RTD plans $1 billion in new bond program for FasTracks

By Kevin Flynn

RTD intends to issue up to $1 billion in tax-exempt bonds that would be used by private contractors to help build the FasTracks lines to Denver International Airport and Arvada-Wheat Ridge.

Because these would be Private Activity Bonds, issued on behalf of a private party for construction of a qualifying transportation project, they would not count against RTD’s $3.7 billion TABOR cap on FasTracks sales tax revenue bonds, which voters approved in November 2004.

Nor would RTD or the taxpayers be on the hook for ultimate repayment.

It’s all part of RTD’s hunt for a way out of the financial bind preventing it from completing FasTracks the way it was promised to voters. RTD is currently about $2.2 billion short of the $6.9 billion it needs to finish it all by 2017.

RTD is currently dealing with three separate private consortiums interested in building a potential $2 billion piece of the FasTracks program – the East Corridor to DIA and the Gold Line to Arvada-Wheat Ridge, along with the rail yard and maintenance facility to serve them. Both corridors will use self-propelled electric “heavy rail” commuter cars, different from those on RTD’s current light rail system.

RTD needs approval from the U.S. Department of Transportation to issue the bonds.

The proceeds of these Private Activity Bonds, although issued by RTD, would be turned over to the wining team, to be selected late in mid-2010. It would form part of the package of private financing brought to the table by the partnership – which RTD hopes will enable it to save money on the FasTracks program.

Under federal law, the bonds would be tax-exempt, enabling RTD to issue them at a lower cost. RTD’s annual payments to the private partnership for use of the corridors would help supply the repayment of the bonds. RTD expects to sign a 50-year contract with the winning team to complete the design, construction, financing, operation and maintenance of the two corridors.

The idea is that by saving the upfront costs of building the two big lines, instead paying out over 50 years for them, RTD will have more money now for other corridors that are cash-strapped.

Private Activity Bonds are not new instruments. Denver used similar mechanisms to help airlines and others build their private facilities at DIA. It gives the private parties the tax advantages of a government bond issue.

The use of these bonds for transportation projects was authorized by Congress four years ago. It set up a $15 billion ceiling on the total amount, but so far, the U.S. Department of Transportation has allocated only $4.93 billion of it among eight projects. The only one for which bonds actually have been issued so far is for high-occupancy toll lanes on the Capital Beltway in Virginia.

–Reach Kevin Flynn at kevin.j.flynn@comcast.net