Tim Romer of Goldman Sachs, left, goes over FasTracks financial data with the media, accompanied by RTD General Manager Phil Washington and RTD planning manager Bill Van Meter.

Forget the difficulty of finding the money to get FasTracks built; RTD’s bigger problem now is finding the money to be able to operate the rapid transit expansion after its planned 2017 completion.

The cost of building FasTracks has come down with the recession, to $6.487 billion by 2017 – a drop of $512 million. But RTD’s ability to pay for it has suffered even more, to a budget gap of $2.451 billion, because the recession is eating into the estimate for sales tax revenue to pay for it. In last year’s evaluation, the so-called “capital gap” difference between the cost through 2017 and the available capital to pay for it was $2.242.

Worse for RTD is that even if it could find the financial wherewithal to get it built by then, the newly lowered sales tax forecasts out to the 2035 planning horizon show a consistent deficit in operating and maintaining the system after opening day.

Tim Romer, a financial consultant to RTD from Goldman Sachs, said the deficit eventually closes shortly after 2035 but those calculations haven’t been completed.

“The reduction in sales tax funds is having a greater impact on the ability to run the system after it’s built,” Romer said.

The figures all come from RTD’s annual program evaluation, a regular exercise it performs to re-price construction and operating costs and re-estimate revenues. You can read the entire presentation as given to the board and media Tuesday evening here.

FasTracks started in 2004 at an estimated 2017 construction cost of $4.717 billion. It climbed to as high as $7.9 billion during an unprecedented worldwide spike in construction materials costs several years ago and had backed off to $6.999 billion in 2009 before dropping this year to $6.487 billion.

It is not unexpected for the price tag to fluctuate over the course of a 12-year build-out program. In fact, it is normal to do so as each year brings actual results that prompt changes to the bottom line, for good or bad. RTD had planned to do annual reviews as each year brings actual results and baseline prices can be reset. Since most of the construction work hasn’t even been contracted yet, the projections remain nothing more than reasoned calculations based on quantities of each material needed, current unit prices for them, multiplied by the expected rate of inflation.

All of those factors have varied from year to year. RTD used to use the expected change in the Denver-Boulder Consumer Price Index for calculating future construction costs. Believe it or not, that was actually a more conservative figure to use than actual construction cost increases, which early in FasTracks development were going up less than consumer prices.

But now, said Bill Van Meter, RTD’s manager for planning, RTD is using a custom-developed projection put together by regional and national construction economists including Ken Simonson of Associated General Contractors. The projections of costs get closer to actual targets the closer RTD gets to 2017 completion, the more detailed engineering is done on each corridor and the more the actual sc ope of each project gets narrowed down.

This chart shows, in billions, changing price tag of FasTracks from the start in 2004 to annual revisions starting in 2007. The price is for completion by 2017.

The agency will look at a mix of cutting construction costs by reducing the scope of the rail lines it builds along with cutting planned service on those lines to reduce future ongoing operating costs. But it is also considering asking voters as early as this year for a second four-tenths cent increase in the sales tax.

RTD Chairman Lee Kemp

“The board is 100 percent together on making sure the whole FasTracks program gets completed,” said RTD Chairman Lee Kemp. “That’s board members from the south and board members from the north. The politics of this is just as important as the numbers.”

“We are looking for ways we can build this investment,” said Phil Washington, RTD’s newly appointed general manager.

The main culprit in the growth of the construction gap is RTD’s newly lowered estimates of sales tax revenue through 2035. The agency assembled a panel of economists and other experts late last year to come up with a more tailored methodology for predicting sales tax revenue in RTD’s eight-county region. It recommended a three-point range of low, medium and high averages for sales tax growth through 2035 – all of the them lower than the original 6.06 percent annual average assumed in the 2004 plan or the 4.8 percent average used in last year’s plan.

Using the new mid-range estimate of a 3.7-percent annual growth in revenue, RTD projectys the existing four-tenths percent FasTracks tax will bring in $7.8 billion through 2035, $1.3 billion less than last year’s estimate.

That’s less of a problem now with the years remaining in construction than it is in the outer years for operations, Romer said.

Using those new estimates, RTD ran several financial scenarios in response to questions from metro area mayors who are working with the transit agency to get the FasTracks program back on track. They showed that without new revenue, the program could not be completed until after 2035. With a second sales tax election this year for an additional four-tenths of a cent, the program could be completed and operated by 2017 without deficit.

If RTD waits until 2012 to ask voters for another increase, it would still complete the program but take until 2019 and add at least $200 million to the construction cost. A second sales tax increase of four-tenths of a cent – four cents on each $10 of taxable purchases – would fill the construction gap and fill the operating deficit. It would raise the FasTracks sales tax to eight-tenths of a cent.

Romer said the four-tenths cent increase is the number that closes the gap under even the low-growth scenario.

But with doubts about voter mood and appetite for doubling the original tax, RTD is also looking at how to work within the existing revenue stream.

RTD General Manager Phil Washington

At Washington’s direction, project managers on five of the FasTracks corridors not yet assured of full funding, were asked to come up with “critical adjustments” – bureaucrat-speak for cuts – that could be absorbed while still getting corridors built out. The assumption is that by getting a corridor onto the ground and operating at some level, RTD can come back in and augment service through additional train cars or add track and other facilities as money allows.

In response, the team came up with up to $688 million in cuts to the North Metro, I-225, Northwest Rail, Southeast Corridor and Southwest Corridor. Primarily through reducing frequency of trains on those lines, RTD saved money by not having to purchase as many rail cars up front and not building as many double-track sections

In addition to making cuts, Washington is also directing his team to advance as much work as possible on all the corridors ahead of a potential November vote.

That includes preparing the North Metro commuter rail corridor to Commerce City and Thornton and the I-225 light rail corridor in Aurora to go out for design-build contractor proposals right after election day if the vote succeeds.