The SB 125 Transit Transformation Task Force (TTTF) is poised to adopt a final report on September 30, 2025. The State Legislature intended for the report from the TTTF to serve as the basis of legislative and administrative actions to reform transit to better achieve the state’s goals of reducing vehicle miles travelled and greenhouse gas emissions.
There are many good recommendations in the draft final report around improving transit operations, fare products, coordination, cost recovery, and transit-supportive land use.
Critically there are three crucial items missing from the final report. The first is state support for transit operations. Ridership is strongly correlated to service frequency, and California chronically underfunds service compared to other states with large rail and transit networks.
The two remaining, outstanding recommendations items relate to reforming capital projects to enable more cost-effective and timely delivery. To illustrate what’s missing, let's look at a new case study out of the North Bay that illustrates why we need transit project delivery reform.
SMART to Healdsburg
SMART, the North/South regional rail line in Sonoma and Marin Counties has long sought to extend the line north to Healdsburg and then onto Cloverdale. Cost increases for previous extensions have steadily chipped away at the ability of SMART to fund the extension using the Regional Measure 3 bridge tolls and the dedicated SMART sales tax. Instead SMART has increasingly looked to state sources to fund extensions.
SMART started winning state competitive, discretionary grants in 2023 at 5-10% design status. The projected cost at this point was $269m. SMART won:
- $35m TIRCP Cycle 6 grant in 2023
- $81m TIRCP Cycle 7 in 2024
- $81m Solutions for Congested Corridors in 2025
As part of each grant process the State of California ran a cost/benefit analysis. But the cost/benefit analyses are different between TIRCP and Solutions for a Congested Corridor. And the cost/benefit analysis is only applied at the conceptual design stage – not further along during preliminary or final design. This makes it relatively easy for agencies to overstate benefits and understate costs early to win construction funding.
Collectively SMART has $269m in funding. The state is currently funding 73% of the project across three different grant awards. Designs now are at 30%.
Last week the SMART board approved a progressive design-build project for the Healdsburg extension. The selected contractor will progress designs towards completion and attempt to come to an agreement with SMART on construction pricing once designs are complete. If the parties cannot come to an agreement, SMART can opt to off-ramp the contract and bid the project as design-bid-build.
Given that the $269m cost estimate was based on 2023 conceptual designs and there has been 5-7% construction cost inflation annually since then, it is highly probable that the 100% design cost estimate and offer from the contractor will come in significantly higher – even if the construction scope remains stable. There is also a good chance that third parties like local governments and utilities will demand additional scope as design progresses to 100%. So costs will likely further increase, which will require SMART to find more money from the state or other sources.
This pattern isn’t speculative. As we showed in our Capitol Corridor 3rd Track to Roseville case study, funding construction for projects at conceptual design allows 3rd parties to extract more money and leads to cost spiral escalation. In fact last week Capitol Corridor disclosed that the price on 3rd Track to Roseville had risen from a 2024 estimate of $275m to $400m. The cost increases are attributed to the new yard, utility relocations and Caltrans requiring more expensive bridge upgrades (although Caltrans would not chip in any money to cover these cost overruns).
In the case of SMART, the State of California has committed through 3 different grants to cover the Healdsburg extension before the scope, schedule and budget were defined. Moreover, even though the State of California is covering 73% of the construction costs, the funding is split into 3 different grants with different requirements, reporting, timelines and administrative burdens. By committing so early before the benefits, costs and risks were clearly defined the State of California has locked itself in to essentially cover the expected cost overruns in order “to protect the existing investment.” The scramble to cover the shortfalls will likely result in delays beyond the projected 2028 revenue service date.
This is poor funding and project delivery practice at the state level. A more rational system for state investment would fund a Healdsburg extension, but in a more comprehensive and judicious way.
In a reformed California, SMART would receive early design/engineering resources to advance design. As design progresses from conceptual, preliminary and final engineering the State of California would periodically assess the costs, benefits and risks of the project. This would incentivize SMART to limit cost increases and protect service benefits. Projects with a positive cost/benefit analysis score would be prioritized in the 5 year investment framework for full construction funding.
The good news is that there is an opportunity to reform this exact scenario via the SB 125 TTTF final report and follow on legislation and administrative action.
Framework Funding Agreements
Despite direction from TTTF members Ian Griffiths and Laurel Padget-Seekins to bring forth a recommendation for framework funding agreements, CalSTA staff have declined to bring forward such a recommendation. Framework funding agreements are a best practice for funding transit capital projects throughout the world. They’re also used by New York’s MTA and Chicago-area transit and commuter rail. Californians for Electric Rail have documented why the existing competitive, discretionary grant program system is broken and how framework agreements can help in the white paper “Against Patchwork Funding.”
The TTTF draft final report includes recommendations to simplify grant programs. While this may slightly improve the existing administrative burdens of grants, it does not address all the other downsides of competitive, discretionary grants: fractured capital stacks, lack of certainty as to funding, lack of focus for funding categories, early construction awards before scope is fully defined, and delays associated with cycles of funding awards.
The TTTF final report must go further and recommend the state adopt global best practices for funding state transit capital investment by using framework funding agreements.
Late Commitment based on Cost/Benefit Analysis
Prior language in draft concepts for Late Commitment Based on Cost/Benefit Analysis at the TTTF have been dropped from the draft final report.
Recommendation on capital project timelines from August 2025 task force meeting
Instead the recommendation has been watered down to focus on guidance for business cases and “enhance benefit cost analysis.”
Recommendation from September 2025 task force meeting draft
Improving business cases and cost benefit analyses are important by using common planning bases to assess costs, benefits, risks, service and schedule both transit agencies and state level funders can more accurately assess investment opportunities for service on an apples to apples basis.
This recommendation is missing the key element: late commitment of construction funding.
The use of cost benefit analyses needs to be iterative – happening periodically as the project progresses from planning to preliminary design to final design - and avoid early commitment – which locks in equity funders to later cost overruns. The 3rd Track to Roseville case study and impending cost overruns for SMART to Healdsburg show why.
If California is going to invest in transit and passenger rail projects – which it should – it should exercise more control in valuing projects and selecting the best ones. The current system instead encourages agencies to overstate benefits, understate or selectively disclose costs in order to win early construction funding to push the project forwards. But what may be helpful to one project “playing the game” undercuts the ability of the state of California as a whole to hold down costs and maximize service benefits for riders.
The TTTF should be sure to include a modified recommendation in the final report that reflects this late commitment for capital projects so California can reap more from transit investments.
Across the board, both capital and operations funding needs to be consistent, reliable, rational, and abundant. To fulfill the task force's mission of recommendations to transform transit, the final report must contain details about support for operations, multi-year funding agreements, and late funding commitment. To speak out, attend the meeting on 9/30 in Sacramento or email sb125transit@calsta.ca.gov.