May 16--SMART officials say cuts to train service and staff are likely needed to cover projected financial losses from the coronavirus pandemic and an existing deficit.
The Sonoma-Marin Area Rail Transit district is weighing proposals such as canceling all weekend service, reducing weekday service, cutting dozens of full-time positions and eliminating on-board Wi-Fi, among several others.
The district has posted an online survey asking the public what cuts it would prefer over others. The survey is bit.ly/3cGMHyO.
"We might just have to be forced to make those painful cuts -- we probably will," said Sonoma County Supervisor Shirlee, a SMART board member, during the board's discussion last week. "But I think we really need to demonstrate to the public that we hear them and ask them of what they think in terms of where to cut."
Service or staffing cuts would not occur immediately upon the start of the fiscal year on July 1, but would require further planning, said Eric Lucan, the board president and a Novato councilman.
Farhad Mansourian, the SMART general manager, told the board at its May 6 meeting that discussing the cuts with department heads "felt like we were sitting there drilling a hole in our heart because we're cutting the service and people's jobs."
"But we don't know what else we can do given the financial present and future and not knowing how fast the economy will recover," Mansourian said.
Weighing options
SMART was hit by a double financial blow in March. Marin and Sonoma voters rejected Measure I, the agency's bid for early renewal of its quarter-cent sales tax, in the March 3 primary. SMART pitched the measure to refinance its construction bonds, saying it could save millions of dollars per year in debt payments that instead could be used to cover a projected $9 million operational deficit.
Then the coronavirus outbreak prompted a "shelter in place" order from health authorities. The crisis could cost SMART $11 million to $14 million in sales tax revenue this fiscal year, the staff said. The tax is the rail agency's primary revenue source.
This will be offset by the $10.3 million in federal stimulus funding SMART is set to receive. While more transit stimulus funding will be available later this year from the Metropolitan Transportation Commission, it's unclear how much SMART will get.
"The budget cuts you are going to be asked to consider would be very dependent on the revenue outlook in the coming months and years," Erin McGrath, SMART's chief financial officer, told the board.
The staff outlined three areas where the board could begin making cuts. The first was about $3.5 million in one-time savings by implementing a hiring freeze on 16 vacant positions, reducing fuel costs and deferring purchases and maintenance projects.
A second area involves ongoing service cuts to save at least $2.6 million per year. These options include eliminating onboard Wi-Fi to free up about $530,000 per year; eliminating the customer service contract with the Golden Gate Bridge district; trimming various lobbying, consulting and security contracts; and refinancing existing bond debt under a shorter term to potentially save up to $1 million in annual payments.
The board voted unanimously to give notice to SMART's train Wi-Fi provider, the Virginia-based GBS Group, to end service. Some board members were reluctant to take this step over concerns it might discourage commuters from using the trains.
"But that $500,000 might be able to save one or two jobs within SMART," said board member Deborah Fudge, a Windsor councilwoman. "It sort of goes to our employees or Wi-Fi. Neither choice is palatable."
"No one wants to cut Wi-Fi, but it's half a million dollars and that's where we're at," said board member David Rabbitt, a Sonoma County supervisor.
Charging for onboard Wi-Fi likely would not work, Mansourian said. A previous survey of SMART riders asking if they would be willing to pay for Wi-Fi service for a higher bandwidth was met with strong opposition.
The board also voted unanimously to approve a consulting contract with the Philadelphia-based Public Financial Management Co. to begin assessing bond refinancing options. The contract is estimated to cost about $150,000, according to McGrath.
The SMART staff was also directed to begin work to reduce its rail liability insurance coverage from $295 million to $200 million to avoid a projected $635,000 hike in annual premium increases.
"This is, frankly, an increase we cannot afford right now given all of the other challenges we're facing," McGrath said.
The reduction would keep premium cost increases to about $133,000, according to McGrath.
Board members Joe Naujokas and Gary Phillips were absent from the three votes.
'Drastic' cutting
The largest ongoing savings, about $5.8 million, would be attained through cutting service and staff.
One proposal would reduce weekday trips to 22 per day, down from the 38-trip schedule that was recently implemented at the start of the year. This would result in about $4.7 million in annual savings, but also the loss of 31 full-time staff positions, McGrath said.
Another proposal is to cut all 10 weekend trips to save about $2.2 million annually. About 14 full-time staff would be cut, McGrath said.
There was some debate on whether weekend trips should be cut. Some board members, including Fudge and Marin County Supervisor Damon Connolly, said weekend ridership represents an area where ridership could grow, especially if people are looking to travel locally when the economy begins to reopen.
"On the other hand, we recognize we're in likely a drastic, cost-cutting scenario for the time being," Connolly said.
Rabbitt expressed concern that people will "shy away from transit" when the economy reopens over concerns about potential exposure to the virus.
"I think we need to do a lot of listening before we make that decision," said board member Chris Rogers, a Santa Rosa councilman.
Cutting just one weekend day of service would not generate much savings, Mansourian said, because all operational and safety staff would need to be on the job regardless of how many train trips there were.
Mansourian said the board must be prepared to make significant decisions in the coming weeks before it passes its 2020-21 budget by the end of June.
"The most difficult part is when we lay off our staff, then we cannot get them back in quickly, if at all," Mansourian said. "This is why this is so difficult and we have two or three weeks to figure it out."
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