# Transit Agencies In Peril



## WhoozOn1st (Mar 10, 2009)

This first of two reports focuses on the San Francisco Bay Area as an example of the unpleasant economic realities currently facing transit systems nationwide.

Transit Agencies in Peril as Ridership Rises

You don't get stuff like this from commercial television news! I'll post the second part when it becomes available online.


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## George Harris (Mar 10, 2009)

WhoozOn1st said:


> This first of two reports focuses on the San Francisco Bay Area as an example of the unpleasant economic realities currently facing transit systems nationwide.
> Transit Agencies in Peril as Ridership Rises
> 
> You don't get stuff like this from commercial television news! I'll post the second part when it becomes available online.


I have watched so many blatant fare cheats on the Muni buses, I have no sympathy for their problems. Their ridership is high enought that they should be coining money. Most of their problems are within their own ability to solve. Get some of the people out there writing parking tickets to start giving citations to fare evaders - or arresting them, and the city government quit listening to all their poor me becuase I am . . . . whatever and so therefore deprived. That would be an easy place to start.


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## John Bredin (Mar 10, 2009)

George Harris said:


> I have watched so many blatant fare cheats on the Muni buses, I have no sympathy for their problems. Their ridership is high enought that they should be coining money. Most of their problems are within their own ability to solve. Get some of the people out there writing parking tickets to start giving citations to fare evaders - or arresting them, and the city government quit listening to all their poor me becuase I am . . . . whatever and so therefore deprived. That would be an easy place to start.


   

If Muni, or any other transit system in the U.S., collected every single penny of fare due, with *no* fare cheats at all, they would still be in the red. Transit fares don't cover the entire operating expense of *any* U.S. transit agency. They haven't for several decades now, and they haven't in good economic times as well as bad ones.

High ridership doesn't change that significantly. The biggest transit system in the U.S. by a mile, the New York MTA, is in worse shape financially than some of the smaller systems. In fact, if a ridership increase requires *any* increase in resources -- more train cars or buses, more mechanics to get existing buses and trains back in service quicker, or even just more overtime to the existing mechanics -- the losses can get worse. Transit is like the old joke about the merchant who loses money on each unit sold but claims he can make it up on volume. :blink:

If I had a dime for every letter to the editor or blog post saying why the CTA (or SEPTA, or MBTA _ad infinitum_) doesn't just use their millions of dollars in profits (as if!) to fix the system, I'd be Bill Gates. :lol: With all due respect, I don't expect that same level of ignorance of how public transit works on a rail forum.


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## tp49 (Mar 10, 2009)

Any system that uses the "honor system" for fare payment risks huge fare revenue losses from fare evaders.

Knowing George's involvment in the transit industry I think you're missing what he's saying. I am quite certain that he realizes and knows that transit agencies cannot by their nature make any kind of a profit from the farebox. What I believe he is saying is that systems like Muni, that have a high percentage of fare cheats would do better to try to do something to mitigate their losses before crying "oh woe is me."

I've ridden Muni for over ten years and in all that time I have only ever seen fare inspectors once on the light rail and that was in the Embarcadero station. If they spread those inspectors out not only over the light rail system (especially once it goes onto the surface streets) and numerous bus lines (1, 21, 24, 30, 38, 44) that have a high percentage of people boarding from the back door many of whom are not displaying either a valid pass or transfer they would raise revenue from the citations issued for the offenses.

Second, at least in regard to SF Muni they need to tighten up the transfer policy. Currently it is possible to take numerous rides within a two hour period without ever having to pay more than the initial $1.50, many people do it myself included. What they should do is mandate that transfers must be surrendered to the driver/operator of the second vehicle and only accepted at transfer points where routes cross. Better fare enforcement while not being the be all end all of the problem would help the transit agencies mitigate their losses.

Finally, transit agenceis need to examine all aspects of their operations before cutting service. Be it renegotiating labor deals with the unions or contractors (as some agencies contract out for drivers) or cutting management staff or looking to renegotiate contracts with vendors when it comes time to renew. It's too easy for these agencies to look first to service cuts and fare increases before examining their own house to see if there is any other way to streamline their operations.


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## George Harris (Mar 10, 2009)

tp49 said:


> Finally, transit agenceis need to examine all aspects of their operations before cutting service. Be it renegotiating labor deals with the unions or contractors (as some agencies contract out for drivers) or cutting management staff or looking to renegotiate contracts with vendors when it comes time to renew. It's too easy for these agencies to look first to service cuts and fare increases before examining their own house to see if there is any other way to streamline their operations.


I am not talking about Muni, because I simply don't know, but if it is true of them, if the shoe fits wear it.

