Trolling for Tolls: How Regional Measure 3 May Affect Commuters

BAY AREA, CA — For two decades, Bay Area toll bridges have been cash cows feeding the seemingly insatiable financial appetite of the region’s transportation agencies grappling with increasing volumes of traffic on already clogged roadways, packed buses and over-crowded commuter railcars. Since 1998, the seven state-owned bridges have collected $9.1 billion in nickels, dimes, quarters and five-dollar bills from cars and trucks crossing the spans, money that flows through the Bay Area Toll Authority (BATA), an obscure public agency responsible for managing bridge operations and doling out toll proceeds.

Last year, toll collections topped $721 million, revenues greater than those of many publicly-traded companies. This year revenues are projected to reach $727 million. But transportation planners say they need much more to solve the region’s chronic traffic congestion. So next week voters in the Bay Area’s nine counties - Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano and Sonoma – will be given the chance to decide if they’re willing to pay additional billions just to cross a bridge.

If approved by a simple majority vote on June 5th, Regional Measure 3 (RM3) will generate an estimated $4.5 billion in additional revenue through a three-dollar toll increase phased in over the next six years. The initial hike will come in January with subsequent one-dollar increases in 2022 and 2025. After that BATA can index the RM3 portion of toll revenues to inflation, permitting tolls to increase without another vote.

By the time the last dollar is added to tolls, motorists -- already smarting under the burden of increased gasoline taxes and vehicle fees levied to generate $5.2 billion annually for statewide road repair and transit projects – will be paying a minimum $9 toll.

The ballot measure was required in a bill authored by State Sen. Jim Beall, whose district includes San Jose and much of Silicon Valley, and signed into law last October. During the eight months Beall’s bill bounced around the Capitol, Assembly members added amendments establishing a spending plan containing 38 specific projects and programs upon which new toll receipts could be spent.

Something for Everybody

The measure is championed by the Metropolitan Transportation Commission (MTC) an agency that exercises near-dictatorial control over Bay Area transportation planning and holds the purse strings on most transit projects. MTC says the new toll revenue will be used to pay for its Bay Area Traffic Relief Plan, the infrastructure improvement projects mandated by the legislature in an attempt to alleviate commuter headaches by unclogging freeway bottlenecks, improving public transit and ultimately taking more cars off the road.

Randy Rentschler, an MTC spokesman, said the plan was structured to include projects in all nine counties, giving residents in specific areas “a sense of equity” in the improvements. There is some flexibility in how RM3 money can be spent, he said, not by moving it from one region to another, but in redirecting it within regions.

One example cited by Rentschler was Marin County’s decision not to proceed with a highway project funded by Regional Measure 2 passed in 2004 and instead using that money for the SMART train that began operations this year. Every project funded with Measure 2 toll money has been completed at the cost estimated in the original ballot measure, he said.

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If RM3 is approved the MTC says several projects ready to go, including additional expansion of the Muni fleet in San Francisco, more express lane construction, the SMART train extension to Windsor, additional improvements on the Marin-Sonoma Narrows section of US 101 and the Interstate 80-6800-Route 12 interchange in Solano County.

Another project that could receive funding as early as next year, but seemingly has nothing to do with traffic or highways is the the San Francisco Bay Trail, a popular hiking and biking thoroughfare that will eventually snake 500 miles around the bay, crossing all toll bridges in the process. That project is 70 percent complete, and passage of RM3 would provide up to $50 million in expansion grants over the next three years.

Heavy Hitters Pushing for Passage

The MTC has been joined in support of RM3 by scores of state and local politicians, area Chambers of Commerce and other business organizations along with some newspapers and labor unions whose members will benefit from construction projects.

So far more than $3 million has poured into the “Yes on 3” campaign with technology giants, healthcare companies and even the 49’ers football team contributing to the cause. Among the ranks of the major cash contributors are Facebook ($$375,000), Kaiser Permanente ($250,000), Dignity Health and Salesforce.com ($125,000 each), and HNTB Corporation, an Omaha-based transportation infrastructure engineering and consulting firm ($100,000). Other large corporate contributors throwing in $50,000 apiece include Google, Adobe Systems and the 49’ers.

