VTA’s $25M deficit could lead to cuts

Board members will consider several options including reduction in services, buyouts and higher fares

Dire times are again smacking the Valley Transportation Authority’s bottom line, leading to an operating deficit of $25 million a year and likely to lead to painful cuts in bus service, offering voluntary buyouts to workers nearing retirement and tying some future fare hikes to inflation.

The VTA board met Thursday night to consider several options to curb the financial bleeding over the next year after staff recommendations followed several months of audit committee meetings.

The agency knows the ledger is bleak and has been issuing warnings for more than a year. Over the last six years, operating ex- penses have grown twice as fast as revenues. Sales taxes account for roughly 80 percent of VTA’s income, but the rate of growth has slowed while expenses continue to increase.

This has led to dipping into its capital reserves, which are down to $5 million from $49.5 million 18 months ago. And with BART coming to San Jose late next year, costs for the 10-mile extension from Fremont to Berryessa will require more bus service and covering the financial needs of the BART link.

The biggest chunk of savings will come from reductions in service — $15 million a year. Another $2 million will come in the form of higher fares adjusted for inflation and $1 million in voluntary buyouts. Other savings will come from delay- ing some projects.

“The committee came up with substantive recommendations that should help stem the tide as the board and staff continue to work on a long-term plan,” said Santa Clara County Supervisor Cindy Chavez, who will chair the board next year.

This isn’t the first cash crisis to hit the VTA. During the Great Re-

cession in 2008, layoffs, fare hikes and service cuts were deep. Ridership on buses and light-rail trains dropped a staggering 23 percent from 2001 to 2016, forcing the VTA to consider its biggest shakeup ever in service.

Tough, unpopular decisions loom if the VTA hopes to attract new passengers, get them to their destinations and improve its dismal 10 percent farebox return, which is the worst in the nation among similar agencies.

At the crux: Is the board willing to cut sparsely used, unprofitable routes that carry a handful of passengers — many of whom have no other means of transportation?

At the time, VTA General Manager Nuria Fernandez said “this is going to take quite a bit of courage. Ridership continues to decrease. Our farebox is not getting any better. Clearly, we are going to have to make a choice to take a chance, or nothing will ever change.”

About 30 percent of VTA bus service is geared to covering areas where bus rides are vital to the very few riders those lines carry. A report by consultant Jarrett Walker and Associates said if that was lowered to 10 percent, and money was redirected to the most heavily used routes, ridership and fare revenues would likely increase.

Problems for the VTA have been mounting as the local population swells. The fastest-growing county in the state, Santa Clara County is projected to surpass 2 million residents by 2030. Total VTA boardings have declined substantially from a high in 2001 of more than 57 million annual passenger trips to 44.1 million trips in 2016.

But voters approved new taxes to offset BART operating fees and to boost transit operations.

The VTA included a 10.3 percent increase in bus and light rail hours over the past two years. This represented the culmination of an 18-month process undertaken to completely redesign the transit network and increase ridership and improve cost-effectiveness.

This redesign, known as Next Network, resulted in the development of a more extensive frequent core network serving the most heavily used routes through downtown and East San Jose, but reducing buses to outlying areas where few riders board.

With this latest deficit, almost everything will be analyzed from paratransit operations to potential revenues from state gas tax funds to future regional tax funds to payments for Caltrain and cutting back on planned projects.

If these work, they could “effectively address the structural deficit and longterm financial stability,” according to VTA’s fiscal resources manager Carol Lawson in a memo to its 12-member board.

This process would take about six months to complete. The board is expected to consider the plan in January, take it to the public and then vote on it in May with changes to begin next fall when BART opens in the South Bay.