Marin transportation tax revenue trends upward

Tax revenue is up at the Transportation Authority of Marin, but economic volatility has the agency taking a conservative approach to the budget.

Measure AA, the county’s half-cent transportation sales tax, is set to finish the 2025-26 fiscal year at $35.9 million. That’s a 1.7% increase over the previous year, better than earlier projections, said Melanie Purcell, the agency’s finance director.

Revenue is expected to climb another 1.5% next year, and continue on a 2% growth rate through 2031, according to financial forecasts. The growth is signaling a rebound from the pandemic-induced revenue slump.

“But we do have, obviously, some pretty mixed indicators,” Purcell said. “There’s definitely people who are shopping, as we know, we are getting new sales tax revenue, but their sentiments are a little bit different and all of the experts are kind of giving mixed signals.”

Purcell gave the update during an executive committee meeting on Monday.

In 2004, Marin voters approved Measure A, a 20-year, half-cent sales tax to support transit, roads, school routes and highway projects. The passage of Measure AA in 2018 extended the tax for 30 years, with a revenue estimate of about $35 million annually.

According to the agency, the tax collected $29 million the first year it was renewed. That dropped to $27.35 million in 2020, the first year of the pandemic.

Due to the county’s demographics and income levels, Marin remained relatively isolated from the ups and downs of the pandemic and recovery, Purcell said.

The tax revenue shot up to nearly $35 million by 2022. Initially, TAM officials projected no growth in Measure AA revenue for this year and the following two years.

This year is the first indication of the revenue trending upward again.

“Our revenues did come in better than expected, which is great news,” Purcell said. “But it doesn’t leave us a whole lot of confidence in what that means going into next year.”

At the national level, gross domestic product is heavily propped up with artificial intelligence development and investment, Purcell said. The consumer price index has continued to creep up, manufacturing is down and retail sales are neutral. The homebuilders index nationally is in steady decline, which is of concern because it indicates builders are not particularly optimistic, Purcell said.

Out of some 16 key statistics, seven are good, four are neutral and five are bad, Purcell said.

The Transportation Authority of Marin also gets revenue from Measure B, the $10 vehicle registration fee. The county has been averaging around 240,000 registered vehicles the past five years or so.

Revenue dropped from about $2.42 million to $2.33 million during the pandemic. Revenue is projected around $2.36 million this year, with similar receipts anticipated for next fiscal year.

“This has been historically dropping and not behaving real nice and then slowly leveled out and has actually seen a slight uptick this year,” Purcell said. “Not quite sure why, but we’re happy to see it.”

Purcell said the agency’s draft budget, which assumes these projections, is expected to be released in May.

San Rafael Mayor Kate Colin, chair of the Transportation Authority of Marin board, said she appreciates the staff’s pragmatic approach to the budget.

“That has stood us well in all the past years, and I think it’ll help us in the years going forward,” Colin said.

“TAM remains financially healthy, and careful forecasting helps ensure long-term stability for the agency and its projects,” Colin said.

Meanwhile, TAM has proposed a reallocation of some Measure AA revenue as part of its routine review process. The agency is considering a shift that could provide an additional $1.25 million for its school crossing guard program through 2034.

The expenditure plan also includes redirecting tax revenue from two funding categories to create a new “reimagined roadway” fund.

Four percent of revenue would be pulled from a local roads fund. An “innovative technology” category would be eliminated, freeing another half-percent. That revenue would feed the new fund with 4.5% revenue for major road projects on key Marin corridors. That translates to around $35 million over the life of the tax, which expires in 2049.

The TAM board is expected to hold a public hearing on the Measure AA expenditure plan in March.

Robert Betts, general manager of Marin Transit, the county’s local fixed-route bus provider, said the agency is budgeted to receive about $23 million in Measure AA revenue this fiscal year, which ends June 30.

“It’s good to see the projections are higher than what they estimated from last year,” Betts said, noting that the forecast is more in line with what Marin Transit staff have been using for planning and budgeting. “Even though these are more optimistic projections, our future operations cost still exceed our future revenues. It’s good to be trending up, but we’re still looking at some potential financial shortfalls.”

Betts said Marin Transit is fortunate to have a dedicated revenue source such as Measure AA.

“Without that funding, we would be in a lot more challenging position financially,” Betts said.

Betts said the Marin Transit draft budget will be presented in May. Staff aim to pursue an update to its 10-year planning document, which uses the financial forecasts, along with its budget approval process.