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Health & Fitness

SMART Addicted to Future Sales Tax Revenues

Train system's ability to provide the promised rail services will depend on future sales tax revenues, a source that it doesn't control and is likely to be far less than SMART thinks.

SMART’s financial structure will continue to be precarious.  If it is ever built, its ability to operate the commuter trains as promised on weekdays at 30-minute intervals and four weekend trains will depend on the growth of sales tax revenues, a revenue source that it does not control.   

Proponents have argued that concerns about future revenues are no different than challenges faced by other transit agencies.  SMART’s case is different:  The agency is intentionally constructing a system that it will not be able to support financially should sales tax revenues not grow as proponents optimistically hope.  And when the next recession hits — and, yes there will probably be two recessions between now and 18 years from now when the 20-year Measure Q sales tax measure expires — SMART will have to make deep cuts in services in order to balance future budgets.

Rail can only be provided with huge capital investments. As a consequence, when revenue shortfalls arise they can only be addressed at a high cost.  There is little to cut, when revenues are not sufficient to subsidize the operations.  So when times get tough, the cuts to rail services are deep.  There is less opportunity to make adjustments to the cost base because so much of the costs are sunk. 

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This economic fact of life has always been glossed over by rail advocates.  If sales tax revenues don’t grow as SMART forecasts, once the trains are rolling, the agency will have few choices to balance its future budgets.  So, what will future SMART boards be forced to do in the future facing red ink?  They will do what other rail transit agencies do when faced with shortfalls.  They will:

  • Raise fares
  • Eliminate services that capture only a few riders (e.g., in SMART’s case weekend trains are the first to go)
  • Reduce rail frequency (e.g., SMART’s midday train)
  • Reduce support for associated services like shuttles or “express buses to Cloverdale.”

In the future, when faced with red ink, it’s a good bet that SMART will also go after other sources of revenue just as it did last summer when it siphoned $8 million from Marin County transportation programs.  Once trains begin to operate and the agency faces red ink, it will come back hat in hand for more.  Given how the Transportation Authority of Marin caved to these demands, we should expect no change in their responses in the future.  SMART is likely to continue to take revenues from other transportation programs in both counties.

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SMART could also attempt to raise the sales tax another quarter cent.  Unless there are changes in the state constitution, does anyone think SMART could ever again obtain a two-thirds vote for a larger rail tax?  Even push polls sponsored by the North Bay Leadership Council couldn’t find a super-majority supporting SMART.

Few are talking about the financial realities facing this agency down the road; of what will happen if and when SMART operates trains.  It’s an abstract problem now.  Once they lay down the rail, it won’t be.  And what will proponents say then?  They’ll do what rail proponents in other areas do: they’ll try to get more revenues.

If the 35 mile rail segment is ever constructed, the public will eventually learn the hard lesson of what it means to underfund a rail system.  It’s not just that the public is only getting a 35-mile system when it voted for a 70-mile system in 2008.  SMART is likely to end up providing far fewer trains each day than promised carrying a pittance of passengers. 

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