CorneliusNews.net: 3-Hour Red Line Meeting Brings
12:00 pm
Fri January 13, 2012

CorneliusNews.net: 3-Hour Red Line Meeting Brings More Questions, Some Answers

Cornelius Rail Task Force members Jeff Hare and Gary Knox talk before the meeting with Red Line Rail Project consultants Tuesday. (Christina Ritchie Rogers / CorneliusNews.net)

The Cornelius Rail Task Force Tuesday night grilled consultants from the Red Line Regional Rail project about project costs, financing and development. N.C. Deputy Secretary of Transportation Paul Morris also attended the meeting at Town Hall, and fielded questions about the state's role in the financing and its interest in the project.
Tuesday's was the second in a series of Cornelius meetings planned to analyze plans for the proposed Red Line Regional Rail from Charlotte to Mooresville. Consultants say the project would cost around $452 million, and would be paid for through a partnership between the towns, Charlotte Area Transit System (CATS) and the state Department of Transportation.
The Red Line Task Force of the Metropolitan Transit Commission presented the plans last month. Area towns, as well as the Mecklenburg and Iredell county governments, are begin asked to decide over the next few months whether to support the project by joining the partnership. The Cornelius Town Board appointed a 6-member task force to look at the plans, gather additional information and determine whether the project is right for the town.

Kurt Naas presents his research into the Blue Line and other similar rail projects.

On Tuesday, Cornelius resident Kurt Naas, a former consultant and member of the town's Transportation Advisory Board, presented to the Cornelius task force the findings of his independent research. He raised concerns, saying the numbers don't add up and the link between rail construction and new development is a "tenuous" one.
Task force members shared some of Mr. Naas' concerns, and asked consultants for more information about their plans for financing the project. They also want to know more about the project's development projections, and were skeptical of the consultants' claim that taxpayers would somehow not be affected, if the project required a bailout from the state.
FINANCING
As proposed, the plan calls for the state Department of Transportation and Charlotte Area Transit System (CATS) both to pay 25 percent of the cost, or $113 million each. The towns and county governments have to come up with 50 percent - or $226 million.
According to the plan, the towns and counties, along with CATS and the NC DOT, would govern and operate the rail line through a regional agreement, called a Joint Powers Authority (JPA), that would issue the debt and manage operating costs. And the state would act as a "backstop," protecting local governments by providing loans if revenues ever fell short of financing or operating costs.
Under the financing plan, the towns and counties would pay their portion by creating special tax districts along the line. Property in these districts would presumably gain value because of the rail line, and provide future revenue to help finance the project. The towns and counties could tap that in two ways:

Tax increment financing - This would apply only to commercial properties near the line, within perhaps 1/2 mile. Property owners would not face any change in their tax rates, but any increased property values would translate into additional tax revenues. Those could be "captured" to help pay for the rail line. The rail line would get 75 percent of the new revenues (not all tax revenues) while the towns and counties would get 25 percent to help pay for town services and infrastructure needed because of growth. (In answer to questions Tuesday, officials clarified that it would include any income-generating property, including rental housing.)
Special assessment districts - Again, this would apply only to commercial property in designated districts, and it would be voluntary. A majority of commercial property owners in each district could agree to a fee or tax surcharge that would help fund the line. Red Line supporters say the incentive would be increased value and potential for their rail-side properties.

Task force members wanted to know how the town - and taxpayers - might be affected if the tax districts did not generate revenue as anticipated.
There are two possible approaches to transferring risk, consultant Mark Briggs, a vice president and director of finance at consulting firm Parsons Brinkerhoff, explained: obtaining private financing, or entering into a design/build/operate/maintain contract (DBOM).
Under the first, the regional authority, or JPA, would bundle the potential revenue streams and sell state-backed bonds. It would be less expensive, but requires buy in from private partners. With state backing, the interest rates would be lower and investors would be more inclined to commit, Mr. Briggs said.
If the project uses a design-build approach, any vendor would be contractually obligated to execute the project within costs - in this case, the $452 million. The $452 million would be raised through selling bonds to investors. These kinds of projects often include incentives to ensure they come in under budget and/or ahead of schedule, Mr. Morris said. The state enters into DBOM contracts regularly, he said.
In either case, the towns would not be responsible for paying down debt if the project did not generate enough revenue, Mr. Briggs said.
"Contractually there would be no recourse to any of the seven entities," he said.
NORFOLK SOUTHERN

