City Transit Systems Begin to Peer Over the Fiscal Cliff
BART and other transit agencies are budgeting the last of their pandemic-era federal relief and looking ahead to big, ongoing deficits. Solutions are still hard to find.
For Bay Area Rapid Transit, fare revenue used to be a point of pride.
In the years before the COVID-19 pandemic, BART had a higher farebox recovery ratio — a measure of how much of the annual budget is covered by rider fares — than all the other transit providers in the region and most other transit systems across the country. It was a sign of the system’s health as well as the city’s: People wanted to ride the trains, and the region was organized well enough that they were useful. But the pandemic inaugurated a drastic drop in ridership that is likely to last, as more employers, especially those in the tech industry, shift to remote work.
BART carried 118 million riders in 2019, and fewer than 35 million in 2022; its operating ratio dropped over the same period from 71 percent to 21 percent. A region that was built around one of the strongest downtown job centers anywhere now has the highest rate of remote work and the slowest downtown recovery in the country, says Alicia Trost, BART’s chief communications officer.
“That dynamic duo of highest and slowest is — what’s the right adjective? — it’s very detrimental to our future. It is forcing us to invert our funding model,” Trost says.
Like almost every other big transit system in the U.S., BART is now facing a fiscal cliff, the moment when the federal government's enormous pandemic financial relief for transit systems runs out and agencies are forced to find a way forward. BART’s budget is balanced for the 2023-2024 fiscal year, but next year, it’s facing a $140 million deficit.
Every year after that the system is looking at a deficit of around $300 million. As it tries to avoid draconian service cuts, which it says would ultimately yield limited cost savings and create even deeper revenue losses, BART is looking to a future where riders pay less of its costs and the whole region invests more.
“What used to be the gold standard and what made BART stand out as being really efficient is now our Achilles' heel,” Trost says. “We cannot bank on people all of a sudden coming back to work. It’s certainly not going to happen five days a week, and even three days a week isn’t enough to fill our hole.”
Budget Requests and Ballot Measures
How can you fill a revenue gap when the riders haven’t come back? For San Francisco's transit systems, the path forward is looking increasingly like a broad regional ballot measure that asks voters to put up more money for transit. But that likely won’t be possible until at least 2026, says Rebecca Long, director of legislation and public affairs at the Metropolitan Transportation Commission (MTC), the metropolitan planning organization for the region. That’s because in 2024, MTC is also hoping to ask voters to address a different regional crisis — housing costs — with a major funding measure.
The size and shape of an eventual transit measure have yet to be determined, but to do the job, it would have to be big. And asking voters to approve two big funding measures at the same time is a big risk, Long says, and “far too much of a gamble” when it comes to providing money that BART and other agencies will need for fiscal years 2025-2026.
To get a regional transit measure on the ballot will also require enabling legislation from the state, something that’s already in place for the housing measure. Long says that MTC and agency leaders are laying the groundwork for an eventual measure with public polling and other research. "At this point, the overall deficit for regional transit authorities appears to be about $500 million a year for the foreseeable future,” she says.
“I think it’s too early to say if we are going to be able to fully close that shortfall through a regional measure,” she says.
In the meantime, BART and other agencies are looking to the state to help provide bridge funding until a longer-term solution is in place. Some state legislators are already pushing to have billions for transit restored to the budget, after Gov. Gavin Newsom made big cuts amid a $22 billion budget deficit.
High Water Everywhere
Virtually all big-city transit agencies are facing a fiscal cliff, and no one has figured out a clear path forward.
The Metropolitan Transportation Authority in New York is considering raising subway fares above $3 as part of a suite of measures to plug an estimated $2 billion yearly revenue gap once federal funding runs out. The Massachusetts Bay Transportation Authority (MBTA) is facing gaps of between $286 million and $542 million in fiscal years 2026-2028 and is leaning more on state and local subsidies than it used to; MBTA’s fare recovery ratio dropped from 43 percent before the pandemic to less than 25 percent in the current budget, according to Lisa Battiston, an agency spokesperson.
The authority is also looking for ways to raise more money from parking, real estate and advertising sources, even though those only account for 2 percent of its operating budget, Battiston says. The Regional Transportation Authority in Chicago is considering relief from a state requirement that transit agencies collect at least 50 percent of their revenue from fares, according to a report. That’s part of a package of strategies the authority is pursuing as part of a recently adopted plan called "Transit Is the Answer."
The Washington Metropolitan Area Transit Authority (WMATA) was able to balance its budget for FY 2024 by pulling in all its remaining federal aid, says Randy Clarke, the authority’s general manager and CEO. But in FY 2025, the deficit shoots right up to about $750 million. WMATA needs additional subsidy to avoid “very, very significant, some people say catastrophic” service cuts, Clarke says. But as a creature of four jurisdictions — Maryland; Virginia; Washington, D.C.; and the federal government — it can’t easily raise more money itself. The system is essentially relying on elected leaders from all over the region to step in and provide new, stable funding to avoid cuts, and, hopefully, to make service improvements that will bring more riders back.
“I’m gonna be optimistic until someone proves me otherwise,” Clarke says.
The Big Problem With Service Cutbacks
While transit ridership is down in most big cities and not expected to return to pre-pandemic levels immediately, many millions of people still rely on public transit every day. Cutting service to save money would harm those riders and wouldn’t do much for most agencies’ budgets in the long run, says Garett Shrode, a policy analyst at the Eno Center for Transportation who has written about the fiscal cliff.
“Cutting service is a feedback loop that makes everyone worse off,” Shrode says. “Even when you cut a significant amount of service, you aren’t going to fill that gap, because the costs to maintain the system are pretty fixed. Whether you’re running 10 trains an hour or 30 trains an hour, you’re still paying a station manager for a full day. …”
BART carried 118 million riders in 2019, and fewer than 35 million in 2022.
In San Francisco, planners are trying to thread the needle of making the system less reliant on ridership in the short term while getting more people to use it in the long term. BART, the Metropolitan Transportation Commission and others are making the case to California lawmakers that they can’t achieve their ambitious climate goals without getting many more people out of their cars and onto public transit. The pandemic showed the risk of over-relying on fare revenue to fund a public amenity like transit. But even as they move away from fare revenues, transit agencies need lots of riders to show their worth to elected leaders and the public — something they won’t likely achieve with more cuts.
“At the end of the day, the value of transit is increased the more people are using it,” says Long. “We need to keep our eye on the ball of getting more riders, because that is where 100 percent of the climate benefits come from.”