With Caltrain in Funding Crisis, Counties Strike Deal to Put Sales Tax on November Ballot

Updated 1:45 p.m. Tuesday

Officials in San Mateo, San Francisco and Santa Clara counties have hammered out an agreement to put a Caltrain sales tax measure on the November ballot — a levy that supporters say is crucial for the rail agency to survive a pandemic-driven financial crisis and expand in the future.

The agreement, confirmed early Tuesday by officials from all three counties, resolves an impasse over how the rail agency is governed that had threatened to prevent voters from getting to decide on the one-eighth-cent sales tax. Assuming that all the agencies that must approve the ballot measure go along with the deal later this week, the levy still must win two-thirds approval at the ballot box.

San Jose Mayor Sam Liccardo, a member of the Santa Clara County Valley Transportation Authority board that will vote on the tax measure Wednesday, said the deal was the result "of many hours of phone calls, shuttle diplomacy and redrafting by several of us through nights and weekends."

He said the agreement "will enable Caltrain to expand its service with long-overdue reforms in governance that will enable greater accountability to taxpayers."

The deal provides the ballot measure will be "clean," meaning that it will not include a series of last-minute conditions that San Francisco and Santa Clara officials had insisted upon to change how the rail agency is run.

The conditions, approved by the San Francisco Board of Supervisors last week as part of its proposed ballot measure, would require the three-county Peninsula Corridor Joint Powers Board that oversees Caltrain to begin the process of enacting governance changes at the rail agency. Those provisions, authored by San Francisco Supervisors Shamann Walton and Aaron Peskin, would restrict the use of the sales tax proceeds while those governance talks were underway.

San Mateo County, whose SamTrans transit district has run Caltrain since 1991, resisted those ballot conditions and insisted they were illegal under the 2017 state law that authorized the ballot measure.

The issue has taken on added urgency with Caltrain facing a plunge in ridership and fare revenue due to the pandemic. System patronage plummeted as much as 98% after coronavirus shelter-at-home orders were imposed across the Bay Area in March.

The ridership loss is especially problematic for Caltrain, which gets 70% of its operating funds from passenger fares. Unlike most other transit agencies, the railroad has no dedicated source of funding and has depended on federal pandemic relief funds to continue operations. Agency officials have warned that the system will run out of cash this fall and could be forced to drastically curtail or even suspend service.

The agreement will require a furious scramble by the seven different boards that, under the state law authorizing the tax measure, must act by Friday to put the measure on the ballot.

San Mateo County's Board of Supervisors and the SamTrans board approved a "clean" version of the tax measure earlier this year and don't need a further vote.

The Santa Clara County Board of Supervisors approved the the tax measure on Tuesday morning, and the Santa Clara County Valley Transportation Authority board will consider it on Thursday.

In San Francisco, the Board of Supervisors will hold a special meeting Friday to pass a resolution without the Caltrain governance conditions approved last week. The city's Municipal Transportation Agency board, which voted down the tax measure last week, will meet Wednesday to reconsider it.

And the Joint Powers Board overseeing Caltrain will meet Thursday to formally approve the tax measure and pass a separate resolution committing the agency to reforming its governance structure.

The San Mateo County Transit District, or SamTrans, runs Caltrain — largely the result of the county paying for the line and never having been fully repaid. San Francisco and Santa Clara counties have argued that with their counties expected to pay about 80% of the estimated $108 million the tax will raise each year, they need to have a more meaningful voice in running the agency.

Among the changes sought by San Francisco Supervisor Shamann Walton and Santa Clara County Supervisor Cindy Chavez — both of whom serve on the Caltrain board — is the power to hire and fire the agency's CEO.

The resolution will also incorporate language limiting use of the sales tax proceeds pending enactment of the governance changes — due by Dec. 31, 2021 — and provide for immediate retention of counsel and auditor independent of SamTrans.

The Tuesday agreement also includes an undertaking by the parties to repay the $19.8 million San Mateo County is still owed for purchasing the Caltrain right-of-way from Southern Pacific in 1991. The source for that reimbursement is unclear.

Charles Stone, vice mayor of Belmont and a member of the Caltrain board, expressed some reservations about the repayment language.

That section says the Caltrain board will "initiate efforts" to reimburse SamTrans, including by "prioritizing the payment of the (SamTrans) investment ... if the Caltrain tax measure is approved."

"If that's meant to say the revenues from the one-eighth-cent sales tax should be used to pay back the SamTrans investment, that's saying that San Mateo County taxpayer money should be used to pay back the San Mateo County taxpayers," Stone said. "I hope that's not what it's meant to say. If it is, it's a real problem."

But Walton said that's not the resolution's intention.

"There's nothing in the resolution that leads me to believe we are discussing sales tax money going toward reimbursement for San Mateo County," he said. "We're going to focus on a solution to make SamTrans and San Mateo County whole." He added that repaying San Mateo County for the initial investment that made Caltrain possible "has never been a point of contention for me."

He said his push for a new governance agreement is "really about making sure that all three (Caltrain) counties have an equitable say in management."