Contributions ................................................................................................. 43 8.0 Case Studies ........................................................................................................................ 44 Econsult Solutions | 1435 Walnut Street, 4th Floor | Philadelphia, PA 19102 | 215.717.2777 | econsultsolutions.com SEPTA| Funding the King of Prussia Norristown High Speed Line Extension | Draft Report 8.1 Case Studies ............................................................................................................... 44 8.2 Summary ..................................................................................................................... 51 9.0 Summary .............................................................................................................................. 53 Appendix A – Methodology for Revenue Potential Calculations............................................ 1 Sales Tax ........................................................................................................................ 1 Real Estate Transfer Tax ............................................................................................... 2 Property Tax Surcharge ............................................................................................... 2 Tolls ................................................................................................................................. 3 VMT Tax/Fee ................................................................................................................. 5 Regional Gas Sales Tax ............................................................................................... 6 Income Tax ................................................................................................................. 11 Earned Income Tax Surcharge ................................................................................ 12 Appendix B – Methodology for Bondable Revenue Projections ........................................... 12 Appendix C – Maps of Potential Alignments ............................................................................ 14 Appendix D – Value Capture Methodology ............................................................................ 21 Econsult Solutions | 1435 Walnut Street, 4th Floor | Philadelphia, PA 19102 | 215.717.2777 | econsultsolutions.com i SEPTA| Funding the King of Prussia Norristown High Speed Line Extension | Draft Report EXECUTIVE SUMMARY The Southeastern Pennsylvania Transportation Authority (SEPTA) is evaluating alternative alignments to extend the Norristown High Speed Line (NHSL) to provide faster and more reliable public transit service between destinations in King of Prussia and the 69th Street Transportation Center in Upper Darby. This is known as the Norristown Transportation Center (KOP Rail Project). The expected capital cost of the project is approximately $1.1 billion in 2015 dollars and $1.3 billion anticipated at the time of construction.1 The Federal Transit Administration’s New Starts program, which has traditionally been a major funding source for new rail transit projects, will fund at most, one half of the capital cost. The remainder of the funding must come from other sources. This report provides information to help regional leaders make informed decisions about how federal, state, and local sources can be used to fund the region’s transportation future. It is not intended to develop a specific funding plan for the KOP Rail Project, but rather to provide a menu of funding options for this and other potential projects. This report identifies numerous funding sources and it is clear that there is sufficient funding potential within the state and region to fund the non-Federal portion of the KOP Rail project and other projects. It is also clear that there is no “magic bullet” or existing funding source that can be relied upon for this purpose and future work with project stakeholders and political leaders will decide which of the identified sources work best for the project and for the region. Any regional funding system will require regional agreement about transportation funding priorities. Developing regional consensus on these issues is an important step for the region to implement projects such as the KOP Rail Project. Regions in the US have taken a wide variety of approaches to regional public transit funding – no two projects are ever developed the same way – but communities often combine multiple sources to fund transit expansion projects.2 Figure ES.1 summarizes the mix of federal, state, and local funding for recent comparable projects. Potential funding sources for the Philadelphia region include: the Federal Government, State Government, regional sources, and local sources. 1 The expected capital costs are for a year-of-expenditure of 2020 and represent the average cost of the five alternatives under consideration. 2 See Section 8 for a selection of case studies of the funding sources used for other large-scale transit projects. Econsult Solutions | 1435 Walnut