Increased Ridership Causes Denver RTD Budget Shortfall?

The Regional Transportation District (RTD) in the Denver metropolitan area is well known for its pie-in-the-sky budgetary estimates for its FasTracks rail expansion. However, it appears RTD cannot perform its primary function—transporting people on busses and trains—within its budget. From yesterday’s Rocky Mountain News story:

RTD buses and trains are attracting new riders in record numbers as fuel costs and congestion drive more commuters to abandon their cars.

In fact, ridership is up so much that the agency is having difficulty keeping up with the costs of moving all those new customers.

RTD had an 11 percent increase in ridership last year and, through the first quarter of this year, is up another 8 percent.

But the transit agency is falling victim to its own success as it spends more for fuel while contending with flat sales tax revenue that's combined to create a potential $24 million shortfall that could force service cuts. [Emphases added]

What is the cause of this budget shortfall? Read on…

As the agency adds buses to its most crowded routes, it is paying 55 percent more than it did a year ago to fill them with diesel fuel.

Worse, RTD is far off budget in revenue collections. Even with the unexpected increase in riders, farebox revenue is 3.3 percent lower than anticipated in spite of a general fare increase that took effect in January.

That's because a good portion of the new riders are taking advantage of an annual flat-fee program through their employers. That means more riders, but no more fare revenue.

And sales taxes, the backbone of RTD's budget, are nearly 6 percent below budget through March…

Because fares only cover about 20 percent of the cost of service, collecting less in sales taxes has a big impact. RTD board member John Tayer said the agency has to develop a better forecasting model for predicting sales taxes in the metro area. [Emphases added]

Obviously, RTD cannot control the economy and its sales tax revenue. Fuel is a fixed demand commodity for the service (though they lock in fuel rates for each year at approximately $1/gallon below the service station price).

From the RTD website, a monthly local pass costs $60.00 for adults. At the regular fare price of $1.75 per one-way trip, this pass covers unlimited local trips in a month for the price of 34 individual fares. Seniors over 65, RTD Special Discount cardholders, Medicare recipients, and K-12 students under 19 only pay $30.00 per month.

Certain groups pay even less than this discount rate. One area hospital system offers a yearly pass to its employees for only $32! That is $2.67 per month (a 95% discount)! Plus, this $32 covers express and regional routes, too (retail price: $144). It is no wonder that the total fare collections only cover 20% of operational costs.

In nearly every instance, public transit requires heavily subsidies from the taxpayer. While it is easy to support subsidies for students and the elderly, it is more difficult to support subsidizing doctors and pharmacists. RTD needs to reexamine the wisdom of offering passes to employers at such an extreme discount from face value. Also, RTD should raise the normal fare to cover 100 percent of that rider’s share of the operating cost.

Finally, RTD needs to reexamine the wisdom of continuing FasTracks. It seems remarkably silly to expend so much capital to construct new rail lines while the expansion of ridership will only lead to further deficits. Unfortunately, the standard operating procedure at RTD is to leap first, then try to justify the budgetary problems at a later date.

by Civil Sense

Comments

[Allen]

Fuel costs --> Why isn't RTD doing more to mitigate the risks of changes in this? The tools are out there, why aren't they using them?

As for the fares, those programs have always been there. Did RTD not raise the prices on those when they raised fares? If not, that's horrible. High school econ students could see not proportionally raising the prices on those other passes would make the all-you-can-eat passes even more attractive.

As for the employer pass, aren't some of those very cheap because the employer is paying a big chunk?