Funding Seamless Transit (Part 2): Who pays what for transit in the Bay Area?

Part One explained on how network managers have addressed funding complexity in other regions. This second post will explore the differences in funding sources and levels of funding in the Bay Area - but also how local funding sources aren’t always as ‘local’ as they appear, considering how interconnected the Bay Area region is.

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Over the past 18 months, the following chart (Figure 1) has been shown at many public meetings to demonstrate how each agency has a different mix of funding sources. The narrative that often goes along with this chart is that coordination or revenue sharing would be impossible due to the differences in local funding.

Figure 1. This chart demonstrates the disparate nature of Bay Area transit agency funding sources; it is commonly presented to attempt to show the impossibility of greater integration, given the degree of funding complexity in the region.

However, the chart makes funding disparities seem greater than they really are. For one thing, transit agency budgets come in vastly different sizes, so gaps of many percentage points might end up being small in magnitude, and the amount of funding needed to make one agency whole might end up being a rounding error in another’s budget.

By reconfiguring the same data by total budget size, the revised chart (Figure 2) shows that SFMTA’s annual budget (~$1.2B) is over 20 times the size of SF Bay Ferry’s annual budget (~$51M). Furthermore two more important trends emerge:

For five agencies -- VTA, AC Transit, SamTrans, SF Bay Ferry and County Connection -- Sales Tax revenues comprise 42-78% of their annual budgets. These agencies tend to provide more local service, i.e. most service provided is within county boundaries. (SF Bay Ferry is an exception to this trend.)
Three agencies with a regional mandate -- BART, Caltrain, and SF Bay Ferry -- significantly rely on farebox revenue, i.e. farebox consists of 49-69% of their annual budget.

Figure 2. This chart reformats the same data presented in Figure 1 by total annual budget size. Seamless Bay Area reformatted the data to follow the color scheme of Figure 1 as close as possible.

One could reasonably conclude from this that more local-serving agencies tend to rely heavily on county-approved sales tax funds, while more regional agencies rely more heavily on fare revenue. Of course there are exceptions, which we will discuss more below, but these two trends indicate that the funding distributions may be more similar than previously presented.

Local vs. Fare vs. State vs. Other Fund Sources

From Seamless Bay Area’s analysis of this annual budget data, we found that there are effectively five categories of funding sources that Bay Area agencies use for transit service:

Local Funds: Local funds are controlled by the municipality or county; they can be changed by a vote of the representative body, e.g. County Board of Supervisors, or directly by the electorate via a ballot measure. Thus the exact fund source -- parking revenue or sales tax -- matters less than the type of control exerted over the funding source. Critically, these funds need to return, in the form of local transit service, to residents of the jurisdictions that approved the use of those funds.
Fares or Earned Revenue: These funds are earned by the transit system for the service that they sell. Each Bay Area agency controls the funds they earn from fares directly right now, but ultimately they are the same type of funding source. Arguably, parking revenue that accrues to the individual agency like BART or Caltrain is a similar type of revenue and belongs in this category.
Multi-County Sources or Bridge Tolls: In the Bay Area there are some multi-county jurisdictions that designate Bridge Toll revenue to support the transit service for a specific set of counties. For instance, Golden Gate Bridge toll revenue is approved to support transit service that serves the five counties of the Golden Gate Bridge, Highway, and Transportation District. AC Transit also has a special district that includes parts of Alameda and Contra Costa Counties, which enables the district to assess a parcel tax to pay for transit that serves the inner East Bay. For the purposes of this exercise, Seamless Bay Area categorized AC Transit’s parcel tax as a Local Fund source.
State Funds: After the State of California passed the Transportation Development Act in 1970, it effectively got into the transit funding business. While distributed by formula or passed through MTC to distribute, the state has control over a small share of funds (4-15%) that go to seven of the nine agencies featured in Figure 1.
Other Subsidies and Operating Revenue: Transit agencies receive funds from other subsidies and revenue sources, like advertising revenue. Admittedly these sources could likely be recategorized into Local, Earned Revenue, or Multi-County Sources, but distinguishing the types of those “other” sources” was beyond the scope of this project for Seamless Bay Area.

Given the these five types of funding sources, a different way of looking at the chart would be to consolidate and recolor the funding sources by type. For instance, parking citations, general funds, and some sales taxes will be controlled by the same local governments, and can be lumped together into “Local Funds.” Figure 3 shows that with this simplification, the agencies begin to look even more similar than before. It also becomes clear that SFMTA, BART, and Caltrain together collect the vast majority of fares in the Bay Area.

Figure 3. Redrawing Figure 2 by combining the local funding streams simplifies the picture and reveals that more local serving transit services rely on Local Funds, while more regional or inter-county services rely more on fares or bridge tolls funds, such as Golden Gate. MTC exerts some control over both State STA funds and Bridge Toll funds.

Finally, while Figures 1-3 show the agencies in order of budget size, which places very different agencies next to one another to contrast their differences, Figure 4 below groups them by scope, showing that the agencies providing cross-regional transit depend more on farebox revenues than agencies providing local transit. Grouped this way, this chart reveals the disparities between agencies is not as dramatic as shown in Figure 1.

Figure 4. Redrawing Figure 1 by combining the local funding streams and grouping the transit agencies by scope reveals that agencies are more or less similar to other agencies of similar scope, with Caltrain and Golden Gate Transit as the only exceptions.

