DALLAS — After opening its light rail line to the airport four months early, Dallas Area Rapid Transit officials are pressing on with bond-financed rail development.
"There's no rest at this point," said Dave Leininger, chief financial officer for the regional transit agency. "We've got enough to keep us busy."
DART opened the third and final stage of the $1.4 billion Orange Line linking downtown Dallas to Dallas-Fort Worth International Airport on Monday, and is already deeply involved in another round of projects.
A 2.7-mile extension of DART's 32-mile Blue Line will connect to the University of North Texas' new south Dallas campus in 2016. Planners are also designing a $700 million tunnel for light rail to downtown's Union Station in the event funding becomes available.
More immediately, DART is building a modern streetcar from the city center to nearby Oak Cliff with contributions from the Dallas city government. In the northern suburbs, a commuter rail proposal along the 51-mile, DART-owned Cotton Belt freight route is moving to the front burner.
"We are turning our attention to two major issues: core capacity and seeing what we can do with the Cotton Belt," Leininger said. "On expanding core capacity, we've got $60 million of funding from the Texas Transportation Commission for platform extensions that will allow us to do three-car train sets."
For development of the Cotton Belt line, DART is considering 41 scenarios ranging in estimated cost from $200 million to $1.6 billion. Options include converting the route to bus rapid transit or full-fledged passenger rail. Current plans would have the route developed in the mid-2030s, Leininger said.
"We're looking at what could be done to accelerate that," he said. "There is an inclination in the community to go big or go home."
Since 2007 DART has gone big and fast, adding 46 miles of track at a cost of $3.2 billion. At more than 90 miles, the DART light rail system is the largest in the nation, ranking seventh in ridership. While Houston is expanding its 12.8-mile rail line, no other city in Texas has anything resembling the DART system.
At the peak of construction in 2010, DART accounted for more than a fourth of all light rail building in North America, according to research by the University of North Texas.
"Even through difficult economic times, DART has demonstrated its ability to boost the North Texas economy through its capital spending, daily operations, and attracting private investment," said Terry Clower, former director of the Center for Economic Development and Research at UNT.
Indeed, DART found a way to turn the unprecedented turmoil of the Great Recession to its advantage, said Clower, who is now an economics professor at George Mason University in Virginia.
"Interest rates went through the floor, so there was no better time to invest in these expansions, and there was no better time to have this entity spending money," Clower said in a telephone interview. "It was the timing of that happening that was so important."
Leininger, former chief financial officer for the city of Irving, came to DART in the momentous year of 2008 when the agency was seeking design-build proposals for the Orange Line. The commitment came after threats from Irving that it might withdraw from DART after contributing $1 billion of sales tax revenue.
The rancor was heightened by Irving's loss of the Dallas Cowboys to a new, taxpayer-financed stadium in Arlington in 2009. That led to the demolition of the team's former Texas Stadium in Irving in 2010 and a vacant site that is targeted for long-term development tied to the Orange Line.
Cowboys owner Jerry Jones failed to convince Irving voters in 1996 to drop out of DART and shift their sales-tax revenue to a new stadium to replace Texas Stadium. When Irving stayed with DART, Jones began looking for cities to subsidize a new stadium.
Arlington, a neighboring suburb that has no mass transit and does not belong to DART, agreed to back bonds for the $1 billion stadium with a 1-cent sales tax.
With the Cowboys gone, Irving bet its future on economic development from the Orange Line, particularly in the Las Colinas business and residential center near DFW Airport.
Suggestions that DART lacked sufficient funds to start the rail project because of soaring construction costs and flat revenues created uproar in Irving during the time that Leininger was the city's CFO.
"From the beginning of 2008, the economy and politics got worse and worse," Leininger recalls. "By the end of 2008, the financial world was coming to an end. That was a tough time."
