BART has 'no backup plan' if Bay Area voters reject tax measure

By Ricardo Cano | San Francisco Chronicle (TNS)

BART officials say the tax measure is their only way forward — there is no plan B.

The regional rail agency expects to run out of the $1.9 billion in federal and state assistance by around April 2026, at which point BART projects a $35 million deficit for the 2026 fiscal year.

By fiscal 2027, the agency expects to face a $385 million deficit — about one-third of BART's operating costs — with projected shortfalls of $377 million following in fiscal 2028 and $355 million in fiscal 2029.

Those latest budget projections, which BART's Board of Directors will discuss Thursday, represent a noticeable increase from figures the agency released in late March. The rising deficits are partly due to expected declining sales tax revenues and a slower-than-anticipated ridership recovery.

BART plans to use $328 million in federal and state subsidies to balance its budget for fiscal 2025, which starts in July. The agency expects to exhaust its remaining $294 million in subsidies that state lawmakers approved last year to shrink a $329 million shortfall to $35 million in fiscal 2026, which begins July 2025.

BART officials plan to defer allocations to its priority capital program that funds high-priority capital projects, as well as deferring indefinitely allocations to its pension trust that help reduce BART's future pension liabilities to stay in the black in fiscal 2026.

But 2026 will mark the beginning of a dreadful financial situation for BART as the agency begins incurring nine-figure operating deficits.

BART officials are putting all their chips on voters' approval of a tax measure expected on the November 2026 ballot that could raise $1.5 billion annually for BART and Bay Area transit agencies' service costs.

"I'm just going to be very candid with you right now — if a transit funding measure is unsuccessful, BART does not have the ability to close funding gaps of $300 or $400 million," said Pam Herhold, BART's assistant general manager for performance and budget.

BART cut service by about 40% during the height of the pandemic, saving about $100 million in operating costs, Herhold said. BART would likely have to implement the sorts of "doomsday" service cuts — in which it shutters stations, ends weekend service, and eliminates two of its five rail lines — to balance shortfalls trending toward $400 million.

Those cuts could place BART in a vicious transit death spiral, where service cuts deter riders and the fares they pay, leading to more service cuts and dwindling ridership.

BART's budget proposal would preserve current service levels, which are slightly above 2019 levels, for the next two fiscal years — a strategy officials hope will lure more riders.

"There is no backup plan if that measure is unsuccessful," Herhold said. "That is why we're putting our best service out there and reminding the region how important BART is to the Bay Area."

BART's sluggish ridership recovery is a driving factor behind its financial peril. The rail agency has recovered under 45% of its 2019 ridership, when trains carried 400,000 people on weekdays. Ridership on BART has been mostly flat since last year, and officials expect modest growth in coming years.

Slow ridership recovery, though, isn't the only thing straining BART's finances. The agency, for years, has faced rising labor costs and officials expect they'll continue to go up in subsequent years.

According to board Director Debora Allen, the agency's expenditures for fiscal 2024 are projected to be 9% higher than fiscal 2023's actual expenditures, which were 13% higher than in fiscal 2022.

Allen says BART management has not done enough to find ways to rein in spending and has been critical of agency officials for not planning contingencies outside of lobbying for a regional ballot measure.

BART's rising operating costs will continue to financially strain the agency, even if voters approve a tax measure, Allen said.

"We don't have control over this deficit spending, and already we're seeing that in those later years, 2027 and 2028, deficits are going well beyond $350 million where just last year they were saying it was under $300 million per year," Allen said. "The deficit keeps growing, the spending keeps growing."

Legislation by San Francisco state Sen. Scott Wiener and Hayward state Sen. Aisha Wahab would authorize the nine-county Bay Area to place a 30-year tax measure, such as a parcel tax or vehicle registration fee, on the 2026 ballot.

A regional tax measure would transform BART's financial structure. The agency relied on fare revenues to cover 70% of its operating costs in 2019, a model that agency officials say is no longer sustainable, post-pandemic, following a precipitous decline in office commuters.

"The three biggest problems facing BART are remote work, remote work and remote work," said BART board President Bevan Dufty. "The reality is, we're not doing anything wrong. We were built upon a model that relied on fares from our riders, and that was something that looked really good to people for many, many years. And COVID just flipped that entirely."

Even if voters approve a tax measure for BART and Bay Area transit, that funding likely won't come until fiscal 2028, leaving the agency with a $385 million deficit to balance on its own in fiscal 2027. Herhold said BART could use "one-time solutions," such as implementing a hiring freeze and instituting more deferrals to balance a budget that fiscal year.

It's unlikely more financial help will come from the federal government, with a split Congress, or from California, which faces its own yawning budget shortfall.

Federal and state subsidies have helped delay a potential death spiral BART officials have forecast since the start of the pandemic. BART spokesperson Alicia Trost said BART is not alone in its financial peril, and will continue to lobby the state and federal government for subsidies.

"We know the federal government and the state government and our local government won't let BART fail," Trost said. "We're carrying many people, hundreds of thousands of riders, even today, and we don't want those cars back on our roads."

Reach Ricardo Cano: [email protected]; Twitter: @ByRicardoCano

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