Budget problems are forcing local transit officials to explore cutting service, increasing fares and possibly asking voters in 2026 to approve a sales tax increase for transit operations and projects. The sales tax measure would be limited to areas served by the Metropolitan Transit System, so North County communities would be excluded because they are served by the North County Transit District. Other financial solutions presented Thursday to the MTS board include delaying infrastructure projects to free up money for operations and seeking an exemption from state rules requiring zero-emission buses. The aggressive proposals are being prompted by a structural budget deficit of roughly $100 million per year that MTS faces starting in 2027 when federal pandemic will have run out and short-term state assistance is scheduled to end. MTS officials say $360 million in federal COVID-19 aid and $284 million in state aid under SB 125 have helped mask a structural deficit fueled by a combination of rising expenses and ridership’s failure to rebound fully to pre-pandemic levels. In the fiscal year that begins in July 2027, MTS is projected to have a $90 million deficit — $407 million in revenue versus $497 million in expenses. The next fiscal year, that deficit is projected to climb to $95 million. A pedestrian walks across W Broadway near Kettner Boulevard as a bus drives past on Thursday, Jan. 16, 2025 in San Diego, CA. (Meg McLaughlin / The San Diego Union-Tribune) “Our recurring revenues do not match our recurring expenses and we’ve been balancing that with the stimulus and reserves,” said Mike Thompson, MTS director of financial planning and analysis. “We really don’t have any plan right now for what happens in fiscal year 2028. That’s what we call a fiscal cliff.” That cliff is prompting MTS to consider a wide range of options, including some short-term and long-term steps outlined Thursday by chief executive Sharon Cooney. She said an obvious move would be delaying or canceling plans to improve service, which include having trolley trains arrive twice as frequently and adding an express bus from the border. But Cooney said it might also make sense to go further and make immediate service cuts. “There are short-term things we can do to kind of delay the fiscal cliff,” she told the board. Another option was a crackdown on fare jumpers. Cooney said more people have been riding MTS buses and trains without paying in recent years, which hadn’t historically been a problem for MTS compared to other transit agencies. But she said higher fines for farebeating that take effect Feb. 1 are expected to soften losses of about $1 million per month MTS has been suffering. “Those hopefully will start moving the needle on fare revenue,” she said. Another option is a fare hike, which would need approval from the county’s regional planning agency, the San Diego Association of Governments. But Cooney stressed that a fare increase alone could not close the $100 million structural gap. “A fare increase isn’t going to get to that number alone, because once you start increasing fares you are going to chase people off the system,” she said. Another option is a November 2026 ballot measure asking voters within the MTS service area to approve a sales tax increase that would affect only that area. That would differ from recent, unsuccessful attempts to raise the countywide Transnet sales tax surcharge. Transnet money pays for both transit and road projects, but the MTS sales tax revenue measure would only fund transit. MTS previously explored a sales tax measure for the November 2020 ballot but abandoned that effort when the pandemic hit. Cooney said planning for such a measure, which would include focus groups and deciding exactly what it would pay for, would have to start this year. “That’s a long lead-time type of thing,” she said. Cooney said she plans to ask the board to hire a consultant to complete a comprehensive operational analysis to help determine what expenses the revenue from a ballot measure would fund, and how best to reduce service if cuts are needed. She said she wants that analysis done by the beginning of 2026, when the board is expected to face many key decisions. Another option she proposed Thursday was shifting federal and state money that is now devoted to infrastructure and capital projects. She said the money — about $160 million per year — could be spent on operations instead, but warned of long-term problems if infrastructure decays too much. “If you defer that maintenance, if you defer those projects, you will run into issues further down the lane,” Cooney said. A pedestrian walks along Fifth Avenue as a bus drives past on Thursday, Jan. 16, 2025 in San Diego, CA. (Meg McLaughlin / The San Diego Union-Tribune) MTS could also ask the state for an exemption to Innovative Clean Transit rules that require the system to convert its entire bus fleet to zero-emission vehicles, which cost about 50 percent more than the existing compressed natural gas buses. To comply, MTS plans to build a $300 million Clean Transit Advancement Campus. Cooney said the state rules let agencies seek exemptions by crying poverty and contending that complying would require major service cuts. On a positive note, she said, some state lawmakers have been lobbying for an extension beyond fiscal year 2028 for the SB 125 funding. Cooney also said the statewide Transit Transformation Task Force, which she serves on, has been discussing a statewide sales tax increase to fund transit. “It’s been half a century since they’ve really done a full deep dive into how to fund transit as an important piece of the state’s goal of reducing emissions,” she said. “If you want to fund a modern transit system throughout the state, you really need to look at modern funding sources.”