Shared Spaces could cost cash-strapped SFMTA more than $10M a year

Program intended to boost small business could come at a cost for struggling city transit agency

As city officials prepare to make Shared Spaces permanent, The San Francisco Examiner set out to explore the potential impacts of the popular program, which began as a temporary emergency measure introduced during the pandemic to help small business. Today’s story is the second of three in a planned series.

The first installment can be read here.

The potential upsides of making Shared Spaces permanent are well documented: it could be a boon for small businesses, a reimagination of neighborhood commercial corridors, and a chance to breathe new life into San Francisco.

Less well known is that the legislation, expected to be heard by the Board of Supervisors next month, would saddle the San Francisco Municipal Transportation Agency with around $10.6 million of projected annual costs.

Under ordinary circumstances, that financial loss might be easier to stomach.

But these are not normal times, especially for an agency that currently can’t afford to run full Muni service.

Still, Mayor London Breed’s Shared Spaces team remains bullish on the idea that benefits of proposed permanent legislation far outweigh the costs borne by SFMTA.

“Shared Spaces are a vital component for our strategy for stabilizing the locally-owned, neighborhood-serving businesses,” Robin Abad, who oversees Shared Spaces for the Planning Department, said in an email. “Retaining employment and tax base will be critical for the long-term economic future of The City, its residents and small business sector.”

The cost to SFMTA

Though Planning would run point, SFMTA’s role as steward of the streets means its operations and bottom line would be greatly implicated as well.

SFMTA would be required to forego revenue from parking spaces given over to parklets, charged with principal oversight of permits that seek to close entire roadways and tasked with providing input and sign-off on all curbside parklet applications that occupy parking spaces.

A January 2021 analysis concluded the temporary emergency program cost SFMTA $8.1 million, a figure bound to increase given the likelihood of more applicants and return of parking meters to higher pre-pandemic prices.

Under a permanent iteration, SFMTA estimates staff time would cost $2.6 million, down from the same line item under the temporary program, and it would forfeit about $9.6 million in annual meter revenue.

Estimates also include a one-time price of $100,000 in non-labor costs.

Those costs are partially offset by collection of permit revenues, currently estimated at $1.7 million annually, resulting in net costs of $10.6 million to SFMTA every year to facilitate Shared Spaces as currently written in the legislation.

City officials emphasize, however, these projections are exceedingly variable based on the number of permanent permits issued, a point echoed in the staff report prepared for SFMTA’s Board of Directors meeting on May 4, where board members will discuss the legislation publicly for the first time.

If past is precedent, the number of applicants could continue to grow, especially once businesses are sure a permanent program will endure and that a parklet investment – which can run to thousands of dollars – will be rewarded with the opportunity to generate revenue for the long haul.

A city-conducted survey of current Shared Spaces operators found about 80 percent would continue to operate their permitted outdoor space year-round or seasonally if the program is extended.

A sample of over 100 restaurants with an active Shared Spaces permit from July 2020 to September 2020 concluded the outdoor dining resulted in an additional $82,000 in taxable sales compared to restaurants without it, according to a presentation Abad delivered to the Planning Department on April 22.

Permit fees

As of January 2021, 3,214 applications had been received. Of those, 69 percent, or 2,218 were approved.

Roughly 9 percent of existing issued permits are roadway closures, which allow a group of applicants to close travel lanes for limited periods of time, an idea tested by Valencia Street and Grant Avenue last year.

The legislation calls for SFMTA to be the lead on this type of Shared Space, spearheading review, approval, administration and enforcement.

About 30 percent of issued permits are for the curbside, turning over one or more parking spaces to the business owner for conversion into a parklet.

SFMTA would sign off on every application for curbside permits, evaluating potential for transit conflicts, interference with traffic or pedestrian safety signals, crowding an active driveway, proximity to paratransit loading zones and other metrics.

The transit agency would also collect half of each of the curbside permit fees, which range from $1,000 to $6,000 the first time a merchant applies to convert a single parking space, depending on what kind of structure the business plans to build.

Most expensive is a private, fixed commercial parklet, at $6,000; then, a movable commercial parklet that can be deconstructed outside business hours, at $3,000; finally, a public parklet that any individual can access at any time, at $1,000.

Additional parking spots for the same merchant run up the tab –$1,500 for permanent commercial parklet, $1,000 for movable commercial parklet and $250 for a public parklet – while renewals for each year after cost about 50 percent of the first year’s cost per parking space.

Fee assessment would begin July 1, 2021, but collection would be delayed until June 30, 2022.

These fees aren’t cheap, especially for businesses without cushy savings accounts or reliable cash flow. Nor are they high enough for SFMTA to make up what it’s spending on the program.

Officials are banking on costs to SFMTA being only “partially offset” by permit fees.

A dire budget situation

As part of a $1.28 billion budget for next fiscal year, a nearly $11 million loss might seem trivial, but SFMTA’s current environment of severe budget austerity complicates the picture.

Though March 2021 was the agency’s best month since the pandemic started, revenues remain at historic lows, with one-third of the budget covered by one-time federal funding. That bailout saved SFMTA from mass layoffs needed to close deficits of $68 million and $168 million over the current and upcoming fiscal years, respectively.

Things are so dire, in fact, that Muni can only run about 70 percent of its pre-pandemic service hours, with plans to bump that up to just 85 percent by next January.

Launching a new program that hurts the bottom line when the agency can’t even fully fund Muni befuddles some transit advocates, including Chris Arvin, who sits on the Citizens’ Advisory Council.

“SFMTA has continued to refer to its financial woes as reason for not restoring transit service,” he said. “If that is truly the case, the SFMTA should be demanding cost-recovery from The City for this business-oriented program before going forward with it.”

Then, there’s the reality of an exhausted staff, many of whom regularly work seven days a week and far beyond traditional office hours, according to SFMTA Director Jeffrey Tumlin.

Owens from Breed’s office told the Examiner The City would work with SFMTA to ensure it had “sufficient staffing levels” to implement the permanent program.

“If you’d like us to do more, then tell us what to stop doing,” he said at the April 20 board meeting.

Ultimately, however, the final call does not lie with the agency’s board of directors, who will vote on relevant amendments to the Transportation Code on May 4.

Rather, it is the Board of Supervisors that will have the final say in whether or not parklets and outdoor dining will become fixtures on San Francisco city streets.

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