Caltrain board 3-county governance discussion drags on

On Thursday, the Caltrain board held their seventh or eighth discussion focusing on governance, depending on how you count (see timeline below). With slow progress in an agenda item that took about 4 hours, the board will now need to hold another special meeting in January prior to the February 2022 board meeting. Meanwhile, Caltrain staring down a fiscal cliff that may come as soon as 2023 , due to revenue loss caused by the pandemic and a $400 million gap to finish the electrification project, which will require the board and senior management working together to fix.

Raising the risk of unravelling the Caltrain Joint Powers Agreement without an orderly path
Rather than starting with the outlines of an agreement that had been painstakingly crafted over multiple months, and working to address remaining open issues, multiple board members spent the first 90 minutes of their discussion revisiting and picking apart underlying concerns about the Joint Powers Agreement that constitutes the three-county arrangement to govern Caltrain.  

Multiple public comments, including speakers from SAMCEDA, the leading business organization in San Mateo County, regional think tank SPUR with presence in San Francisco and San Jose, and multiple transit riders, urged the Caltrain board to swiftly reach agreement in order to move on to guiding the service through the challenges ahead in restoring ridership, filling the funding gap for electrification dealing with an upcoming budget fiscal cliff as soon as FY 2023, regional service coordination, and more…

In particular, Director Chavez at first seemed to imply, and Director Walton stated strongly that they lacked confidence in the viability of the proposal for SamTrans to retain the formal status of managing agency while delegating the roles of executive director and dedicated rail staff to Caltrain.  Chavez raised concerns that the Caltrain Executive Director was not able to hire and fire employees, and Acting ED Michelle Bouchard stepped in to assure her that she did in practice have this ability.  Walton alleged that the Caltrain Joint Powers Board has no authority or power of oversight over the actions of the agency. Staff confirmed that the Caltrain board routinely reviews and approves the agency budget.

Director Stone asserted that SamTrans making changes to the way that SamTrans executes its role as managing agency (by delegating the management of Caltrain to a dedicated executive director reporting to the Caltrain board, with a documented service agreement for shared services) would be opposed by the taxpayers of San Mateo County unless there was compensation for making this change. Edited to add: Stone noted that he supported having a dedicated Executive Director who could be hired and fired by the Caltrain board. ((Having dedicated executive staff is an eminently reasonable step for a maturing agency with big projects, big goals, and big challenges that are separate from running a county’s bus service)).

Director Hendricks asked whether maintaining SamTrans’ nominal role as managing agency serves any ongoing role for Caltrain.  SamTrans board members have previously said that they are dead set against changing this status, although they are open to the proposal to retain the formal title as managing agency while delegating the role of Executive Director reporting to the Caltrain board, senior rail management reporting to the executive director, and shared services provided via formal agreement.

Director Heminger, who will be taking the reins as chair, started his comments 90 minutes in (11:30), urging his colleagues to use the agreement as the starting point and make progress.

Paths to change
The Peninsula Corridor Joint Powers Board that governs Caltrain does not have the power to change the Joint Powers Agreement, which is a pact between SamTrans, VTA, and the City/County of San Francisco.  However, the Caltrain board can create a template recommending changes, and send that to the member agencies, as an orderly path to change.

But, if the Caltrain board punted back the job of renegotiating the JPA back to the three partners, without guidance, to local agencies that do not have a clear goal to run an important link of the region’s transit system, in the middle of election season, with politicians motivated to fan the flames of competition against counties that they see as rivals – that is a recipe to leave the agency languishing, with greatly diminished ability to steer through the rocky road in the year ahead.

Three hours into the discussion (1:15), Director Chavez observed that with the roles that Caltrain board members play on the member agency boards, “it is incumbent upon us to take the lead in creating a proposal” –  this was an important moment, indicating Director Chavez’ goal for the board to reach agreement rather than to punt the governance question back to the member agencies, leaving the future of Caltrain in pieces on the floor.

Director Gee observed that he sees an agreement as a step on a path, not to renegotiating the Joint Powers Agreement, but toward a new regional rail governance arrangement.  A regional study of rail governance is moving forward this year.