Several individuals also have provided substantial funding support for the RM3 campaign with $150,000 coming from Nick Josefowitz, the multimillionaire founder of a clean energy company and candidate for San Francisco supervisor who already serves on the boards of BART, the MTC and the Capitol Corridor Joint Powers Authority – agencies all slated to receive money if the Measure is approved. Other big contributors are Silicon Valley Capitalist John Doerr and Mitchell Kapor, head of Oakland’s Kapor Center for Social Impact, who each ponied up $100,000.

According to campaign finance reports, another 56 individuals, companies and labor unions have provided $1 million in contributions of between $10,000 and $70,000 apiece. Another $155,000 came from 53 contributors giving $1,000 to $7,500. The Bay Area Council, a business advocacy organization, and the Silicon Valley Leadership Group, a trade association, together contributed nearly $80,000 worth of staff time hawking the Measure.

Opponents Outgunned

Against this array of big money and political influence are the opponents, a smaller coalition of taxpayer groups, county political and other organizations including the Bay Area Transportation Working Group, an Oakland-based volunteer organization advocating non-automotive transportation systems. Spearheading the opposition is the Transportation Solutions Defense & Education Fund, or TRANSDEF, a Marin County nonprofit organized to advocate for better regional transportation solutions.

David Schonbrunn, TRANSDEF president, questions the constitutionality of RM3, saying “toll increases are being treated as a user fee when, in fact, they are a tax” and should require a two-thirds vote.

“It won’t work and it’s not fair,” said Schonbrunn. “The MTC has never demonstrated the ability to reduce traffic so its claims on RM-3 are bogus and it’s not fair because the cost of transportation projects are being placed on bridge users and many of these projects have no connection to bridge use.”

Schonbrunn says only about 18 percent of the money generated by RM3 is being allocated to bridge-related corridors. He likens the MTC project list to Santa’s bag of gifts: Goodies for everybody, making the measure more attractive to voters.

Another voice critical of the ballot measure is that of Congressman Mark DeSaulnier who represents the 11^th Congressional District encompassing most of Contra Costa County.

DeSaulnier describes RM3 as a “grab bag of transportation projects cobbled together by state lawmakers behind closed doors” that fail to address the regions real transit challenges, And he points out that East Bay residents, including thousands from his own district, comprise half of the motorists who will be paying higher tolls -- about $700 more each year according to DeSaulnier.

Watching the Wallet

At least $1 million in new toll revenues would be used each year to fund an independent BART Inspector General, although it’s hard to assess how effective this watchdog will be. The Measure also creates an 18-member Independent Oversight Committee to “ensure toll funds are spent in a manner consistent with the law.”

But some RM3 critics note the existence of an Oversight Committee doesn’t automatically guarantee all money earmarked for specific projects on the MTC’s expenditure plan will actually be spent on those projects.

How toll money was spent became an issue in 2011 when another obscure agency formed by the MTC and BATA, the Bay Area Headquarters Authority, used $93 million in toll receipts to purchase a 487,000 square foot building at 390 Main Street in San Francisco (now called Bay Area Metro Center and using the address of 375 Beale Street) where it intended to relocate its Oakland offices. Since then another $134 million has been spent developing the site.

Despite questions raised by members of the public and state legislative staffers about the propriety of spending toll revenues to purchase a building containing nearly twice as much space as the MTC needed for its own offices, the purchase was completed. Opponents complained MTC plans to rent out excess space to other agencies, such as the Bay Area Air Quality Management District and the Association of Bay Area Governments, would put the MTC into the commercial real estate business.

A subsequent state audit and separate review by the State Legislative Counsel concluded the acquisition “likely was legally permissible” and so long as the MTC and BATA board members could demonstrate their decisions were not “arbitrary, capricious or lacking evidentiary support” toll money could be spent on almost anything, but suggested the MTC and BATA could have been more open with financial details.

Ultimately, BATA’s investment in the building reached $193.6 million by the end of its 2017 fiscal year. Today the building has several tenants including Cubic Transportation Systems, a San Francisco Muni contractor, Twilio, a communications technology company that numbers Salesforce.com, Netflix and Airbnb among its clients, and several public agencies. Last year the Headquarters Authority collected $5.6 million in lease payments and $4.5 million in fees for providing tenants with shared services and common area access.

