• Subscribe
  • Magazine
  • 40 Under 40
  • Supplier's Directory
  • Advertise
  • Contact Us
    1. Management

    SFMTA budget: Revenue, expenditures and future projections

    March 30, 2020
    SFMTA outlines state of projected revenue and expenditures and how they inform budget development.
    Related To: San Francisco Municipal Transportation Agency (SFMTA)

    The San Francisco Municipal Transportation Agency (SFMTA) outlines its operating and capital budget, saying a key challenge to creating the budget this year involves the COVID-19 outbreak 

    Operating budget

    In Fiscal Year 2021 (July 1, 2020 – June 30, 2021), SFMTA says it expects the total operating budget to be $1.3 billion. SFMTA has four main sources of revenue: general fund (34 percent), parking and traffic fees and fines (31 percent), transit fares (18 percent) and operating grants (17 percent).

    Over the past seven years, there has been a meaningful decrease, in inflation-adjusted dollars, in two of the main revenue sources: parking and traffic fees and fines and passenger fares. These declining revenues make the SFMTA increasingly reliant on revenue from the general fund and state operating grants to fund operating costs.

    The general fund is the total pot of money that the city and county of San Francisco collect from taxpayers throughout the year. The city charter sets a minimum level of funding from the general fund that goes to the SFMTA. State operating grants come from the state of California’s General Fund through various taxes, mostly on gasoline, and are allocated through various state and regional agencies such as the California Transportation Commission (CTC), California Department of Transportation (CalTrans) and Metropolitan Transportation Commission (MTC). The SFMTA general fund allocation and state operating grants are fairly flexible revenue sources, meaning that they can be used for a variety of operating and capital expenditures.

    While these two revenue sources provide a large portion of the SFMTA’s overall budget, their size and stability are dependent on the state of the economy and corresponding tax revenues. Reliance on revenue sources that fluctuate with economic booms and busts means that economic downturns will force the SFMTA to reduce service. This is especially true as current revenue sources are expected to decrease significantly due to the coronavirus pandemic and current shelter-in-place orders.

    As the main revenue sources have decreased, the SFMTA also faces constantly increasing expenditures. Overall, SFMTA says the deficit is projected to rise from $66 million in FY2020-2021 to $167 million by FY2024-2025.

    The SFMTA is proposing a suite of policy changes in this year’s budget to achieve the strategic plan goals and help address this deficit. These policy changes are projected to impact revenue and expenditures, bringing the agency to a balanced budget for FY2021-2022. 

    Capital Budget

    In FY21, the agency’s total capital budget is projected to be $468 million. This budget includes four main expenses: transit optimization and expansion (31 percent), fleet (26 percent), transit fixed guideway infrastructure (14 percent) and streets (12 percent).

    The SFMTA’s medium to long-term projected capital needs for the city’s transportation system, detailed in the 20-Year Capital Plan, have grown by $8.9 billion, to a total of $30.8 billion in 2019. General sources of this increase include realities like the increased costs for constructing projects. Additionally, cost estimates for streets projects have increased because there are more of them and they are more extensive in order to meet Vision Zero goals and eliminate traffic fatalities in San Francisco. 

    Along with escalating projected costs, the State of Good Repair (SGR) backlog is growing. Between 2018 and 2019, the agency’s reported asset backlog rose to $3.23 billion due primarily to the agency’s aging facilities and parking and traffic assets.

    As with the operating budget, capital expenditures required to reach the transportation goals are far outpacing available capital revenue. The majority of the funds are spent on State of Good Repair, followed by transit optimization, followed by streets.

    In FY17-21, the capital budget was $3.4 Billion. In FY21-25, the capital budget is expected to decrease by approximately 30 percent to $2.4 Billion. This means that the number of projects that the SFMTA can deliver is expected to decrease. 

    Looking ahead

    SFMTA says it is facing an operating structural deficit as expenditures steadily outgrow revenue and the capital budget is experiencing declining revenue. In 2017, San Francisco Mayor Ed Lee and then Board of Supervisors President London Breed convened Transportation Task Force 2045 (T2045). The task force was responsible for developing and evaluating options for how the city can generate additional revenue for transportation needs.

    Several of the options explored by T2045 include:

    • Congestion Pricing: This option wasn’t considered as a revenue-generating tool but as a part of policy package to reduce congestion. 
    • A second transportation sales tax: Proposition J and K went on the ballot in November 2016. Proposition J was a charter amendment that would dedicate funding that comes into San Francisco’s General Fund from the Proposition K sales tax measure which included a half cent for transportation. The joint measures did not pass.
    • Transportation Network Company (TNC) fee: A per-ride fee on TNC rides to help pay for congestion management efforts to mitigate the impacts of TNC trips.

    This past November, one of these potential revenue measures, Proposition D, was approved by the voters. Proposition D is a tax on ride-share companies like Uber and Lyft to provide funding for both the operating and capital sides of the SFMTA budget. This tax is estimated to bring in $30 million dollars annually, with half going to capital investments for pedestrian and bicycle safety.

    Several of the other revenue sources that might be up for consideration soon include:

    • A second GO Bond: This revenue was not included in the current FY2021-2025 CIP, a second $500 million GO Bond is scheduled to go to the ballot in November 2022.
    • Reauthorize Proposition K: Reauthorizing Proposition K by developing a new expenditure plan would provide funding to a wide array of capital programs.
    • Community benefits district: A tax district that allows communities to raise money for local infrastructure investments and services.

    As the agency moves forward with adopting the next two-year budget, SFMTA says it needs to continue the dialogue about revenue and expenditures. That includes adjusting to the new economic conditions and continuing to support the long-term financial health of the agency with new on-going revenue sources.