Anticipating a drop in sales tax revenues as economic activity slowed following the October firestorms, the North Bay’s fledgling commuter rail line is bracing for a hit to its key funding source and counting on cash reserves to offset the potential loss.
The quarter-cent sales tax approved by Sonoma and Marin county voters in 2008 has provided $36 million to the Sonoma-Marin Area Rail Transit system, triple the amount from state and federal grants and other contributions in the agency’s fiscal year ending June 30.
No fare revenue was earned during the year, since SMART trains began running in late August.
All six of the San Francisco Bay Area’s rail operations, including giant BART and newcomer SMART, depend on sales taxes to subsidize their operations, a standard practice in the industry.
John Goodwin, a Metropolitan Transportation Commission spokesman, said he is not aware of any rail system in the country that pays its own way with revenue from riders. Fares based on covering rail operations would be astronomically high, he said.
SMART did not estimate the drop-off in sales tax revenue, but disclosed it as a possibility in a year-end fiscal report released last week, noting that the fires did about $2.8 billion in damage and destroyed more than 7,000 structures in Sonoma County.
“A lot of people lost jobs and revenue,” said Erin McGrath, SMART’s chief financial officer. “Not to mention the fires would have been a huge omission.”
Damages have been pegged at more than $3 billion, with 5,100 homes destroyed countywide and a loss of some 400,000 square feet of commercial space in Santa Rosa alone.
SMART’s fiscal report said the agency’s finances “rely directly on the strength of sales tax revenues and its strong link to employment rates and median incomes.”
The fire losses will likely have “short-term impacts on the district’s revenues,” the report said, pointing to cash reserves of $16 million to cover any decline in sales tax revenues.
Santa Rosa officials have forecast the possibility of a sales tax surge as insurance checks get cashed and fire victims start replacing cars and personal belongings, such as clothing and appliances, and begin rebuilding homes.
SMART’s report acknowledged that prospect but said “there may be many months delay before that impact is seen.”
“We will be watching the revenues, which will take some time,” McGrath said. “But if the budget is short then we will look at both reducing costs as well as dipping into operating reserves.”
The rail system, which runs green and gray diesel-powered trains from the Sonoma County Airport to downtown San Rafael, also suffered a loss of fare revenues during the fires when free rides were offered for two weeks, costing SMART about $10,000 a week, McGrath said.
But fare revenues rebounded in November and December, enabling SMART to meet or exceed its weekly target of $68,000 in fares for the period including the fires, she said.
The agency’s budget for the current fiscal year anticipates $2.9 million in passenger fare revenue and should reach $3.9 million in fiscal year 2018-19, the rail system’s first full year of service, McGrath said.
Even if sales taxes fall short of the $37 million budgeted this year, they will continue to be the rail agency’s economic lifeblood. State and federal grants and other contributions account for $18.6 million.
Read all of the PD's fire coverage here