GILROY
– The county’s transit agency is at a financial crossroads, and
Santa Clara County citizens and businesses could potentially face
decisions about new taxes – or whether to borrow against existing
taxes in the short-term for a new purpose – to help remedy the
financial quagmire.
GILROY – The county’s transit agency is at a financial crossroads, and Santa Clara County citizens and businesses could potentially face decisions about new taxes – or whether to borrow against existing taxes in the short-term for a new purpose – to help remedy the financial quagmire.
Officials with the Santa Clara Valley Transportation Authority say they face an estimated $160 million annual deficit over the next 20 years and warned that the agency will run out of money within two years’ time unless dramatic steps are taken.
That budget hole is forcing officials to consider major changes to how the agency’s buses and light-rail trains are funded – and a centerpiece question at the moment is a search for new revenues.
Nearly 85 percent of the VTA’s operating budget is comprised of sales-tax revenues, which tend to be volatile and fluctuate dramatically along with the economy.
With the current downturn, agency revenues have dropped 33 percent in two years after seven consecutive quarters of declining sales taxes. That’s a bad drop, stressed VTA spokeswoman Dina Braun.
“It’s tough for any organization,” she said.
So far, in response the agency has cut bus and light-rail service 8 percent in the past two years, laid off workers, raised fares and made other moves designed to improve efficiency. Another 9 percent service cut is slated to begin Monday, and modifications to paratransit service are also in the works.
And agency officials across the spectrum admit they need to boost efforts to make the system pay for itself. While officials say so-called “farebox recovery” hovers around roughly 12 percent today, they say it needs to be at least double that – or higher – in order to compare with other agencies.
Meanwhile, if the public wants to maintain the same type of system and expansion plans, officials say they’ll need a new source of revenues.
“What it will really boil down to is, ‘Do people in the Valley really want a transit system, and what do they want it to look like?’ ” said District 1 County Supervisor Don Gage. “Do you want a stripped-down version or a full-blown version – and are you willing to pay for it?”
The VTA board has formed a special committee to work on the issue of ongoing financial stability, including Gage, Gilroy Mayor Tom Springer and several non-voting stakeholder groups.
After the course of several meetings, the committee and three consultants hired to work with it have developed a range of options.
One is the possibility of another sales-tax increase for transit operations. That would require a two-thirds vote of county voters, although there are pushes to lower the threshold for such taxes to a simple majority to help pay for transportation projects, possibly including the VTA budget gap.
Another idea raised is a tax on county businesses in the range of a one-half to 1 percent levy on their payrolls. While that would potentially face a two-thirds threshold at the ballot box as well, there’s discussion of making it a general county tax that would lower that threshold but divert some of the money generated to other purposes than the VTA.
For example, Springer said rough discussion so far has suggested earmarking 20 percent for affordable housing, 20 percent for health services supporting the county and 10 percent for expressways and county roads, which face their own funding issues. Small businesses and governments would be exempted from the tax.
Meanwhile, another idea raised is to ask for short-term changes to how an already-approved transit tax would be spent.
Gage has raised the idea of asking county voters to allow the agency to borrow against revenues expected from Measure A, the half-cent transit tax that voters approved in 2000.
When it becomes effective in 2006, that tax is expected to eventually generate over $6 billion for transit, including $2 billion to help bring BART to San Jose, over $325 million for Caltrain improvements in South County and other funds for projects such as expanded light-rail and zero-emission buses.The rough idea is to borrow against those future revenues in order to help fill the existing service gap and restore them down the road. The idea is that if the agency doesn’t have the money to support existing operations and levels of service, launching into an expansion could be a hairy proposition, Gage said.
“It doesn’t make sense to me to do the future projects if we don’t have the money to keep existing bus service running,” Gage said. “How do we get people to Caltrain if we don’t have buses to get them there and take them home?”
“I’m not suggesting that once we take money we never see it again,” he said. “It’s borrowing from the front end and moving out a couple years on the back end to accomplish the same thing.”
Ideas for parcel and gas taxes have also been cast into the fray.
The options will be presented to the VTA’s full board of directors – which includes officials from a range of the county’s cities – in a full-day workshop later this month. With so much at stake, and so many different political and geographic interests at the table – assembling consensus may be difficult.
For example, observers have noted the sales tax is already a volatile source of revenue – and could potentially have to compete with sales-tax increases that could come down from state leaders looking to balance their own budget.
The general concept of the payroll tax has already gained opposition from the Silicon Valley Manufacturing Group, the influential technology industry organization representing Silicon Valley’s technology corporations that’s been a strong force behind Measure A, the BART extension and two other recent local campaigns for overall transportation funding.
SVMG President and CEO Carl Guardino said a 1 percent payroll tax would average roughly $1,000 per employee annually – a heavy burden on struggling companies.
“We can’t afford anything that will cost one more family a job,” he said.
And he warned that tinkering with Measure A would likely be perceived by voters who long for the BART extension as a huge “bait and switch.”
“You never build that faith back up once you’ve broken it,” he said.
But Gage said he wouldn’t pursue such a move without putting it before the voters to decide for themselves.
“That’s why we need to go back to the voters and ask them,” Gage said. “If they say no, we don’t do it … I’m not suggesting we do anything without voter concurrence.”
No matter what, the challenge is a big one.
“There are four alternatives that we feel would generate the funds necessary,” Gage said. “Now it’s trying to figure out how you can massage those to make it pay off for everybody and make it acceptable to everybody.”
Parochial interests will need to be set aside, Springer said.
“It doesn’t matter what part of the boat you’re in if it’s sinking …” he said.