Paul Morris

Commissioner Jeff Hare asked to what extent Norfolk Southern has been involved in the most recent plans, which call for upgrading the Norfolk Southern tracks, buying trains and running a freight and commuter rail line. According to an agreement drawn up years ago, when the project was first discussed, the rail company planned to request a licensing fee of $28 million, adjusted for inflation, for use of the rail. But that original agreement will likely be revisited and changed, Mr. Morris said. He has been in communication with the rail company, and was going to meet with an executive Wednesday, he said.
"Norfolk Southern would be our first private partner," Mr. Morris said.
Task force member Jeff Wakeman asked how Norfolk Southern would benefit from the partnership.
"They're in the freight movement business," Mr. Morris said, "not rail building or marketing," so they would benefit from increased efficiency and publicity.
Norfolk Southern's primary concern is the cost per mile to operate and move freight, and gaining access to more customers on a more efficient route, he said. And improved freight service is an incentive for the state's involvement, because improvements to the rail system would make North Carolina more globally competitive in freight, he said.
"We're losing deals at a corporate level to South Carolina and Virginia because we can't provide sufficient rail services," Mr. Morris said.
WIDENING I-77
Commissioner Hare stressed the importance of another state project - widening I-77 - proceeding in conjunction with the rail project. He and Commissioner Dave Gilroy both expressed concern that high-density development along the rail would result in more cars on the road, increasing traffic on an already congested road.
Mr. Morris said the rail construction would not delay or take away from the I-77 widening project. In fact, the two rely on each other, as air quality regulations prevent the addition of new roads in areas where air quality is below a certain point - a point that Charlotte is nearing. Constructing a rail system reduces the number of cars on the roads, potentially improving air quality and allowing for new road construction.
"[The projects] are dependent on one another, not competing with one another," Mr. Morris said.
But Commissioner Gilroy challenged the assumptions that the rail would reduce traffic, particularly as it draws more high-density development.
"In fact, the bigger picture is quite the opposite," Commissioner Gilroy said.
Commissioner Hare also remained skeptical, as he said not all commuters will opt to ride the rail versus drive, and there is no way to determine those numbers at this time.
DEVELOPMENT
Concerns about high-density development extended beyond traffic on I-77, and task force members asked about the impact of that development on the town.
"The project is not proposing any new land uses that are not already in the books," Mr. Morris said.
All the local entities would maintain control over their own planning, zoning, density decisions and strategic area plans, Mr. Briggs said. He gave the following example: Cornelius has identified $6.9 million in station area improvements needed. The town would handle the project, putting it out to bid, entering into a construction contract, etc., and then could approach the JPA to request $6.9 million of the $452 million designated for the project.
After nearly three hours, Commissioner Hare ended the meeting, acknowledging the fact that questions remain. Mr. Briggs and consultant Katherine Henderson, at the request of Mr. Morris, are working on a project website that will include all of the questions asked and responses, as well as additional resources and documentation. The website - www.redlineregionalrail.org - should be live by the end of the week. Also, Mr. Briggs and Ms. Henderson will meet again with the Cornelius task force to continue discussion.
The next Cornelius Rail Task Force meeting is Jan. 26 at 6 p.m. in room 204 of Town Hall, 21445 Catawba Ave.
The Town of Cornelius also will host a special meeting Feb. 8 in the Community Room of Town Hall to hear an analysis by Cato Institute's Senior Fellow, Randal O'Toole regarding the Red Line Regional Rail Business/Finance Plan. There will be an open forum to allow elected officials, community leaders, residents, business operators and other stakeholders to ask Mr. O'Toole questions.
RELATED NEWS
In Davidson Tuesday, the town board voted to schedule a public hearing Jan. 24, and to authorize the town staff to begin working with other towns on Red Line planning. Read the story here.

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