CA: Bailout for Rail and Bus Agencies; AC Transit and Caltrain Likely to Use Capital Funds

Regional transportation officials have endorsed a plan to bail out AC Transit and Caltrain by allowing the transit agencies to divert millions of dollars intended to maintain or purchase buses and rail cars. Instead, the money will be used to fill huge gaps in their operating budgets.

But the money - $24.5 million for AC Transit and $5 million for Caltrain - came with a lecture from the Metropolitan Transportation Commission, and some conditions if AC Transit wants to use another $10 million in capital funds to run its buses.

Using federal capital funds - money set aside for maintenance, equipment purchases or physical improvements - to cover operating expenses is a bad habit to get into, said Steve Heminger, the commission's executive director.

Years ago, the regional transportation agency prohibited the practice because deferring maintenance and investment would allow the Bay Area's transit network to fall into disrepair.

And while regional officials still frown on it, they've allowed the money to be spent on operations to prevent drastic service cuts.

The agreement was approved Wednesday by a planning committee; it is likely to be approved by the full commission later this month.

"We are eating our seed corn," Heminger said. "We are not going to go hungry today - but our kids will."

The Bay Area's use of capital money for operating expenses has not reached a point where transit upkeep is being neglected and systems are deteriorating, he said. Other cities haven't been as fortunate. In Chicago and Philadelphia, for example, transit systems have been plagued by dilapidated rails and failing equipment that slows service and has been blamed for accidents.

AC Transit carries about 200,000 riders a day and faces a structural deficit estimated at $260 million over the next 10 years. AC has spent about $10 million a year in capital money for a decade, leaving the transit district with older buses requiring more maintenance. AC Transit has cut costs and balanced its budget last month, but that wouldn't have been possible without the redirected funding.

"We need a strategy to try to break that cycle," Heminger said.

The commission last year approved the use of $35 million in capital funds over two years, but the $17.5 million for this year needed to be reaffirmed after completion of an independent financial review. AC requested an additional $17 million in capital funds be reassigned to operating expenses. The committee agreed to allot $7 million immediately but withheld $10 million until the agency comes up with a plan to avoid relying on capital money or service cuts and to cut operating expenses and raise additional revenues. It has until January.

Caltrain, which had threatened to run trains only during weekday commute times, came up with a plan to retain its 86-train schedule that relies on several one-time funding sources, including $5 million in capital funds. The commuter railroad, which carries about 41,000 passengers a day, faces an ongoing deficit of about $30 million a year. Coalitions of passengers and businesses are working to come up with a tax measure or other stable source of funding.

"We are eating our seed corn. We are not going to go hungry today - but our kids will." "

Steve Heminger, MTC

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