Sonoma-Marin Area Rail Transit foresees potential $7.5 million budget surplus

By Will Houston, Marin Independent Journal

After two years of recovery from the coronavirus pandemic, SMART expects to have a $7.5 million budget surplus in the 2022-2023 fiscal year.

Sonoma-Marin Area Rail Transit, which provides 45 miles of passenger rail service between Larkspur and Santa Rosa and runs North Bay freight hauling services, attributes the surplus to a predicted sales tax revenue boost, millions of dollars in federal stimulus funding and expectations it will recover lost ridership in the coming year.

"The higher sales tax, as well as the money we got from the federal government, has allowed us to not only reduce fares but bring back service," Heather McKillop, the finance director, said Thursday. "That's big for us and for our customers."

The draft budget, which will be open for public comment through June 3, is set to go before the SMART board for a final vote on June 15. The budget would take effect July 1.

How SMART plans to potentially use the surplus dollars could be decided in the coming month, especially as it looks to update a plan identifying its priority projects for the next decade.

On Wednesday, board member Melanie Bagby, a Cloverdale councilwoman, recommended an increased focus on expanding rail service and a parallel pedestrian path as part of SMART's ultimate goal of reaching Cloverdale.

The agency has yet to expand past the Sonoma County Airport in Santa Rosa. Its more than $65 million Windsor extension is on hold because of an ongoing legal challenge against Bay Area bridge toll hikes that would provide needed funding for the project.

"It's time to consider additional investment in planning for the pathway and passenger and freight rail north of Healdsburg," Bagby said.

Novato Mayor Eric Lucan, also a member of the SMART board, said the surplus is only a forecast and is subject to change. But should the surplus become a reality, he said, it could be put to a variety of uses such as investing in the railway; providing matching grants to construct the remaining pedestrian path segments in Marin; continuing SMART's reduced fares; or putting them into a rainy day fund.

"There are lots of options at the board's disposal," Lucan said.

SMART was already anticipating a $7.5 million allocation from the $1 trillion American Rescue Plan Act federal stimulus package passed last year. The projected 10% increase in sales tax revenue compared to this current fiscal year came as a surprise, McKillop said. Sales taxes, which make up more than half of SMART's revenue, are expected to increase from about $46.9 million budgeted for the current fiscal year to $51.6 million in 2022-2023, according to McKillop.

SMART's quarter-percent sales tax was passed in 2008 and is set to expire in 2029. A 2020 ballot initiative to extend the tax by another 30 years failed to reach a two-thirds majority approval from Marin and Sonoma voters.

Critics and opponents of the measure had cited several reasons for their positions at the time, including a lack of transparency, excessive taxation, allegedly poor fiscal management of the agency, a lack of proper oversight and a failure to live up to promised service from Cloverdale to Larkspur.

The draft budget also assumes that SMART will see a significant recovery of ridership within the next year that will nearly double its fare revenue. The budget assumes SMART will receive $2.3 million in farebox revenue, up from $1.2 million in the current budget.

SMART is aiming for 594,000 passengers in the next fiscal year, or about 49,500 passengers per month. So far, the service has had nearly 274,000 passengers from July through April, averaging about 27,400 passengers per month. However, ridership steadily increased the first several months of 2022 to the highest monthly totals since the pandemic began two years ago.

"We're starting to see the ridership continuing to climb and it looks like things are finally starting to return and get to that trajectory SMART was on pre-pandemic," Lucan said Thursday.

In an effort to attract new or lost riders, SMART has reduced fares by 40% since May 2021 and plans to continue doing so through August. The $2.3 million fare revenue projection assumes that the fare reduction will be extended through the entire fiscal year from July 1 through June 30, 2023, McKillop said.

Additionally, SMART has nearly restored its pre-pandemic service levels. It plans to run 36 daily weekday train trips per week as of June 13 — two trips fewer than it was providing before the pandemic — and has restored weekend service.

SMART administrators are hoping the increased frequency of train trips will attract more riders, especially given the return of highway traffic and the high fuel prices.

Ridership has been a focus of past and ongoing criticism of SMART. Mike Arnold, a Novato economist who was part of the opposition campaign against SMART's tax extension measure, called on the district to publish more performance metrics in its budget, including the taxpayer subsidy per boarding. In a letter to the SMART board this week, Arnold wrote that taxpayers have paid about $75 per train boarding for the first nine months of the current fiscal year, up from $33 in the 2019-2020 fiscal year.

"In the interest of transparency and full disclosure the public and agency would be better served if staff disclosed the full set of performance measures that are readily available in the NTD and of interest to the public," Arnold wrote, referring to the National Transit Database.

McKillop said she has yet to read Arnold's letter, but said all public comments submitted through June 3 will be reviewed by staff and discussed as part of the budget deliberations.

A copy of the 2022-2023 draft budget can be found at bit.ly/3LtIYoQ.

___

(c) 2022 The Marin Independent Journal (Novato, Calif.)

Visit The Marin Independent Journal (Novato, Calif.) at www.marinij.com

Distributed by Tribune Content Agency, LLC.

Daily News Briefing