For Bay Area Transit, a $590MM ‘Fiscal Bridge’ (UPDATED 2/20)
FEB. 20 UPDATE: Gov. Newsom, alongside state and community leaders, on Feb. 19 signed AB/SB 117, authorizing the California State Transportation Agency (CalSTA) to loan $590 million to the MTC—the transportation planning, financing, and coordinating agency for the nine-county San Francisco Bay Area—from the Transit and Intercity Rail Capital Program (TIRCP).
“California is stepping up to support Bay Area transit—this agreement will help protect transit service for more than three million monthly riders,” Gov. Newsom said. “The benefits of a strong transit system are clear: growing ridership, cleaner air, and less congested roads. I’m proud of the progress the Bay Area transit service and operators are making on ridership recovery, and this loan will continue to build on that success as the region works together on long-term funding solutions.
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MTC on Jan. 30 reported that the original agreement was “[n]egotiated in close coordination with the affected transit agencies—which together face a projected deficit of more than $800 million in the next fiscal year—the new agreement will sustain operations used by hundreds of thousands of daily transit riders across the region.”
The agreement authorizes the loan to be funded no later than July 1, 2026, using money awarded but not yet allocated for Bay Area projects by the California Transportation Commission through the TIRCP, according to MTC. “Because many transit capital projects have long construction timelines and the TIRCP is continuously replenished, the loan is structured to uphold the state’s commitments to awarded projects while minimizing risk to project schedules,” it said.
This loan provides what MTC called a “fiscal bridge” until sales tax dollars could potentially be available. A regional funding measure authorized by the state legislature last year via state Senate Bill 63 may appear on the November 2026 ballot in Alameda, Contra Costa, San Francisco, San Mateo, and Santa Clara counties, according to MTC. If the measure qualifies for the ballot and is approved by voters, it would establish a temporary 14-year sales tax to support transit operations, it said. But these funds would not begin flowing until around July 1, 2027.
“MTC greatly appreciates the time and energy the Department of Finance and the Governor’s office put into this loan negotiation,” MTC Chair Sue Noack, who also serves as Mayor of Pleasant Hill, said on Jan. 30. “It was critical to reach agreement on funding that would avert major service cuts this year while also protecting the Bay Area’s priority capital projects and this agreement does just that.”
BART General Manager Bob Powers noted that his agency, “is currently developing detailed budget plans for two funding scenarios to close our projected $376 million operating deficit for Fiscal Year 2027 through either new revenue and efficiencies or through service reductions, station closures, fare increases, layoffs, and across-the-board internal cuts. A state loan gives us reassurance money will be available to continue to deliver the best service possible for the Bay Area. We are thankful to Governor Newsom and the Department of Finance for finding a path to fund transit operations during such an unprecedented scenario brought on by the pandemic and remote work. We also thank the Bay Area Legislative Caucus for their supportive efforts and look forward to working with the Legislature on early action to include the loan within the state budget.”
“This bridge loan will help us maintain Muni service for one crucial year for everyone who depends on transit to get where they need to go,” SFMTA Director of Transportation Julie Kirschbaum said. “We thank the Metropolitan Transportation Commission for its leadership and the Governor and the Department of Finance for their collaboration. We are deeply appreciative of the tireless efforts of Mayor Daniel Lurie, State Senator Scott Wiener, State Senator Jesse Arreguín, the Bay Area Legislative Caucus, the Board of Supervisors and the transit advocates who kept this loan alive last year. With this key agreement completed, securing the additional funding we need to address our ongoing deficit is the critical priority.”
“We are so grateful to the Governor, our delegation members, and our state and regional partners for stepping in and supporting public transit in the Bay Area at this critical time,” Caltrain https://www.caltrain.com/ Executive Director Michelle Bouchard commented. “This loan will allow us to preserve the service that made Caltrain the fastest growing transit agency in the U.S.”
