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SMART could waste $1 billion over next 20 years
I am not kidding. SMART could really waste $1 billion over the next 20 years if we let it. And, I am talking in real $2024 dollars. SMART only survives because of the ongoing subsidy from the Measure Q sales tax of 0.25% that raises $50 million annually. And, this amount grows with inflation.
Measure Q expires in 2029. And, Sonoma and Marin voters will have to pass it by a 2/3d majority to extend it. Anyone who understands SMART's poor performance will not vote for it. SMART is exploring other public funding sources willing to waste $50 million a year on its inefficient transit system.
This article is a follow up to my earlier one when I compared SMART to CalTrain. And, SMART came in a very distant second on every count. It has virtually no impact on removing a material % of traffic from 101. It does not increase the Larkspur ridership (look to my earlier article for further documentation on this issue).
My earlier article analyzed SMART performance using their most recent 2023 annual report (fiscal year ended June 30). Today, nearly a year and a half later, these are still the most recent figures available.
Within this essay, I still use the fiscal 2023 figures but I also compare them to SMART's 2019 five-year projections. And, I also review their 2024 five-year projections.
Back in 2008 when SMART was just at the planning stage, it already planned to reach a daily ridership of 5,000. Now, 16 years later they have never come close to even reaching half of this figure.
As we speak they have done everything they can to boost ridership to the maximum by chronically reducing their fares as shown on the table below.
Source: SMART Annual Comprehensive Financial Report 2023.
Regarding the average fare, fiscal 2024 figures are not available yet. But, they are most probably much lower. I would not be surprised that they will come in at under $2.00. Indeed, SMART has offered free rides to Seniors, Veterans, students, etc.
Among Bay Area transit systems,SMART is the closest thing to a free ride for the few privileged passengers. Well, it is not so free when you factor the $50 million a year paid by local consumers that could be better used for shoring up the fiscal position of Marin and Sonoma county.
However, despite the nearly-free riding, ridership has always fallen way below the 5,000 target.
Source: SMART Annual Comprehensive Financial Report 2023. SMART Strategic Plan 2025 - 2030.
In good part because of SMART's near free-riding strategy implemented over time, it has grossly missed the mark on its fare revenues 2019 five-year projections.
Source: SMART Annual Comprehensive Financial Report 2023. SMART Strategic Plan 2019.
As shown above in fiscal 2023, fare revenues came in at $1.8 million or - 60.1% below their 2019 five-year projection for fiscal 2023. And, their implemented reduction in fares accounted for 85% of the decline in fare revenues. Indeed, their average fare of $2.81 in fiscal 2023 came in at - 51% below the average fare of $5.71 in fiscal 2019.
Similarly, SMART's fare revenues wildly missed projections as a % of operating expenses. This measure is called the farebox recovery ratio. According to a Marin Grand Jury Report in 2023, SMART originally projected it would reach a farebox recovery ratio of 36%. It never ever came close to this level. The graph below shows that over the most recent four fiscal years this ratio ranged between 1.8% and 5.1%. The graph compares this ratio during the shown fiscal years with SMART 2019 five-year plan projections.
Source: SMART Annual Comprehensive Financial Report 2023. SMART Strategic Plan 2019.
SMART must have the smallest farebox coverage ratio among Bay Area railway transit systems. And, SMART's coverage barely above 3% in fiscal 2023 is 10 times lower than BART or CalTrain that come in at 33% and above. Before COVID, BART and CalTrain farebox coverage ratio was above 70% over 10 times SMART's level.
The graph below shows total fare revenues in $million for the fiscal years 2020 - 2023 (red) vs the 2019 five-year projections for these same fiscal years and the 2024 five-year projections for fiscal 2025 - 2030. The 2024 projections appear more reasonable than the 2019 ones. But, by 2030 they still entail a 48% increase over 2023. Good luck with that.
Source: SMART Annual Comprehensive Financial Report 2023. SMART Strategic Plan 2019 and 2025 - 2030.
When you review SMART's documents (annual reports, 5-year plans), they show upbeat pictures conveying that SMART is a thriving transit system with a crowded and enthusiastic ridership. The reality is often different.
Below I contrast what on boarding looks like when you look at SMART's documents vs what it often actually looks like.
Same comparison for ridership inside the wagons.
Why SMART will never succeed.
First both Sonoma and Marin counties populations are declining.
They will continue to do so. Below I imported a couple of graphs from my my earlier study on the subject. The California Department of Finance Demographic Research Unit (DRU) generated some overly optimistic population forecast for both counties (red line). I constructed another scenario (Model) based on more realistic assumptions (for more details see my study).
The DRU overly optimistic population projections relied on migration rate forecasts that are way too high. For both counties they anticipate that migration into these counties will rebound to levels not seen since 2014, a decade ago. They anticipate these high migration rates will remain constant till 2070.
The above projected migration rates are highly unlikely when you factor that migration rates in both counties have been strongly negative through calendar 2023 at the same time that the US has been experiencing an "immigration crisis" that caused the Democrats to lose the Elections.
Immigration is now a bipartisan issue. If Marin and Sonoma still experienced negative migration rates when our borders were open, they are most unlikely to record robust positive migration rates when our borders will be shut.
Second, Work From Home has a permanent impact.
And, it will continue to do so. Every other day you hear some grand announcement by a CEO or a Governor that every one is to return to the office. Well a lot of employers have not gotten the memo. WFH has devastated the San Francisco office market. Check out the rapid rise in its office vacancy rate since 2019 Q2.
Source: San Francisco City Government.
San Francisco is the main employer node that is at the foundation of the SMART commute ridership through the Larkspur Ferry connection. With a diminishing San Francisco pull, the SMART train is dead. And, WFH is not going away. An old generation of CEO, Governor, Mayors demanding return to the office will retire within the next decade. And, the next generation of leaders will recognize the economic, environmental. and life balance benefit of WFH.
Third, SMART has permanent operational problems.
These include:
- The San Rafael station causes traffic bottlenecks during commute hours. Car commuters are stuck behind the rail guards and have to wait for three lights before they can drive again. The car commuters observe that the SMART train is most often just about empty. Thus, SMART contributes far more to commuting traffic congestion than traffic alleviation.
- The SMART to Larkspur Ferry connections during commuting hours are often associated with 35 minute wait between the two (see schedule). This renders a commute to the City unduly long. That's a pretty strong motivation to WFH.
- SMART's stations' locations are often far away from residential areas, urban centers, and employers.
- The area that SMART serves does not have the urban density to make it work. The Manhattan Institute has an interesting study on the subject. Quoting the study: "The best-performing systems, such as Minneapolis, Seattle, and Houston, are all compact, serving urban areas near downtown. By contrast, larger light rail systems that stretch into low-density suburban areas tend to underperform." The latter describes SMART. The study also mentions that the successful systems carry daily over 1,000 passengers per mile. The failing ones carry 500 or less. In fiscal 2024, when SMART recorded a record ridership due to near free rides, it came in at: 2,329 daily passengers/20 miles = 116 passengers per mile. This is nowhere close to render SMART effective.
- SMART does not help the environment. Carrying just a few passengers with nearly empty heavy wagons fueled by diesel is not good. SMART looked into electrification. It was too expensive.
THE END
Gaetan Lion is an independent researcher with expertise in economics, econometrics, investments, risk management, statistics, and quantitative analysis. His areas of interest include demographics, economics, investments, Climate Change, health care, sports, and politics.