Transit House-of-Cards Begins to Fall
COST Comments: The articles below are prime examples of the fact that rail transit does not opperarte with a sustainable cost model. Operating subsidies are very high and all taxpayers subsidize a small number of riders. Capital costs are ignored until replacement is required and then a financial crisis occurs because there is no “sinking fund” or source of funds to replace worn out capital.
Atlanta Business Journal
Monday, December 15, 2008 – 11:22 AM EST |
Modified: Monday, December 15, 2008 – 6:10 PM
MARTA expects a $60 million revenue shortfall because of the
recession and poor sales tax receipts and it is looking to the General
Assembly and possibly the incoming Barack Obama administration for help.
The rapid transit agency’s board approved cuts of $11 million internally
—including salary freezes and even the elimination of the general
manager’s $1 million expense account – but it won’t be enough.
If the state doesn’t intervene with a direct infusion of cash by
July 1, MARTA officials will have to make “draconian” cuts to
its workforce and services, officials said.
MARTA General Manager and CEO Dr. Beverly Scott said with
the cuts in place, officials believe the system can go through
the fiscal year “without having to increase fares, without having
to decrease service. However if we do not receive an infusion
of additional funding by July 1st, then everything is on the table,”
she said, referring to job cuts and service reductions.
“True-sizing” the authority, she said, without state funding,
“to live within a financial envelope that is $60 million less than
what we have, we are talking about a draconian, unbelievably
draconian reduction in services.”
MARTA has not hiked its fares since 2001. Scott said that
she personally would like to see a modest fare increase,
but if state or other funding sources aren’t made available,
fare hikes and service reductions would be severe.
Officials will ask the state for direct funding and changes to
the system’s bylaws that restrict MARTA from using sales
tax and earned interest from investments.
Scott said she wants the state to roll back a requirement that
sales tax revenues be split 50-50 between operations and
capital costs. The transit agency has a large capital account
it could tap into to help manage the downturn.
MARTA officials also want the freedom to bring in concessionaires
to sell food and drink at stations as a new revenue stream.
Scott said she would like to see that more metro counties take
part in the penny sales tax that largely funds the transit system.
Scott said she supports plans for regional transit improvements,
which calls for regional funding solutions.
Currently, the sales tax is only in place in the City of Atlanta and
Fulton and DeKalb counties. Voters in Gwinnett County turned
down a bid earlier this year to extend MARTA lines to the northeast
and implement the 1-cent sales tax.
MARTA is the only major transit system without a dedicated
source of state funding, Scott said.
MARTA has been in the red each of the past two years. Last year,
MARTA tapped its reserves to cover a $21.8 million shortfall. Last
June the agency cut 180 largely vacant jobs.
Local sales taxes account for 52 percent of MARTA’s operating
budget. Train and bus fares make up only 30 percent of the budget.
City officials had projected a 5 to 6 percent increase in sales tax
for the year, but the downturn has forecasters now calling for 4.4
percent declines in revenues. According to the Economic Forecasting
Center at Georgia State University, MARTA could face a cumulative
loss of $633.4 million in sales tax revenues over the next 10 years.
Though ridership is up thanks in part to skyrocketing fuel prices
earlier this year, the 5 to 6 percent lift in fare revenues only accounts
for about $3.8 million, Scott said. Ridership has slacked slightly since
fuel prices have improved, but ridership is still high.
Improved ridership alone won’t fix the problems.
Last month, MARTA and 11 other transit agencies told Congress
they could soon face $2 billion in payments because of financing
deals the agencies have with investors could collapse because
of Wall Street’s failures.
The New York Times
December 17, 2008
M.T.A. Approves Austerity Budget
By WILLIAM NEUMAN
The board of the Metropolitan Transportation Authority on Wednesday approved an austerity budget for 2009 that calls for painful cuts in bus, subway and commuter rail service and a steep increase in fares and tolls, all aimed at plugging a $1.2 billion deficit.
In virtually the same breath, officials at the authority appealed to lawmakers in Albany to pass a financial rescue plan that would soften the fare and toll increase and avoid most of the service cuts by creating a dedicated payroll tax and charging tolls on bridges over the East and Harlem Rivers.
If the authority does not receive new sources of revenue, it seems likely that the base subway fare could rise to at least $2.50, from $2, starting in June. A monthly unlimited-ride MetroCard could rise to more than $100, from $81.
The success of efforts to help the authority are far from assured, as the state grapples with its own budget crisis. On Tuesday, Gov. David A. Paterson unveiled a budget proposal for the state that included dozens of increased taxes and fees. That means a bailout of the authority would compete with other powerful interests, including advocates for schools and hospitals, for scarce government dollars.
The authority’s $11 billion budget calls for a 23 percent increase in revenues from fares and tolls.
Next week, the authority will issue a public notice for hearings on the fare and toll plan that will set the maximum possible increases. About a week or so after that, the authority will detail the expected increases to the base subway and bus fare, unlimited-ride MetroCards, commuter rail fares and bridge and tunnel tolls.
The authority and its supporters must now focus their efforts on building support among elected officials in the state and city.
That effort will be spearheaded by Richard Ravitch, a former authority chairman who led a state commission, appointed by Governor Paterson, that proposed the rescue package for the authority. That package calls for a payroll tax of a third of a percent, to be paid by businesses in the region served by the authority.
The tax would generate an estimated $1.5 billion a year to plug the immediate budget gap and, in the long term, help pay for capital expenses to modernize and maintain the transportation system.
The package also calls for tolls on the bridges over the East and Harlem Rivers, with the money, about $600 million a year, going to expand bus service in the region. It would raise revenues from fares and existing tolls by 8 percent and eliminate the need for most service cuts.
The authority’s executive director, Elliot G. Sander; its chairman, H. Dale Hemmerdinger; and several board members said they would work to persuade lawmakers to pass Mr. Ravitch’s plan.
Officials at the authority have said privately for months that they hoped that the State Legislature would pass a rescue plan before it became bogged down in broader budget issues. And they feared that if that did not happen, they would wind up in a bruising brawl with other interests over state support.
“The Legislature has understood for some time that the M.T.A.’s situation would be resolved in the context of a very difficult budget,” Assemblyman Richard Brodsky, a Democrat from Westchester, said on Tuesday, after the governor released his budget proposal. “This is not going to be easy.”
Meanwhile, there were indications that the doom and gloom may not end with the passage of the budget, and that the authority’s finances could become much worse quickly.
The authority said that an important source of revenue — taxes on real estate transactions — was running well below the latest forecast for the month, a figure that had already been revised downward several times.
Those real estate and mortgage taxes brought in $37 million this month, compared with $103 million in the same period last year, Gary J. Dellaverson, the authority’s chief financial officer, told at a meeting of the board’s finance committee on Monday.
“This is a really sobering number,” Mr. Dellaverson said. “This does show how frightening this economy can be in terms of our sensitive taxes.” He said the authority had tried to be very conservative in predicting real estate transaction tax receipts as the economy worsened, basing its forecasts on projections made by the city.
He said that projections of December’s tax receipts had repeatedly been reduced as the year progressed, falling to $88 million from $99 million before finally being revised down again only a month ago, to $64 million. The authority receives those revenues in a lump sum in the middle of each month.
But the reality turned out to be even worse, missing the mark by $27 million. Mr. Dellaverson also warned that the authority’s budget relied on similar forecasts for other taxes, like a portion of the sales tax and a surcharge on corporate income taxes, that could decline sharply along with the economy.
Copyright 2008 The New York Times Company