Financial outlook for Caltrain is grim

SamTrans, the other public transit agency serving San Mateo County, has also been significantly affected by COVID-19, but not to the extent of Caltrain, officials said at a meeting Wednesday. That’s largely because Caltrain is uniquely dependent on riders — the agency relies on fares and parking fees to cover 75% of its operating costs, the largest percentage of any transit agency in the nation — and ridership is down 98% since the outbreak of the virus.

“We’re somewhat a victim of our success in being such a fare box driven entity,” said Board Member Dave Pine, also a San Mateo County supervisor.

Unlike SamTrans riders, who are largely dependent on the service, most Caltrain riders choose to take the train. Officials expect fears of contracting COVID-19 to keep many of them away for the foreseeable future and social distancing guidelines will likely limit the number of passengers per train anyway.

“It’s likely we’ll be in a situation that’s far from normal for a considerable amount of time,” said Sebastian Petty, Caltrain’s director of policy development. “We’ll likely see very depressed ridership and we’ll be operating in a mode that’s deeply abnormal.”

Officials also expect many of Caltrain’s regular riders to continue working from home even after the economy reopens, further reducing ridership.

“[We should think about] how to keep some of that work at home in place, but at the same time it really hurts an agency like ours where we’re heavily dependent on those exact same workers,” said Board Member Jeannie Bruins, also a Los Altos councilwoman.

Board Member Cindy Chavez, also president of the Santa Clara County Board of Supervisors, wants to survey riders to understand what it would take to get them to return to Caltrain, adding that cleanliness will likely be a key factor.

“Being able to demonstrate that public transportation is clean, clean, clean is going to be the coin of the realm,” she said.

Caltrain was already in precarious financial footing before COVID-19, and now the outlook is far worse. The agency is facing a budget deficit of more than $80 million through fiscal year 2021 if current conditions persist, but it’s also getting a significant amount of federal relief funding.

Federal money

A first tranche of funding from the federal CARES Act totals $49.3 million and a second, smaller tranche of funds will arrive sometime in the summer. The Metropolitan Transportation Commission, which doles out the money to Bay Area transit agencies, has yet to decide how much money Caltrain will get in the second tranche.

Finance Director Derek Hansel does not expect the entirety of CARES Act funding to cover Caltrain’s deficit through fiscal year 2021, but it is enough to cover the deficit this fiscal year, which totals an estimated $11 million.

“My guess is that’s going to be very, very challenging,” he said, referring to the likelihood of CARES Act funds to cover the agency’s deficit through fiscal year 2021. Hansel added that revenue could be even lower than currently projected and there are no guarantees that contributions by the counties served by Caltrain will be the same as years prior, among other factors that could further impact the agency’s financial outlook. San Mateo, San Francisco and Santa Clara counties each year collectively contribute around $30 million to Caltrain.

During the meeting, officials said additional federal funding beyond the CARES Act will be needed as well as a dedicated funding source. A proposed eighth-cent sales tax for Caltrain in each of the three counties along the corridor is winding its way through the approval process for placement on the November ballot.

Without new funding, furloughs and even a systemwide shutdown all become possibilities, officials said.

“[Today’s meeting] has reminded me of the incredible importance of finding additional funding sources for this entity,” said Board Member Charles Stone, also the Belmont vice mayor. “And I certainly understand that the optics of talking about measures in November aren’t great, but certainly this highlights the facts, and the facts are absent a new stream of revenue from somewhere this organization is in deep trouble.”

Cost reductions

Officials have also taken steps to reduce costs. A hiring freeze has been implemented and overtime has been eliminated, to name two moves, and further reductions to service was also proposed. Even with the extremely low ridership of late, Caltrain is still running hourly service and a total of 40 trains a day, down from the usual 92 trains per day.

“Is there a chance that’s still too much for the demand?” asked Board Member Steve Heminger.

Michelle Bouchard said it’s a Caltrain policy decision to provide at least hourly service for essential trips, and also noted that because so much of Caltrain’s costs are fixed, further service reductions wouldn’t yield much in the way of savings anyway.

She did add that “real opportunities for cost savings” would be to reduce staff, but that hasn’t happened yet and would also be counter to the intent of the federal relief money, she said.

Despite the rough news, officials are confident Caltrain will ultimately weather the storm.

“This corridor has been an active rail corridor for 150 years so there’s a lot of history here and it’s been a real long-term investment for the cities on the corridor,” Petty said.

“We’re not going away,” Hartnett added.

SamTrans, unlike Caltrain, is largely dependent on sales tax revenue rather than fares, which currently are not even being collected on buses. Hansel said he initially projected $136.5 million in sales tax revenue in fiscal year 2020, that number increasing slightly by fiscal year 2021.

Due to COVID-19, he is now instead projecting a decrease of sales tax revenue to $130 million for fiscal year 2020 and dropping to $125 million in fiscal year 2021. And that doesn’t take into account the $28.5 million in federal relief funding SamTrans has already received. Like all Bay Area transit agencies, SamTrans will see a second tranche of federal funds in the summer.

zachary@smdailyjournal.com

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