The San Francisco Municipal Transportation Agency needs $3.2 billion, or roughly $632 million annually over the next 20 years, to replace infrastructure that’s “beyond its useful life,” according to the most recent State of Good Repair Report.
That’s a tall order for a transit agency currently facing an estimated loss of up to $555 million in capital revenues over the next five years.
SFMTA oversees $14.9 billion of assets, all of which decline over time due to regular wear-and-tear. The annual State of Good Repair Report provides an overview of how much money is needed to maintain, rehabilitate and maintain that existing infrastructure.
“We’re talking today about the thing that no one wants to talk about. It seems to be, in our profession, we put all our creative thinking into building the new stuff,” SFMTA Board Director Steve Heminger said during Tuesday’s meeting.
But proper maintenance and replacement of the nitty gritty parts of the transit system are absolutely essential to delivering an efficient service, officials emphasized.
SFMTA has two budgets that, together, make up the total financial plan for the agency: an operating budget and a capital budget.
Simply put, operating budget expenses cover day-to-day functions and revenues come largely from rider fares and sales tax. Capital budget expenses cover maintenance, repairs and longer-term transit system improvements or expansion while revenues come from a much wider range of funding including state or county allocations, fees and other tax receipts.
Over the last decade, the agency has invested an annual average of $235 million from the capital budget in replacing or rehabbing aging assets. Officials said this level of funding is “insufficient,” and cautioned against putting off the multi-billion dollar backlog.
“It is critical that a higher percentage of capital investments address state of good repair needs than expansion needs when possible,” a staff report said.
In April, SFMTA approved its five-year Capital Improvement Program, a financial strategy to deliver projects that provide maintenance and safety enhancements to the transportation system as well as improve its reliability.
The revenue used to fund those projects has been considered relatively safe from the short-term impacts of COVID-19 because it comes from more than 60 sources, most of which are less immediately affected by declines in ridership and sales tax receipts.
But as the COVID-19 crisis continues, even that financial security has dissipated, and the agency now faces a financial crisis, especially once the current two-year budget cycle comes to a close.
Staff said the agency has an “extremely high level of projects right now in construction” such as the ongoing L-Taraval and Muni Forward projects, that will have to be completed and paid out.
Decreasing revenues will cause cash flow concerns, and officials warned directors they’d need to make some tough decisions about how to create savings.
Those cuts are unlikely to impact aspirational projects such as the TransBay Transit Center or Central Subway, as those were accounted for as much as two decades ago, SFMTA Director Jeffrey Tumlin said. He added his predecessors were “very conservative” and invested in capital projects that would directly improve basic operations that touch riders.
Tumlin described combing through the capital budget to identify “fat we could trim” to easily create savings without having to jeopardize basic service delivery to the highest need riders.
Instead, he found almost exclusively focused efforts to get physical infrastructure into good condition in order to minimize delays, expand critical service and increase reliability.
“When we have to go slashing our capital budget, we’re going to be slashing budgets that benefit essential workers the most, transit riders the most […],” Tumlin said. “It’s going to be grim.”
Though the SFMTA Board of Directors won’t be expected to take action on any changes to the Capital Improvement Plan until sometime in the fall, once a more complete financial analysis can be done, officials warned them tough decisions would be inevitable.
“We’re going to need all of you to help us make some very painful decisions over the next 22 months,” Tumlin said.