By Cameron McWhirter 

DENVER -- Maintenance backlogs, budget shortfalls and breakdowns plague many of the U.S.'s aging transit systems. But here, where the plains meet the Rockies, Denver's system is a rare success.

Created in 1969, the Regional Transportation District operated for years as a modest bus service, and in the 1990s it added a few rail lines. But in 2004, voters in the eight-county region approved an additional 0.4% sales tax to expand the train network, called FasTracks. That new funding dramatically boosted a stream of local tax money already going to transit.

RTD relies on public-private partnerships for much of its construction and maintenance, and its management takes a fiscally conservative approach toward expansion: It only builds what it can afford to operate and maintain for the long term, according to Heather Copp, RTD's chief financial officer.

The financial problems plaguing transit agencies in San Francisco, Washington, D.C., and elsewhere reinforce the conservatism. "We don't want to be like them," she said.

The system opened two new rail lines this year -- one to the city's airport and one to northern suburbs -- both operated under contract by private company Denver Transit Partners LLC. Two more lines are scheduled to open by the end of 2016.

Financially, RTD is "basically doing everything right," said Jeff Brown, who researches public-transit system finances and is chairman of Florida State University's Department of Urban and Regional Planning.

Still, in 2013 the RTD spent the most in capital costs per passenger ride among the nation's 15 largest transit agencies, due to the cost of its buildout. And it isn't immune from economic concerns.

With a fiscal 2015 operating budget of $466.7 million, the Denver system recently lowered its revenue growth projections in coming years to 5% from 8%, which likely will limit future expansion. According to RTD, sales-tax revenue has been less than expected, in part because big-ticket items like cars and appliances haven't been selling as anticipated.

Budget shortfalls after the recession already forced it to postpone plans to extend rail lines to Boulder, about 25 miles from downtown Denver, and Longmont, roughly 30 miles from Denver.

A half-dozen riders on the RTD's light-rail system on a recent weekday said they were excited about the expansions, but said most people still drive because that often is less expensive given low gasoline prices. A full-fare, one-way local trip on RTD costs $2.60, while a longer, so-called regional ride is $4.50.

Some critics note that because most of the area's 2.9 million residents don't use public transit, the system has done little to reduce congestion. In many European cities, 60,000 to 80,000 people are within a 15-minute walk of a transit stop, but sprawling Denver has only about 3,000 people within the same radius, according to Edward Ziegler, retired law professor at the University of Denver.

The RTD system never will have the concentration of riders needed to make it financially sustainable even with federal subsidies and tax revenue, said Mr. Ziegler, an expert on land use. "Denver, in my view, is a case of 'let's pretend,'" he said.

RTD officials believe the expansion will draw new riders, bringing in added revenue to help expand and maintain the system.

Jeff Wright, a 46-year-old marketing manager who lives in Lakewood, west of downtown Denver, said he bought a house near a train station so he could ride to his office in Denver, avoiding traffic. "It's still cheaper to drive, but this is a lot less frustrating," he said one afternoon while heading to the train.

The agency's Ms. Copp said the district realized long ago what many other transit agencies now are learning: "The federal government is not going to save our bacon."

Still, in 2011, the U.S. Department of Transportation provided more than $1 billion for the FasTracks expansion. But private-sector investment and management has been pivotal for RTD, according to Robert Puentes, president of the Washington, D.C.-based Eno Center for Transportation, which promotes public transit.

Aaron Epstein, chief executive of Denver Transit Partners, a private company owned by units of Fluor Corp., John Laing PLC and Lloyds Banking Group PLC, said the investors have been pleased so far. He declined to say how much profit they expect to make.

The system must pay back hundreds of millions of dollars, with interest, to the partners, which purchased federally backed private-activity bonds to initially fund construction of new lines. It also must pay the partners for managing and operating the rail lines under a contract that runs until 2044.

During the recession that ended in 2009, sales tax revenue plummeted while construction costs soared, posing significant challenges for the RTD. That prompted the agency to postpone some projects.

The Federal Transportation Administration's 2014 profile of RTD showed about 71% of $863 million in capital funds -- money used for expansion, upgrades and equipment -- expended that year came from local sources, including private investment. About 29.1% came from the federal government while only 0.2% came from the state.

By comparison, San Francisco's BART system spent only $522.5 million on capital projects for the same period, with 37% coming from local sources, 15% from the federal government and 28% from the state of California. BART, the nation's 10th-largest transit system, began operations in the early 1970s.

In Washington, D.C., meanwhile, the Metro system has been hurt by falling ridership, service interruptions and funding shortfalls at the agency that runs it.

Write to Cameron McWhirter at cameron.mcwhirter@wsj.com

(END) Dow Jones Newswires

September 26, 2016 19:58 ET (23:58 GMT)