Published Thursday, November 7, 2002, in the San Jose Mercury News

VTA facing $6 billion shortfall
BART extension to downtown S.J., light-rail expansion hang in balance

By Gary Richards

The Valley Transportation Authority will go broke within three years
unless major sources of new funding are found, a new report says,
threatening the ambitious $4 billion BART extension to downtown San
Jose and the expansion of the light-rail system.

A blunt 62-page assessment of the transit agency's future, which will
be unveiled Friday, says that revenue has fallen so sharply and so
quickly, there appear to be only two choices: cut transit projects --
the keystone of transportation improvements touted by San Jose Mayor
Ron Gonzales -- or go back to voters to get approval for yet another
tax measure for transit, possibly as early as 2004.

Up front and in bold type, the report to the 12-member board of
directors issues this dire warning: "Without substantial additional
operating revenues, VTA will be unable to continue operations through
(fiscal year) 2005."

The amount the VTA needs is enormous: an extra $6 billion over the
next 20 years to keep trains and buses running in Santa Clara County.

The report concludes, again in bold type, that scaling back the
agency's ambitious plans to build new rail lines may be inevitable:
"Sometimes the only solution to projected shortfalls is restructuring
of the capital program. This involves paring items."

To avoid making drastic cuts by 2005, the VTA will need an extra $147
million a year immediately. This figure will soar to more than $200
million annually when -- or if -- BART trains arrive in the county in
another decade. A $42 million reserve at the beginning of this fiscal
year will dwindle to $6 million by next summer. And by 2005, only
$150,000 will remain for emergencies, mere pennies for an agency with
an operating budget approaching $350 million a year.

If each quarter continues to bring bad economic news, the report says
VTA cash reserves could be gone by as early as next summer.

Options running out

"The picture isn't pretty," said VTA General Manager Pete
Cipolla. "We're at a major crossroads. And we don't have very many
more rabbits we can pull out of the hat."

In the last fiscal year, there was a decline of $71 million in
revenue, as sales tax receipts plunged 21 percent. Two-thirds of the
agency's operating budget comes from the volatile sales tax.

To remain afloat, the agency is burning through more than $5 million a
month in cash reserves. It has already slashed $164 million in
spending, cut service and eliminated more than 300 jobs, 11 percent of
its workforce. If the revenue flow continues to slacken more layoffs
may be ahead and transit employees may be pressed to share insurance
costs. Some disabled and elderly passengers who rely on popular
paratransit service will be paying more. More trolley and bus service
cuts are likely.

Regional ramifications

The crisis promises to ripple throughout the region, affecting what
VTA contributes to help run Caltrain, commuter trains over Altamont
Pass, and express buses over the Dumbarton Bridge and Highway 17.

"We have some tough choices in front of us," said Mayor Ron Gonzales,
who also chairs the VTA board. "At this point, I've not made up my
mind what direction we ought to take.

"But when you face difficult times, it's better to make tough
decisions early. The longer you delay, the more difficult they get."

The VTA is beginning to explore new sources of revenue, and each
originates with the taxpayer. Higher fees for licensing cars and for
developments along transit corridors will be considered. Even a Bay
Area-wide gas tax increase of 3 to 5 cents a gallon could be
resurrected.

But those combined won't approach what a higher sales tax will bring
in -- up to $200 million a year with a quarter-cent increase. A new
sales tax once envisioned for 2008 may be on the ballot in two years
-- along with an immediate push in Sacramento to get the Legislature
to lower the two-thirds threshold needed to pass these measures.

Would a new tax get even a simple majority? "It depends," said Carl
Guardino of the Silicon Valley Manufacturing Group, who has led three
successful past campaigns. "Voters in this county are always committed
to traffic solutions, but it would be incumbent on the VTA to show
what improvements would be gained. It needs to be something in
addition to operating funds to capture commuters' imagination."

If the VTA wants to place a half-cent sales tax on a future ballot, it
would need the Legislature to approve raising the cap from 8.5 percent
to 8.75 percent. Santa Clara County's sales tax is now 8.25 percent.

U.S. funds for BART

And then there's BART. When voters approved a historic 30-year tax two
years ago to extend the popular commuter train to downtown San Jose,
many surely thought it was a done deal.

But local leaders need $834 million from Washington to complete
funding to build the nearly $4 billion, 21-mile extension. To qualify
for that money, the VTA needs to show federal transit officials that
it has funds to run and maintain BART trains within the county -- an
ability seriously undercut by the current budget crisis.

The BART extension will cost VTA $48 million a year to operate and
maintain, the third-highest figure of nearly 50 new train lines across
the country likely to be considered for federal funding.

But for Gonzales -- and probably the 71 percent of voters who approved
the measure two years ago -- BART is the No. 1 priority.

"BART has got to happen," Gonzales said, calling it the "backbone of a
transportation system which we haven't had. Of all the things we are
doing, BART has the clearest voter mandate."

The bulk of the VTA's operating budget comes from a sales tax approved
in 1976, when 215 buses passed for transit in the county. Now there
are almost twice as many buses, light rail may soon run for nearly 50
miles, and millions more are being spent for paratransit service and
trains, buses and shuttles that carry thousands of commuters into
Silicon Valley from neighboring counties.

