State Treasurer Ted Wheeler today presented Gov. John Kitzhaber with a the results (PDF) of a two-month review of key assumptions about the financial plan for the proposed $3.6 billion Columbia River Crossing Project between Portland and Vancouver, Wash.
The takeaway from two consultants Wheeler hired to review the CRC's projections—the cost assumptions seem reasonable but traffic and toll revenue projections are wildly optimistic.
"Key assumptions in the traffic and toll revenue forecast used in the 2008 [Draft Environmental Impact Statement] are now outdated," Wheeler's report says. "The combined impact of of Washington State Treasurer McIntire's requirement that CRC adopt a more conservative toll bond debt structure and the potential toll revenue reduction of 15 percent to 25 percent is a $468 [million] to $598 million reduction in projected CRC funding resources."
Currently, the CRC's finance plan calls for tolling to provide the largest single chunk of cash to fund the project—$1.3 billion. So the consultants' finding that more accurate traffic projections and a tolling structure that does not include annual toll increases contemplated by CRC staff could wipe out nearly half that revenue.
That's a big problem for a project that has also made little progress on obtaining the other two streams of projected financing: a hoped-for contribution of $450 million each from Washington and Oregon; and, $1.25 billion in federal funds.
There are a couple of key takeaways from the consultants' reports that underpinned the message Wheeler gave Kitzhaber today.
First as WW reported earlier, CRC traffic projections, which call for a significant annual increase, are simply wrong.
"Traffic volumes using the I-5 Bridge have flattened-off over the last 15-20 years; well before the current recessionary period, wrote Robert Bain of the London firm RB Consult Ltd. "The clear inference is that the flattening-off is a long-term traffic trend; not simply a manifestation of recent circumstances."
The import of less traffic is that it produces less tolling revenue.
A second major finding came from the consulting firm C & M Associates is that Metro's population and employment growth projections, which are also underlying the tolling revenue projections, are vastly more optimistic than two independent estimates.
"Employment growth projections by IHS Global Insight and by Moody's Analytics are significantly lower than those utilized in the [Draft Environmental Impact Statement] process," wrote Herb Vargas and Carlos Contreras of C & M.
The differences in employment—which drives traffic—are huge. Metro projects that the number of jobs in the region will increase from 1,032,200 in 2005 to 1,691,900 in 2030, a growth of 64 percent.
Both Moody's and Global Insight say the growth will be less than half that amount—a difference of 400,000 jobs.
"The lower rate of employment would result in a significantly lower traffic demand which may result in lower traffic and revenues for the project," the consultants wrote.
So how can CRC backers fill what could be a $600 million hole?
Wheeler's report offers two options: beginning tolling in advance of construction, which could provide up to $200 million. Second, the report identifies a federal loan program that could supply the rest.
The catch—the Washington Legislature has yet to approve tolling the bridge (Oregon's does not need to do so) and as for obtaining a big federal loan—now may not be the best time for that.