Bay Area voters may get the opportunity to raise sales taxes in a bid to raise more than $500 million a year to address major funding shortfalls facing BART and other regional transit agencies, part of a plan pushed by two local Democrats that’s moving through the state Legislature.
But the plan faces a late-hour challenge from labor unions and environmental groups, who want businesses to foot the bill instead of regressive tax shared by consumers.
The state Senate approved SB 63 on Monday. If it survives the Assembly and Gov. Gavin Newsom signs it, voters in certain Bay Area counties will decide in 2026 whether to raise sales taxes by half a cent. That would generate roughly $550 million annually, to be distributed between BART, Caltrain, Muni in San Francisco, and AC Transit in the East Bay. The amount is in flux and would also depend on the number of counties that approve the tax.
The bill is co-sponsored by Sen. Scott Wiener of San Francisco and Sen. Jesse Arreguín of Oakland. It passed the Senate 28-10, with all 10 Republicans in opposition.
If voters did approve the tax increase, it wouldn’t fill the total funding gaps for all of the transit agencies. Even so, the pair of Democrats say their proposal is the region’s best hope to keep trains and buses running after years of serious fiscal challenges and short-term solutions.
Ridership fell during the pandemic and never returned to normal levels. BART, the region’s flagship train network, faces a $378 million funding gap in fiscal year 2027.
“This vote provides a much-needed ray of hope for public transportation in the Bay Area,” Wiener said in a statement after the Senate’s approval.
Up until this week, the plan appeared to have the buy-in of a diverse coalition of supporters, including labor unions, environmentalists and business interests. Then Bay Area Forward, an advocacy group representing unions and environmentalists, bucked, as reported first by Politico. Among its members are influential labor unions representing transit workers, including the SEIU and Amalgamated Transit Union, and the environmental nonprofit 350 Bay Area.
Bay Area Forward suddenly began wielding polling it commissioned earlier this spring that suggests voters may not have the appetite to raise sales taxes if given the option — and that taxing businesses would be a smarter political move.
The polling firm, Oakland-based FM3 Research, surveyed about 1,300 likely voters in Alameda County, Contra Costa County, San Francisco and San Mateo County. After hearing pro and con messages about the measure, 57% supported a gross receipts tax on businesses. In February, the Metropolitan Transportation Commission released a separate poll it commissioned that found 54% of voters — slightly fewer — would support the sales tax increase “to avoid major transit cuts to BART, Caltrain, Muni and AC Transit.”
Ryan Williams, a spokesperson for Bay Area Forward, said that’s evidence that a tax on businesses is a “no brainer.”
“No one is coming to rescue these transit agencies,” he said. “We have to be able to fully fund these transit agencies. And the only way to do it right now is on a gross receipts tax.”
That’s brewing conflict with business interests. The Bay Area Council, which represents the region’s biggest employers, has been “firmly opposed to any taxes that would be specifically targeted at jobs and business,” said spokesperson Rufus Jeffris.
“That’s been our position. I don’t think that’s changed,” he said Tuesday.
Losing the support of business interests could imperil the fate of any funding solution for public transit. Jeffris said the Bay Area Council had discussed leading the political campaign to persuade voters to approve the sales tax increase next year — a campaign that’s likely to be expensive and hard-fought in a region where voters consistently decry the high cost of living.
Lawmakers could also tweak the ballot measure process to give the plan a better chance with voters. If lawmakers refer the measure directly to voters, two-thirds must approve it. But if lawmakers pass the bill, and a citizen-led campaign collects enough signatures to place it on the ballot, only a majority is necessary.
“In order to have a measure that’s going to ultimately pass, it’s going to need support from the business community,” said Rebecca Long, director of legislation and public affairs for the Metropolitan Transportation Commission. “Unfortunately, it does not appear likely that the business community would support a business tax at this time, when the Bay Area economy is really recovering from the pandemic.”
Asked about the potential political cost of changing the source of the tax, Williams said Bay Area Forward and business interests aligned in their mission to revitalize downtowns in Oakland, San Francisco and elsewhere, where transit plays a key role in shuttling workers and shoppers.
“The business community has just as much to lose if the ballot measure doesn’t pass,” Williams said.
SB 63 now moves to the Assembly, where it will be considered in committees this summer before a possible vote on the floor. In a joint statement, Wiener and Arreguín said it’s “very late” in the multi-year process of writing and passing the bill, “and changing the funding source at this point will be difficult.”
Funding for transit agencies has proven to be a heavy lift in the Democrat-controlled Legislature. In 2023, lawmakers approved $1.1 billion for Bay Area transit. But that money will run out by mid-2026, according to Wiener’s office.
If lawmakers don’t find a funding solution?
“BART could be forced to cut 65-85% of service, meaning trains only every 60 minutes, no weekend service, and station closures and line shutdowns,” Wiener said.
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