Voters may be asked in November to approve any number of higher taxes — sales, hotel, payroll — to prop up the strapped-for-cash Municipal Transportation Agency.
The San Francisco agency that operates Muni just made it more expensive to ride the transit system while it reduced service — making buses more crowded and less frequent.
More service reductions are likely if Muni does not see an infusion of money, the agency says. “Without additional revenues, the SFMTA financial challenges will worsen, resulting in a smaller, more expensive and less effective transportation system,” said an agency report for the San Francisco Municipal Transportation Agency’s Board of Directors.
The board meets Tuesday to vote on whether to pursue tax measures for the November ballot and, if so, which of the six proposed tax increases to push during these challenging economic times. The report finds nearly all the options would be difficult to pass.
The agency could gain as much as $65 million annually if voters approve a half-cent sales tax. But sales taxes are often criticized for being “regressive.” One measure would increase the payroll tax from 1.50 percent to 1.75 percent to generate as much as $60 million a year, but there is a movement afoot by city leaders to do away with the payroll tax, which has long been criticized by business advocates as a disincentive to hire workers.
The one option that is considered “easier,” or perhaps most realistic, is increasing the hotel tax.
“It might be easier to approve a hotel tax because it would mostly be paid by tourists,” the report said. “The hotel tax might have a small impact on the tourism industry (the tax increase on a $150-per-night [base rate] room would be $3.)” This tax increase would generate $20 million annually.
Without new revenue, the agency says the system’s operations will struggle. “The SFMTA will continue to face long-term financial uncertainty without new revenue sources. In turn, this will undermine the SFMTA’s ability to keep fares in line with inflation and provide frequent and comprehensive public transportation.”
As the agency looks to higher taxes for revenue, at least two city commissioned reports have been issued recently calling into question the agency’s operations and identifying millions of dollars in savings if specific improvements were made. Also, the Muni operators have come under attack for not giving up some part of compensation to help with the funding shortfall.
Budget analyst Harvey Rose’s audit released last week found factors like use of overtime pay and poor scheduling and management of operators is wasting more than $3 million a year. The agency plans to release a full response to the audit by Tuesday.
Some of the operational challenges are blamed on work rules. At least one measure is headed for the November ballot that, if approved, would eliminate work rules blamed for excessive overtime costs.
Muni’s budget for the fiscal year that begins July 1 remains under threat by members of the Board of Supervisors who are unhappy with the 10 percent service cuts that went into effect May 8.
Those cuts eliminated more than 300,000 hours of annual service “which includes changes that will increase crowding and reduce service hours and frequency, particularly during the evenings and weekends,” said the agency’s report.
Members of the Board of Supervisors say they may be forced to reject the budget if the cuts are not scaled back. Negotiations continue.
The Board of Supervisors Budget and Finance Committee will hold a hearing on Muni’s operations on Thursday that will include a discussion about the agency’s response to the budget analyst’s audit.
Possible sources of additional transit funding per year:
Description: Another .5%
Revenue potential: $65.0M
Vehicle license fee
Description: From 1.15% to 2.00%
Revenue potential: $33.0M
Revenue potential: $28.0M
Description: 1.50% to 1.75%
Revenue potential: $57.5M
Description: 14% to 16%
Revenue potential: $20.0M
Description: 25% to 35%
Revenue potential: $20.4M