BART is on track to run out of federal relief funds by March 2025, with estimated operating deficits of more than $300 million per year over the next several years, according to the transit agency's preliminary budget.
In a presentation to the agency's governing board, Pamela Herhold, BART's assistant general manager for performance and budget, along with Michael Eiseman, the agency's financial planning director, outlined that BART's operating revenue remains hundreds of millions of dollars below where it was before the COVID-19 pandemic began, mostly due to a sustained lack of ridership at pre-pandemic levels.
BART is on track to use $321 million in federal relief funding by the end of the current fiscal year on June 30 to close its budget gap.
The agency would then use an estimated $376 million in the following 2023-2024 fiscal year before exhausting its remaining $206 million in funding during the 2024-2025 fiscal year. That would still leave BART some $143 million short of a balanced budget based on current projections, according to Herhold and Eiseman.
"We will continue to evaluate and develop opportunities to reduce spending or increase revenue with the goal of not impacting the service that we currently operate," Herhold explained to BART's Board of Directors.
BART budget officials have already shaved off or deferred several million dollars in projected spending over the next two fiscal years, including suspending roughly $20 million in allocations to the agency's pension fund and restricting overtime to recoup some $16 million.
Even with those changes, the two budget officials said, preliminary projected costs will only drop by $51 million over the next two years.
BART officials elected to switch to a rolling two-year budget approval process last year in an effort to improve the agency's long-term financial planning.
"These reductions are not choices we want to make, but we know we need to get our ongoing operating expenses down," Eiseman said.
BART is also facing higher-than-expected costs in its current fiscal year, with operating expenses projected to be $15 million over budget, due mostly to overtime hours and reimbursements.
Fare revenue is also projected to be roughly $500,000 below what the agency expected in its budget, with weekday ridership remaining mostly static around 40 percent of pre-pandemic expectations.
Herhold and Eiseman noted that the preliminary figures for the next two fiscal years are subject to change before the board discusses and approves its budget for the next two years in June.
The preliminary budget also did not include the expansion of funding for BART's internal investigation office from $1 million to $2.7 million, the addition of a new Office of Infrastructure Delivery and consideration of BART's current staff vacancy rate of 7.25 percent, below the expected 7.5 percent for the 2023-2024 fiscal year.
BART would increase fares systemwide by a total of 11 percent over the next two years under the current preliminary budget, a standard fare adjustment to keep up with inflation as measured by the U.S. consumer price index.
The two fare increases of 5.5% in January 2024 and January 2025 would add an estimated $26 million to BART's revenue pool, according to the agency's financial officials.
Some BART Board members have been hesitant to support the fare increase, arguing that the rise would be too quick and would disproportionately hurt low-income riders.
Board Director Rebecca Saltzman suggested BART should raise fares by just 4% over each of the next two years, as the two 5.5% increases would raise the cost of a two-way trip between Berkeley and the Embarcadero in San Francisco by at least $1.
"If you look at the revenue difference between the 4% and the 5.5%, considering the hole in our budget, it really is not significant," she said. "It's not like it's going to make or break our budget. Whichever one we do, either way, we're in trouble."
Members of the board also called for a budgeted plan to increase revenue, including by making BART stations and trains safer and more reliable and increasing service on weekends and outside of peak commute hours around which BART's service has been centered.
"We need the frequency to improve for folks to choose BART as an option other than Uber, other than taking a car," Director Mark Foley said. "So for me, this budget, while palatable, I can't accept it until I see what's the plan that goes with this to get riders into the system."
Board Director Debora Allen argued that additional service is an expense BART can't afford for now, but that the agency needs to prioritize the rider experience and simultaneously increasing revenue and driving down costs.
"There are only two ways to impact the over $300 million per year of deficits that this agency is generating," she said. "You can increase revenue; you can decrease costs. It is that simple, and we need to be focused on both."
Allen added that she hopes to see at future budget discussions a list of specific "deep cuts" the agency could make that would meaningfully improve its current fiscal state, including cutting "levels of service, certain hours, certain lines (and) certain stations."
BART budget officials have previously argued that the agency cannot realistically cut its operating costs without sending BART into a "death spiral" because rail transit has high fixed costs—in BART's case, roughly 30% of its operating costs are fixed.
Eiseman argued at the agency's board meeting in early December that the cuts necessary to meet BART's current annual deficits would end service on the Richmond-Millbrae and San Jose-Daly City lines, close nine stations, reduce service to weekdays only and limit trains to arriving just once an hour.
The BART board is expected to hold its next discussion on its budget for the next two fiscal years on May 11. The board is set to adopt the budget on June 8, with the next fiscal year beginning July 1.
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