MTS still projects major budget shortfall despite strong ridership gains

Transit officials said a few months ago that San Diego’s Metropolitan Transit System faces a fiscal cliff, but the messaging has shifted based on an official’s recent comments.

“MTS is approaching a crossroads,” said Julia Tuer, government affairs manager for the San Diego’s Metropolitan Transit System, which operates four light rail lines and approximately 100 bus routes across central, southern and eastern San Diego County. 

In a presentation last month to the San Diego City Council’s Active Transportation and Infrastructure Committee, Tuer described the crossroads. On the one hand, the system has made impressive gains in ridership. Of the 25 major transit hubs across the nation, MTS has the second-fastest growing ridership. 

On the other hand, an impending budget crisis looms. “Despite all these really positive ridership trends, in a few years we will hit a major budget shortage,” Tuer said. 

The agency is projecting a budget deficit of $120.1 million by 2029. In 2030, the budget gap is expected to grow to $145.6 million.

Tuer said that amount of funding is a “huge portion” of the agency’s budget, representing about a quarter of total operating expenses. 

To make the $120 million shortfall figure more tangible, Tuer gave examples: If MTS were to stop service on all four trolley lines or eliminate all weekend bus and trolley rides, that would only make up half of the budget shortfall. 

One-time emergency funds have been filling the budget gap in recent years, including federal pandemic relief funding through the CARES Act and emergency transportation funding from the state through SB 125. 

The MTS board accepted some measures to address the gap in February, three months before approving a $473 million budget for the current fiscal year. But staff estimated last winter that the agency would hit a “fiscal cliff” and run out of “budget-balancing funds,” leading to the major deficits in 2029-30.

The agency, though, since has reached out to the public about transit priorities. Of the approximately 7,600 people who have participated in surveys, the clear winner for the public was maintaining frequent services, followed by personal safety and hours of service.

The MTS did not include higher fares on the list, but lower fares, despite the impending budget crisis. Survey respondents ranked lower fares sixth among their priorities.

Tuer attributed the budget issues to a combination of factors, including local sales-tax revenue remaining flat, with significantly lower shares of it going to MTS than to other major transit hubs in California.

While Los Angeles allocates 2 cents of every dollar in sales tax to its local transit system, San Diego allocates just half a cent. Of that, MTS receives an eighth of a cent. By comparison, San Francisco allocates 1.5 cents. 

Other factors contributing to the shortfall include wage increases (MTS has increased base pay by 40% in recent years), loss of fare revenue during the pandemic (MTS is now at 95% of pre-pandemic ridership levels) and the increase in costs of goods and utilities. 

The budget shortfall is not unique to San Diego. Transit systems in the Bay Area, Philadelphia and Pittsburgh are slashing services and increasing fares. 

Tuer said that MTS is being proactive now to “slow or minimize the impact of revenue shortages.” 

This includes indefinitely delaying planned service increases, slowing the transition to zero emission buses, moving capital funds to operational expenses where possible, increasing fare enforcement, as well as other operational and cost-saving measures. The agency also worked with SANDAG recently to survey riders about fare increases and their possible impacts. 

“These changes will help somewhat in the short term to delay the budget issue, but not solve it completely,” said Tuer.