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SMART adopts trimmed budget, approves east side Petaluma station

SMART will head into July with a new, slimmed-down budget and looming financial challenges, but its leaders expect to continue building out the rail line with the help of some welcome cash infusions.

The Sonoma-Marin Area Rail Transit board of directors voted unanimously Wednesday to adopt the agency’s next budget, shedding more than $7 million in expenses and reducing weekday train service by nearly a third.

The cuts come in response to significant dips in revenues linked to the coronavirus pandemic and the related stay-at-home orders and economic recession. The service may require even further reductions in the coming months based on how quickly the nearly 3-year-old rail system sees signs of recovery.

“We do admit to a number of unknowns right now. We don’t know what the future holds,” Erin McGrath, SMART’s chief financial officer, told the 12-member board. “We will need to be vigilant.”

Even with the cuts, which include eliminating free onboard train internet service among other one-time savings and ongoing expenses unrelated to salaries, total operating costs year over year are still projected to remain at about $27 million. But total revenues through the voter-approved sales tax that primarily funds the system and the fare box are anticipated to come in at less than $25 million, contributing to the agency’s need to spend upward of 40% of its $17 million rainy-day fund through next June.

“We’ve worked very hard to try to minimize the reliance on reserves, but because of the uncertainty, we do rely on some reserves during this budget,” McGrath said. “This is the exact time that we would need reserves.”

Already built into the budget is emergency aid through the federal CARES Act. SMART has so far received nearly $10.4 million in a first-round award through the region’s transportation commission, and planned for another $6.6 million this summer. But the formula for those payments may be shifting for the second round to account for other Bay Area transit agencies, and could come in almost $1.2 million lower, with a decision expected in July.

“Obviously we want to maximize what we can get out of this,” said Supervisor David Rabbitt, a SMART board member who also is a member on the committee recommending the final payments. “It’s something we kind of have to pursue and see if we can’t find a soft landing spot. We may not get the total amount that we thought we were going to.”

The loss of that money would more than likely lead to layoffs, SMART General Manager Farhad Mansourian said. The downshift to a 26-train daily schedule as early as this summer - six each direction during the morning and evening commutes, plus one each way in the afternoon - already amounts to the loss of seven full-time jobs, though each of those positions had been vacant.

Also in play could be permanently ending weekend service to make up the difference in the budget. SMART stands to save $1.6 million annually by eliminating its limited 10-train service on Saturdays and Sundays, according to McGrath.

For now, the agency is operating no weekend runs and a 16-train daily service during the ongoing stay-at-home order.

It wasn’t all hardship this week for the North Bay’s passenger rail system. The board on Wednesday also unanimously approved a plan that would spend the $8 million in proceeds from a land sale and swap with a developer to build its long-planned second station in Petaluma, on the city’s east side of town.

Completion of the station - along with another platform plus track currently being built in Windsor - would move the agency closer to finishing its proposed vision when voters approved the Measure Q sales tax in 2008 to launch the 70-mile passenger rail system. Once finished, the infill station in Petaluma would see SMART offer service to 13 of its originally planned 15 stations, leaving the 22 miles of track north and platforms in Healdsburg and Cloverdale left to fund and build. A third station in Novato, in the Marin County city’s downtown, was later added and finished late last year.

“This is one of those watershed moments,” said Deb Fudge, a Windsor councilwoman and longtime SMART board member. “We just opened Larkspur, we just opened (downtown) Novato, and now we’re getting really close to honoring another piece of Measure Q by building the second Petaluma station.”

Mansourian also announced Wednesday more than $5 million in state funding that the agency received as part of a sustainable housing grant application in partnership with an affordable housing developer and the city of Santa Rosa and county of Sonoma. SMART will apply the money toward its $65 million Windsor extension, which is scheduled to be finished by the end of 2021, as well as to make some pedestrian pathway improvements in Santa Rosa.

That work, with the addition of the second Petaluma station, will spirit SMART forward into 2021. But there may still be financial hurdles ahead to get there, such as restoring ridership to pre-COVID levels. The first new budget review for possible adjustments is anticipated to take place for the board by September.

“That’s just one of those factors that we’ll have to wait and see on,” McGrath said of ridership. “Even though we’re voting today, this is just unfortunately going to be the beginning of the process.”

You can reach Staff Writer Kevin Fixler at 707-521-5336 or kevin.fixler@pressdemocrat.com. On Twitter @kfixler.

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