Before the end of 2017, Palo Alto released the results of a study showing rough estimates of revenues of local funding options to supplement grade separation funding, and cost estimates to implement various design options. Â In Palo Alto, many residents prefer options where the train is underground (in a trench or tunnel). Â These options are typically more costly than other designs by hundreds of millions or even billions of dollars. In the first half of 2018, the conversation will add a focus on the community’s willingness to pay for more costly designs.

The preliminary cost estimates suggest that an open trench design in South Palo Alto, for Meadow and Charleston, would cost approximately $400 to $500Million more than other design options (and tunnels with underground stations would be at least $2Billion more). Based on the analysis, Palo Alto could realistically pay for a trench – if citizens are willing to take on the cost and/or land use changes required.

The Financing Study explores a variety of funding mechanisms including taxes (which would need voter approval), and value capture tools that would raise money from the increased value of development in areas that would benefit from grade separation.

In order to raise the hundreds of millions of supplementary local funding that would be required to pay for a trench:

• Palo Alto homeowners would need to pay an additional $1,750 to $6,500 annually in property taxes. ( The lower estimate is based on the average residential assessed value in the City of $700,000. The higher end is based on average market value in the City of about $2.6 million), and/or
• Palo Alto would need to permit 2,000 units of housing and 750,000 square feet of commercial development to raise $235,000,000 in funds. (The city’s newly adopted Comprehensive Plan calls for up to 4,420 new housing units across the city by 2030 and caps new non-residential development at 1.7 million square feet)

The report notes that timing of funds raised by a general obligation bond funded by a property tax increase would be more predictable. Value capture funding would depend on the timing of real estate development; Palo Alto has some of the most valuable real estate in the country. San Francisco has generated substantial revenue using Value Capture for its Transbay Terminal project.

Grade separations on the Peninsula Corridor typically are paid for multiple funding sources. For example, the construction budget for the Hillsdale project in San Mateo is $165 million (not counting earlier design). To fund construction, the City used $84 million from the High-Speed Rail Authority, $65 million from the San Mateo County Transportation Authority, and $10 million from the California Public Utilities Commission, and $6 million in developer fees from development in the Bay Meadows/Rail Corridor plan area.

In 2016, Santa Clara County raised $700 Million for Caltrain grade separations in Sunnyvale, Mountain View and Palo Alto.  The VTA board adopted a policy requiring cost-effective use of funds. That is likely to mean that VTA will authorize enough funds to contribute to a basic project, but would require additional local funds to pay for a more deluxe design.

Palo Alto’s most recent round of community workshops showed consistent preferences for below-ground options, not considering cost.  Hybrid options, similar to the designs in Belmont/San Carlos where the road is depressed and the tracks are partially raised, were ranked in third line.

Hybrid designs haven’t gotten much study yet, since hybrids haven’t gotten much study yet because the Council’s earlier policy was to disallow study of options that entailed any elevations of the tracks.

The preference for underground designs had been especially prominent in the era of first-round High Speed Rail planning, when the High Speed Rail Authority put forward a plan with a 4-track elevated design that ran the length of the Peninsula Corridor, with dedicated tracks for High Speed trains.

To counter this unpopular HSR proposal, Palo Alto and several other cities adopted policies prohibiting elevation of the train tracks. At that time, Palo Alto also adopted a policy prohibiting any local funds for a grade separation; the city wanted more costly designs, but only if others paid the full bill.

In the more recent years, after the Peninsula agreed to a “blended system” where Caltrain would share tracks with High Speed Rail, the Palo Alto City Council modified its policies to allow local funds to complement other regional, state, and/or federal funds.

With the information in the Financial report, the community and city council can now start to have a realistic conversation about design and funding choices.

What do you think?