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Caltrain board finance workshop considers fiscal cliff and hints at ways to regrow ridership

On Thursday, April 6, the Caltrain board will consider the budget challenges created by pandemic-induced ridership declines.   

Caltrain can fend off an immediate fiscal cliff because of state funding to complete electrification construction.  But with persistently low ridership and depressed fare revenue caused by a decline in white collar commuting – Caltrain’s previous business model is broken, and the future shows big deficits without big changes. 

The board has an opportunity and critical need to consider how to transform its service and its funding.

Fiscal cliff averted for the moment

The grant received in January from the State of California to complete electrification can enable Caltrain to be reimbursed funds that it advanced for the electrification construction.  This reimbursement can enable Caltrain to balance its operating budget over the next two years.

Need for strategic plan to regrow ridership – more kinds of riders and trips

However, the slow recovery of ridership has punched a large hole in Caltrain’s former financial model. Ridership remains below 30% of pre-pandemic level and farebox revenues have declined from 75% to 26% of Caltrain’s operating budget.  

Major causes of the ridership decline include a high share of white collar work from home – the Bay Area Council’s surveys consistently show that white collar workers are coming to the office 2-3 days per week.  And in particular the slow recovery of downtown San Francisco – previously the highest ridership Caltrain station – which lags the nation in pandemic recovery.

Caltrain’s new data being presented to the board provides hints and clues about the opportunities to regrow ridership building on current ridership patterns.  Caltrain needs a strategic plan to build ridership back differently than before the pandemic using these clues from the ridership patterns.

Commuting is still the most common trip purpose – but commuting down from over 80% share of trip purposes before the pandemic to 61%.   

Offpeak ridership has grown to 66% of pre-pandemic level and now accounts for 40% of overall ridership, despite Caltrain’s longstanding pattern of infrequent offpeak service.

Weekend ridership is back up to 56% of pre-pandemic level despite Caltrain’s longstanding pattern of infrequent weekend service. 

Caltrain has an opportunity to make use of electric service to provide more frequent all-day, all-week service to increase ridership for more kinds of trips.   

Electric service also includes opportunities to increase service at some under-served stations that had pent up demand before the pandemic, for example California Avenue, and express service at downtown Sunnyvale, and South San Jose.

At the same time, Caltrain’s ridership demographics have shifted.  A larger share are low to moderate income. The share of students has doubled and only a minority of riders have access to a car.

These patterns suggest strategies to make service more convenient and affordable for people who need to take local transit to the train by integrating fares and schedules.

Early results from the BayPass all agency transit pass pilot are extremely promising – showing a 40% increase in transit ridership when a randomly selected set of riders at public colleges and universities and affordable housing communities who previously had a single-agency pass were provided with an all-agency transit pass.   This suggests substantial opportunities to increase ridership among more kinds of institutions such as  – and among employers whose employees have a much broader range of travel needs than the Caltrain corridor. 

On the Peninsula Corridor, with Caltrain’s historically high share of ridership from the GoPass, an all-agency pass may appear like a risk that could cannibalize revenue.  But in an era where ridership is lagging at less than 30% of pre-pandemic levels, this is an important opportunity to pursue and negotiate.

The BayPass pilot success with students and affordable housing residents also suggests that Caltrain also has opportunities to increase ridership among commuters – including commuters who were underserved by Caltrain’s prepandemic fares and schedules, and by providing service at hours needed by people with jobs in health care, food service, hospitality and more.   There are opportunities to strengthen and standardize the transportation demand management programs in cities along the corridor that provide transportation benefits to people beyond the largest employers.

Caltrain is not alone. All around the US, services that had been designed as “commuter rail” – with a peak-focused service pattern and relatively high fares focused on a customer base of white collar commuters – are seeing post-pandemic ridership lag with changes to white collar commute patterns. 

Fortunately, even before the pandemic,  Caltrain had developed a business plan which outlined a strategy to move from the historical US commuter rail model toward the international model of regional rail.  The international model, with service that is more frequent all day and all week, and that is better connected with other parts of the transit system, serves a greater diversity of riders and trips, and overall better return on public investment.

Caltrain’s business plan studied equity and concluded that there were pent-up opportunities to attract a greater diversity of riders by income and ethnicity, by providing coordinated fares and schedules connecting to local transit, and service hours addressing needs outside white collar commute times. 

