Caltrain facing budget deficit

“If we receive that allocation in the future, this financial picture changes materially. It’s one of the reasons why I am pretty comfortable proposing a budget that has that kind of deficit financially,” Hansel said.

Caltrain will have to borrow money due to the lag in receiving ARPA funding following the allocation process.

“Just to put it bluntly, we are going to be borrowing money. Whether that money stays borrowed at the end of the fiscal year is still an open question, though I don’t anticipate it will be,” Hansel said.

There continue to be areas of uncertainty in the 2022 budget, including pandemic response, ridership recovery and federal funding allocation. According to Hansel, each 1% of pre-COVID ridership recovery at pre-COVID average fares is worth about $700,000 to Caltrain in revenue.

“Really coming back on the fare revenue side is going to be critical to what we do,” Hansel said.

The main revenue sources for 2022 revenue will be $34.6 million in fares, $27 million in Coronavirus Response and Relief Supplemental Appropriations funding and $82.6 million in Measure RR funds, with fare revenue still not fully back to prepandemic levels.

“We hope that ridership will continue to recover, and that piece of the pie will look significantly better moving into fiscal 2023 and beyond,” Hansel said.

Top 2022 preliminary expenditures include $98.3 million for rail operations, $28.9 million for administrative costs, $10.4 million for fuel, $7.8 million for insurance and $7.5 for facilities and equipment maintenance. Key expense drivers in 2022 will be the relaxation of the 2021 hiring freeze, increased contributions to CalPERS and retiree medical programs, five new proposed Caltrain positions, operation and maintenance. Caltrain has 90 allocated full-time staff.

Caltrain staff presented the 2022 preliminary operating and capital budget to its board at its May 6 meeting. Caltrain will bring back an updated 2022 budget in June.

The operating budget covers expenditures and revenues based on daily business. The capital budget covers projects, assets and replacement of trains. The total unrestrained capital budget is $69.4 million if all funding can be acquired. If not, the constrained capital budget is $31.4 million, with a $38 million funding gap between the two. If constrained, it would mean less money for improvements and enhancements.

Caltrain historically has no dedicated funding source other than passenger fare and relied on member agencies to provide capital budget help each year. However, Hansel said no funding contributions had been agreed upon this year from member agencies like SamTrans, Santa Clara Valley Transportation Authority and the San Francisco County Transportation Authority, based on discussions with the agencies. All three agencies contributed an equal amount of capital funding each year, usually around $5 million to $7.5 million per agency. Several Caltrain board members asked the staff if it could discuss and meet with the other member agencies to find funding for this year. The SamTrans board recently called on other member agencies to make contributions this year around $5 million.

Caltrain has faced several pandemic-related challenges in its 2021 budget, including a steep decrease in ridership, decreased revenue and providing services to essential workers. Caltrain estimates it will end the 2021 budget cycle with around a $12.6 million deficit but will use $12.6 million in federal funding to meet the deficit. Caltrain in 2021 made schedule changes, suspended fare increases, had cost containment and reprioritization of existing resources.

Hansel said the board did not present a 2021 fiscal year preliminary budget in March 2020 due to the pandemic and uncertainty of when federal funding would be available and ridership recovered. Caltrain staff instead presented a first quarter 2021 fiscal year budget in June.

“While this is certainly a challenging [2022] budget, it’s certainly a pleasure to bring you one,” Hansel said.

curtis@smdailyjournal.com

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