Caltrain budget warns of deficits, possible shutdown without funding

The agency’s backup plan was discussed amid annual budget discussions. Its updated fiscal projections are modestly better than original estimates for the upcoming fiscal year 2027, which starts next month, however, it still anticipates a $75 million average annual deficit in the coming years.

The state loan is helping the agency close its $47.6 million deficit for fiscal year 2026.

Next fiscal year, expenses are expected to increase by a little over 5% compared to the current year, in part attributable to higher maintenance costs of electrified infrastructure. The agency’s contract with TransitAmerica Services, which handles most of its day-to-day operations, has increased substantially over the years as well, going from nearly $94 million in Fiscal Year 2022 to a projected $128 million this year.

“We’ve continued to look for ways to reduce our costs, and we sharpened our pencils and looked at our wages and benefits line item,” Oscar Quintanilla, director of Budgets and Financial Analysis, said during a recent Caltrain board meeting. “We were able to reduce that by $800,000 and this is primarily by delaying the hiring of currently vacant positions.”

With strong ridership growth, fare revenue is expected to surpass the current fiscal year’s forecast, with an increase in average fare per passenger as well. Revenue from Measure RR — a Caltrain-dedicated sales tax measure passed in 2020 — is expected to remain relatively flat.

The budget adoption also comes at the same time the board finalized its financial efficiency plan if the measure passes — and the more daunting report if it doesn’t.

“I don’t want to sugarcoat it,” Executive Director Michelle Bouchard said during the meeting. “With that level of high fixed cost, it is conceivable that we will not be able to provide any Caltrain service.”

As a condition of the sales tax measure, the Metropolitan Transportation Commission led an independent analysis to identify past and potentially future financial efficiencies each transit operator has done or could implement. The report found that Caltrain realized about $76 million in savings, about 7% of operating costs, driven largely by “a strategic hiring freeze, elimination of the standalone mobile app, reductions in special trains, improved operator crew efficiency and overtime reduction, and integration of electrification infrastructure maintenance into existing operating contracts,” according to the report.

To further efficiency gains, the report recommended updating parking rates, increasing enforcement, monetizing its fiber optic and communications assets, increasing GoPass and Clipper BayPass enrollment and evaluating retail partnerships at stations.

The ballot measure could also invite legal challenges, which Board Member Pat Burt said should be taken into consideration when budget planning and implementing efficiency measures.

“I remain very concerned that the bridge loan that we received from the state will not cover us into a period if we get the very good chance of legal challenges to the regional measure should it pass,” Burt said during the meeting.

If the Connect Bay Area measure passes, another efficiency review will required for all agencies that will receive funds.