Written by: InfrastructureWeak
Despite operating reduced service since 2020, like many Bay Area transit operators, AC Transit has been projecting a ~$35 million annual budget deficit beginning next year, as revenue growth falls behind expenses and pandemic financial support expires.
The AC Transit Board will hear at its Wednesday meeting this week, with updated revenue projections from the Metropolitan Transportation Commission (MTC), that projected annual deficit has grown to ~$55 million.
The main reason for the worsening deficit projection is decreased revenues from statewide, regional, and local sales taxes.
At the February 12th MTC Programming and Allocations Committee meeting, regional committee members learned that funds for the 9-county Bay Area from the statewide Transportation Development Act sales tax will be $37 million less this year than projected…
…that Bay Area funds from the State Transit Assistance diesel sales tax will be $45 million less next year than this year…
…and that revenue from the ½ cent regional BART sales tax will not grow next year, down somewhat from fiscal year 2023-2024 levels. This was attributed mainly to slow population and employment recovery since 2020. The reduced tax revenue projection affects transit agencies throughout the Bay Area.
What is the potential impact on AC Transit? We can see from prior projections that 100% service would cost about $30 million per year more than the current 85% service. Extrapolating roughly, this would suggest that cutting service to meet AC Transit’s previously-projected ~$35 million deficit would require an additional service cut of at least 15%, to 70% of pre-pandemic levels. With the new, ~$55 million deficit projection (again extrapolating roughly), an additional ~27% cut may be required – to less than 58% of pre-pandemic service. We need to hear official forecasts from AC Transit about the impacts these projected deficits would have, to be sure of them.
Losing this much service would be catastrophic for AC Transit, a major chapter in the history of cuts that have affected the agency since 1991. What can be done? AC Transit can’t cut wages to make up the difference – bus operator pay is already below other Bay Area agencies, and AC Transit has had difficulty recruiting people to do the job for the pay being offered. The agency has some reserves, which it plans to use to bridge the next two years while changes are made.
Management is also considering raising fares. Fares are only $37 million of AC Transit’s revenue, so even adding $1.00 to the current ~$2.25 fare would raise at most $16 million. That’s assuming everyone continues riding, whereas in fact ridership would decline – for every 10% fare increase, research suggests bus ridership will decline 2.8% in the short run and 5.5% in the long run. Instead, a fare increase would mainly be symbolic representation that AC Transit is doing its part, to help garner funding from the government.
It is clear that the only alternative to a catastrophic AC Transit service cut is fresh funding. 67% of AC Transit riders are low-income, and providing mobility service is socially necessary to support the base of the Bay Area’s economy. Bus service helps to reduce traffic for those who can afford to drive – imagine 11,000 more people trying to drive down College Avenue in Berkeley each day. And taking transit is a green transportation option we need more people to embrace, in order to reduce driving by 30% by 2045 (slide 10) and triple transit ridership (page 113) to meet California’s climate emissions targets. Expanding ridership requires increasing transit service to make it more attractive, instead of cutting it.
Bay Area transit operators including BART, Muni, Golden Gate Transit, and Caltrain also face large deficits, and county representatives have been negotiating a regional tax measure for the 2026 ballot over the last year. Unfortunately, the proposal currently on the table is a sales tax that’s projected to raise only $31 million for AC Transit (page 82) – not enough to fill its projected $55 million 85% service deficit, let alone restore service to 2019 levels. (The $10 million feeder bus funding is more likely to go to small operators such as WestCAT, Wheels, and Tri-Delta, replacing funding from BART they are expected to lose.)
Beyond the insufficient size of the ½ cent tax, the wisdom of relying on a sales tax that varies year to year to fill a deficit partially created by variability in existing sales taxes is questionable. And sales taxes already vary from 10.25% to 10.75% in Alameda County – opponents will seize on further increasing a regressive tax.
Transit advocates will instead argue tomorrow – Wednesday (2/26)- for a larger tax raised from a progressive source, such as a 25-cent square-foot parcel tax, that would prevent cuts and allow agencies without deficits to expand their service. You can sign up to comment here.
As an additional hope, Bay Area state legislators will request state assistance for transit operations in this year’s budget. Funds were previously provided by Scott Wiener’s SB 125 on an emergency basis to bridge agencies to their 2026 ballot measures. To persuade the rest of the state to support such funding, the Bay Area needs to show that we support transit with an ambitious regional tax of our own.