Before the pandemic these business plan findings were good strategies, and now they are existential.  Diversifying ridership to serve more kinds of riders and trips is essential. 

New revenue is critical

With the loss of fare revenue, the presentation to the board makes clear that finding new sources of revenue will be critical.

The region’s transit agencies are currently working together with MTC and agencies around the state to pursue funding from the state to avert the fiscal cliff that threatens Caltrain along with 80% of Bay Area transit riders and 72% of California’s transit agencies.

And the region’s agencies are working together with MTC on options for regional transit funding needed to bolster long-term financial sustainability.  The multi-agency vision for a regional measure includes funding for the Transit Transformation Action Plan initiatives for coordinated fares, schedules, and wayfinding that have strong potential to increase ridership and are popular with voters.

As a peer agency, the BART board has been discussing the need for a multi-agency funding measure over the last year.   A scenario where agencies go to the voters separately would potentially have SFMTA, BART, Caltrain, and AC Transit seeking funding at the same time, increasing the risk for any measure to pass.   Also, Caltrain corridor voters recently passed Measure RR.  Rather than asking voters to rescue Caltrain again, it may be more appealing to ask voters to support the popular idea of regionally coordinated transit service – a concept that has polled extraordinarily well over time.

To Caltrain, regional revenue strategies may appear more risky than single agency measures because they appear to offer more control. But the value provided to riders and the public by funding a well-coordinated transit system may increase the likelihood of a ballot measure passing. To pursue these regional strategies successfully, they would need to be negotiated in order to increase benefits and reduce risks to riders and corridor residents. 

Opportunities for greater efficiency with electric service

Electric service also creates some challenges and opportunities to run more efficiently and cost-effectively.

Replacing old diesel trains

One opportunity is to take advantage of an option to purchase 4 additional electric train sets by August 2023. Caltrain has applied for a federal grant to pay $80 million of the $200 million cost of the train sets, with an additional 76 million coming from formula funds, leaving $44 million to pay with local matching funds; Caltrain will hear about the grant funds in a month or so. Purchasing the train sets this year would save Caltrain $120M from the retail cost of the train sets, and importantly, would enable Caltrain to retire old diesel trains that have a $558 million maintenance backlog.   Given the cost to maintain the aging and polluting diesel trains, this seems like an excellent choice. 

More efficient staffing practices

With more electric trains, Caltrain has additional options to consider to reduce costs per rider.  

Fully electric service under the wires. By moving to 100% electric service between San Francisco and Tamien, Caltrain can increase fleet utilization and reduce duplication of training, tools, spare parts, etc. Modernize crewing practices. Reduce train crew staffing to one conductor only, with no assistant conductors. This requires the difficult step of renegotiating union labor agreements, but could save Caltrain up to ~$15M/year in operating costs.  If this is done in tandem with electric service, the change could be done without layoffs.Renegotiate service conditions with FTA. The FTA set a requirement of more frequent peak service as a condition of funding electrification.  With changed commute patterns and the need to diversify ridership, Caltrain could run four trains per hour with a schedule supporting easy connections.  

More cost-effective electricity procurement

Caltrain is reporting a potential cost challenge in moving to electric service, since electric rates from PG&E have been high and volatile.  

As a major customer of electricity Caltrain may have opportunities to work with Community Choice Energy providers such as Peninsula Clean Energy and Silicon Valley Clean Energy. These public purchasing consortiums emerged over the last decade, focusing on in bulk procurement of power and storage in order to provide lower and more stable costs.

Summary – transformation needed

Caltrain’s data shows that the old model of a standalone commuter rail service, heavily dependent on fare revenue from white collar workers – is not working in the current post-pandemic world.   

It is essential rework the service to grow ridership serving more kinds of ridership and trips, to provide more effective incentives for a greater diversity of commuters as well.  

New revenue is essential, with opportunities to work with regional partners to provide a more appealing, well-coordinated transit system to voters. 

And there are opportunities for electric service to be more cost-effective.

Caltrain’s Board Finance Workshop starts at 9am on Thursday, April 6. The zoom link is here with opportunities for zoom public comment.  The agenda is here. The location to attend and comment in person is at 1250 San Carlos Avenue in San Carlos. 

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