Governance of Caltrain talks make progress

Caltrain governance and the role of SamTrans have been a long-running issue at the board level. SamTrans, known as the San Mateo County Transit District, currently serves as the managing agency of Caltrain, with the Peninsula Corridor Joint Powers Board, or JPB, owning and operating Caltrain. The JPB consists of representatives from San Francisco, San Mateo and Santa Clara counties. Some Caltrain board members from San Francisco and Santa Clara counties have pushed for changes to the Caltrain governance structure due to SamTrans and Caltrain’s interconnected nature as the managing agency. The two transit agencies have overlapping staff and until recently were headed by the same general manager.

The Sept. 30 discussion was the fifth special meeting on options and financial and legal analysis toward developing a governance recommendation. Timing remains an issue, as the Caltrain board has committed to adopting a governance recommendation by December. Staff still needs to determine the process for a draft recommendation, a recommendation for a basic governance structure, and how best to address governance issues like the right-of-way repayment to SamTrans.

The meeting discussed three governance options for Caltrain moving forward. Option one called for a refined shared service model and executive director relationship. SamTrans would remain as managing agency of Caltrain with increased JPB oversight over the Caltrain executive director and increased oversight through a shared services agreement. Option two calls for a new shared services model and executive director relationship. It would lead to greater JPB management and authority, including the JPB hiring the executive director and senior leadership and establishing purchased service agreements for remaining services provided to the railroad by SamTrans. Option three would dissolve the current SamTrans managing agency model and replace it with a separate, independent Caltrain agency to directly manage and administer the railroad, either through reorganizing the JPA or forming a special district. At its Aug. 20 meeting, the board acknowledged that option three of dissolving the current model and replacing it with a separate Caltrain agency was financially impractical or unsuitable.

Option one would cost $63.8 million, with $1.5 million in one-time costs that will take six months to 18 months to implement. Option two has $69.7 million in annual costs, with $4.6 million in one-time costs taking 12 to 18 months to implement. Option three would have annual costs of $73 million, with $48.9 million in one-time costs, and would take one to three years to implement. The expenses are tied to the SamTrans repayment, new contracts and worker costs.

Director Charles Stone, also SamTrans chair and Belmont mayor, wanted SamTrans to remain the managing agency as part of its contractual right as part of a 1991 right-of-way transaction of the railroad. If there was an outcome where SamTrans was no longer the managing agency, he believed the SamTrans board would want repayment for its right-of-way transaction. Under the 1991 Real Property Ownership Agreement, he estimated repayment at $38.5 million, plus interest. He estimated the 2008 amendment to the Real Property Ownership Agreement would add $19.8 million, plus interest. Stone also wanted assurances that if SamTrans were no longer the managing agency, the money would be repaid in a short, specified period.

“Any outcome I would think that doesn’t include the repayment of that $19.8 million, plus interest, I don’t think would be palatable to me or the SamTrans board, even though I am not speaking for them,” Stone said.

Stone, however, wanted to wrap up the governance issue.

“I’m sort of hopeful that, maybe it’s our GMs, but maybe someone can get into a room and hammer something out that captures the perspectives of everyone and may find some common ground,” Stone said.

Director Steve Heminger, who represents San Francisco on the board, wanted to turn the executive director into a Caltrain hire with more of its board oversight and repay SamTrans for the right-of-way agreements.

“We’ve got something of what we need here, and maybe the next step isn’t so far a step after all,” Heminger said.

The timing for approving governance reform was an issue for Heminger, and he was open to minimal changes if they made a significant impact. At the very least, he thought SamTrans was owed right-of-way repayments as a managing agency of at least $20 million. He suggested working in the next few weeks to reach an arrangement on the role of the executive director and payments owed to SamTrans.

“To buy a little more independence, we might have to go higher than that $20 million figure,” Heminger said.

Director Jeff Gee, also a SamTrans board member and Redwood City councilmember, suggested Acting Caltrain Executive Director Michelle Bouchard could come back in October with a straw proposal that had solutions and details to some of the issues discussed.

“I don’t think we are that far. I think there may be an opportunity to find a way to achieve many of the values that were articulated by Director [Jeff] Hendricks and Chair [Dev] Davis that would be acceptable to the other board I report to,” Gee said.

Director Dave Pine, a San Mateo County supervisor and SamTrans board member, supported asking Bouchard to reconcile the differing opinions.

“I support giving her that opportunity. I think it would be valuable to hear back on that work in October and have that take precedent over any regional discussion since time is short to see if we can come up with a governance recommendation by the end of the year,” Pine said.

Bouchard will develop a straw proposal over the next few weeks to try and thread a needle to meet all requests from the individual board members. The next special meeting on governance is Friday, Oct. 22. She will provide an update on potential proposals during that meeting.

Caltrain staff noted the use of Measure RR to repay SamTrans for its investment would be vulnerable to legal challenge because it was not presented to voters. Measure RR is a special tax approved by voters in 2020 as a dedicated funding source for Caltrain. Staff said Measure RR could likely be used to implement governance options because it is a type of operating cost contemplated by Measure RR.

While the Caltrain board can recommend governance change, it must rely on approval from all three JPA organizations that have representation on the Caltrain board. The three JPA members are the city and county of San Francisco, SamTrans and the Santa Clara Valley Transportation Authority. If the three members approve amended agreements, the selected governance option takes effect.

curtis@smdailyjournal.com

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