Tax dollars, loan money, freight track revenueall in question now

The SMART rail line faces major financial hurdles that need to be overcome if its trains are to leave their stations on time, initially promised for late 2014.

Construction was supposed to start next year, but the timeline for the Cloverdale to Larkspur line may be thrown off by three key factors linked to the recession. It has crimped the flow of sales tax dollars needed to back bonds and pay for running the railroad, has soured the bond market necessary for obtaining construction loan money and has raised questions about the prospects of revenue from freight traffic.

Directors of the Sonoma-Marin Area Rail Transit board have been aware of the financial challenges since June 2009, when their strategic planners identified shortfalls in funding that could delay construction. As a result of these shortfalls, the construction cost estimates have risen from $541 million to $590 million.

SMART's consultants say there is a funding gap of $154.7 million, which has created "the additional need for an aggressive program to identify and secure other funding sources." But critics say the gap is much larger, citing the same consultants' report that notes the gap is $175.9 million if inflation is factored in.

Revenue from the quarter-cent sales tax collected in Sonoma and Marin counties is now projected to be $845 million over the 20-year life of the tax, about 5 percent less than rail proponents projected in 2008.

Anticipated tax revenues are key to paying off bonds issued by SMART to finance construction of the 70-mile rail line and its 14 stations.

Although SMART's strategic plan, adopted last June, called for the first of two bond offerings totaling $214.8 million to be issued in the fiscal year ending June 30, there is little likelihood of it occurring by then.

Meanwhile, freight service on the Northwestern Pacific Railroad in Sonoma County, which is supposed to pay SMART about $168,000 a year in trackage fees, is unable to get rolling. Freight trains will share the track with SMART, and SMART is counting on it and other arrangements, such as right-of-way leasing and advertising revenues, to help pay for operating costs.

Freight service encountered yet another glitch this month when the North Coast Rail Authority announced that service won't start until at least July. The replacement of signaling equipment at three railroad bridges over the Petaluma and Napa rivers still needs to be completed.

SMART's funding dilemma is compounded by the realization by board members that the project stands little prospect of securing federal funding for construction. The board's exploration last month of a two-phase construction plan in which federal funds paid for most of the Sonoma County portion is largely responsible for inciting northern Sonoma County residents to complain about being left behind.

"There is no doubt that we support the project and that is is part of the commission's Bay Area expansion plan," said MTC spokesman Randy Rentschler. "The federal funding is really structured for lines that run a lot of people in an urban setting."

Rentschler said BART and Muni extension projects "will still take years and years." Although SMART has secured small grants from MTC, he said "to seek big money is a totally different thing."

You can reach Staff Writer Bleys W. Rose at 521-5431 or bleys.rose@pressdemocrat.com.