VTA budget reveals structural deficits and risks -and need for a strong business plan

An analysis of VTA’s recently approved budget reveals underlying causes of structural deficits, and risks that may cause the structural deficits to increase.  To address these risks, VTA needs to take a clear-eyed approach to the Business Plan that it is starting; to immediately support opportunities for federal operations funding; and to plan for regional or local ballot measures to support operating funding by 2024.

To learn about the business plan and get started with business plan advocacy, join Turnout 4 Transit which is meeting at 4pm today, Saturday, June 26.

What the proposed budget shows about the transit future for Santa Clara County.

  • COVID relief is just postponing VTA’s structural problems – there aren’t enough operating funds to continue operating current service, much less to expand service.  Costs have been growing faster than revenue.  Without significant new revenue, service cuts of 7-10% are possible later this decade.
  • Labor contract impacts are not included, but are likely to further increase operating costs.
  • Continued sales tax dependence (currently 85% of the budget, up from 79% just a couple of years ago) is a big part of the problem.  The sales tax is subject to annual fluctuations of the economy, but also long term changes that may constrain growth.  Current estimates are up to 25% below projections from 2008.  Annual changes range from declines of 15-25% last year and in 2009 to gains of 6-8% in good years.  Overall growth is 2-3%, but is frequently projected higher.  
  • When will ridership return, if it will?  Revenue isn’t really the issue (except for VTA’s BART service), since fares currently only cover 5% of local transit operating costs.  But political will to maintain service may be, if ridership remains low.  Ridership was 43 million in 2016, but the budget only projects 29.5 million in 2023.
  • Aging capital assets need more attention (e.g. light rail vehicle replacement), which will likely increase capital funding in the future.  More Federal funds could help, but may also require more local matching funds.
  • Building Light Rail to Eastridge continues to advance, but funding to operate that service isn’t clearly identified.  Will other services have to be cut to start light rail service to Eastridge?
  • Payments to BART for the Berryessa extension greatly exceed the annual 2008 tax measure receipts.  Accumulated reserves will postpone any immediate financial impact.  Will VTA’s costs be typical in future years?  Ridership has been minuscule during the pandemic; how much will post-Covid ridership growth help?  Will there be adequate future funding to support BART Phase 2?  It looks problematic, but VTA hasn’t laid out a clear plan.  

VTA’s budget may be conservative and there is hope that sales tax revenue, ridership and fare box receipts will increase more rapidly.  But hope is not the best planning strategy.

The combination of all these issues lays out a disturbing future for VTA.  Already well below places like Portland in terms of per capita transit service, the future transit plan looks to be a combination of a high capacity (potentially under-used) BART extension, an inefficient light rail network and an inadequate bus network.  What could be done to forge a different direction?

This is where a strong business plan and strategy can come into play. VTA can:

  • Prepare a focused business plan that specifically addresses transit needs and the resources required.  It is important that the plan looks at a vision for the future, not just sustaining the current status, and provides a strategy for linking all rail and bus modes, even if operated by different agencies.
  • Begin defining the renewal of the 2000 Measure A tax, potentially for a vote as early as 2024.  But define the new program with an operations first strategy, rather than starting with a list of new capital projects.  
  • Increase transparency about the future operations cost for BART Phase 2.  If additional funding is needed, it should be part of the business plan and folded into the broader funding strategy.
  • Explore non-sales tax funding sources.  While dependence sales tax revenues may have to continue in the near future, VTA would be wise to plot a strategy that brings in other, less volatile sources.   

If you are interested in engaging with these issues, join Turnout 4 Transit at today’s meeting, or join the list on that page for the campaign to support a strong VTA business plan.