Cutting Transit, Terminating the Economy


Transportation and Land Use Coalition (now known as TransForm)

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Executive Summary

Governor Schwarzenegger's May Revise of his 2004-05 Budget included a $350 million, twoyear property tax shift for from the state's special districts. Historically, the transit operators in California were exempt from property tax shifts since they were considered "essential services" that could not easily pass on their fare increases without a significant loss of ridership. The May Revise, however, abruptly ends this exemption and instead categorizes them as "enterprise districts," the same category as water and sewer districts, requiring them to now return approximately 40% of their property tax revenues back to the state for two years.

Over 96% of the cuts to transit districts fall on the Bay Area, with AC Transit standing to lose $20 million a year, and BART standing to lose $9 million a year, for two years. If the Governor's budget is not revised, BART will have to cut the equivalent of all of its Sunday service, and AC Transit will have to cut the equivalent of all of its weekend service. Both agencies have already significantly pared down their budgets over the last three years and can no longer make cuts that do not directly impact service and reduce the mobility of their riders.

In the governor's budget, the top criterion for spending the newly reinstated Traffic Congestion Relief Program funds is "economic impact, including job creation". If, in fact, that is the key criterion for the state's overall transportation investment, then the governor needs to reverse the course of his proposed 2004-05 budget, since it is likely to result in losses of approximately 200 jobs from AC Transit and 30 from BART.

The most devastating result of the potential service cuts may be to AC Transit riders. TALC staff used the methodology and passenger surveys of a 1997 study to calculate the potential cost to AC Transit riders in terms of additional travel expenses, lost income, and additional travel time. We estimate that AC Transit riders alone stand to lose $155.8 million over two years, in addition to the one-time loss to riders of $3.6 million that occurs immediately when service is cut. So for every dollar that the governor proposes to cut from the AC Transit's operating budget, it will cost their riders nearly four times that amount.

In addition to the losses experienced directly by AC Transit riders, the Bay Area economy will lose money as well. As stated previously, investments in transit operations are extremely economically efficient because the investment primarily goes to pay local transit workers, who pump their salaries back into the local economy. Since every $10 million expenditure on transit operations and maintenance triggers a $32 million increase in local business sales, Bay Area businesses can expect to lose $186 million over two years unless the proposed $58 million property tax shift from transit operators to the state is reversed.

Finally, Governor Schwarzenegger recently launched his "Flex Your Power at the Pump" initiative aimed at slowing the State's consumption of gasoline. How can he expect such initiatives to succeed when at the same time his budget chokes off funding to essential public transit services?

We urge Governor Schwarzenegger and the State Legislature to recognize the devastating consequences the May Revise budget proposal would have on Bay Area children, seniors, workers, and the economy. The FY 2004-05 budget must recognize public transit as an "essential public service" and absolve transit districts' liability for the property tax shift.  

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