SMART says it faces multimillion-dollar deficits without sales-tax renewal

The North Bay’s commuter rail system could face crippling multimillion-dollar deficits within three years if voters in Sonoma and Marin counties don’t pass a proposed sales-tax extension in March, SMART officials revealed for the first time Wednesday.

Starting in 2022, Sonoma-Marin Area Rail Transit would need to slash at least $9 million annually - about a seventh of its operating expenses - resulting in cuts to service and SMART’s workforce if the 12-member board opts not to seek early renewal of the tax next year, or if the extension is put to voters and they reject it, officials said.

The agency’s financial forecast showed operating expenses climbing from $58 million this fiscal year to about $63 million two years from now, with tax and fare revenues not expected to keep pace. The rise is driven mostly by escalating payments on debt accrued in SMART’s buildout, as well as rising labor, fuel and maintenance costs.

“We just need to call a spade a spade as we see it today,” Farhad Mansourian, SMART’s general manager, told the board. “Doing nothing is not an option and pretty bad for everybody. We’re being straightforward. We don’t want to mislead the members of the public. We want to tell them what the pains are, what the chokeholds are and what our options are.”

The newly unveiled forecast marked the first public acknowledgment by SMART officials that the 2-year-old line already faces a potentially deepening near-term shortfall in its budget. The projections did not account for the possibility of a recession, which would carve an even larger hole into the system’s budget. More than 70% of SMART’s spending on operations is supported by the quarter-cent sales tax.

It isn’t set to expire for another decade, but SMART officials say early renewal would allow them to restructure and reduce debt payments, which are now set to rise to $16 million next year and $18 million by 2022.

Without the tax renewal and financial adjustments it would support, SMART would be forced to cut commuter service in half, according to the agency’s finance chief, effectively sidelining 18 of the 36 train trips. Dozens of jobs could be also eliminated from the workforce of about 200, officials signaled.

The cuts to service could spell “almost a death spiral” for SMART, said San Rafael Mayor Gary Phillips, the board chairman. The agency, he said, needed to level with taxpayers in order to prevent that demise.

Phillips said SMART would need to publicly recognize that it had fallen short of promises made under Measure Q, the 2008 voter-approved sales tax that envisioned a 70-mile system from Cloverdale to Larkspur, with an accompanying bike and pedestrian path. Forty-five miles of track - from north of Santa Rosa to Larkspur - is set to be in service by the end of this year; only about 20 miles of the path have been completed.

“We do have some baggage as far as SMART operations go and the SMART board - perhaps not attributed to any of us individually, but to us collectively,” Phillips said. “It’s time to lay out what our situation is and how best to deal with. It’s certainly not ideal.”

The financial revelations confront SMART with what looks to be an exceedingly difficult political challenge: How to secure support from two-thirds of voters in two counties, where a minority of residents - and voters - currently ride the train?

“The realities are tough, but we’ve come to grips with them earlier rather than later, which is really important,” said Steve Birdlebough, co-founder of advocacy group Friends of SMART. “We’ll be there when it comes to the ballot.”

Any campaign would also be without a key piece of information on future northward extension. SMART officials have been unwilling or unable to say when they think the line will reach Healdsburg and Cloverdale, the last two stops on the planned line.

Officials acknowledged that SMART forecasts showed it would not have the money to support buildout beyond Windsor, where rail service is set to begin at the end of 2022. Construction of those final 22 miles would have to rely almost exclusively on regional, state and federal transit funds.

“How am I going to go back to my constituents and say, ‘Well, even with a 30-year extension, sorry, there no money here to fund the extension?’” Healdsburg Councilman Joe Naujokas, a SMART board member, asked Erin McGrath, SMART’s chief financial officer. “Help me explain that to them.”

In May, SMART estimated a $364 million price tag to complete the line to Cloverdale. Officials on Wednesday offered no updated figure cost or completion date.