Thursday, July 24, 2008

Bus fare increases appear inevitable


Facing a stagnant economy and precipitous leaps in fuel prices, Santa Barbara Metropolitan Transit District leaders took a preliminary look at lifting bus fares to aid the transit agency’s struggling pocketbook.
While a decision is still months away, MTD officials seemed resigned to the fact that raising prices is their only option at this point.

“A fare increase is just about the only way we can go without reducing service,” said John Britton, chairman of the agency’s board. “With our ridership in Santa Barbara being such a big following, cutting service would not do them justice.”
As it stands now, an estimated $1.5 million in increased annual revenues is needed to keep the agency in the black for the next few years. Much of that is tied directly to the cost of filling up.
Diesel fuel is the second largest expense for the agency, behind wages and benefits, and is expected to cost $2.8 million this year, up from $1.5 million two years ago.
Jerry Estrada, MTD’s assistant general manager, said fuel costs have increased nearly 50 percent in just one year, a clear reflection of skyrocketing gas prices across the board that have stunned officials.
“We didn’t see this coming this fast,” Estrada said. “I don’t think anybody did.”
His estimate of a $1-million leap in fuel expenses this year is based on an assumed average of $4.25 per gallon. He has concerns it may grow higher, as prices are currently averaging $4.06.
“We’re going to have to watch it and adjust as we go,” he said.
Ironically, the rising fuel prices are also prompting more residents to ditch their vehicles and hop on the bus, straining service during peak hours.
As a result, transit officials are forced to “boost” service on high-volume transit lines, adding additional buses to the road with more drivers to pay and more gas tanks to fill.
Santa Barbara MTD isn’t the only municipal transit agency to face the issue of rising gas prices. Steve Maas, the MTD’s manager of strategic planning and compliance, said surveys are showing many other agencies are struggling with the same problem.
“We’re finding this is very common around the nation and in California,” he said.
In a survey by the American Public Transportation Association, nearly half of the responding agencies nationwide had raised fares due to fuel costs by May 2007, before the gas crisis truly hit, Maas said.
A study of agencies similar to the local MTD in California found six of nine have applied or are planning a fare increase, he said. One is reducing service and another is monitoring the situation.
Setting aside the issue of diesel fuel, Estrada said a lethargic economy is also driving the move toward increasing bus fares.
Approximately $7 million of the MTD’s revenues pour in through the Transportation Development Act (TDA) — a quarter-percent sales tax. For the current fiscal year, the agency’s $22-million operating budget is swallowing that entire sum.
“Historically, MTD has never done that,” Estrada said, explaining that at least $1 million is typically set aside annually for capital expenses such as engine replacements or bus stop improvements.
Even with the full $7-million boost, the operating budget is expected to fall $400,000 short, forcing officials to shore it up with deferred TDA funds used for cash flow issues or unexpected financial shortfalls.
Had sales tax revenues kept pace with the consumer price index (CPI), the agency would have received approximately $400,000 this year to fill that gap, Estrada said. But TDA funds have leveled off for the second consecutive year.
“When it does not keep up with CPI at a minimum, it makes it very difficult for us to keep up with expenses,” he said.
In his multi-year financial forecast, Estrada estimated that sticking with the status quo would permit the transit agency’s deficit to mushroom to $2.4 million by 2013.
Assuming fuel and maintenance costs rise 4.5 percent annually — coupled with a 3 percent growth in ridership and a 1 percent growth in sales tax revenues each year — a $1.5 million infusion should cover costs for the short term.
“We essentially have no perfect way of getting to balance without looking at increasing fares,” said Dave Davis, vice chairman of the transit board.
As the board started looking at possible fare changes — plugging various options into a spreadsheet to see the expected revenue boost — leaders made it clear they will do their best to limit the impact to those who rely solely on the bus to get around.
“That’s the charge of the board, to help those people that are transit-dependent, that don’t have access to cars,” Britton said. “That’s the area, if possible, where we limit any kind of increase.”
