Finances for the passenger rail service remain healthy, but spending for freight has been slashed to $1.8 million to match projected revenues for fiscal year 2024-25, officials said.
Sonoma-Marin Area Rail Transit needs about $500,000 more in annual revenue for its freight operations to be self-sustainable, officials said.
Eddy Cumins, general manager of SMART, said the finances for the passenger rail service remain healthy, but spending for freight has been slashed to $1.8 million to match projected revenues for fiscal year 2024-25. The fiscal year begins July 1.
Cumins said the agency has asked the state for $10 million to help its freight operations. He suspects the state will award the agency about $500,000 to get it through the year, Cumins said.
“A vast majority of that is maintenance focused,” Cumins said Thursday. “It needs a lot of repairs.”
The budget includes $870,099 for salaries and benefits, $767,290 for operations and $167,920 for capital repairs and replacements. A part-time utility worker position will remain vacant, and spending on maintenance was cut to balance the budget.
The operating fund balance for the fiscal year ending next month is $393,549. That is expected to reach zero by the end of the following fiscal year. There is no operating reserve for freight.
Revenue has been down $500,000 to $750,000 since the agency decided to stop storing liquid petroleum gas tankers in southern Sonoma County in 2021 amid concerns about safety and graffiti on vehicles.
The agency is able to store about 160 rail cars at a facility near Schellville and about 40 cars at a facility near the Marin County Airport north of Novato. The draft budget projects about $104,800 in revenue for freight storage for the next year.
The district opened a discussion of how to monetize its storage capacity last year. The board signaled interest in bringing back the practice of gas tanker parking to help address the ongoing deficit. However, residents near the storage facilities remain vehemently opposed to the idea.
“We’re in the business of serving the people,” Cumins said. “That’s why we exist and that’s what we do. So we’re trying everything we can come up with, without having to do that.”
That could include potential taxes and increased fees to help close some of that half-million-dollar gap, Cumins said.
The agency is also looking to market the storage opportunities to acquire new business, Cumins said.
“I feel confident we’re going to make it through 2025,” Cumins told the board at a budget meeting on Wednesday. “But we’re going to have to make some tough decisions to make sure that this is long-term sustainable, bottom line.”
Mike Arnold, a Novato resident who worked on the opposition campaign against SMART’s tax renewal measure in 2020, remains critical of the agency.
In a letter to SMART, Arnold said the board needs to confront the issue, which could involve planning, public outreach and consultants who specialize in freight regulations enforced by the Surface Transportation Board.
“The budget should include this as an expense item,” Arnold said.
Meanwhile, the draft budget for passenger rail service is in good shape, Cumins said.
Estimated revenues are expected to reach $120.28 million next year compared to $114.8 million this year. Expenditures are projected to reach $142.64 million, up $12.1 million, mostly because of engineering and construction on rail extension and multiuse path projects.
Staff said the district priorities are on increasing ridership through expanded rail, path and service offerings, and the spending plan reflects that.
“We continue to manage this as well as we can knowing our goal is to expand service and making sure we’re in a place to provide those operations,” said Heather McKillop, chief financial officer.
The draft budget includes spending of nearly $30 million on path projects, including construction and design of new paths and on wayfinding programs.
More than $37 million is planned for rail extension projects, including the big-ticket Santa Rosa to Windsor extension; Windsor to Healdsburg; and the new Petaluma North station.
Cumins said staff is working to increase trips per day from 38 to 42 starting in August. This will allow earlier morning departure times to better serve students, Cumins said.
Additionally, the agency continues to see growth in ridership boosted by a program offering free rides for youths and seniors that launched in April. As of Wednesday, trains carried 722,983 riders for fiscal year 2024, which is well above the 716,847 count set in pre-pandemic conditions in 2019.
Fare revenue is projected to reach about $2.2 million for the fiscal year 2024-25.
About $50.4 million, nearly half of the revenue, comes from the quarter-cent sales tax approved by Marin and Sonoma voters in 2008. That tax expires in 2029. A 30-year tax extension failed in 2020.
While officials have agreed that a sales tax extension is vital for the survival of the district, the board still has not committed to when it will seek another renewal.
Arnold said officials need to make a decision on a renewal and let the public know the plan. If officials decide not to place a measure on this November’s ballot, they are telling the public they are worried that they might lose, Arnold said, “and then face the loss of confidence by state and federal agencies that continue to fund SMART’s extensions,” Arnold said Friday.
Cumins said, “The clock is ticking. People will know soon.”
The operating reserve is expected to be $11.7 million by the end of fiscal year 2024-25, growing $450,000. About $20.46 million from the fund balance is expected to be used, with an ending fund balance of $60.5 million.
The draft budget will be reviewed by the citizens oversight committee on May 22.
Public comments will be accepted until 5 p.m. May 31. Comments can be emailed to McKillop at hmckillop@sonomamarintrain.org or mailed to Sonoma-Marin Area Rail Transit District, Attn: Heather McKillop, 5401 Old Redwood Highway, Suite 200, Petaluma, 94954.
The final budget will be presented for board approval on June 18.