BATA by the Numbers

Created by the state Legislature in 1997 BATA was formed solely to manage the toll bridges and distribute their revenues and is currently celebrating its 20^th year of operation under MTC supervision. Its primary role is funding bridge operations, maintenance, rehabilitation and administration for the San Francisco-Oakland Bay. Antioch, Benicia-Martinez, Carquinez, Dumbarton, Richmond-San Rafael and San Mateo Bridges. In 2004 it was given the added responsibility of managing the FasTrak toll collection system.

The Golden Gate Bridge is operated by the separate Golden Gate Bridge, Highway and Transportation District which also operates Golden Gate Transit bus system and Golden Gate Ferry.

Last year 136.8 million toll-paying vehicles crossed BATA bridges generating $720.8 million that accounted for 85 percent of Authority’s total $845.4 million in revenues. Another $25.4 million was collected in toll violation fines with remaining revenues coming from various reimbursements by other agencies.

BATA also chalked up around $10 million in lost tolls from 4,541 vehicles that didn’t pay for various reasons, the most frequent being vehicles with Dealer Plates or no license plates and a few hundred vehicles whose plates couldn’t be read or no information was available from DMV, suggesting that many of these were vehicles with “confidential” license plates used by law enforcement.

BATA pays for regional transportation projects with money borrowed from Wall Street where it sells Revenue Bonds with toll receipts used as collateral. This provides immediate money for big ticket projects that is paid off over time. Last fiscal year BATA paid nearly $518 million in principal and interest on its outstanding bonds. So far during its current fiscal year, the Authority has paid $152.1 million of the $555 million budgeted for bond payments. Over the next 38 years BATA will need $18.7 billion in toll revenues just to repay principal and interest on its currently outstanding bonds.

BART System Wins Big

If RM3 is approved, the big winner will be BART, the Bay Area’s aging and overcrowded commuter rail system that needs billions to rebuild its deteriorating infrastructure while at the same time engaging in expensive expansion activities.

More than $1.1 billion of the RM3 toll revenue is earmarked for BART or projects that will directly benefit the transit district. BART is slated to receive $500 million for additional railcars with $375 million included for Phase II of system expansion into San Jose, $130 million for the Eastridge Regional Connector, a light rail project that will shuttle passengers from the Alum Rock area to BART’s Milpitas station and $100 million to expand San Jose’s Diridon Station to accommodate future BART and high-speed rail service.

The MTC’s Rentschler emphasizes that BART itself won’t get all of the RM3 funding because infrastructure construction supporting expansion of its service into San Jose is the responsibility of the Valley Transportation Authority.

Rentschler also notes that BART moves more people across the Bay than bridges, making it the lynchpin of the transportation system.

Still, the $500 million in RM3 funding for new BART railcars would come on the heels of voter-approved Measure RR in 2016 giving BART authority to issue $3.5 billion in General Obligation bonds, providing some of the $9.6 billion BART estimates it will cost to rebuild its crumbling core system over the next decade.

However, unlike Revenue Bonds used by BATA, BART’s General Obligation Bonds are repaid with property taxes collected in only three counties -- Alameda, Contra Costa and San Francisco. At the time BART was touting Measure RR it estimated the average tax rate over the 47-year life of the bonds would be approximately $8.98 per $100,000 of assessed property value – about $63 annually on a $700,000 home.

However, spiraling Bay Area property values will most likely increase the amount homeowners pay over the coming years. Last year these increased values provided BART with an extra $3.5 million in property tax receipts.

At the end of its 2017 fiscal year BART had combined General Obligation and Revenue Bond debt of $1.6 billion outstanding, including $300 million in Measure RR bonds. When $1 billion in interest is added BART will need $2.6 billion over the next 30 years just to repay its current debt. This amount will increase significantly after the remaining $3.2 billion in Measure RR bonds are sold.

Like many public transit districts BART has trouble making ends meet. Last year BART reported an operating loss of $361 million despite collecting $486 million in fare revenue and $61 million in other revenue from operations. BART was only able to balance its books using non-operating revenue that included $247 million in sales tax receipts and $99 million from property taxes. Its operating expenses totaled $995.2 million, much of that due to increased wages and employee benefits.

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