Voters in Marin and Sonoma counties may soon face a referendum on whether to continue funding the Sonoma-Marin Area Rail Transit District with a quarter-cent sales tax.

The SMART Board of Directors voted unanimously Wednesday to have its staff begin the process of renewing the district’s quarter-cent sales tax on the March 2020 ballot.

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“It’s not an easy task before us, but this is the first step and frankly we don’t have a lot of time,” said San Rafael Mayor Gary Phillips, the SMART board chairman.

The district has relied on the quarter-cent sales tax, passed via Measure Q in 2008, to build out and run its rail system, which now spans downtown San Rafael and the Sonoma County Airport.

Measure Q expires in 2029, but staffers say it is imperative the tax be renewed well before then. While sales tax revenues have increased through the years, so has SMART’s operational costs and debt payments, according to SMART Chief Financial Officer Erin McGrath.

By having a tax renewal locked in early, the agency can make long-term financial decisions and refinance its $167 million of outstanding bonds so it can make lower payments.

If SMART chooses to wait until closer to 2029 and the sales tax is not approved, McGrath said, “We’ll have to contract very quickly.”

Wednesday’s vote kicks off a monthslong process. SMART board members said this time will be critical in gaining public support for the tax extension. A final vote on whether to place a tax measure on the ballot would occur in October or November, according to staff.

Healdsburg resident Doug Kerr said north Sonoma County residents have been patient with SMART, especially because they were promised a 70-mile rail and pathway system from Larkspur Landing to Cloverdale when voters approved Measure Q a decade ago. While work is underway to extend the rail to Larkspur, Kerr said there needs to be a plan for the northern extension.

“You cannot leave that as an open issue and expect north county support,” Kerr said.

Board members’ perspectives varied on the proposal, though most expressed support for extending the tax.

David Rabbitt, a SMART board member and a Sonoma County supervisor, said there is “no alternative” because the tax is the agency’s primary funding source. He added it would also make no sense to include a sunset date for the tax this time.

“What are you going to do, mothball the fleet? Unacceptable,” Rabbitt said.

SMART board member and Sonoma County Supervisor Shirlee Zane said the board should consider a higher tax, saying the quarter-cent tax has “never been sufficient” for the plan to build out the full railroad. She added that the agency needs to present the public a plan on how SMART will continue to grow.

Some board members such as Santa Rosa Vice Mayor Chris Rogers said he was on the fence about a March ballot measure. He requested staff to bring back more polling data to show whether the tax renewal can garner the two-thirds vote it would need to pass.

Measure Q has generated $289 million in revenue since taking effect in 2009, far short of the growth needed to meet the $890 million the tax was initially expected to generate in its 20-year life. The entire rail build-out was also expected to cost $541 million, but SMART has now spent more than $550 million on a yet-to-be-completed track.

Staff attribute these variations to the Great Recession. However, staffers said they’ve been able to leverage these tax revenues to bring in another $304 million in grants for building and running the train system.

The tax revenue has consistently risen from $4.9 million in 2009 to about $37.1 million in the 2018-19 fiscal year, according to an audit report last year. The 2009 tax revenue was collected between April 2009 — when the tax took effect — through the end of the fiscal year on June 30, 2009. Sales tax is expected to account for half of the revenue collected by SMART this fiscal year. By comparison, the revenue derived from charges for services, which include fares and parking fees, was about $4 million, or about 5 percent.

About 1,163,000 passengers have ridden on SMART since it began operations in August 2017, or about 56,700 passengers per month.

This trend of revenue growth is expected to continue through 2029, when the tax is forecast to bring in $51.4 million. But while the tax revenue growth has been healthy, as McGrath described it Wednesday, costs are also rising and the district has had to dip into its reserves.

For example, the district anticipates spending another $10 million in the next three years to replace brakes, engines and other equipment on its rail cars. Staffing levels have risen from 25 to 121 full-time employees between 2013 and the current fiscal year, with about 20 employees added in the last year alone. SMART is also paying employees more to compete with other transit lines such as BART and Caltrain, McGrath said.

Of the nearly $38 million in sales tax revenue it expects to take in this fiscal year, about $16.1 million will go to paying off its debts.

In the coming years, SMART’s debt payments are also projected to grow from about $16.1 million this year to as much as $22 million in the 2027-28 fiscal year, according to a recent audit report.

SMART had already taken out $5 million of its reserves to balance the budget this fiscal year, which is something that SMART General Manager Farhad Mansourian said could not be sustained should a sales tax renewal be struck down by voters. Positions and services would immediately be frozen and cut, he predicted, in order to balance the budget.

Another factor weighing on Mansourian’s mind is the possibility of another recession in the near future. By approving the tax early on, the agency would be able to plan for these financial ebbs and flows more efficiently, Mansourian said.

Discussions about the sales tax are expected to continue at the board’s May 15 meeting.