Marin grand jury urges SMART to bolster public support for sales tax renewal

SMART is running out of time to convince Marin and Sonoma voters to support renewing a critical sales tax to prevent the North Bay passenger rail service from financial collapse, according to a new grand jury report.

At the center of the report produced by the Marin County Civil Grand Jury is the Sonoma-Marin Area Rail Transit district’s primary funding source: a quarter-percent sales tax paid by Marin and Sonoma residents since 2008 that is set to expire in April 2029 unless renewed.

SMART previously failed to convince voters to renew the tax in the 2020 election, the grand jury noted. The agency should acknowledge critiques about its performance and begin a more aggressive public outreach campaign to avert another electoral defeat before it is too late, the report said.

“The table is now set for a critical decision,” the report states. “SMART’s management and Board of Directors need to make the case to voters in Marin and Sonoma why they should continue to support a project that has fallen short of its original goals and promises.”

Launched in 2017, SMART operates passenger trains along a 45-mile route from Larkspur to the Sonoma County Airport near Santa Rosa.

The grand jury report states that SMART’s ridership and rail expansions have fallen short of what it pitched to voters who supported and passed the agency’s sales tax measure in 2008.

A 2006 environmental report from the agency projected SMART would carry 5,050 riders per weekday by 2025 and construct a 70-mile route from Larkspur to Cloverdale with 14 stations and a pedestrian pathway along the rail route.

Lower-than-projected sales tax revenue amid the Great Recession prompted the agency to constrain its buildout to the 43-mile route from Santa Rosa to San Rafael. The two-mile extension from San Rafael to Larkspur was completed in late 2019.

Ridership has fallen short of the 2006 projections, with the grand jury stating that average weekday ridership has “rarely exceeded 2,500” since SMART begin service in 2017.

The grand jury attributes the defeat of the 2020 sales tax measure, which sought to extend the tax for 30 years, to voters failing to believe that SMART delivered what it promised and a lack of confidence in the agency’s leadership. The report states bolstering ridership and continuing progress to complete the full rail extensions will be critical to gaining support.

“The Board and management team have difficult tasks ahead of them,” the report states. “They must continue to construct and improve the system and regain public support in the organization’s mission.”

The report states timing will also be important. State lawmakers are considering a bill to raise tolls on the seven state-owned bridges in the Bay Area. The toll hike would be used to support larger Bay Area transit providers such as BART and San Francisco Muni who continue to experience ridership revenue losses.

The grand jury is recommending SMART complete a public process by April 2024 that examines how the agency would fund its operations beyond 2029 and an evaluation of when it would attempt another sales tax renewal. The report also calls for SMART to bolster its marketing and public outreach and consider hiring consultants to evaluate when to place a tax measure before voters.

SMART General Manager Eddy Cumins, who began the job in 2021, said the report identified some key points that SMART has also found its own public outreach and analyses following the 2020 election.

After the pandemic caused transit ridership to plummet, Cumins said the agency enacted several initiatives that have led to a return to full train service and SMART leading in ridership recovery among all Bay Area transit providers. In May, SMART carried an average of 2,502 passengers per weekday, which is about 98% of ridership in May 2019, according to SMART.

Last week, SMART also received a $30 million state grant that agency staff said will fully fund the long-planned rail extension from Santa Rosa to Windsor. Cumins said he expects the extension will be completed in 2025.

“I think a lot of voters and a lot of people are like me and want to see results more than they want to hear the talk,” Cumins said. “I think that has been our primary focus: increasing our ridership, getting our projects built and securing funding — actual actions that are tangible that people can see.”

Cumins questioned the grand jury’s recommendation on improving marketing and public outreach, stating that the agency and board have held many public meetings on improving SMART and have promoted new programs such as reduced fares and free parking at train stations.

Ultimately, the decision on when to bring a tax measure will be up to the SMART Board of Directors to make, Cumins said. The board plans to discuss the grand jury report at its July 19 meeting.

“I think the key question there as I look at that is just really what is the right timing and what’s the right outreach, and overall, what strategy does the board want to take on this one?” Cumins said.

The grand jury states SMART faces several challenges as it works to bolster public support. Unlike other Bay Area transit agencies that operate in major metropolitan areas, SMART has “fewer potential riders, operates on a route with stops that are not close to many residences or large employment centers, and its route is such that it does not serve as many commuters as do other public transit agencies.”

Fares only make up about 4% of SMART’s annual revenue compared to nearly 60% that comes from its sales tax. The agency’s reliance on sales tax revenue has helped it weather the impacts of declining ridership from the pandemic far better than other Bay Area transit providers that rely more heavily on fares.

Taxpayer subsidy of SMART has also been a point of concern among voters and an issue not addressed in the grand jury report, said Novato resident and economist Mike Arnold, who worked on the opposition campaign against SMART’s tax renewal measure in 2020.

In the 2018-19 fiscal year, the taxpayer subsidy per boarding was about $33, which increased to $196 in the 2020-2021 midst of the pandemic, according to SMART data. As ridership recovered, the subsidy was reduced to $74.94 in the 2021-2022 fiscal year. SMART Chief Financial Officer Heather McKillop said a preliminary estimate for per-rider subsidy for the 2022-2023 fiscal year, which ended on June 30, will not be available for several weeks.

Arnold said even if the agency was to complete the full extension of the rail system to Healdsburg and Cloverdale, Arnold said these areas have lower populations and would not bring in enough new riders to address the subsidy concerns.

Arnold lauded the grand jury for calling on SMART to be transparent about its plans for the sales tax renewal and how it plans to remain financially viable should it fail.

“The taxpayers deserve to know what the agency intends to do,” Arnold said. “They’re certainly going to try to pass the tax extension measure, but there are no guarantees.”