SMART on Solid Financial Foundation

by Erin McGrath
Petaluma, CA - Sonoma-Marin Area Rail Transit is two years away from the start of passenger service between the Sonoma County Airport and downtown San Rafael.

We may soon be able to add Larkspur to that service. A trip from the airport to San Rafael during commute hours that takes 90 minutes on Highway 101, will soon get you there in under 60 minutes while you drink coffee and work on your laptop or just enjoy the scenery.
The SMART board and staff have been focused and determined in getting us to that future.
As chief financial officer for SMART, with over 15 years of experience in government budgets and projects, I want to report to you that SMART is on solid financial footing. Here are the facts:
Fact No. 1: SMART will have enough funds to operate. For the past three years we have been both building the system and planning for operations.
Our operating estimates plan for both the known and the unknown. There are many things that will fluctuate over time such as labor and fuel prices.
The question surrounding any future uncertainty is this: does SMART have enough funds put away to weather unpredictable storms?
Most agencies, to prepare for such problems, rely on their reserve policies to cushion against the unknown. Those reserves are typically set between 5 and 15 percent of a government's budget. SMART is currently planning an operating reserve of over 30 percent of our total costs. A reserve of this size is our recognition that there are unknowns and we are prudently preparing for them.
Fact No. 2: SMART's future sales tax assumptions at 3 percent are reasonable. Examining sales tax fluctuations over time, it is true that recessions will occur. But we have anticipated that in our financial planning.
In the SMART district over the past 20 years (which included two recessions, including the "big" recession) the average growth was over 3 percent. In addition to this history, our current 3 percent growth assumption was reviewed by analysts at Wall Street rating agency Fitch in March 2014, a review process that resulted in a reaffirmation of their earlier excellent "A" rating.
Fact No. 3: SMART's debt burden is manageable. In order to build this large, complicated project, it was necessary to build as much of the project as possible at one time. This results in a well-known process of issuing revenue bonds against future tax receipts.
The resulting debt burden is one that SMART can handle, year-in and year-out, illustrated clearly in our publicly available financial plan. It's an updated version of a plan prepared during our 2012 bond sale, which involved an exhaustive financial review process and interviews with investors and two independent rating agencies. Our bonds received anexcellent "AA" rating from Standard and Poor's and an "A" rating from Fitch. And our independent annual financial audits, available on our website, are reviewed every year by investors and rating agencies.
Managing a project and an agency the size and complexity of SMART is not just a matter of projections on paper. It's day to day decision-making by professionals with experience in governance; professionals who have weathered the ups and downs of operations costs and board members who set the policies needed to weather those ups and downs.
Fortunately for the public who will soon rely on SMART's train and pathway, SMART has both going forward into the future. SMART will continue to be responsible and transparent with our finances because it serves the overarching goal of building and running the best transportation alternative to Highway 101 possible.
Erin McGrath is the Chief Financial Officer of the Sonoma-Marin Area Rail Transit District.
The SMART train and pathway project is currently under construction and will provide a new regional transportation backbone with improved transit options for all North Bay residents. SMART expects to begin passenger rail service by the end of 2016.

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