State Task Force - Big gaps in funding and capital projects; improvement needed in coordination
On September 30, California’s State Transit Transformation Task Force has opportunities to advance policies for more coordinated transit and more timely and cost-effective capital projects.
However, the draft recommendation has a catastrophic gap in operating funding, as well as big gaps in the potential to advance timely and cost-effective capital projects, and room for improvement in coordination.
The top goal, for agencies, advocates and academics, was to identify new sources of operating funding. As was discussed early in the Task Force meetings, California dramatically underinvests in transit operations compared to other areas with large transit systems. However, despite repeated requests, the draft report does not include proposals for new relatively near to medium sources of operating funding.
The draft report does have proposals to improve land value capture to generate revenue from real estate near transit. But major developments take years to plan and be built. This can be a good source of long-term revenue but does not address the need in the short to medium term, 4-10 year time frame.
There are some small scale recommendations that don’t come near the hundreds of millions needed to maintain and improve service to achieve the state’s goals.
Major new sources of operating funding, such as a millionaire’s tax, a business tax, a mileage fee replacing the declining gas tax, or shifting highway expansion funds will not be easy to do, and will likely take more than a year to do. Most task force members agree on the need for new funding but may not agree on which source. But these are not good reasons to punt on the most important mission of the Task Force.
The staff report does include recommendations for fare, schedule, mapping and wayfinding coordination which are important strategies to increase convenience, affordability, and ridership. However, these recommendations can be strengthened by
Strengthening and clarifying the recommendation about clearly defining California’s regional for the purposes of transit coordination and identifying a coordinating entity for each region
Providing some state funding to implement regional coordination rather than leaving the funding entirely up to the region. State funding for regional coordination is an international best practice.
Broaden state technical assistance for regional coordination beyond the helpful recommendations for ID verification, payment interoperability, and ticketing for interregional trips, to include guidelines and assistance for fare, schedule and wayfinding integration.
Missing Capital Project Reform Recommendations
The section on capital project reform has solid recommendations about increasing public sector capacity, and service led planning (YY5).
Service-led planning is especially important to deliver the projects that generate the most ridership and public benefits. It is an international best practice for planning used by the Swiss, German, Danish and increasingly other developed countries. Examples of the need for this can be found in two Californians for Electric Rail blog posts regarding how project delivery reform would enable a more cost-effective and timely delivery of SMART's extension to Healdsburg and Capital Corridor's Sacramento to Roseville Third Track Project
Service-led planning is concerned with provision of the transit service itself; what markets are served, how frequent that service is, what connections are provided, how much capacity is offered, and what trip times can be delivered. Service-led planning focuses on the customer, rather than on the operator or on the infrastructure developer. Only once a transit service concept is developed is it appropriate to design operations, analyze technology or equipment capable of delivering operations, or identify infrastructure necessary to support operations. Service-led planning empowers planners to understand required operational changes and infrastructure investment and articulate tradeoffs in terms of their relative utility for customers. This process provides the necessary context to large scale projects and offers a clear, documentable, and reproducible reference for funding applications, stakeholder coordination, and project development.
- Caltrans State Rail Plan, Appendix 4-2
However, the staff report is still missing two critical recommendations that would improve the cost-effectiveness of capital programs: framework funding agreements with continual benefit/cost analysis.
Framework Funding Agreements
A major driver of inefficient delivery of capital programs is a funding system that spreads out funding in small pieces to many different projects, and each project needs to put together its own funding from multiple funding sources.
Another recommendation from Task Force members and public comment that is missing in the staff recommendation is state transit investment as framework funding agreements with multi-year commitments. This is how New York's MTA works with their 5 Year Capital Plan -- which funds renewals, rolling stock and expansion/capacity increases.
Californians for Electric Rail produced a policy brief on this topic in June 2025 called "Against Patchwork Funding."
The Against Patchwork Funding paper identifies how the current discretionary competitive grant programs used to fund transit in California are correlated with cost increases and delay.
This competitive grant system is very different from the process used in low and medium cost transit countries. These places provide certainty to transit and passenger rail by providing either formula funding or framework funding agreements. Framework funding agreements focus on funding projects that 1) comply with state/regional service planning; and 2) have full scope definition or design. These multi-year (typically 5 years) agreements give opportunities for legislatures/administrations to provide democratic input while giving certainty to projects and programs that are funded in the agreement. That certainty allows projects to plan for project development, design, procurement and program integration in ways that cannot be dreamed of in the competitive grant agreement regime.
Fund fully designed projects
One important contributor to cost overruns is the current practice of committing state investments at an early stage when design is at 0-15%. Much of the scope is undefined, risk profile a big question mark and costs unknown and benefits unclear.
When funding for construction is awarded early then there is ample opportunity for 3rd parties like local governments, utilities and private railroads to extract value from transit agencies – thus creating a floor for future cost increases.
An earlier proposal from the SB 125 TTTF was to refrain from funding construction until design is complete or scope fully defined. This allows funders and transit agencies to fully understand the costs, benefits and risks of the project. It also minimizes opportunities for 3rd party extraction of value from transit projects. Unfortunately this aspect of the recommendation was cut from the final draft report.
The final draft report does include a good recommendation to support business cases development and cost benefit analyses. However, what is missing from the recommendation is the best practice of reassessing the cost-benefit analysis at stages when the project design is more fully fleshed out.
As the project goes from conceptual, to preliminary and to final design, state level funders would periodically analyze these benefits and costs against other projects to inform prioritization for construction funding.
Under the current paradigm, where funding is committed to a project at an early stage of design, costs tend to balloon, and the scope of the project is cut back to reduce costs, which could lead to an even worse cost-benefit outcome.
By funding fully designed projects and updating business cases/cost benefit, the public gets more certainty about the costs and benefits of the project.
Next Steps
The task force's last scheduled meeting is Tuesday, September 30th. In order to get these crucial funding and capital project reform recommendations included in the final report, please send a letter and/or make public comment with these points:
It is essential for the Task Force to make recommendations for substantial near to medium term sources of operating funding for transit and rail to achieve the state’s goals.
Strengthen the recommendations to deliver capital projects more timely and cost-effectively by adding the international best practices of multi-year funding agreements, funding fully-designed projects, and doing cost-benefit analysis at key project stages to ensure projects deliver value to the public