No one can imagine the VTA shutting its doors, but the agency is
facing difficult decisions in upcoming months. Cuts made earlier this
year have bought some time, but not a lot.

"We think we'll be all right for the remainder of this year," Cipolla
said, adding that more service cuts will be looked at.

"If we do have to have some," he said, "we hope it can see us through
until this economy turns around."

No one is guessing when that will be.

NEW SOURCES OF CASH

The Valley Transportation Authority is considering ways to raise
revenues to overcome an estimated $6 billion shortfall over the next
20 years to operate trains and buses.

Category Fee VTA's likely revenue/year
---------------------------------------------------------------------
Sales tax 1/4-cent increase $140-$200 million
Vehicle license fee $5 increase $7 million
BART development fees* $10-$15 per sq. foot $8-$12 million
Other TOD** NA $5-$10 million
Bridge tolls $1 increase $5-$10 million
Regional gas tax 3-5 cents/gallon $25-$45 million

* Within half-mile of BART stations

** Levied on commercial development within one-third of a mile of a
transit stop

Source: Valley Transportation Authority

The Valley Transportation Authority will discuss its financial
situation at a workshop at 8:30 a.m. Friday in the Mediterranean
Center at the Hyatt San Jose on North First Street.

TRANSIT IN SANTA CLARA COUNTY

Santa Clara County began placing a priority on transit in 1976,
when voters approved a tax measure to merge city-run bus lines
into a countywide agency. That measure remains the main source of
operating funds for a district that now includes funding for light
rail, Caltrain, Altamont Commuter Express trains, shuttle vans,
paratransit and express buses over the Dumbarton Bridge and
Highway 17.

The Beginning

1976: Permanent half-cent sales tax increase approved by voters to
create a countywide transit agency, running 215 buses, overseen by
county supervisors.

1981: Supervisors approve building a 21-mile, $580 million light-
rail line from Almaden Valley to North San Jose.

1984: A highway-only measure pays for completion of Highway 85,
widening of Highway 101 and removal of traffic signals on Highway 237.

1985: Construction begins on rail line and downtown transit mall.
Bus ridership falls to 112,900 riders daily.

Ridership rises in '90s

1992: Voters approved a 20-year, half-cent sales tax to ring the
valley with light rail. The tax is later ruled invalid because it
didn't get a two-thirds majority.

1993: Falling ridership leads to cuts in bus and light rail service,
fare increases and layoffs.

1995: The Valley Transportation Authority is created, the 12-member
board composed of elected city and county officials taking control
away from the board of supervisors. VTA uses local and federal
dollars to begin construction on light-rail line into Mountain View,
a project seemingly dead when the 1992 tax was thrown out.

1996: A nine-year, half-cent sales tax increase will fund trolley
extensions into Milpitas, East San Jose and Campbell.

1998: Ridership reaches an all-time high of 24,000-plus on light
rail, a 22 percent increase from 1991 when service first opened
to the Almaden Valley.

1999: $327 million extension to Mountain View opens, and daily
ridership soon passes 30,000 mark.

Promise, then trouble ahead

2000: Voters approve a 30-year sales tax extension to extend BART
to downtown San Jose and lengthen light-rail lines.

2002: Recession slams transit agency, as daily rail ridership falls
to 21,260 people a day. VTA says it needs $6 billion over next two
decades to keep buses and trains running.

2004: New tax measure may be on the ballot to raise money to operate
expanded rail and bus service.

Source: Valley Transportation Authority

Contact Gary Richards at grichards@... or (408) 920-5335.


[BATN notes: These developments were, of course, accurately predicted
by opponents of VTA's sales tax measures years ago. The writing has
been clearly visible on the wall to any viewer prepared to do basic
fiscal arithmetic. BATN notes that it *appears* VTA kept this story
quiet until immediately after Measures B cruised to its predicted easy
win <http://groups.yahoo.com/group/BATN/message/8565> at the polls.]

See in particular the Transportation and Land Use Coalition's
March 2001 report <http://www.transcoalition.org/overextended.html>
"Overextended: An Analysis of the Economic Uncertainties and
Environmental Justice Risks of Extending BART to San Jose"

Also see:

* <http://www.transcoalition.org/whatstherush.html> "What's the Rush?
Why Santa Clara County will benefit by waiting to renew its
transportation sales tax"

* <http://www.transcoalition.org/njnt_report.html> "No Justice, No
Tax How the Proposed Santa Clara County Transportation Sales Tax
Extension Short Changes Transit-Dependent People"

* <http://www.transcoalition.org/southbay/vta_fiscal_analysis.htm>
the May 2002 report "Sustainable Transit: An Analysis of the Valley
Transportation Authority's Fiscal Management and Solutions to Improve
Their Financial Health"

The passage of the 30-year straight-jacketing Measure B on Tuesday --
actively supported by SJ Mayor Gonzales, the VTA Board, the SVMG, the
Mercury News, and columnist Gary Richards -- will only serve to
exacerbate an already desperate situation. Yet no heads roll...]