Pittsburgh Regional Transit  could borrow $800 million to replace light rail trains

Pittsburgh Regional Transit is committed to replacing its 81 light rail trains and will set up a process to borrow as much as $800 million for the work in case it needs it.

Borrowing money through state and federal programs is a backup plan in case the agency is unsuccessful in efforts to obtain grant money for the project and reinforces the agency’s plans to replace the cars over the next 12 years.

Chief Development Officer Amy Silbermann and Chief Finance Officer Donminika Brown briefed the board’s Finance Committee Thursday on plans to ask for the ability to borrow $379 million through the Transportation Infrastructure Finance and Innovation Act, a program operated by the Federal Transit Administration. The committee recommended the full board authorize the agency when it meets next Friday to submit a letter of interest to the U.S. Treasury to begin the borrowing process.

The proposal also includes the possibility of bond issues through the state Department of Transportation in 2026 and 2032.

In 2016, the Chicago Transit Authority used a $255 million TIFIA loan to help buy 490 new light rail trains.

The program’s website says it provides “credit assistance in the form of direct loans, loan guarantees and standby lines of credit [rather than grants] to projects of national or regional significance,” including roads, bridges, rail facilities, transit vehicles and maintenance garages, among others. It can provide up to 49% of the cost of a project at a low interest rate, and loans have to be repaid in 35 to 70 years.

The money would act like a line of credit where the agency has a fixed interest rate and can draw down on the money as it is needed.

Borrowers have to pay a $250,000 origination fee, reimburse the agency for the cost of program advisers for each project, and pay an administration fee of $400,000 to $700,000 based on the complexity of the project and a $13,000 annual servicing fee.

With the long-term payback and the ability to draw money as it is needed, Brown estimated the agency would save about $65 million compared to traditional borrowing. The agency currently has about $29 million in long-term debt from building the North Shore Connector about 20 years ago, but it should be paid off in 2029 when the agency is likely to need money for the new rail cars.

If it borrows the maximum amount of money, agency could pay as much as $42 million a year in debt service, Brown said.

Silbermann and Brown said the agency wants to set up the ability to borrow in case it doesn’t receive grants to replace the cars. For example, PRT applied for $100 million in startup funds for the project in December but wasn’t selected.

Brown said financing the project will require “a delicate balance” to make sure the agency takes the money it needs at the best times so it doesn’t begin paying it back before it has to.
Completing the application process for TIFIA takes nine to 12 months, so PRT wants to set it up now so that money is available when it is needed. Silbermann said the agency has had a steering committee working on preliminary design features for the new trains for about a year and expects to issue a request for proposals to design a prototype early next year.

It will take about a year to negotiate an agreement with the provider, one year to build the prototype and another year to test it to make sure it has all the features PRT wants and functions properly. Then the agency will make an order to begin producing them at a rate of 10 per year.

“It will be a decade, maybe more, before we get all the cars,” Silbermann said.

PRT has been talking for several years about the need to replace its aging light rail fleet.
The agency has 53 trains manufactured by the former Siemens AG when the light rail system opened in the 1980s, so they are more than 35 years old. The rest were bought about 20 years ago from CAF and would need major upgrades by the time the new trains are available in about 12 years so the agency will replace them, too.

The agency has other large projects pending, such as a long-term maintenance garage and a new regional service garage that could be funded the same way, but Brown said the agency isn’t interested in taking on that much debt.