After examining a variety of changes that included increasing adult cash fares from $1.25 to $1.50 or $1.75, lifting 10-ride passes from $10 to $12.50, and raising 30-day passes from $41 to $50 or $56, the board directed staff to come back with a range of options during a public hearing planned for August.
Belen Seara, executive director of the local nonprofit economic and environmental justice organization PUEBLO, told transit leaders that she can handle a $1.75 increase in cash fares if she sees more frequent service and increased hours of operation.
She translated for several other Spanish-speaking women who also asked for service improvements and complained that some drivers are discriminating against Hispanic drivers.
But officials made it explicitly clear that any fare increases would be used solely to keep the MTD ship afloat.
“Our goal is to get that $1.5 million to maintain service,” Davis said. “To increase service beyond that is going to take a whole different discussion and a new funding source.”
Director Chuck McQuary echoed his colleague, saying “If the expectation is for increased service, that’s just not in the cards right now.”
The range of price increases to be studied includes 25-cent or 50-cent increases in the adult cash fare — consequently increasing the senior, mobility and express fares tied to that price.
Leaders will also examine keeping the 10-ride pass static at $10 or increasing it by 10 percent, and increasing prices for a 30-day pass based on the adult cash fare increase or higher.
A critical component of rate increases is ensuring that the fares are balanced in relation to each other, Estrada said. Simply boosting the cash fare, for example, may push riders to the 10-ride or 30-day passes and actually result in a loss of revenues.
“Why are you going to pay an extra quarter, especially if you can afford something else?” he said.
Further complicating the issue is the fact that any increases beyond $1.50 for the adult cash fare will force Santa Barbara City College to reconsider its contract with MTD by a student vote.
The college, along with UC Santa Barbara, has a deal with the transit agency to pay a fixed rate for each enrolled student; that rate is tied to the adult fare.
Losing the SBCC account by raising prices too much would cost the agency upwards of $600,000 a year, Estrada said. Transit leaders plan to invite university officials to the upcoming hearings and possible meet with them to discuss the issue.
Ultimately, the board agreed that staff should develop information in preparation for a public hearing on Aug. 11 at 5:30 p.m. After gathering public input, officials will revise their options and return for a second hearing on Sept. 15 at 5:30 p.m., when a final decision may be made.
Both meetings will take place at MTD headquarters, 550 Olive St. Transit leaders also plan to post information about the potential fare changes online at and on buses in the coming weeks.
If transit leaders plan to implement fare increases by January, Estrada said they would need to make a decision by September at the latest.
Those extra months before the year end will give transit officials enough time to prepare for increases and plan contingencies for another critical issue beyond fuel prices and the economy that is further muddying the waters of MTD’s fiscal future: Measure D, a half-cent sales tax levied locally for transportation costs.
MTD currently receives $2.7 million annually from Measure D, which is up for renewal on November’s ballot as Measure A.
While he is prevented from expressing support for the measure, Estrada made it clear that losing those funds is a worst-case scenario; they not only subsidize MTD, but also other South Coast transportation entities, such as Easy Lift, the Coastal Express, the Clean Air Express and the Valley Express.
“If that funding source ceases to exist, what is going to happen?” he asked. “There will still be a need for those transportation sources.”
Helene Schneider, a Santa Barbara city councilmember who attended Thursday's special meeting at MTD headquarters, had no problem voicing her explicit opinion on the tax measure.
“Measure A must pass,” she said. “If we lose Measure A locally, we are in grave danger in terms of transit.”


Anonymous said...

Gas prices are going down a bit, and MTD has all those hybrid and biodiesel buses, so thay should help. Suggest making raising the price only on the X-lines, but not the local lines. $2.00 to go from downtown to Milpas is too much, but $1.25 from SB to Carpinteria is a steal. $2 for X lines, $1 for local lines. No more quarters! And add more frequent rider options to help low income people.

Anonymous said...

that would encourage people to take the local buses instead of the express, i'd guess, which isn't something that MTD wants to encourage . . and what about transfers, discount prices, etc.?