Tuesday, September 9, 2008

MTD agrees to rate increase compromise


It took two and a half hours and some serious number crunching, but Santa Barbara Metropolitan District leaders came up with a fare increase that seemed to please everyone in a packed room at the transit agency’s headquarters.
Going with an altered version of a proposal offered by a coalition of community groups, the board of directors received a cheer from the audience upon their unanimous vote of approval.

“It was pretty similar to what we were proposing,” said Belen Seara, executive director of PUEBLO, an organization that advocates for working class families. “It’s still going to be significant for some families. … They knew it was going to increase, but they’re happy with a little increase, not a huge increase.”
The new rate structure that goes into effect on Jan. 1 includes a bump in cash fares to $1.75 for adults and 85 cents for seniors and disabled riders. Those figures are up from $1.25 and 60 cents, respectively.
For 10-ride passes, adults will pay $11.50, up from $10. Seniors and disabled passengers will pay $5.50, only a 50-cent increase, while student prices are going up 75 cents to $8.25.
Finally, 30-day passes will increase from $41 to $52 for adults, from $32 to $42 for students, and from $18 to $20 for seniors and disabled passengers.
“We’re not talking about huge increases,” said Roger Aceves, an MTD board member and Goleta councilman. “Yeah, it’s a little more money, but it helps us all share the burden of raising the $1.5 million we need.”
That sum of money is how short MTD officials expect their budget to fall due to skyrocketing fuel costs and a stagnant economy. Since revealing their plans to increase fares a few months ago, they’ve held several public hearings and collected input from the community.
They’ve also done the math on how much fares need to increase to bring in that kind of cash. A proposal offered by MTD General Manager Sherrie Fisher included slightly higher rates for 10-ride and 30-day passes.
Using a formula based on data from the last rate hike, MTD officials estimated Fisher’s proposal would bring in approximately $1.55 million. Using that same formula, they estimated that a proposal submitted by PUEBLO and other groups would only raise $1.18 million.
But David Pritchett, a board member of the Santa Barbara County Action Network, said the formula being used to estimate the “shift,” or how many people will switch from cash fares to a cheaper pass, is based on “voodoo economics.”
Jerry Estrada, MTD’s assistant general manager, admitted that estimating how people will react to fare increases in terms of their purchasing habits is a tricky business.
“We’ve acknowledged it’s the most difficult part of this whole process for us,” he said. “There is no crystal ball.”
By using figures from the last rate hike, he came up with a possible scenario where more riders would stop using cash fares and start buying up cheaper 10-ride passes.
Pritchett presented a different calculation that estimated a significantly less drastic shift from cash fares that showed the PUEBLO model raising $1.52 million.
Ultimately, Dave Davis, an MTD board member, split the difference and tinkered with a few fares until the model showed an estimated $1.45 million in increased revenues.
He also argued that the “shift” would be less significant than the last rate hike, noting that MTD introduced a series of new passes along with the new rates, likely causing more people to go for a cheaper option. Davis said he doesn’t anticipate a similar move this time around.
“There is a vast number of people who do cash fare because they don’t have the money for the passes,” he said.
Another serious issue for the board was a discussion of MTD’s contract with Santa Barbara City College. The transit agency currently receives between $500,000 and $600,000 from the university for student passes.
If the board raised their fares above $1.50, the matter would have to go to a vote of the students. Should the students vote down the increase, there would be no contract and the agency would lose at least half a million dollars.
MTD board member Chuck McQuary expressed hesitation about putting that chunk of money at jeopardy for the estimated $110,000 gained by raising those rates above the trigger point.
“It’s going to cost us more than we’re going to gain,” he said.
But his colleague, board member Brian Fahnetock, said the price increase — to $26.60 from $19 — is not significant. Even if students vote it down, he argued, they would have to pay cash fares or buy passes to ride the bus, possibly increasing revenues further.
“I think it’s something we have to do,” he said.
Fisher agreed that SBCC students are heavy users of the transit service and can’t foresee them abandoning the bus completely. The agency has had to double and triple bus service to the campus in recent years due an increasing demand, she said.
“We have a never-ending need going up that hill,” Fisher said.
In addition to the new rate structure, MTD officials approved a plan to put the new fares into effect. New passes will be sold in December and fares will jump in January.
Old passes will still be valid through January, but will no longer be accepted in February. Riders will still be able to exchange those old passes for credit toward new passes.


David Pritchett said...

News writer Lindberg got the point well in this article. Also good to see it is at the SBDS website after a 4-day lapse of articles.

As the article explains, the Voodoo Economics was how the staff proposals (economic models) incorporated assumptions on how many riders would shift their payments from cash in the fare-box shifted to various types of pre-paid passes that cost less per bus ride but also must be purchased prior to the bus ride.

The coalition of PUEBLO, COAST, SBWPC, SBCLUE, AFSCME, and others, and SBCAN (where I am a Director on the Board) all analyzed the several staff proposals during the past two months and we determined they were a bit arbitrary and/or faulty about the demand-shift elasticity values of how riders were predicted to shift from cash fares to passes.

The literal bottom-line goal to raise MTD revenue by $1.5 million was highly sensitive in that economic model about the percentage values for the demand shift elasticity.

For instance, a 10% difference in the assumed number of bus riders who would pay with passes instead of fare-box cash could yield an approximate $500K difference in the bottom-line revenue, thereby influencing the decision on what the price of those passes would be.

My remark about Voodoo Economics was intended to raise attention to the sensitivity and arbitrariness in the economic model about the assumptions of the demand-shift elasticity.

Perhaps encouraged by such pointed rhetoric, the MTD Board of Directors also focused on how these staff assumptions were too linear and seemingly arbitrary for the values incorporated into the economic model.

In the end with the MTD Board deliberation, the price of the various bus fares were modified and their demand-shift elasticities in the model were adjusted to values that still were reasonable assumptions that would yield a revenue increase of about $1.4 million for MTD.

This resulted in an overall price structure that caused minimal increases in the types of bus passes used by people in our community who can least afford a raise in bus fare prices.

That was the goal of the coalition of PUEBLO, SBCAN, COAST, SBWPC, SBCLUE, AFSCME, and others.

Not reported in the article was an additional motion passed by the MTD Board about looking into additional rider customer service enhancements, such as offering a 7-day bus pass option that would benefit local people who cannot afford the larger investment of buying a monthly pass.

Of course, this is really all moot if Measure A does not pass on the November ballot. Nearly all of the funding for MTD will be dependent upon the revenue attained through the suite of projects funded under Measure A. If this ballot measure fails on the November ballot, MTD will have to raise fares drastically and cut services deeply.

No other Voodoo Economics will be able to get around that factual reality if Measure A does not pass.

Anonymous said...

The working poor have been hit again. I will either have to move closer to work or change jobs to live with this "great compromise." I have noticed that Transit Center staff have become less interested in customer service than ever (no, I was not trying to get a free pass, the electronic pass machine ate $10.) So, what am I getting for my increased fare? Better scheduling? Nope. Cleaner buses? Nope. Nicer treament by company employees? Don't wait for it. If you start walking now, you might eventually get home.