In addition to expected federal funding, New Orleans could leverage its $100 million of bonding capacity and public-private partnerships to fund transportation improvements in the city.
Alex Wiggins, CEO of the Regional Transit Authority of New Orleans told New Orleans City Council’s Transportation Committee federal funding may pay for half to 80% of the projects and the RTA could use "bond authority and public-private partnerships” for the balance. Dwight Norton, RTA’s senior director of strategic and long-range planning, also testified about the agency's operations and capital project plans at the April 5 meeting.
Almost a year and half ago the RTA reorganized and transferred its operations and management, becoming a public entity from a private one.
“That transformation is complete,” Wiggins said, “I am very pleased to report that we are now a fully public agency, fully accountable to the public.”
The RTA — governed by a Board of Commissioners, eight publicly appointed representatives — determines policy and oversees funding, operation and expansion of public transportation in the region. Its mission is to provide safe, dependable, efficient transit service to residents and visitors by investment in infrastructure and services.
Last year, the RTA initiated a feasibility study for a proposed Bus Rapid Transit (BRT) corridor in the city, that would connect East New Orleans and downtown, with a possible extension to Algiers. The aim is to cut down on residents' commuting time.
The study was funded by the Federal Transit Administration’s Helping Obtain Prosperity for Everyone grant program, which supports projects to improve transit services or facilities in areas of persistent poverty.
BRT is a bus-based transit model that can create faster service through the use of dedicated lanes, busways and traffic signal priority. The RTA wants to use BRT on corridors throughout the city, but with an emphasis on West Bank and East New Orleans — areas which analysis shows have longer commute times to downtown.
The RTA said this high-capacity bus project is needed to provide equitable access throughout the region so all people have opportunities to travel to areas where good jobs are located.
“We’ve done our planning, that was the core foundation for where we’re going,” Norton said. “We’re ready to start moving into design and construction over the next several years on major initiatives.”
Norton said the idea is based upon the notion of “think rail, but use buses.” This includes providing frequent service, specially designed stations, level boarding platforms off-board fare collections and unique vehicles.
Looking at the costs, analysis showed that light-rail transit costs about $75 million to $150 million a mile to build while BRT costs about $15 million to $20 million a mile.
“This can provide equivalent service at a fraction of the cost,” he said.
While construction costs continue to rise due to inflation, the price tag for just creating dedicated transit priority for the 12-13 streets needed is estimated between $180 million and $260 million.
If approved, the project is expected to be completed in 2025.
To pay for projects like this, Wiggins said RTA typically applies for federal funding, which can range from 50% to 80%. “I do feel optimistic that once we complete our planning efforts and we go after funding that we’ll find a revenue source that will make sense.”
Wiggins said the RTA will try to get as much federal funding possible. The RTA is funded almost exclusively by sales taxes, hotel/motel taxes and vehicle sales taxes, while all of its capital funds come from the federal government.
“We really need to shift our thinking about how much of an investment we are willing to make in public transit,” Wiggins said. “It you look at other cities around the country you see sizable investments in public transit infrastructure.”
Councilmember Joseph Giarrusso asked Wiggins if the RTA was able to use bonds for its capital projects, based on its tax revenue stream to help pay for the project.
“We’re looking at that. Because of the need to make significant investments in infrastructure, we are actually looking at our ability to leverage our current bond authority,” Wiggins said.
“Right now we have relatively low debt service, so we have some room to leverage additional bond sales to generate funding," he said. "We have about $100 million for us to be able to leverage and so we’ll be looking at a combination of bond authority and public-private partnerships.”
The RTA continues weighing other funding structures, such as using public-private partnerships and
Giarrusso noted that as the pandemic winds down, social events in New Orleans, like Mardi Gras, would support the RTA’s tax base with rising revenue.
“And as long as we have that, we can leverage that for capital expenses as well,” Giarrusso said.
Since 2011, New Orleans has sold more than $2 billion of bonds, with the biggest issuance occurring in 2021, when it sold $812 million of securities. The city was not in the market in 2017 or 2018.
The RTA’s fiscal picture has already started to brighten as it begins to turn the corner after being hard hit during the coronavirus pandemic.
At the height of the COVID-19 pandemic, many major tourist events which had bolstered the city’s economy were cancelled and many local businesses closed. The loss of this sales tax revenue left a large gap in transit funding.
In 2021, RTA’s operating revenue of $90 million fell within 1% of its budget and while passenger fares of $7.2 million were 25% below projections, but still 5% higher than in 2020, according to the RTA’s
“Despite the challenges, RTA ended 2021 with a $14 million surplus thanks to diligent fiscal oversight of staff and the $43 million in CARES Act funding received from the federal government,” Wiggins wrote in the report. “The agency was able to utilize $20 million in CARES/ARP Act revenue and expenditures to offset lower fare revenue for operation in 2021 and generated an additional $25.1 million from competitive federal grants.”
In 2021, net debt service decreased to $8.659 million from $9.503 million in 2020 and $14.584 million in 2019, data showed.
Looking ahead, Wiggins testified the RTA’s strategic mobility plan goals include providing a world-class transit experience, fostering innovation, establishing regional connections, promoting equity and backing workforce development.
In January, Moody's Investors Service completed a periodic review of the RTA and kept the rating at Aa3.
“New Orleans Regional Transit Authority's Aa3 rating reflects the gross pledge of a portion of its sales and use tax and the moderate coverage provided by it; exposure of the New Orleans economy and pledged revenues to another major weather event; and the legal protections for bondholders, including a debt service reserve fund, a 1.5 times additional bonds test, and provision requiring direct funding with the trustee,” Moody’s said.
The rating also reflected the dramatic declines in transit ridership and fare revenues caused by the coronavirus epidemic, the rating agency said.
“These declines will persist over the next two to three years but, in our view, are unlikely to dramatically impact the long-term credit quality of the transit authority, given the availability of federal assistance and stable dedicated taxes,” Moody’s said. “However, the situation for transit operators is fluid and rapidly evolving. If our view of the credit quality of rated debt changes, we will update the rating and/or outlook at that time.”
In July 2020, Moody's assigned an Aa3 rating to the RTA’s issue of sales tax revenue refunding bonds, consisting of $59.575 million of Series 2020A bonds not subject to the alternative minimum tax and $19.955 million of Series 2020B taxable bonds. The outlook on those bonds was stable.
