Planning Ahead - Funding K Line North

Hi. Congratulations on getting past a major hurdle yesterday. Pat yourself on the back if you haven't already.

Now for the hard part. How do we pay for this? I'm trying to understand how the financing for the K Line North Extension will work, and boy is it a rabbit hole. Money is a difficult conversation but we need to figure this out sooner or later. Going to throw out a preemptive thank you for those who are familiar with the subject that can fill in my gaps of understanding!

For context, Nandert's March 21, 2026 video on the K line north said the 2023 capital cost (5:06) for the La Brea and San Vincente Fairfax (locally preferred alternative as of today) routes were $11.0B and $14.8B in 2023 dollars. The Federal Transportation Administration Capital Investment Grants from Uncle Sam can cover up to 25% of the costs if done through the Expedited Project Delivery (EPD) program, lowering the LPA cost optimistically to $11.1B. It is highly probable that Metro will borrow the majority of the funds through a federal Department of Transportation TIFIA Program loan. On July 7, 2025, this program was modified to require revenue backed P3 projects, which K line north is all but explicitly stated to be, to bring aboard private investers to commit to a 25% co-investment (metro pays them back with interest) to get a full 49% loan (increased from 33%). It's implied the final 1% would be covered by the cities.

So how do we pay back the $14.8B * 74% in TIFIA and private loans = $11.7B, along with all the interest accrued? The TIFIA interest rate should be based off the treasury interest rate, extrapolated out to 75 years. There are too many details for me to thoroughly understand the intricacies of how these rates are calculated but an LLM spat out 4.98% for years 1-40 and 5.12% for years 41-75. Private loans are a completely different animal. In exchange for the risk private investors face, e.g., cost overruns, LLMs speculated that lenders would want a 9-12% interest rate. The LLM estimate for the nominal (value of dollar at the time of each annual payment) money paid over the life of the loans will be $28.5B for TIFIA and $13.7B for the private loans for a total of ~$42B. The LA County $2.24B (in 2016 dollars, plus an annual inflation adjustment) Measure M sales tax funds that start in 2041 would make a dent in that, and would likely be taken by private capital to cover their investment first. It's not clear to me how the split in Measure M funds between LA city and WeHo portions of the LPA would math out, or how much that these funds would contribute towards reducing loan repayments in 2041 until the end of the century. That leaves the nominal remaining ~$38B to be covered by other means. That's a lot of tacos... Hopefully someone with a project finance background can jump in and bring some clarity!

I've heard many times this week that WeHo plans to raise $2.2B using a financing tool called EIFD. After some searches online, I found this WeHo Funding Study from March 21, 2024. I traced it back to the WeHo city council meeting on June 10, 2024 which you can find here under 5.A. Metro Update Attachment D. The revised Attachment C is also worth checking out for the slide shows and visual representation of 0.5 mi buffer zones later on.

Before I explain what EIFD is I need to highlight a discrepancy. In the funding analysis, a key point stated that WeHo's application for Metro's Early Project Delivery (same acronym as the federal program but different) program for 2029 groundbreaking would generate the most points with Metro if WeHo "can contribute up to 25 percent of the total project construction costs within that jurisdiction" (page 6), citing Metro EPD requirements for the Funding category (stated explicitly in Metro doc 2020-0174 p. 75). Furthermore, it determined 49% of San Vincente Fairfax (LPA as of today) would be in WeHo, concluding that $14.8B total construction costs * 49% proportion in jurisdiction * 25% contribution = $1.81B needs to be raised by WeHo according to WeHo.

There's a problem with this number. Metro EPD requirements are listed in Appendix A, and you can also find it on Metro's website here under Attachment A. On their table of strategic inputs and its point grading system, the Funding accelerator asks, "Has new, committed funding become available at an amount greater than 25% of the total project construction cost?" In this context, "new" refers to WeHo covering $14.8B * 25% = $3.7B. It does not say anything about a jurisdiction (49% in WeHo city vs 51% in LA city). There are five mentions of "jurisdictions" in this doc in the subsequent Partnerships section that discuss 3% local minimum funding amounts, and no mentions elsewhere. There may be something I am overlooking but it seems that the consultants that prepared Funding Study under-reported the money needed by ($14.8B * 25%) - $1.81B = an additional $1.89B still needs to be raised by WeHo according to Metro EPD rules. Note that this is separate from the 25% federal grant money.

The doc continues with number crunching for how WeHo can raise money with Enhanced Infrastructure Financing Districts (EIFD), which would borrow money paid for by 50 percent of property tax revenue increases in WeHo for the next 75 years on properties within a 0.5 mile radius of the tunnels (refer to WeHo Funding Study revised Attachment C p. 5) The reason why the revenue would be collected over 75 instead of 45 years (default) is because 75 allows WeHo to raise an estimated $2.2B (the number in headlines) versus just $646M over 45 years. This longer timeline was made possible by Laura Friedman CA-30 in CA AB 761, which created an exception to the 45 year rule for LA County rail projects. $2.2B is a lot of taco money but it's still $1.5B short of the $3.7B (25%) required by Metro EPD. This funding gap is probably why the motion passed in yesterday's meeting said the LPA is approved "contingent upon the formation of the [EIFD by WeHo] in coordination with Los Angeles County to provide additional local sources of funding at least 25% [...] per the [EPD]." If these funding issues aren't solved, K Line North Extension will likely go back to 2041 Measure M timeline.

In order for WeHo to raise the remaining $1.5B to meet Metro's requirements to get the project started in 2029 and pay back loans, the West Hollywood needs LA City to create its own EIFD with similar specifications (p. 32). Using assumptions (p. 9) like a 50% contribution, 2% assessed growth to align with Prop 13 (another rabbit hole), with 6% & 4% annual residential & commercial value appreciation once properties are sold (presumably upzoned by CA SB 79), the study estimates that EIFDs from WeHo and LA City could generate a nominal total of $22.2B by 2099 (p. 10). Is this realistic? That's up for discussion, but either way the math no longer checks out. $22.2B is not enough to cover the ~$38B to pay back the lenders. In fairness, the funding study couldn't have known at the time that federal TIFIA rules would change to require 25% private investment, but this funding shortfall is the reality we face today. I have not come across literature that answers how this total funding gap is going to be solved, or any agreement by LA City to cover the $1.5B that WeHo needs for the 2029 accelerated timeline.

So at the end of all this, I'm left with more questions. How can Metro raise more money? What are Metro's best options for low private investment interest rates? Is there new analysis with updated EIFD figures? Does an EIFD starve the oxygen out of any other WeHo projects this century? Will EIFD-affected neighborhoods be able to sustain themselves against rising costs? And at the root of it all, is a head start today worth borrowing from the future? Thanks for reading.