From 2000 to 2010, DART experienced a "lost decade," with sales tax revenues in 2010 at the same level as 2000. In fiscal years 2009 and 2010, DART's sales tax collections declined by a combined 9.8%, to $377.6 million.
In June, 2010, Fitch Ratings downgraded DART's senior-lien revenue bonds to AA-minus from AA, citing a rapidly growing debt load. Three months later, Standard & Poor's lowered its rating on DART's $2.6 billion of outstanding senior-lien sales tax revenue bonds to AA-plus from AAA.
DART had originally planned to complete the Orange Line by December 2013. But in June 2010, the board placed the line on indefinite hold due to declining revenue.
Then, on Sept. 15, 2010, the agency said that due to cost savings and newly available federal funds, the plans for the line had been revived. The new completion target would be December 2014.
Adjusting to the new revenue scenario required a $6 billion rewrite of DART's 20-year capital spending plan, Leininger said.
However, DART was well positioned for a reversal of fortunes.
When federal stimulus funds were offered for "shovel-ready projects," DART stood at the front of the line.
"Coming out of the recession, not much good happened," Leininger said, "but one thing that did was the stimulus funding."
After Build America Bonds were authorized, DART increased the size of a $650 million issue in 2010 to about $1 billion.
"The other thing that worked in our favor was additional funding for TIFIA (Transportation Infrastructure Finance and Innovation Act)," Leininger said. "It had not really been used for transit before, but they broadened it to make it available for these kinds of projects."
In December 2012, DART closed on the $107 million TIFIA loan, locking in a fixed rate of 2.9% for 30 years.
DART also found significant savings by providing its own liquidity for its $200 million commercial paper program, Leininger said.
"We made a determination that our credit rating was better than those who were offering us credit enhancement," he said. "If we kept our commercial paper program within $150 million to $250 million, we could self-insure."
Under self-liquidity, DART's rates on commercial paper fell from 75 basis points to less than 20, Leininger said.
"We've settled in at about 10 basis points," he said. "It has saved us millions of dollars."
Leininger likened the financing of the Orange Line to gathering a "bundle of sticks."
"You have to bring together three or four funding sources to finance these kinds of projects," he said. "The days when you could identify a single revenue stream and issue bonds for a project aren't likely to return."
After the DART board made what many considered a courageous decision to accelerate the Orange Line, "things started to cut our way," Leininger said.
The first sighs of relief from Irving came in 2012 when the initial leg of the Orange Line opened.
"Irving was very nervous because they had already committed $60 million to the project," Leininger said. "But there was a really, nice celebration when that first station opened in 2012."
At that point, construction and material costs were clearly running in DART's favor, and the joint venture project managers Kiewit, Stacy and Witbeck, Reyes, Parsons were moving methodically toward the next station.
The economy was recovering, but the political thrill ride continued as Congress considered defaulting on U.S. debt in 2011. That led to a historic Standard & Poor's downgrade on U.S. credit to AA-plus with a continuing negative outlook. In October 2013, Congress shut down the federal government for 15 days amid renewed threats to default. That crisis abated on Oct. 16 with a continuing funding resolution.
"Default by the U.S. government might have so rattled the financial markets that you might have had a liquidity freeze in which short-term financing suddenly gets frozen," Leininger said. "We actually moved several hundred million dollars into cash to prevent getting into a 90-day liquidity trap."
Through it all, DART managed to keep its credit ratings high and its borrowing costs low. The authority has about $3.6 billion of debt outstanding with coverage ratios at two-times debt service.
In June, S&P affirmed DART's AA-plus rating, Moody's Investors Service affirmed its Aa2 rating, and Fitch Ratings affirmed DART at AA. Outlooks are stable.
"That's a very high investment grade rating," said Tim Blake, managing director in Moody's Dallas office.
"I think completing the extension to DFW is terrific. The whole story is very impressive," he said. "If they were to suffer another lost decade, they would be in tough shape," Blake said. "But growth has been very positive in the past three years. They are coming out very strong right now."
