July 8, 2008

In fiscal squeeze, RTD studies fare hike, service cuts

Rocky Mountain News

RTD is weighing a fare increase, cuts in bus and light-rail service or a combination of both as it faces the three-sided economic squeeze of skyrocketing fuel costs, declining sales taxes and increasing ridership.

“It’s choose your poison: Do you charge more or do you cut service?” said Cal Marsella, Regional Transportation District general manager.

On Tuesday, RTD board members got the latest report on ridership and revenue, which are, respectively, up and down.

The board will soon consider a package to trim its $458 million annual operating budget, to reflect sales tax collections running 4.5 percent below projections while ridership is up 5.6 percent. RTD had budgeted for a 3 percent ridership increase this year.

The eight-county transit agency is facing a $21.4 million gap - an estimated $15.4 million less in sales taxes than budgeted and $6 million more in cost for diesel fuel.

When the budget was adopted last year, RTD estimated it would pay $2.62 a gallon.

Instead, it recently locked in a 2008 constant price of $3.20. RTD doesn’t pay federal or state fuel taxes.

Fuel costs hammer budget

Essentially, it began the year already 22 percent over its fuel budget.

Worse, for next year, analysts are suggesting RTD budget $4.55 a gallon - a whopping 42 percent over this year.

Denver drivers don’t need to be reminded of the jump, but for the record, just four years ago RTD paid an average of $1.11 a gallon.

The sharp worldwide spike in oil is fueling a surge in transit riders - folks leaving their cars behind when they can.

As a result, RTD has to redeploy some of its buses onto heavy demand routes - adding trips to some - at the expense of lower-ridership routes.

Cutbacks on lesser-used routes can cause hardship on transit-dependent riders.

At the same time, the cost of fuel is redirecting consumer spending. As more money flows into the family car’s gas tank, less goes to discretionary spending that generates sales taxes, the lifeblood of RTD.

“Our ridership is at record- breaking levels,” Marsella said. “I took a bus home last night and we had six or seven standing-room- only passengers on the regional bus to Boulder. I talked to the driver and he said more and more he’s getting counts of standing room only.

“In this situation, you want to split the trip by adding another bus, but we can’t.

Just when we need more service, we can’t provide it because our means to provide it is being undermined.”

Less spending, less in tax

RTD gets only 14 percent of its total revenue from fares. Nearly 70 percent comes from sales taxes.

So when families stay home on the weekend and buy less, there’s less money for RTD to put into transit service.

And even though fare revenue in May was up 21 percent, RTD is providing more service for riders without getting any additional farebox revenue.

Under its Eco Pass program, RTD signs contracts with major employers to provide annual passes for their workers.

The price is based on the assumption that many workers won’t use it.

But more eligible employees are picking up their passes lately and trying transit, RTD said.

Since the crisis deepened a few months ago, RTD has had one round of its three-times-yearly service changes, which take effect Aug. 17.

But even that first swing at saving money came up short.

The original proposal in May would have cut enough service to save $4.1 million a year.

But after public pleas to spare some of the cuts, the package was thinned down, first to $3.43 million savings and finally to $2.78 million.

Written by Kevin Flynn
Published on July 8, 2008