Predicting the future is a risky game.
For instance, what will federal government policy be come 2025—depends largely on who is in the White House and what party controls Congress.
You can say the same about whether the Federal Reserve’s tightening of interest rates is going to result in a soft landing or a recession. In polling, the public is quite nervous, although the unemployment rate is at record lows and economists are split. For people in the Bay Area tech sector, there’s almost daily news of big employers shedding lots of workers to prepare for more challenging economic times.
And housing prices have stabilized and dropped—driven largely by the hike in interest rates that changed the affordability picture significantly. For instance, we’re now paying nearly as much monthly on our home equity line of credit that floats with the fed rate as we are on our fixed rate mortgage that borrowed twice as much money.
Let’s turn to the transit agencies that showed up in Sacramento with their hands out to the state government for money to “stabilize” their systems when the federal largess that has propped them up since the lockdown dries up.
What’s true about their situation is nobody really knows whether transit ridership is going to return to pre-pandemic levels. Ridership on BART already had started to slip. Now, with downtown San Francisco’s business district more than half empty and most employers embracing a hybrid work model if not fully remote, trains are still running with minimal passengers during peak hours.
San Francisco officials, seeing potentially plummeting tax revenue, are rightly concerned and floating different proposals. Has golden goose of millennial tech workers and their employers that rescued the city 20-plus years ago flown away with a different working reality after the pandemic?
It also translates to investors in the high-rise buildings. Loans typically are amortized on a 30-year basis, but mature in 10 so they must be refinanced. Given the vacancy rates and the significantly increased interest rates, some landlords already have given buildings back to lenders. Firms that track the data report it’s likely to get a lot worse before it gets better.
All of this needs to be factored into the transit discussions. At the minimum there should be a moratorium on most, if not all, capital projects. Spending billions to extend BART tracks under downtown San Jose or to bring CalTrain into the Salesforce Transit Center in San Francisco is a fool’s exercise at this point. Consider how low ridership levels are on the very expensive Central Subway in San Francisco.
The Legislature is considering legislation developed by 15 transit agencies and introduced by Sen. Scott Wiener (D-San Francisco) to provide $5.15 billion over five years to avoid drastic service cuts. Perhaps, the agencies should be looking at a mixture. BART is widely viewed as unsafe and dirty so it’s no surprise that riders would stay away.
It's hardly a great year to go to the state—revenues are well below estimates and with no federal or state taxes due until Oct. 16 because of the winter floods (that’s regular quarterly payments from January, April and June plus whatever is due to 2022), the May budget revision will be lacking its usual accuracy.
BART was designed to deliver suburban workers to downtown centers—will that continue to be a necessary service?
All in all, the windshield is foggy.
