Hard Times for Transit Districts

When the Peninsula Rail Joint Powers Board, or Caltrain, proposed recent increases in fares and other fees, many riders said they should drop the fares instead and make up the loss by attracting more riders. Unfortunately, the Woolworth theory does not work for transit. A smaller profit multiplied by more customers works only if there is at least some profit from each sale. In fact, while riders may feel that they are paying a sizeable amount, none of that money represents a profit for the transit district. Usually, fares represent less than half of the cost of the service riders receive.

Transit districts cannot realistically expect riders to pay the full price of the transit services they use. To provide good transit service for those who cannot or prefer not to drive, and to reduce pollution by decreasing vehicle use, farebox revenues are augmented by federal, state and local subsidies. The subsidy is usually from dedicated tax revenues or from a jurisdiction's general funds, although the Golden Gate Bridge, Highway and Transportation District (GGBHTD) uses only bridge tolls. When those other funding sources shrink, even fare increases may not be enough to stave off service cuts and other impacts.

Financial difficulties for many districts began last summer with the energy crisis. Increased energy costs meant dipping into reserves, postponing projects, or holding off on hiring. Meanwhile, ridership was decreasing as local high-tech companies laid off workers. Sales tax revenue, already dropping, dropped even faster due to the post-September 11 decreases in travel and tourism, at the same time that many government agencies were forced to spend unbudgeted funds on security improvements. For some districts, such as BART, labor contracts negotiated during the region's employment boom began to take effect despite the changed economic outlook. At the state level, the energy crisis drained surpluses which might otherwise have been in place to buffer the impacts of lower sales tax and income tax revenues and higher spending on security measures. In the space of approximately a year, the financial picture for transit agencies became very dark.

Although transit agencies have attempted to shelter riders from the effects of financial difficulties, Caltrain is not the only district where fares will rise in the next few months. Almost every district in the Bay Area will be increasing fares, fees and other charges, as well as cutting costs wherever possible. (See fare-increase table). The impact has perhaps been greatest for the Santa Clara County Transportation Authority (VTA) because of the major economic downturn in Silicon Valley. The district will raise fares and decrease service on light rail and bus lines, including dropping routes or providing only weekday service.

VTA has also deferred some voter-approved capital expenditure projects, because the sales tax revenues dedicated to support them have dropped. However, in other areas riders will see major projects continue to move ahead, such as the first stages of the Caltrain express train and BART to San Jose. In many cases, funds already obtained for these projects cannot be moved to operating budgets.

Financial support for transit from the state, already diminished in early budget projections, may drop again during the annual budget debate. Passage of Proposition 42 on the March ballot ensured that funds from the Transportation Congestion Relief Program cannot be diverted into the state's general fund except when an emergency is declared by the legislature and the governor (see Feb/March 2002 issue), but theoretically such a determination could be made if projected deficits increase.

With few other places to turn, transit agencies may need to look carefully at budgets and allow for future cuts and fare increases if circumstances change. Caltrain has a fare study underway as part of its plans to switch from its current ticket sales procedures to ticketing through vending machines on the platforms. Now the fare study may become a tool to fine-tune the new fare increases and determine if more are needed. GGBHTD is studying increasing bridge tolls, possibly as high as $5, continuing annual transit fare increases, and identifying new revenue sources and cost-cutting measures.

During Caltrain's public process to consider fare increases, several riders commented that a more stable funding source was needed for transit. Ironically, this was what many felt had been achieved with the passage of half-cent sales tax measures in counties around the region, and recently with passage of Proposition 42 which allocates gas tax revenues. The president of the VTA riders association suggested that VTA consider following the example of San Francisco MUNI, which so far has not been faced with the same cutbacks as most other major transit districts; MUNI receives some funding from development fees and a portion of the tax revenue from parking lot operators. For most districts, however, fare and fee increases and service cuts will be in the forecast until the economy improves.

Jayme Maltbie, Caltrain & SamTrans, 650-508-6238

Mary Currie, GGBHTD, 415-257-4548, mcurrie@goldengate.org

Mike Healy, BART, 510-464-7110

Note: This table is subject to change as budget hearings continue. SamTrans will have a hearing on June 12 on cutting bus routes. BART's options are also in flux.