Caltrain warns of $75 million annual shortfall; Gilroy ridership rising but cuts possible without outside funding

Caltrain officials warned Gilroy leaders on June 15 that the regional railroad faces a structural operating deficit of about $75 million a year and that jurisdictions should be prepared for either a ballot measure or deep service reductions.

In a presentation to the Council, Jason Baker, Caltrain's director of government affairs, said the agency's board has adopted a framework that plans for a "no-external-funding" scenario and directed staff to identify what cuts might look like. "We are calling this a critical inflection point," Baker said, describing a future in which, without outside revenue, the agency would consider hourly service, no weekend service, earlier nightly shutdowns and closing a portion of stations.

Why it matters: Gilroy has seen notable ridership gains on the South County connector since electrification; Caltrain cited a roughly 33% increase in boardings at Gilroy. Those gains have improved farebox recovery but have not closed the gap created by changing commute patterns, higher costs for new equipment and infrastructure, and lingering post-pandemic revenue shortfalls.

Baker and Michelle Bousuchard, Caltrain's executive director, outlined two broad paths: with new external funding, service levels can be preserved (and modestly improved); without it, targeted cuts would be necessary by fiscal year 2028. Baker said the agency is evaluating a mix of containment strategies and new revenue approaches and expects a regional funding measure to appear on the November 2026 ballot. He noted, however, that as a public employee he could not discuss campaign messaging; he described the board-approved planning framework and the consequences for service if funding is not secured.

Local questions: Council members pressed Caltrain staff for specifics on what Gilroy residents would receive if they supported a regional funding measure. Baker said he could not advocate for a ballot measure but pointed to recent marketing and outreach, youth fares and efforts to tweak the South County connector. He declined to promise local-only projects tied to a prospective measure and urged Gilroy staff and councilmembers to continue partnership and outreach.

Caltrain's recommendations and next steps: The presentation urged local officials to help the agency tell riders' stories and to explore non-fare revenue options (advertising, fiber monetization, special events) while the board reviews scenarios for service reductions. The agency also told the council it will return with more granular analysis of service-cut scenarios should external funding fail to materialize.

What comes next: Caltrain said the board expects to continue public engagement about funding options; Gilroy officials said they would follow up with staff to better understand local ridership impacts and the city's role in outreach.