Silicon Valley transit agency expects multiyear budget deficit

As the economy teeters at the edge of a recession, Silicon Valley’s public transit agency is weighing its options on how to weather the storm.

VTA is facing a large budget shortfall over the next two years, with a roughly $868,000 deficit in 2026 that’s expected to balloon to $14.9 million in 2027. Without tightening its budget, VTA’s reserves could be depleted as soon as the mid-2030s, according to the agency’s draft budget. To sustain itself, the transit agency is pursuing short term cost cutting measures, such as increasing staff vacancy rates to 20% and continuing its hiring freeze that began in April.

VTA Controller Jayden Sangha said these cost saving measures are only planned for the next two years, but officials will continue monitoring the economy’s status.

“It’s reasonable to be concerned, like any other transit agency, city and county,” Sangha told San José Spotlight.

The deficit comes from multiple sources, including financial volatility, federal economic uncertainty and a slowdown in VTA’s sales tax revenue. More than 80% of VTA’s revenues come from sales tax, which is diminishing as Santa Clara County consumers cut back on spending.

Sangha gave a preliminary budget presentation at an April 25 VTA board of directors workshop, pointing out the agency’s dire situation. He told San José Spotlight the projection of depleting reserves by the mid-2030s is the agency’s worst case scenario. Sangha said VTA isn’t considering cuts to services, even though it’s looking to save on labor costs.

Monica Mallon, transit advocate and San José Spotlight columnist, said that’s the right approach. VTA has one of the nation’s best ridership recoveries, with systemwide ridership at 85% of pre-COVID levels. Mallon said she’s glad to see the agency focus on preserving its core services and supporting its ridership.

“Just making sure the service is there (and) the service is reliable is the main thing, and it’s OK to put some of these other projects on hold just to save a little bit of money in the short term,” Mallon told San José Spotlight.

Mallon said the public transit agency needs to seek new revenue sources to maintain its service level long term, and suggested more transit-oriented developments, with housing built on land VTA owns  The agency has 10 housing projects under construction or in planning that will contribute to revenue growth.

Adam Cohen, a researcher with the Mineta Transportation Institute, said VTA’s reliance on sales tax as its primary revenue is unusual for a public transit agency — and risky when the economy gets tight. He suggested VTA could seek more state transit operating support and explore other regional funding options, such as partnering with the Metropolitan Transportation Commission or generating revenue from express lanes.

“Diversification is essential for VTA’s financial resilience,” Cohen told San José Spotlight.

VTA Board Chair and Campbell Mayor Sergio Lopez said the board is discussing revenue growth in tandem with cost cutting measures. He said VTA is projecting an even bigger deficit in the late 2030s because the agency’s half-cent sales tax measure is scheduled to expire in 2036. The board is considering two options: joining a regional transit measure to boost revenue or pursuing the agency’s own tax. A discussion is scheduled for the June board meeting.

His biggest priorities are making sure VTA serves its riders and workers. The agency still hasn’t worked out a new contract with Amalgamated Transit Union Local 256 —which represents its frontline bus drivers and light rail operators — although VTA recently signed extended contracts with its three white collar unions. The agency is trying to maintain its service operators, but is collaborating with the other three unions about staffing, Lopez said.
If VTA can’t reach the 20% vacancy goal, it will consider furloughing workers for one day a month, Sangha said in his presentation.

“It’s an unfortunate reality of the broader economic fixtures of which we don’t have direct control, but it’s an opportunity for all of our public agencies to become more resilient, more responsive and more transparent,” Lopez told San José Spotlight.

Contact B. Sakura Cannestra at [email protected] or @SakuCannestra on X.