Add to your list management and governance by politically appointed hacks that are completely clueless about transit in any aspect. Such as, never been transit users themselves, either the system they are involved in or any other. No concept of the business realities, etc., etc., etc.


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## Joel N. Weber II (Mar 10, 2009)

The MBTA's general manager is famous for driving to work in an MBTA owned SUV, rather than riding the Commuter Rail system to work. I think we get to look forward to a bit more than another year of his leadership.


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## George Harris (Mar 10, 2009)

Joel N. Weber II said:


> The MBTA's general manager is famous for driving to work in an MBTA owned SUV, rather than riding the Commuter Rail system to work. I think we get to look forward to a bit more than another year of his leadership.


Can you imagine what would happen if you were an employee or manager of FedEx and wanted to send something by DHL?


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## birdy (Mar 11, 2009)

Is fare cheating that rampant? the report doesn't make sense otherwise. I'm sure $6.00 a bus ride is the cost of the fully embedded cost of service. the marginal cost must be much lower. Therefore, the higher the ridership, the closer they get to break even, no?

I have to say that the fare collectors are overwhelmed on our little system. Evidently the contingency of success was completely unforseeable.


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## WhoozOn1st (Mar 11, 2009)

The second part of the report uses D.C.'s Metro as a case in point to explain what I've always considered the lunacy of sale/leaseback deals, and how they have backfired. In my view this is an issue that makes fare beating look piddly. In fact, again in my view, to even bring up fare beating as a factor contributing to current transit difficulties is to completely ignore far larger and more intractable problems involved in the sickly spiral of decreasing revenues, increasing ridership, and the tough choices to be made - none of them good - in our bum economy.

Some Public Transport Agencies Made Risky Deals

EDIT: Just repairing the post's infrastructure.


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## George Harris (Mar 11, 2009)

WhoozOn1st said:


> lunacy of sale/leaseback deals, and how they have backfired.


Howe can a sale leasback do anything but backfire? People that sell these things are qualified to sell sand in the Sahara.


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## birdy (Mar 12, 2009)

PBS let transit off easy. You can't cheat an honest man. They willingly entered into sham transactions with shady people and now complain that they were cheated. They have a duty to not be saps.

Still, I just don't see how the current circumstances should be bad. Again, fares should more than cover marginal costs and increased ridership should mitigate the chronic shortfall in farebox revenues. Interest and willingness to pay for projects is at an all time high, even in areas traditionally quite hostile to mass transit. It seems to me that given the common knowledge that these things lose money, the goal should be to meet 85% percent of revenue needs through the fare box, and to otherwise strive for businesslike operation. The bogey should be governmentally run electric utilities. The transit agencies should operate with the efficiency of say, SMUD, or Salt River Project, or TVA.


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## PetalumaLoco (Mar 12, 2009)

birdy said:


> PBS let transit off easy. You can't cheat an honest man. They willingly entered into sham transactions with shady people and now complain that they were cheated. They have a duty to not be saps.
> Still, I just don't see how the current circumstances should be bad. Again, fares should more than cover marginal costs and increased ridership should mitigate the chronic shortfall in farebox revenues. Interest and willingness to pay for projects is at an all time high, even in areas traditionally quite hostile to mass transit. It seems to me that given the common knowledge that these things lose money, the goal should be to meet 85% percent of revenue needs through the fare box, and to otherwise strive for businesslike operation. The bogey should be governmentally run electric utilities. The transit agencies should operate with the efficiency of say, SMUD, or Salt River Project, or TVA.


Well, yeah if they had been operating that way. But they haven't. And now they're reducing services. So it shouldn't be bad, but it is.


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## tp49 (Mar 12, 2009)

birdy said:


> Still, I just don't see how the current circumstances should be bad. Again, fares should more than cover marginal costs and increased ridership should mitigate the chronic shortfall in farebox revenues. Interest and willingness to pay for projects is at an all time high, even in areas traditionally quite hostile to mass transit. It seems to me that given the common knowledge that these things lose money, the goal should be to meet 85% percent of revenue needs through the fare box, and to otherwise strive for businesslike operation. The bogey should be governmentally run electric utilities. The transit agencies should operate with the efficiency of say, SMUD, or Salt River Project, or TVA.


However, increased ridership comes with the cost of increasing capacity to compensate for the increase in ridership which would also cost money.

I don't think an 85% recovery from the farebox is something that could ever happen due to the nature of the beast. I think that even 50% would be a difficult number to reach.


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## WhoozOn1st (Mar 12, 2009)

George Harris said:


> WhoozOn1st said:
> 
> 
> > lunacy of sale/leaseback deals, and how they have backfired.
> ...


