San Diego will extend a light-rail line with new $1 billion federal transit grant.

DALLAS – San Diego will finance a $2.2 billion light-rail project with a $1 billion, multiyear federal transit grant that is the largest ever for a transportation project in southern California.

The $1.04 billion pledge from the Federal Transit Administration's Capital Investment Grant Program announced on Wednesday will be matched with revenue from a dedicated countywide 0.5% sales tax.

The new 11-mile segment of San Diego Metropolitan Transit System's Blue Line Trolley will include nine stations. The line currently stretches from the international border with Mexico to downtown San Diego.

The extension, known locally at the Mid-Coast Trolley, will extend streetcar service to the University of California at San Diego campus and the growing University City area. The line is expected to handle almost 25,000 passengers per day when it opens for service in 2021.

A groundbreaking ceremony for the new line is set for Oct. 22. Preliminary work, including utility line relocations, is underway.

The official ceremony highlighting the full funding grant agreement included the handoff of a symbolic $1 billion check from FTA acting director Carolyn Flowers to Ron Roberts, chairman of the San Diego Association of Governments (SANDAG), which will oversee the grant.

"With the population along the Mid-Coast corridor expected to grow nearly 20% in the coming decades, this trolley extension will offer a much-needed alternative to traffic congestion in the years ahead," Flowers said.

The federal funding, part of FTA's Core Capacity Grant Program, will begin with $100 million now and continue with annual payments through fiscal 2025. The annual grants will be subject to approval by Congress during the appropriations process.

SANDAG executive director Gary Gallegos said the regional planning agency will borrow money to pay for construction of the trolley line as the $1 billion grant is provided over the next decade. San Diego Regional Transportation Commission, which is the debt-issuing arm of SANDAG, is rated triple-A by S&P Global Ratings and Fitch Ratings.

The federal transit grant program, which includes Core Capacity grants for existing transit systems, as well as Small Starts and New Starts grants for smaller transit projects, will total $2.3 billion per year. That program falls under the five-year Fixing America's Surface Transportation Act that was enacted in late 2015 to provide $11.5 billion of Capital Investment Program grants for transit through fiscal 2020.

The federal contribution was made possible by the 50% match provided by revenue from the 0.5% TransNet sales tax that was first approved by voters in 1988 for 20 years.

The tax was extended for another 40 years in 2004 with 67% of voters in favor.

The 0.5% TransNet tax is expected to generate more than $17 billion over its 60-year life span, with the revenues divided equally between transit, highways, and local road projects.

The construction of the trolley project is expected to create more than 14,000 new local jobs, according to SANDAG. Once the project is completed, it will provide an estimated $116 million of annual economic benefits by reducing congestion and parking needs, and increasing access to jobs.

The trolley extension was first proposed in 1987, said Roberts, who also chairs the San Diego County Board of Supervisors.

"What we're about to undertake is the largest transit project that's ever been done in San Diego County. This is a big one for us," he said. "It is an outstanding example of our ability to leverage the region's local TransNet dollars to bring in outside money to complete major transportation projects."

San Diego County could have more transportation funding available from a proposed 40-year, 0.5% sales tax increase that will be listed on the Nov. 8 ballot as Measure A.

The tax is expected to raise an estimated $18.2 billion over the 40 years if it is approved by two-thirds of county voters.

The Measure A tax would provide $7.5 billion for transit, including a new Purple Line trolley, $4.3 billion for local transportation infrastructure, and $2.6 billion for highway projects.

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