The JPA could be changed by the state legislature
Last year when the governance discussion was kicked off, Caltrain’s attorneys presented an overview of the various (overlapping, inconsistent) elements of the Joint Powers Authority agreements that constitute Caltrain.   However at the September 2021 governance workshop, it was stated clearly that Joint Powers Authorities are subject to the will of the state legislature (slide 27). If Caltrain governance is imploding, the state has the ability to step in and change the system.  

The fight over largely symbolic money 
What appears to be at stake with all the saber rattling is a sum of at least $7 to $15 million over and above the $20 million that all agree that SamTrans must be repaid for the purchase of the right of way in the 1990s.  The principal will be put forward by MTC, and a source for any additional payments has not been identified.

As part of a deal in 2008 with partial repayment, SamTrans forgave $40 million of the outstanding debt. As part of that deal brokered by MTC, the parties agreed that SamTrans would retain the right to serve as managing agency for Caltrain for as long as it wishes (the MTC slides for Wednesday include a good summary of the history.)

SamTrans is seeking the additional payment in recognition of the long period of time that the funds had not been paid back, plus compensation for accepting the changes to Caltrain’s governance, and (edited to add) additional compensation for increased ongoing costs due to the unsharing of services that had previously been shared.

Board members from San Francisco and Santa Clara Counties noted that with Measure RR sales tax in 2020, those two counties now generate a majority of the funds to run Caltrain. Board members from San Francisco and Santa Clara Counties also wanted an accounting of the relative costs and/or savings for SamTrans and Caltrain.

The 2008 deal did not specify interest for late repayment, and also did not specify any price tag associated with making changes to the managing agency role. 

This is above all a political dispute with the different counties having different opinions about what is owed to whom and why.

Sidebar – opposition to MTC strings on funding
A side discussion where Caltrain board members seemed unified was in opposing the idea that MTC might want to put strings on funding that would flow through MTC for right of way repayment or to cover the missing $400 million for Caltrain electrification. A letter from MTC Executive Director Therese McMillan mentioned MTC’s upcoming discussion of Caltrain electrification and governance at Wednesday’s Programming and Allocations meeting. The staff presentation for that meeting recommends that MTC consider the repayment in the context of ongoing regional discussions about transit network management, regional rail governance, and megaproject delivery. While the Caltrain board members expressed strong opinions about the matter, it would seem difficult for the agency to be able to prevent conditions by MTC, since it will depend on the funds through MTC to complete the governance deal and to complete electrification.

Summary – Resolving the open issues

The open issues summarized in the staff report include:

  • language about the timing of response to regional governance
  • the number of votes needed to hire/fire Exec Director – simple majority or supermajority
  • additional funds to repay SamTrans for right of way, beyond the principal agreed in 2008 but not paid

Amid the drama, the board seemed to make progress on two of the issues.

Regarding the timing of response to regional governance, the wording was tweaked to acknowledge the multiple regional governance discussions that are in the works, and to work with MTC to develop a timeline, since there are several interrelated studies in the works. 

Regarding hiring and firing the executive director, Director Gee proposed a compromise requiring a simple majority with at least one vote per county, which seemed to get some traction.

Lastly, regarding the repayment, the discussion shed more light on the amount that was at issue ($7-14 million), and the rationale (the time since 2008; SamTrans feeling the need for payment to make changes.  

Above the issues raised earlier, during the meeting, board members Chavez and Walton seemed to identify an additional goal for Caltrain to bring on a separate CFO, in addition to the dedicated Executive Director.

The board will need to reconvene in January to hash through the issues. 

Or reach a stalemate, leaving matters to three rival counties and the state legislature.

While the governance discussion slogs on, Caltrain is facing urgent issues:

  • The electrification project has a $400 million funding gap that needs to be filled to finish the project
  • The BART and SFMTA boards are moving ahead to grappling with fiscal cliffs in 2024, and Caltrain ought to be grappling with its pandemic-hit finances
  • The region is moving forward with two major studies looking at the regional transit and rail governance

Live tweets from the governance meeting can be found here, and the video can be found here: