City Council Staff Report Page 1 of 6 June 9, 2026
Staff Report
Agenda Item No. 6.3
DATE: June 9, 2026
TO: Honorable Mayor and Members of the City Council
FROM: Joan Malloy, City Manager
SUBJECT: Receive a Report on State Audit 2025-120 East Bay Transit Agencies
EXECUTIVE SUMMARY
Union City’s local municipal operator, Union City Transit, has been involved in a State Audit for the past year. The audit was requested by California State Senator Dr. Aisha Wahab, who represents Senate District 10, to evaluate the performance, collaboration, finances, and efficacy of the six (6) bus operators serving Alameda and Contra Costa counties while also considering potential consolidation of operators as a better use of the region’s funds and improved customer experience. The Metropolitan Transportation Commission (MTC) was also subject to this audit for its role in regional connectivity between operators. City staff was not allowed to discuss the audit publicly, including with other operators, until the final report was released on May 28, 2026. City staff is pleased to report that the State Auditors had no recommendations for Union City Transit.
Staff recommends that the City Council receive the report and presentation on State Audit 2025-120 regarding the East Bay Transit Agencies. No formal action is required.
STRATEGIC PLAN ALIGNMENT
This agenda item is not directly related to the Strategic Plan.
BACKGROUND
On June 4, 2025, the City Manager and Transit Manager for Union City received a letter from the Chair of the Joint Legislative Audit Committee (JLAC) notifying them that a request for an audit of select East Bay transit operators would be considered on June 18, 2025, as well as a request for representatives of Union City Transit to be present at that hearing. Attached to the letter was a request by State Senator Dr. Aisha Wahab to review the “fragmented [public] transit landscapes” of twenty-seven (27) operators in the San Francisco Bay Area that are reportedly “especially harmful to elderly and disabled passengers”, beginning with an audit of the six (6) bus operators in the East Bay “to evaluate how well they are serving the public, assess how we might facilitate future consolidations, and find other opportunities to improve service.” Agenda Item No. 6.3
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The request included the following areas for evaluation as reflected in State Senator Dr.
Aisha Wahab’s letter:
1. Review and evaluate the laws, rules, and regulations significant to the audit objectives.
2. For a selection of transit agencies operating in Alameda County and Contra Costa County, determine the following:
a. The autonomy each agency has to plan its own routes and invest in transit projects without coordination with other agencies.
b. The barriers that may exist to collaboration between transit agencies and their counterparts.
3. From the selected agencies, review a selection of routes that cross service areas and that can require riders to transfer between agencies and between different modes of transit to determine the following:
a. The clarity of the information provided to riders about how to navigate within and transfer between the systems.
b. The availability and accessibility of connecting transfer schedules, including frequency, timing, and any physical obstacles to making a transfer.
c. The ease of payment.
d. Whether there are duplicative services that could be eliminated.
4. Review pre-pandemic and post-pandemic ridership levels at each of the selected agencies and determine whether ridership has returned to prepandemic levels, what initiatives were implemented before the pandemic to improve ridership levels, how current ridership compares to pre-pandemic ridership trends, and what initiatives the agencies have employed since the pandemic to attract riders.
5. Determine the financial condition of the selected agencies by determining their financial reserves, the extent to which they rely on nonoperating revenue as compared to operating revenue, and whether the agencies will face challenges in funding their upcoming capital asset costs.
6. Review MTC’s efforts to collaborate and coordinate with the selected agencies and determine whether they have been effective.
7. Determine for each selected agency the amount of funding MTC provides, the restrictions on such funding, and what proportion of the funding the agency used for operating costs and capital expenses.
8. Evaluate whether the selected agencies are at risk of not being able to continue offering or expanding service without further external, nonoperating funding.
9. To the extent possible, determine the likely financial condition of a single transit agency for local bus service serving Contra Costa County and a single transit agency for local bus service serving Alameda County if such agencies comprised the combined agencies currently operating in each county.
Specifically, determine the potential assets, liabilities, revenue, expenses, and reserves for the new single agency in each county.
10.To the extent possible, determine the fiscal benefit of combining transit agencies in each of the two counties, and identify legal and practical impediments to merging transit agencies.
11.Review and assess any other issues that are significant to the audit.
Agenda Item No. 6.3
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On June 18, 2025, the JLAC voted unanimously to approve the audit.
A letter dated June 27, 2025, was received by Union City Transit staff requesting the preservation of all records related to the forthcoming audit topic.
On August 20, 2025, Union City Transit staff received a letter regarding the commencement of the JLAC-approved audit and a document request list that encompassed fifteen (15) different categories in line with the State Senator Dr. Aisha Wahab’s eleven (11) requested areas for evaluation, referenced to as “Scope and Objectives”:
1. Policies, procedures, or other documents that define the agency’s authority to plan routes, operate, and fund services, and describe its structure.
2. Agreements, contracts, or other similar documents with other transit providers and/or MTC regarding service coordination, joint planning, or funding.
3. Planning documents or policies describing how the agency coordinates schedules and transfers with other transit providers.
4. To the extent available, documentation, memos, correspondence, or other records identifying barriers to collaboration with other agencies or MTC.
5. Current route maps, service schedules, and rider guides (including both scanned printed pamphlets, to the extent available, and digital versions).
6. Policies or guidelines for publishing and updating information provided to riders, including information about transfers between transit systems, fare and payment options, accessibility options, and language access.
7. Ridership reports or data (monthly or annual) for the past seven fiscal years (2018-19, 2019-20, 2020-21, 2021-22, 2022-23, 2023-24, 2024-25).
8. Board-approved documents describing initiatives to increase ridership from both before and after the pandemic. This could include, but is not limited to, policies and strategic plans.
