Last week Governor Newsom authorized a loan that will prevent deep transit service cuts on BART, Muni, Caltrain, and AC Transit for the next several months. SPUR fought hard for this funding. We believe that public transit helps people create better lives for their families and communities, and we refuse to let a century of public transit investments become another casualty of the pandemic. We are deeply grateful to the Newsom Administration and the state legislature for bringing their commitment and creativity to help the Bay Area thrive. But the work isn’t finished, and it’s up to the region’s voters to finish the job. In order to continue to have a reliable, safe, and modern transit system, Bay Area voters will need to qualify and pass two ballot measures this fall to provide long-term, predictable funding: a five-county sales tax and, in San Francisco, a parcel tax to support Muni.
Here’s a look at the loan details and the next steps that will be needed to keep transit functioning in the Bay Area.
What will the loan do?
The loan will help BART, Muni, Caltrain, and AC Transit to sustain service in the near-term until they can collect revenue from a new five-county regional transit measure and a new San Francisco-only measure for Muni — if voters qualify the measure for the ballot this spring and pass the measures in November. If the measures fail to qualify or pass, these operators will be forced to make catastrophic service cuts.
Where does the money come from?
With this loan, the state appropriated future funds that were already awarded to the region in multi-year commitments for capital transportation projects that are not ready to break ground or spend down those funds. In other words, it uses funds that would otherwise be sitting in an account and puts them to work immediately and efficiently, without adding any new burden to California taxpayers. The loan is structured to protect project funding, as described below.
How will the loan be repaid?
MTC will administer the funds to the four agencies facing a dire fiscal cliff and work with operators to repay the loan quarterly over a maximum period of 12 years, so that each future project is made whole. Additional backstops are in place to ensure that any project that needs funding earlier than anticipated can access those funds. As with all loans, this is not free money. Operators will be required to pay interest on the loans. Simultaneously, they are pursuing ongoing belt-tightening efforts.
Why can’t the transit agencies cut service instead of borrowing money?
Cutting service — even temporarily — as some propose does not solve the problem and would be deeply reckless and damaging for the region. For rail operators, like BART and Caltrain, costs simply do not scale with cuts. For example, when BART reduced service by 40% in the beginning of the pandemic, it only shaved 12% off of the operating budget. Rail operators still have to keep every inch of the track and guideway in good condition, whether they are running two trains per hour or six trains per hour—but they get a lot less revenue by running only two trains per hour. Many costs are not directly impacted by the train schedule, and a large share of revenues are service-dependent, meaning that potential cost savings could be offset by revenue losses, leaving the agencies in a bigger hole. Mass transit tends to become less cost-effective and less productive when it runs less service.
Over the last two years, each agency has been taking a hard look at its finances. BART and Muni, who face the biggest deficits, have each tightened their belts by more than $100 million annually with a combination of strategies that don’t impact service, such as reducing staff, holding positions vacant, combatting fare evasion, re-evaluating contracts, and deferring some improvements. Still, those cuts are not enough to backfill the federal and state relief funding that have buoyed our transit systems in recent years.
Service cuts, even temporary ones, will create a vicious downward spiral of less service, fewer riders, and less revenue and will negate years of recovery gains.
A lasting solution: Two ballot measures to save transit
This loan is critical but it buys transit operators months, not years. The next step requires Bay Area voters to take action to qualify and pass two ballot measures. These include a 5-county regional sales tax that would fund Muni, BART, Caltrain, and AC Transit and provide support for local transit priorities in the region, as well as a San Francisco parcel tax that would provide additional funding specifically for Muni operations. The campaign for the regional measure, Connect Bay Area, has begun gathering signatures to be placed on the ballot. You can sign up to learn more and get involved. The campaign for the Muni measure, A Stronger Muni for All, kicks off in early March.