The 2nd report notes that while legislation is now in place to prevent further financial legerdemain, it does nothing to help the agencies that already fell for sale/leasebacks. Interesting that according to some in the piece, the feds were not in agreement. FTA saying go for it, IRS saying no, these things a just a tax dodge by banks. If you're a honcho at a cash-strapped transit system (meaning most of 'em), who do you wanna believe? No real excuse, but understandable.


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## jackal (Mar 12, 2009)

tp49 said:


> I don't think an 85% recovery from the farebox is something that could ever happen due to the nature of the beast. I think that even 50% would be a difficult number to reach.


Just did a Google search to see what came up, and I discovered a new site: the Metro wiki! 

Here's info on farebox recovery rates for systems around the world:

http://metro.wikia.com/wiki/Farebox_recovery_ratio

Only one outside of Japan, the London Underground, approaches 85%. Even the venerated Paris Metro, which is incredibly dense and widely utilized, has a farebox recovery rate of under 50%.

What's the farebox recovery rate of the Interstate Highway System? 0% in most places, since very little mileage of the system is tolled. Even the toll sections probably don't cover their own expenses.


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## transit54 (Mar 12, 2009)

Nice site. I think I heard recently that NYC MTA was down to about the 55% level.

The agency that I work for has a 25% recovery ratio.


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## AlanB (Mar 12, 2009)

jackal said:


> What's the farebox recovery rate of the Interstate Highway System? 0% in most places, since very little mileage of the system is tolled. Even the toll sections probably don't cover their own expenses.


Well the Federal gas tax is also part of the fare box for the Interstate Highway system. However, it fell short last year by $8 Billion dollars, so the Fed needed to prop it up with our Federal Income Tax dollars. Estimates made early last year before the high gas prices further reduced revenues from the tax as people slowed down their driving, figures that the HTF (Highway Trust Fund) would need $9 Billion of our income tax dollars this year and next, followed by $12 Billion in 2011 & 2012. That assumes that Congress doesn't raise the Federal gas tax and soon.

It should also be noted that the 5 year plan that we're currently operating under for the HTF approved by Congress a few years back was $79 Billion less than what the DOT estimated it needed to actually keep the roads in a state of good repair. And that estimate was made before I-35 fell into a river in Minneapolis-St. Paul and set off the bridge scare that found billions of dollars more work that is needed to fix things.


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## AlanB (Mar 12, 2009)

jackal said:


> tp49 said:
> 
> 
> > I don't think an 85% recovery from the farebox is something that could ever happen due to the nature of the beast. I think that even 50% would be a difficult number to reach.
> ...


That list is missing San Diego which I know gets just a bit above the 50% mark. Not sure if that's just the trolley/light rail system or if it includes everything.


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## Guest_Birdy_* (Mar 13, 2009)

That's an interesting site, but it doesn't jibe with the PBS report which describes a system in crisis because of a 15% shortfall.

There's a fair amount of room to maneuver in these calculations. For one thing, what is your overall depreciation expense? If you use an IRS depreciation expense, your expense is way way overstated. The experiential rate is much, much lower than an IRS rate.

Do you account for the cost of capital? For example, if a 450 million system is built with one third cash investment by the government and one third debt financing, with another third provided by the feds, the calculation of the cost of capital should probably be: 1/3 (150 million at 3%--the fed rate) 1/3 (150 million at 5% the state rate) and 1/3 "equity" with a return on equity requirement of probably 9%. So there would be roughly $25 million in cost of capital expense but only the municipal bond financing part of it, or $7.5 mil would be a cash cost to the system. Whether or not you include the non-cash part of the equation as part of the calculation makes a big effect.

Other issues are debateable as well. When we discuss the cost of the interstate highway system, do we include the cost of snow removal? Probably. Do we include the cost of patrolling the highway? probably not. Do we include speeding ticket revenues as part of the system? probably not as well.

I suspect that the Euros for cultural reasons, include very aggressive depreciation against their system, overstating the subsidized nature of public transit compared to the U.S. and possibly Asia.


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## DET63 (May 10, 2009)

I know this is a bit off-topic, but does the MTA's SIRT still provide largely free rides? For those who don't know what I'm talking about, the Staten Island Rapid Transit service is a one-line metro serving Staten Island (duh!). But fares are collected at only one station (St. George, at the north end of the line), from passengers both boarding and disembarking. Passengers coming from or going to the Staten Island ferry (which is also free) who don't want to pay to ride the SIRT can walk to or from the next station, Tompkinsville, and ride for free. To discourage this, some trains, especially during rush hour, don't stop at Tomkinsville or any other stations between New Dorp and St. George. I don't know how long of a walk this entails, but it was my understanding that something like less than 20% of operating costs were recovered through farebox revenue on the SIRT--though lost fares would also of necessity include any and all trips originating and ending at stations other than St. George.

