A $590 million bailout for the Bay Area’s struggling transit agencies has raised concerns for one powerful Silicon Valley legislator that it will put San Jose’s long-awaited BART extension at risk.
The loan will help sustain Caltrain, Muni, AC Transit, and BART as state leaders pursue long-term funding through a potential November sales tax measure that could stave off a transit doomsday scenario of station closures and service cutbacks.
But the loan requires the state to tap into a pool of money — known at the Transit and Intercity Rail Capital Program or TIRCP — that’s supposed to be allocated to critical capital projects at a later date. If projects are ahead of schedule, the loan could ultimately affect the timing of when those projects receive their promised funds.
That’s a problem for state Sen. Dave Cortese. The San Jose Democrat, a long-time advocate of South Bay’s BART extension who chairs the transportation committee and is part of the chamber’s senior majority leadership, described the situation as “mortgaging your capital projects in order to make payroll.”
But the Santa Clara Valley Transportation Authority, the agency in charge of constructing the project, is confident in the bailout plan, and others backing the decision assure it won’t put capital projects at risk as the law that authorized the bailout outlines a repayment process and contemplates scenarios where a project might need funds sooner than expected.
The 6-mile, four-station BART project, which will expand the line from the Berryessa Transit Center in north San Jose through downtown and into Santa Clara, has been awarded $1.125 billion in TIRCP funds from the state — but $866.4 million of that has yet to be allocated to the project. The project has faced a series of cost increases over the years, with a 2014 projection pegging the price tag in the $4 billion range. The extension is expected to be complete in 2036 — a full decade longer than expected.
As VTA prepares to go to the federal government later this year to finally secure the $5.1 billion that the Biden administration awarded to the project, Cortese worries that the bailout will put the funding, which makes up nearly half the budget of the $12.75 billion project, at risk.
“I’m pretty sure that even a very generous federal administration like the last one would call into question money being pledged for a project that has a state lien on it,” the state senator told the Bay Area News Group. “I think there’s even more concern with the Trump administration given their track record at this point with putting these kinds of transactions under scrutiny.”
During the grant application process, the Federal Transit Administration examines whether all local sources of funding for a project are in place and whether any other initiatives would jeopardize the funding. A spokesperson for the FTA could not be reached for comment about the transit bailout’s impact on the San Jose BART extension.
John Goodwin, a spokesperson for the Metropolitan Transportation Commission, which will administer the loan, said in a statement that the “loan is structured to uphold the state’s commitments to awarded projects while minimizing risk to project schedules.”
The loan makes up nearly half of the $1.5 billion currently in the TIRCP fund set aside for Bay Area projects. Goodwin said that capital projects often have long construction timelines and that the bill that authorized the transit bailout lays out a process in case a project is ahead of schedule and needs to tap into those funds sooner.
“If this occurs, it could affect the timing of when projects receive allocations, but it won’t alter the state’s commitment to ultimately provide the awarded funds,” Goodwin said. “The requirement for coordination with MTC and project sponsors on any allocation plan means that it would be developed in a collaborative and transparent manner.”
State officials believe that the need for any such plan is unlikely as the TIRCP fund isn’t tied to the state’s budget and is constantly being replenished. MTC estimates that the Bay Area receives roughly $300 million in TIRCP funds every two years.
The $590 million loan is expected to be repaid in quarterly installments over the next 12 years. If a transit operator misses a payment, MTC could redirect the agency’s share of funds that stem from a tax on diesel fuel to help repay the loan.
Cortese, who abstained from voting on the bill that authorized the bailout because of his concerns, called assurances that the BART project would be protected “worthless,” noting that the MTC doesn’t have its own money as it’s a “pass through organization of existing state and federal money.”
But Greg Richardson, VTA’s deputy general manager, said that the transit agency isn’t concerned about any impact the bailout will have on the project.
“We won’t be drawing on those monies until a little bit down the road,” he said. “That may speed up a bit with some of the things we’re working on right now, but even then it will be a little bit until we start drawing on that.” Richardson said the agency is likely to tap into the money in spring or summer of 2027, thought it could be moved up to late 2026 or early 2027.
Campbell City Councilmember Sergio Lopez, who serves as the chair of VTA’s Board of Directors, said that “there’s few people who care more about this project and transit in Santa Clara County than Sen. Cortese.” He said the agency has done its “due diligence” looking into the senator’s concerns, pressure testing cash flow scenarios and engaging in conversations with both MTC and the Federal Transit Administration about the situation. Lopez said those conversations are ongoing and have yet to yield any formal assurances.
“This process and these decisions made it absolutely clear to me that all of our partners want and need BART to Silicon Valley and the connection that VTA is leading to succeed,” he said.
BART, which is projecting a $376 million operating deficit for the upcoming fiscal year, plans to take a “conservative approach to using the state loan money,” according to spokesperson Alicia Trost. The agency is expected to receive $285 million from the bailout.
“We will only use what we know we can repay,” she said in a statement. “Our plan is to use the loan funds if the November funding measure passes. If the measure fails we will not use loan funds to continue operations because we would not have a revenue source to pay it back.”
But other transit operators included in the bailout might tap into the loan before any assurance that long-term funding might be available — a potential risk when it comes to the future of repaying the loan if the tax fails.
Robert Lyles, the spokesperson for AC Transit, said in a statement that the loan gives them “critical breathing room at a pivotal moment.” The agency is facing a projected $74 million deficit next fiscal year and “may draw up to $55 million from this emergency loan for operations by July 1, while we continue working on additional solutions to close the remaining gap,” Lyles said.
Muni spokesperson Erica Kato also said they plan to use the loan in the first year of the agency’s two-year budget to “avoid significant service cuts” driven by the projected $307 million deficit for the upcoming fiscal year. Muni is expected to receive $200 million from the bailout.
Caltrain spokesperson Dan Lieberman didn’t say when they’d draw on the loan, but said the agency is “relying on those funds to sustain current service levels in its upcoming fiscal year budget.” Caltrain has the smallest share of the bailout funds and is expected to receive $50 million.
The proposed revenue measure would create a half-cent sales tax in Alameda, Contra Costa, San Mateo and Santa Clara counties and a one-cent sales tax in San Francisco for the next 14 years. It’s expected to generate nearly $1 billion annually for struggling transit agencies that have seen ridership declines in recent years.
While an early poll commissioned by MTC last year showed support for the measure, Cortese isn’t convinced it will pass given growing concerns about affordability issues across the state.
The only way he sees VTA being able to tap into the funds it was promised is if the loan is paid off or if new legislators or a new governor that’s elected in November recognize that “the South Bay got screwed.”
“The transit operators in the Bay Area — especially the ones underwater — are rolling the dice,” Cortese said. “It’s riverboat gambling to hope and pray that they’re going to pass the transit measure this year.”