While Sonoma-Marin Area Rail Transit officials praised the progress made after two years of passenger rail service in the two counties, new financial projections show an uncertain future for the transit service.
If the agency does not make any changes to its operations in the coming years, it faces completely depleting its funds by 2024, PFM financial adviser Sarah Hollenbeck told the SMART board of directors Wednesday. Another $9 million will be needed to bring the financial picture into balance, Hollenbeck said.
"I think there is no question that we're getting the clear sense that, even to continue operations, we have to think strongly about how to restructure and looking toward a (tax) renewal," Damon Connolly, a board member and Marin County supervisor, said at the meeting.
Assuming SMART sticks with its Larkspur extension -- set to open later this year -- and Windsor extension, the costs to operate this stretch of track will still exceed the revenue brought in during the coming years. By 2024, the agency's currently budgeted $26.5 million fund balance and its $17 million reserve fund would be depleted. The projected cost increases will result from increased bond debt payments, labor costs, the Windsor extension buildout and other expenses, Hollenbeck said.
SMART staffers seek to remedy this by having the voters approve a 20- or 30-year extension of the quarter-cent sales tax that funds the rail agency. Marin and Sonoma voters approved the 20-year quarter-cent sales tax in 2008 under Measure Q, which expires in 2029. SMART plans to place a tax extension measure on the March 2020 ballot.
If the tax is renewed, it would allow the agency to restructure the debt payments on its existing bonds, saving the agency between $12.2 million to $12.5 million depending on the length of the tax, Hollenbeck said. From these debt savings, the district's operating revenues would eventually exceed costs by about $3.1 million by 2022 and more thereafter, assuming 3 percent inflation and no further rail construction beyond Windsor.
Even if the tax extension is passed and the debt restructured, this extra revenue would still not be enough to fund the planned rail extension to Cloverdale and Healdsburg, Hollenbeck said. This troubled some SMART board members.
"How am I going to go back to my constituents and say, 'Even with a 30-year extension, sorry there is no money here to fund an extension?'" said Joe Naujokas, a Healdsburg councilman and SMART board member.
Should a tax fail to pass, cuts to service and staff would have to be made, which board president Gary Phillips said would almost be a "death spiral to me because obviously the service would not be that attractive."
Farhad Mansourian, SMART's general manager, said with the investment made by the public already, inaction isn't an option.
"The taxpayers have paid almost $600 million creating a railroad system and a railroad operation," Mansourian said. "What is the option? Let's close the door and forget about it?"
David Schonbrunn, founder and president of the San Rafael-based Transportation Solutions Defense and Education Fund, said while SMART has been important in providing new commute opportunities in a time of clogged highways and high greenhouse gas emissions caused by transportation, it needs to be realistic in what it can afford to do. As of now, Schonbrunn said he does not see a Cloverdale extension being feasible.
"I think nobody has ever really faced up to the question of, 'Can we ever catch up?'" Schonbrunn said. "My understanding is unless they show me figures, and they have been reluctant to show figures, I don't see how SMART can afford it because they didn't get the amount projected in 2008."
SMART was anticipating the sales tax to generate $1 billion to pay for what was expected to be a $500 million rail and path buildout. After the recession, the numbers changed, with only $298 million in tax revenue being generated and the project costs for the full 70-mile track now exceeding $1 billion.
While critics have pointed to SMART not living up to its original funding promises, the agency was able to use the funding to leverage another $323 million in state and federal funds for construction of 45 miles of rail and 33 miles of path, Mansourian said.
For most rail projects in the state, local tax dollars are usually insufficient to cover rail extensions and often require money from the state and federal governments, which in turn often require matching local funds, said Ethan Elkind, a climate change and rail transit researcher at the University of California, Berkeley law school.
"That's why you see local sales tax and bonds," Elkind said. "Those are the typical ways to get a transit system launched and keep it going."
With the state eyeing the possible extension of SMART service to Solano County to link up with the Capitol Corridor, SMART could potentially use this as a bargaining chip to get more funds for its Cloverdale and Healdsburg extensions, said Judy Arnold, a board member and Marin County supervisor.
Asking the public for more tax dollars without having more definitive answers on how SMART plans to pay for further rail and path extension plans raised concern for Connolly.
"I think we very much have to put some parameters around that vision and really convince the public that we have the wherewithal with their help to get there," he said.
SMART's Citizens Oversight Committee and board plan to review the agency's financial plans and a potential ballot measure in the coming months. The board is scheduled to consider the ballot measure text in September and October before voting on Nov. 6 to put it on the March 2020 ballot.
Two years of data
Since SMART launched service on Aug. 25, 2017, it has carried nearly 1.4 million passengers, 130,000 bicycles and about 5,000 disabled passengers. The agency said it does not track the numbers of riders that use the service during the morning and afternoon commutes.
Looking ahead, Mansourian said SMART plans to improve service through the opening of the Larkspur and downtown Novato stations as well as the planned construction of the Windsor extension next year.
"We are humbled, we are tremendously appreciative of the trust Marin and Sonoma taxpayers have given us," Mansourian said. "We have made a big change in our short two years of history as an operating railroad and we are committed to working even harder and accomplishing more in the years to come."
Once the Larkspur and Novato stations open, SMART plans to make new schedules to reduce the 90-minute gaps in northbound evening trips to about 30 minutes. However, before this can occur the agency must test the tracks in Larkspur, San Rafael and Novato, which will require the trains to sound their horns between the hours of 11 p.m. and 3 a.m.
Opening the Larkspur station will provide a "huge transit benefit" by being able to connect Sonoma and Marin residents to San Francisco, and vice versa, Elkind said.
"My guess is that when that Larkspur phase opens that's really going to boost ridership and the overall utility of the line tremendously," Eklind said. "That's going to cause impacts on the ferry system as well."
SMART and the Transportation Authority of Marin also seek to secure a vendor for a bike-share program later this year to have it launched in 2020. With the addition of a new commuter line, finding ways to connect passengers to and from the train stations with ease has been a challenge, said Derek McGill, the authority's planning manager. SMART offers discounts for Lyft rides to and from stations while Marin Transit's on-demand ride service, Connect, has worked to link Terra Linda workers and residents to SMART's Civic Center station.
"The bike share opening in 2020 will be a big asset for first mile-last mile connectivity to the train," McGill said.
For the future, SMART is eyeing a second Petaluma station and obtaining the $40 million in Regional Measure 3 funds to construct its Windsor extension. The funds are currently being held in escrow by ongoing litigation. The Windsor extension is set to cost $55 million.
While no funding has been secured to pay for it, a Healdsburg extension would cost about $200 million and a Cloverdale extension another $170 million in today's dollars, Mansourian said.