9. Audited financial statements for the past seven fiscal years (2018-19, 2019- 20, 2020-21, 2021-22, 2022-23, 2023-24, 2024-25).
10.Adopted annual budgets for the past seven fiscal years (2018-19, 2019-20, 2020-21, 2021-22, 2022-23, 2023-24, 2024-25).
11.Policies governing the establishment and use of financial reserves.
12.Capital improvement plans or equivalent planning documents identifying upcoming capital costs and funding sources.
13.Documentation showing the agency’s sources of operating and non-operating revenue.
14.Documentation of funding allocations from MTC and associated restrictions on the use of these funds, specifically relating to operating costs and capital expenses.
15.Prior studies, consultant reports, or legal memos addressing consolidation feasibility.
On August 28, 2025, the California State Auditor held an entrance conference with Union City Transit staff, relevant department directors, and the City Manager’s Office. During the meeting, State Auditor staff (“State Audit Team”) outlined the audit's confidentiality, the broad authority of their office, the level of effort expected of Union City Transit staff, Agenda Item No. 6.3
City Council Staff Report Page 4 of 6 June 9, 2026
and when the State Audit Team expected to publish its report.
The State Audit Team made a site visit to the Public Works Maintenance Facility (Corporation Yard) on September 8, 2025. Staff provided the State Audit Team with a quick tour of the facility and provided details about the service area. The State Audit Team outlined what to expect next in terms of interviews and information requests, then departed to conduct field research. After this date, all meetings, interviews, data, and clarification requests were conducted online or via email.
Union City staff were provided with a link to a heavily redacted draft of the audit for review on March 23, 2026. The following day, the California State Auditor held an exit conference with Union City Transit staff, relevant department directors, and the City Manager’s Office.
During the meeting, the State Auditor Team presented their findings. The overall conclusion of the audit was that Union City Transit is well-managed, fiscally responsible, complies with regional connectivity initiatives through MTC, and communicates with other transit operators to coordinate services. The State Auditor Team further indicated that they had no recommendations for Union City Transit and would be in touch to refine the language in the report, with a final version ready for review and response later in April 2026.
DISCUSSION
On May 28, 2026, the California State Auditor, Grant Parks, issued the findings of the audit in their report, 2025-120 East Bay Transit Agencies. The full report can be found at the State Auditor’s website, www.auditor.ca.gov/reports/2025-120/, with the fact sheet provided as an attachment to this staff report.
The most significant findings of the audit report are as follows:
Transit coordination across the East Bay is already strong.
Auditors took 12 real-world commute trips that everyday riders could reasonably make across East Bay service areas, covering about 25 percent of routes that cross agency boundaries. They conclude that riders did not face significant barriers or major problems transferring between agencies.
MTC regional integration initiatives continue to lag behind schedule.
Although MTC has launched multiple initiatives to improve the rider experience across the Bay Area, auditors found that none of the nine initiatives reviewed were completed within their preliminary timelines. The finding raises concerns about the pace of regional transit modernization efforts.
Five (5) of the six (6) transit agencies face serious fiscal risks.
Apart from Tri Delta Transit, the selected East Bay transit agencies have adequate short-term financial reserves. However, all but Union City Transit are at risk of depleting those reserves without new funding – some as soon as fiscal year 2026–
27. As a result, agencies may be forced to reduce service levels, further impacting mobility, economic access, and regional connectivity.
Zero-emission bus mandates present major financial hurdles.
Agenda Item No. 6.3
City Council Staff Report Page 5 of 6 June 9, 2026
Transit agencies reported significant concerns about the cost of purchasing and deploying zero-emission buses required under California mandates. The report identifies the transition as a growing operational and fiscal challenge for public transit providers.
Transit agency consolidation is unlikely to solve financial problems.
Auditors examined whether combining agencies could improve financial sustainability and found that consolidation alone would not resolve structural deficits. Combined agencies would still face negative unrestricted net positions and long-term financial pressures.
Legal and labor-related barriers could complicate consolidation efforts.
The report notes that federal protections involving private contractors, along with differing labor agreements, would create substantial consolidation challenges.
Additionally, standardizing wages and benefits across merged agencies could significantly increase costs, as AC Transit currently has substantially higher labor costs than neighboring operators.
Union City Transit is the lone agency that does not face serious financial risks. Union City Transit does have a revenue issue to address to avoid depleting its reserves in the future.
As noted above, Union City Transit is not alone in struggling to get its zero-emission fleet operational. The cost of transitioning includes expensive infrastructure upgrades, and the federal government’s transportation funding priorities no longer support electric transit fleets.
Union City Transit staff worked hard to ensure that the transit service was recognized as being efficient and connected. The report also recognized that Union City Transit can exist because of the support it receives as an integrated division of the Public Works Department within the City’s structure, as well as the City Council's role as its governing body.
Union City Transit has recently welcomed new staff to help keep the service functioning for the community. Union City Transit has also initiated its long-awaited Short-Range Transit Plan process and looks forward to community feedback as it produces a draft plan in Spring 2027.
Thank you for supporting public transit and supporting Union City Transit!
FISCAL IMPACT
There is no fiscal impact associated with this action.
RECOMMENDATION
Staff recommends that the City Council receive the report, 2025-120 East Bay Transit Agencies, and the associated presentation.
Agenda Item No. 6.3
City Council Staff Report Page 6 of 6 June 9, 2026
Prepared by: Steve Adams, Transit Manager
Submitted by: Marilou Ayupan, Public Works Director
Attachments
1. Attachment 1 - State Auditor Fact Sheet
2. Attachment 2 - Presentation