When Santa Cruz Metro was forced to confront bleak financial forecasts in 2008, 2012 and 2016, the solution was the same.

“In order to balance the budget, we reduced service,” Metro Chief Planning and Innovation Officer John Urgo told the Sentinel, “and it’s a downward spiral.”

That’s because, Urgo explained, money is saved in the short term by curtailing the reach and frequency of routes, but as costs continue to rise, it eventually throws the equation off balance over time. In 2022, as yet another fiscal cliff approached, things changed.

Metro made an effort to break the vicious cycle when the board set a goal of doubling ridership within seven years, and its staff embarked on a massive systemwide overhaul known as Reimagine Metro. The first phase of that overhaul, based on extensive community engagement and feedback, was a cost-neutral route reconfiguration aimed at increasing efficiency with existing resources. Then, the second phase of the reimagining process — developed as a moonshot that was predicated on the availability of outside funding — was unlocked through a one-time, $28.3 million grant from the state in 2023 that allowed the agency to implement a 40% service expansion beginning later that year.

Now, that funding has almost all dried up and the structural challenges driving Metro’s deficit are rising up once again. The agency’s budget managers have forecast a $4.2 million operating loss in fiscal year 2027 that will increase to $15.9 million in fiscal year 2028. The deficits are primarily driven by rising general expenses such as labor, pensions, services, materials and supplies, while revenue and grants from state and federal authorities have failed to match the pace of those increases.

At its meeting set to begin at 9 a.m. Friday, the board will consider final adoption of its fiscal year 2027 budget. But, critical to that discussion is how the agency can secure a long-term local funding source to keep its service expansion viable, and it’s now clear all options are on the table.

Ballot measure options

Up until this week, the primary vehicle for securing this funding was through a citizens‘ initiative organized by Friends of Santa Cruz Metro that would impose a new half-cent sales tax for the transit provider with a simple majority vote from the public. The campaign’s original intention was to gather the requisite 10,417 signatures by May 11 to add the measure to ballots in November so the funding infusion could hit next year before deficit pressures ramped up even more. While they failed to do so, leaders of the effort now say they are about a week ahead of schedule for meeting an Aug. 9 deadline to quality for ballots in March 2028 or on another special election ballot.

As of last week, Manu Koenig, a member of Metro’s Board of Directors who is acting as a spokesperson for the Friends of Santa Cruz Metro campaign in his capacities as a private citizen, said volunteers were close to securing 10,000 signatures with a goal of gathering 12,500 by August to account for potential invalid signatures.

“The future of Metro really depends on the success of the measure,” Koenig said in an interview with the Sentinel last week. “If we believe in a future with transit in Santa Cruz County then we hope that the public will support it and feels the same way.”

Now, instead of anxiously waiting for a vote in 2028 that could decide the agency’s fate, it appears the Metro board itself will consider taking matters into its own hands.

Friday’s agenda includes a recommendation for the board to introduce an ordinance imposing a half-cent sales tax for public transit purposes and consider calling a public hearing to adopt the ordinance. The item is meant to spark discussion and gauge interest among board members about the possibility of adding the half-cent sales tax to ballots in November. Unlike a citizens‘ initiative, which requires a simple majority “yes” vote to pass, a measure proposed by the Metro board itself needs a two-thirds majority, or 66.7% approval.

“If we get to March (2028) and there’s not a successful ballot measure or a new funding source available, then we are really at what we call a ‘fiscal cliff’ where we will have used our available cash and we will be doing service cuts and they’ll be pretty dramatic,” Metro CEO Corey Aldridge told the Sentinel last week, before the agency’s ballot measure proposal had been made public.

Record to run onUnlike many other public transit agencies in the Bay Area that are facing similar financial woes, Urgo and other leaders at Metro say the agency has the benefit of tangible results from the past three years that paint a picture of what can happen if public investments are made in a countywide bus system on a ongoing basis.

According to Urgo, Metro is expecting to end the year with 5.5 million boardings, which is 10% above pre-COVID levels, 70% higher than 2023 and the agency’s highest ridership since 2011. Its Youth Cruz Free program for local K-12 students brought about a 500% ridership increase among that group since its launch three years ago.

“If ridership didn’t grow, then I think we’d be in a different position right now,” said Urgo. “It’s not that people don’t want to take the bus or take Metro, it’s that it wasn’t convenient before and now it is.”

Language in the citizens’ initiative ballot measure would double down on this convenience by offering free fixed route service to seniors and people with disabilities while aiming to do the same for low-income riders and commuters.

Melinda Orbach, also doubling as a Metro board member and volunteer with the citizens’ initiative, said public transportation is a social justice issue because it provides disadvantaged community members access to basic services, transit-oriented housing and economic opportunities, while also reducing their carbon footprint.

“If we don’t fund transit, there will be significant repercussions in terms of access to medical care, access to jobs; it’ll affect our economy,” said Orbach, adding that she was confident a majority of the community would vote for the citizens’ initiative if it was proposed.

But as a board member, Orbach also believes she and her colleagues need to consider all options for how they can sustain services and prevent cuts.

“I think we need to have that robust conversation as a board,” she said.

Worth the wait?

Metro’s existing half-cent sales tax, passed in 1979, generates $27 million annually for the agency. If another half-cent sales tax increase is approved, it would generate an additional $27 million annually to fill the hole left by the expiring grant that funded Reimagine Metro. The agency has estimated that if no local funding source is found, it will equate to at least a 40% service reduction and 100 employee layoffs in fiscal year 2028. Koenig noted those numbers are likely an undercount, given that costs have risen in the three years since the Reimagine Metro service expansion was launched.

While the deficit is concerning, budget managers have not proposed any layoffs next fiscal year, though they have recommended eliminating 26 vacant positions.

At its meeting Friday, the board will also set aside discussion of a ballot measure to evaluate various service reduction scenarios that could save money in the near term to balance the budget. Urgo and Chief Financial Officer Chuck Farmer will share three scenarios that would save $4.2 million via an estimated 20% service reduction.

Urgo told the Sentinel last week that while a 20% cut might save some money next fiscal year, in his view it only buys the agency about six months and it carries real-world impacts to the Metro workforce.

“No amount of cuts that we do now will save Reimagine Metro without renewed local funding,” said Urgo He added that if cuts are made, “we’re just going to be impacting people’s lives and we’re not going to be solving the long-term deficit without renewed local funding.”

Jaime Renteria, general chairperson for SMART Local 23, the union that represents Metro bus operators, also believes that service reductions should be avoided.

“We’re doing everything we can to make sure that service to the public doesn’t get reduced,” said Renteria. “That’s our main concern right now — our public, our community, our ridership.”

IF YOU GO

• What: Santa Cruz Metro Board of Directors meeting.
• When: 9 a.m., Friday.
• Where: 110 Vernon St. in Santa Cruz. Remote participation available via Zoom at us02web.zoom.us/j/89154887946
• Why: Final budget adoption and possible November ballot measure discussion.

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