“For 65 years, AC Transit’s north star has been delivering safe, reliable, and affordable bus service to the East Bay,” added Salvador Llamas, AC Transit General Manager and CEO. “That legacy was put at risk by unprecedented pandemic-related budget shortfalls. This state loan safeguards existing service levels and brings immediate relief to the more than 3 million riders each month who were at risk of losing some of the service they rely upon for the essentials of life. We thank Gov. Newsom and our local and state partners for making this possible, and while long-term funding challenges remain, today we celebrate a critical win for our riders and communities.”
Loan Structure
The Governor’s Office on Feb. 19 reported that the MTC will use the loan proceeds to provide short-term operating loans to the four Bay Area transit operators and repay the loan in quarterly installments to CalSTA over a period of 12 years, with interest-only payments during the first two years.
Key provisions include:
- “Authorizes MTC to use the proceeds of the loan to offer loans to transit entities within the Bay Area region for public transit operating purposes.
- “Requires MTC to repay the loan in quarterly installments to CalSTA over a period of 12 years, with interest-only payments during the first two years.
- “Requires MTC to secure repayment of any loan issued by CalSTA by pledging the State Transit Assistance Program revenues received by transit entities.
- “Directs CalSTA to work with MTC to ensure there are no impacts on existing capital projects.
- “Requires the California Transportation Commission to monitor and report to CalSTA on the unallocated and unexpended balances of the region’s project awards for the TIRCP.
- “Authorizes MTC, in coordination with CalSTA, to prioritize the use of existing sources of funds allocated by the state to the region so that projects are not materially impacted with regard to scope, schedule, and eligibility for non-state funding.
- “The loan carries an interest rate that reflects the interest rate of the state’s Surplus Money Investment Fund (SMIF) to ensure the general fund will not lose out on interest income.”
Commentary From Railway Age Contributing Editor David Peter Alan, Feb. 3
This story demonstrates how difficult it is to report on the future of rail transit in the United States (that also goes for bus-service providers, but they are generally outside our purview, although AC Transit is a bus-only agency). Ridership on transit has not recovered to pre-COVID levels, while costs keep rising. In the meantime, the COVID relief money that the feds provided for transit during the height of the pandemic has run out, or will run out soon, at every transit agency.
To add to the difficulty of reporting these stories, every one of them is local, with each provider facing different fiscal challenges and potential solutions, all of which depend on local politics, and sometimes on the fickle whim of the voters.
New York’s MTA has money from new levies and some capital assistance from Congestion Pricing in Manhattan. New Jersey has a surcharge on the largest corporations in the State, which has 35 months left to run. Chicago enacted some new revenue-raising measures and regionalized the governance of transit in Chicagoland. Pennsylvania got a two-year reprieve by taking money from the capital side and allowing it to be used for operations; a risky solution, but the Legislature did not come through, and Pittsburghers and folks in the Philadelphia area still have their transit.
When the COVID-19 virus struck nearly six years ago, transit in the Bay Area was hit hard. Service was slashed everywhere. For a while, there were only 17 bus routes operating in San Francisco, and the rule was that everybody had a bus stop within one mile of home. Some of those bus routes substituted for rail lines that had lost service completely.
Since then, service in the area has recovered substantially, but not to pre-COVID levels. There have also been capital improvements, like the recent electrification of the Caltrain line, which has brought shorter running times and a strong increase in ridership.
A bridge loan is still a loan, though, and the transit agencies are required to pay it back. In nine months, the voters will have their say. If they go along, San Franciscans and people who live in neighboring towns and across the Bay will be able to breathe easier about their transit until 2041. In California, voters must approve new taxes by 2/3 and not merely a majority. These supermajority votes allowed Los Angeles to expand its rail transit, but will the voters in San Francisco and the outlying counties give their transit a similar vote of support?
Voters kept Caltrain going when it was in trouble a few years ago, and plenty of San Francisco residents (as well as tourists) depend on Muni transit there. The issue is whether or not enough motorists in the other counties will agree to come up with the money to keep their transit going at or near present levels. As with all of these unique and risky solutions to transit’s post-COVID financial woes, time will tell.
