The stakes are high as Bay Area Democrats in the state Legislature advance a bill that would ask local voters to bail out struggling public transit agencies by raising sales taxes.
But weak polling and mounting divisions between business and labor groups are raising doubts among key lawmakers about its viability.
“With so many disparate interests out there, there’s tremendous risk to this ending badly,” said state Sen. Dave Cortese, a San Jose Democrat who chairs the transportation committee.
In early June, the Democrat-controlled state Senate passed SB 63, sponsored by Sen. Scott Wiener of San Francisco and Sen. Jesse Arreguín of Oakland. If it becomes law, 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 also would depend on the number of counties that approve the tax.
The plan is more than a year in the making, and the stakes are high. Public transit ridership declined during the COVID-19 pandemic and hasn’t returned, and pandemic-era funding is drying up. BART, the region’s flagship train network, faces a $378 million funding gap in fiscal year 2027. In the East Bay, AC Transit faces a projected $72 million revenue shortfall in fiscal year 2026-27 and recently averted major layoffs by tapping reserves that will quickly run out.
“Without new funding and as emergency federal and state aid runs out, Bay Area transit systems will be forced to make devastating service cuts that would push public transit into a death spiral,” SB 63’s authors wrote in a recent analysis. “The loss of transit service would disproportionately impact lower-income people of color, greatly increase traffic congestion and pollution, and destroy the region’s economic recovery.”
But Bay Area Forward, a coalition of labor and environmental organizations, wants lawmakers to change the potential sales tax hike to a gross receipts tax on businesses instead. The group’s members include influential labor unions representing transit workers, such as the SEIU and Amalgamated Transit Union, and the environmental nonprofit 350 Bay Area. Bay Area Forward had released polling it commissioned suggesting that a slim majority of Bay Area voters would approve either a gross receipts tax or a sales tax, but the former was slightly more popular.
“We need a solution in SB 63 that will, in fact, fully fund our transit systems and one that voters will pass,” said Ryan Williams, a spokesperson for Bay Area Forward. “The gross receipts tax is the only mechanism that achieves those goals.”
But business groups, whose willingness to support a transit tax measure would be key to avoiding well-funded opposition that easily could sink a tax measure at the polls, are adamantly opposed to that idea.
On Monday, the San Francisco Chamber of Commerce, the San Jose Chamber of Commerce and about 10 other business organizations in the Bay Area sent a letter to the state Legislature’s Bay Area Caucus making clear that they wouldn’t tolerate the tax burden being shifted onto businesses in the form of a gross-receipts tax.
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Transit insiders say the schism could imperil the plan and leave transit agencies — and riders — in the lurch.
If the state Assembly passes the bill and it’s signed by Gavin Newsom, lawmakers could place the proposal directly on the ballot for voters to consider, but with a catch: to pass, a minimum of two-thirds of voters would have to support it. Additional polling suggests that the measure wouldn’t clear that threshold. In January, a poll by the Metropolitan Transportation Commission found that 54% of voters in Alameda, Contra Costa, San Francisco and San Mateo counties would support a half-cent sales tax “to avoid major transit cuts to BART, Caltrain, Muni and AC Transit.”
However, the measure would only require a simple majority to pass if citizens are able to collect enough signatures to place it on the ballot through the typical initiative process. Then, lawmakers and transit officials expect, backers would need to mount a major advocacy campaign to persuade enough voters to support it.
Business groups, including the Bay Area Council, have considered leading that campaign. But if lawmakers switch the plan to a tax on business activity, the business community now says it would flip sides. Fractured support or outright opposition from business or another sector would probably mean the measure’s failure, said Cortese.
“That’s formidable opposition,” he told Bay Area News Group. “That can kill you right there.”
Cortese’s transportation committee passed SB 63 in April, and he continues to support the bill. But he has doubts about its political feasibility: it’s unlikely that enough voters would support a higher sales tax purely to fund transit agencies’ operations, he said, even if they have approved hikes for specific projects in the past, such as for the BART expansion toward San Jose in 2000. Critics have argued the ailing transit systems should adjust operations rather than ask for more funding assistance. The political hurdle would be even higher if interest groups fight against it, Cortese said.
If lawmakers do pass the bill, “now you’ve got to go win an election,” he said.
It’s unclear how Wiener and Arreguín will respond to the dueling pressure campaigns from business and labor groups.
“Bay Area residents have been really clear: They know transit is in trouble, and a majority support multiple paths to funding operations in a sustainable way,” Wiener said in a statement. “Providing this funding has been a years-long process that engaged many, many stakeholders, and we will continue to work with everyone to secure a vibrant future for Bay Area public transit.”
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