SMART warns of possible fire-related revenue dip

Dec. 10--The Sonoma-Marin Area Rail Transit system saw more sales tax revenue than expected, but there are concerns the source could slow after wildfires scorched areas of Sonoma County.

SMART is primarily funded by a quarter-cent sales tax approved by Marin and Sonoma voters in 2008 as Measure Q. For the fiscal year that ended June 30, SMART sales tax receipts increased by 3.7 percent from prior year and equaled $36 million, rail officials said last week as they presented the agency's annual fiscal report.

"It was higher than we thought it would be during the budget process, which was good news for us," Erin McGrath, SMART's chief financial officer, told the rail board last week.

The sales tax numbers are connected to high-income households and strong employment figures in Marin and Sonoma, rail officials said.

"SMART's finances rely directly on the strength of sales tax revenues and its strong link to employment rates and median incomes," read a staff report on agency finances. "The district is home to a fairly wealthy taxpayer base, with a weighted per capita income base of $76,835 compared to California's $56,374 and $49,246 for the United States according to 2016 reports from the U.S. Bureau of Economic Analysis."

The seasonally unadjusted unemployment rates in Marin and Sonoma counties in September of 2017 were 2.9 percent and 3.2 percent, respectively.

While the financial report was sunny, there are some clouds on the horizon.

While there was the 3.7 percent in sales tax growth, the rate of growth actually decreased compared to the year prior.

And the North Bay wildfires could impact sales taxes moving forward, according to SMART.

"As the city with the largest population within the district, Santa Rosa plays an important role in both SMART's ridership and sales tax receipts," reads an agency report. "Multiple simultaneous wildfires in October caused an estimated $2.8 billion in damages to Sonoma County and over 7,000 structures burned, including 4.25 percent of Santa Rosa's housing stock. It is likely that this will have short term impacts on the district's revenues.

"Some economists have indicated that a sales tax revenue increase would result from efforts to rebuild lost structures, however, there may be many months delay before that impact is seen."

Meanwhile, in its budgeting for coming fiscal year, SMART anticipates operating reserves of $16 million that is available.

SMART also is in the process of procuring four additional rail cars from its current contractor, Sumitomo Corporation of America. The $11 million purchase is funded entirely by the state. Those cars will arrive in late 2018 and be put into service for the current 43-mile segment as well as the Larkspur extension when it opens in 2019.

The added cars would help the agency close scheduling gaps.

"We are looking at ways to close the gap in the afternoon as well as the gap in the evening northbound commute, that is critical for us," said Farhad Mansourian, SMART general manager.

SMART expects to see growth of the system in coming years. More than 75 percent of commuters in the North Bay travel either within or between Marin and Sonoma to get to work.

A study by the Metropolitan Transportation Commission found that motorists in 2015 spent the equivalent of 880 hours moving at speeds of 35 miles per hour or less during peak commute hours attempting to travel from Marin to Sonoma. SMART service began Aug. 25.

"Our ridership continues to be good and we have just passed 200,000 riders," Mansourian said.

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