Ken Larsen's web site - March 7, 2017 DOLRT speech to BOCC by Bonnie Hauser
What about the Financial Risk?
Iím Bonnie Hauser and Iím a retired partner from PricewaterhouseCoopers. Iíve never worked on the Academy Awards Ė but I know a lot about large projects and financial risk. Iíve read GoTriangleís plan Ė twice and Iím pretty confused. With a public hearing, we hope that your staff and consultants can answer questions that are not clear from the plans.
GoTriangleís latest plan projects light rail to cost $2.5 billion. $1 billion in local funds and over $900 million in debt. That assumes all goes well.
What if things donít go as planned? Cost overruns are funded in full by Durham and Orange. For this project a 1% overrun costs $25 million.
Others are asking about alternative technologies and how funds are allocated between bus and light rail. My questions are about cost.
∑ What if thereís a cost overrun Ė above the 30% contingency in the budget. Where will those funds come from?
∑ What if the state funds less than 10%? Last time, DOT scored the project at 8.6%. Thatís $35 million short.
∑ What about revenue? What if sales tax doesnít grow by 4% compounded, over the next 45 years?
∑ Is the $40 million that you discussed last December in or out? The risk scenarios in latest plan assume itís in.
∑ How will you pay back $935 million? The plan stops at 2035 Ė but the debt payments continue until 2062. We heard estimates of $20 million a year to pay back the debt starting in 2036. Itís not plan Ė so that means no federal or state match. Thatís on top of $30 million to run the train. So if all goes well, on top of $2.5 billion weíll be paying $50 million per year for 30 years.
∑ Finally Ė are Orange County taxpayers liable for the $935 million debt? Mrs Snow has more to say about that.
We know that a lot of work went into GoTriangleís plan Ė but the risks will fall on Orange and Durham taxpayers for generations. Thatís why we hope your staff and financial consultant can answer these questions in a public hearing.
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