Most agencies of the same type have similar funding structures, either getting the bulk of their funding from fare revenue or local sources. The only outliers in this figure are Caltrain, which in this graph receives almost no local funding (although this has changed since the passage of Measure RR) and Golden Gate Transit, which uses bridge tolls in lieu of local funding. Viewed this way, sorting out the differences between transit agency funding schemes, while certainly a challenge that needs to be sorted out in negotiations establishing a network manager, appears to be a far more manageable challenge.

Who Funds Transit the Most?

Figure 5. Alameda County has the highest transit-supportive tax rates of any county. This means that residents of Alameda County within the AC Transit District’s property tax zone pay the highest transit-supportive tax rates.

Transit agencies in the Bay Area have been quick to assert that the region could not support a network manager because some counties or municipalities pay more in local funds for transit service than others. As discussed in Part One, Seamless Bay Area recommends that the region find ways to ensure that the network manager simply preserves local funds for local service. However, how different are existing local levels of funding for transit service? Well - that depends on how you measure local funding levels.

Figure 5 below visualizes the various local transit funding sources that fund transit in the Bay Area. Alameda County has the highest transit-supportive sales tax rates of any county at 1.5%, followed by Santa Clara County at 1.25%. Residents of Alameda County who also live within the AC Transit property tax zone pay additional transit-supportive taxes in the Bay Area, making them proportionally among the highest-taxed residents of the Bay Area when it comes to funding local transportation. By this metric, one could argue that Alameda County has a claim to special recognition because of their comparatively high taxes.

Table 1. More dollars of per capita subsidy for transit are generated in San Francisco than in any other Bay Area county, though part of that is due to San Francisco’s higher property values and disproportionately high share of regional sales tax receipts and parking revenue — much of which is paid for by non-San Francisco residents. Source: MTC Bay Area Transit Agencies Funding Sources Report

However, using this metric alone for local funding paints an incomplete picture. As shown in Table 1 below, Alameda County residents might bear the highest tax rates, but San Francisco generates the most per capita public funds for local transportation. Much of that comes from parking citations and parking revenue which San Francisco charges much more for than other parts of the region. Yet, San Francisco also benefits from significant amounts of sales tax and parking revenue paid by people from outside the county. Thus, even though the money flows into San Francisco’s coffers, much of it comes from the counties where San Francisco’s workers originate. San Francisco collects disproportionately more revenue than other parts of the region due to its special position as the nucleus of the region.

One could argue that San Francisco also has claim to special treatment within any cost-sharing structure - overall, it does fund transit at higher levels than other parts of the region. Yet some in San Francisco resist integration or network management reforms, believing it would necessarily divert San Francisco-raised funds to areas outside San Francisco. Conversely, counties around San Francisco would have a case to object to San Francisco’s keeping all locally-generated parking and sales tax revenue for use on local transit on the premise that a significant share of that revenue comes from outside the county.

Table 2. BART Fare breakdown by county, based on BART 2016 Ridership and Station Entry and Exit Data. Alameda County pays the largest portion of BART fares, but Contra Costa residents pay the highest average fares. Source:

The revenue picture is more complex still when one considers who contributes to fare revenue, which makes up approximately 25% of all transit funding in the Bay Area. While we don’t have the data on who contributes the most fare revenue region-wide, we are able to estimate the breakdown for BART fare revenue - which, pre-pandemic, made up nearly half of the region’s fare revenue overall. Alameda County pays the largest portion of BART fares of any county, but Contra Costa County residents pay the highest per capita fares. Thus some would claim that Contra Costa County should get special consideration in the fare sharing agreement.

In addition to these possible points of conflict, some counties have had other longstanding disputes over transit funding. For instance, San Mateo County has shouldered much of the burden for funding and operating Caltrain and is unhappy that San Francisco and Santa Clara Counties are seeking a greater share of power over decision-making and funding compared to San Mateo County. To date, the counties have had equal board representation, and SamTrans has served as the managing agency for Caltrain. From the other side, some in San Francisco, Contra Costa, and Alameda Counties still resent the fact that San Mateo benefitted from the Daly City BART station long before it paid for the extension to SFO. Santa Clara County, meanwhile, has long enjoyed a special source of funding that enabled its refusal to cooperate with the rest of the region: its relationship with Norman Mineta. The urban history of the Bay Area may be less than 200 years long, but in that time we have managed to accumulate enough neighborly mistrust and jealousy that politicians use it as a pretext to not cooperate with each other or, at the very least, as leverage to demand concessions from each other.

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Depending on the dimension used, almost any county in the region could argue they pay more than their fair share for transit, or that things that happened in the past should justify special treatment in the future. Determining how a regional network manager would be funded, including what kind of service would be provided across the region, will be critical to designing a well-functioning network. But opposing the formation of a rational transit system due to these disagreements is counterproductive and threatens to distract from the fact that all of these agencies share the same mission: providing robust transit service to all Bay Area residents.

References

City of San Francisco, Prop K Half-Cent Sales Tax. Accessed September 23, 2021. Prop K Half-Cent Sales Tax | SFCTAhttps://www.sfcta.org › funding › prop-k-half-cent-sale...

National Transit Database, Operations Funding by Agency, 2018. https://www.transit.dot.gov/ntd/ntd-data?field_data_categories_target_id%5B2531%5D=2531&field_product_type_target_id=All&year=all&combine=