I believe there are (or were) also some free-transfer offers for passengers traveling to or from Manhattan.


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## AlanB (May 10, 2009)

DET63 said:


> I know this is a bit off-topic, but does the MTA's SIRT still provide largely free rides? For those who don't know what I'm talking about, the Staten Island Rapid Transit service is a one-line metro serving Staten Island (duh!). But fares are collected at only one station (St. George, at the north end of the line), from passengers both boarding and disembarking. Passengers coming from or going to the Staten Island ferry (which is also free) who don't want to pay to ride the SIRT can walk to or from the next station, Tompkinsville, and ride for free. To discourage this, some trains, especially during rush hour, don't stop at Tomkinsville or any other stations between New Dorp and St. George. I don't know how long of a walk this entails, but it was my understanding that something like less than 20% of operating costs were recovered through farebox revenue on the SIRT--though lost fares would also of necessity include any and all trips originating and ending at stations other than St. George.
> I believe there are (or were) also some free-transfer offers for passengers traveling to or from Manhattan.


Yes, the SIRT is still free to ride as long as one avoids the St. George stop. Of course many riders who do ride SIRT between intermediate stations often transfer to a bus at one end or the other of their ride, if not both, and therefore still pay for their ride.

And yes, assuming that one did not already use up one's free transfer getting to SIRT, then those who paid to exit at St. George would be able to transfer for free to the subway after arriving in Manhattan.


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## henryj (May 10, 2009)

All this discussion just shows how screwed up our transportation system has become in this country. We subsidize one form of transportation and then have to subsidize the others to make things equal and then we have to subsidize the other to make it equal and................... The more we use it the more it looses money. How does any of this make any sense. Why not go back to the free enterprise/captilist system that the country was founded on. Put a meter on your car so you have to pay every time you use it. And if you don't pay your bill your car doesn't start. lol. Charge what it really costs to use each form of transportation. Then we can pick and choose which one we want to use and want to pay for. Gee, what a concept.

The Europeans have figured this out by the way. Their meter is called a gas pump. With a $4.00 a gallon gas tax that takes care of the problem. Their transit systems and rail lines pay their own way.


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## DET63 (May 13, 2009)

Add massive gas taxes in this country and you would see either a massive revolution (remember that our country got started in large part because of tax protests), or a huge black market, with millions of people (aided and abetted by like-minded government officials willing to look the other way) finding ways to skate around the tax. Under the best of circumstances, compliance with the tax would create a major recession (people wouldn't be able to afford to go to work or do business, thus depressing the economy), with the ultimate result that everything (including public transportation—which, in the vast majority of cases, is diesel-powered) would either cost a lot more, or the tax would be repealed.


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## George Harris (May 14, 2009)

The reality is that a lot systems use the 50% recovery rate as a sort of target. They feel if they get there they are doing great. If you compare statistics between systems, you can see how this does tend to play out. Some systems should be doing much better than they are.

If your ridership is in the low single digits of passengers per bus, you need to figure out what you are doing wrong, and some systems are there. It is after all supposed to be MASS transit. While saying this, don't be fooled by near empty buses arriving and leaving the last stop at the end of route, A bus can be empty / near empty there and still have respectible ridership.


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## henryj (May 14, 2009)

DET63 said:


> Add massive gas taxes in this country and you would see either a massive revolution (remember that our country got started in large part because of tax protests), or a huge black market, with millions of people (aided and abetted by like-minded government officials willing to look the other way) finding ways to skate around the tax. Under the best of circumstances, compliance with the tax would create a major recession (people wouldn't be able to afford to go to work or do business, thus depressing the economy), with the ultimate result that everything (including public transportation—which, in the vast majority of cases, is diesel-powered) would either cost a lot more, or the tax would be repealed.


Yes I have to agree. It just shows what a hole we have dug ourselves into. However, if the cost of fuel starts to ramp up again this problem may just take care of itself. Ridership surged when fuel hit $4 a gallon and it will surge again. Unfortunately, as you point out most of our systems are diesel powered. But a loaded diesel bus is still a lot more efficient than a single occupancy car. If fuel starts up again and the price stabilizes in the higher range then the transit agencies can charge more and perhaps make up the diff. I am an old CPA so I think different. My nephew works for Houston's Metro so I asked him one day if they ever did any studies as to how high gas prices would have to go for them to break even or even make money. He just laughed and said they just don't think like that at a government agency. Their budget is all geared to how much tax money they think they are going to get. The fare box take is secondary. Actually, I think running the buses is sometimes secondary to the politics. But, as the country, the states and the cities gradually go bankrupt that thinking might change.


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