Governor signs bill authorizing $590 million loan for Bay Area transit agencies
Image credit: AC Transit bus
Gov. Gavin Newsom signed into law state Senate Bill 117, authorizing a $590 million loan for Bay Area transit agencies that will avert major service cuts at AC Transit, BART, Caltrain and San Francisco Muni during the 2026-27 fiscal year that begins July 1.
The Office of Governor Newsom, the California Department of Finance and the Metropolitan Transportation Commission (MTC) last month reached an agreement on a loan for Bay Area transit agencies. Negotiated in close coordination with the affected transit agencies — which together face a projected deficit of more than $800 million in the next fiscal year — the new agreement will sustain operations used by hundreds of thousands of daily transit riders across the region.
“California is following through in our support for Bay Area transit and the riders who rely on it every day,” said Gov. Newsom. “This agreement between my Administration and the Metropolitan Transportation Commission provides essential short-term financing to support Bay Area transit operations while the region works together on long-term funding solutions. Public transit is essential to our economy and to communities across California, and through continued partnership with regional and local agencies, we are delivering a more stable and reliable system – now and for the future.”
A regional funding measure authorized by the Legislature last year via state Senate Bill 63, authored by senators Scott Wiener of San Francisco and Jesse Arreguín of Berkeley, may appear on the November 2026 ballot in Alameda, Contra Costa, San Francisco, San Mateo and Santa Clara counties. If the measure qualifies for the ballot and is approved by voters, it would establish a temporary 14-year sales tax to support transit operations. But these funds would not begin flowing until around July 1, 2027. The state loan provides a fiscal bridge until the sales tax dollars potentially could be available.
Consistent with state Senate Bill 105 enacted last fall, the loan agreement includes a clearly defined repayment structure, a guaranteed revenue source to secure the loan and an agreed-upon interest rate:
- 12-year repayment term, with interest-only payments during the first two years.
- Repayment secured by the “revenue-based” portion of State Transit Assistance (STA) that goes directly to the transit agencies.
- Variable interest rate tied to the state’s Surplus Money Investment Fund, ensuring the state is fully repaid at the same rate it would have earned had the funds remained in state accounts.
The new law allows the loan to be funded no later than July 1, 2026, using money awarded but not yet allocated for Bay Area projects by the California Transportation Commission through the state Transit Intercity Rail Capital Program (TIRCP). Because many transit capital projects have long construction timelines and the TIRCP is continuously replenished, the loan is structured to uphold the state’s commitments to awarded projects while minimizing risk to project schedules.
Source: MTC
