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Home My WebLink About11/19/1996, 1 - SLO TRANSIT FARE INCREASES council "`"110 y -41 j acEn6a RepoRt �N CITY OF SAN LUIS OBISPO FROM: Michael D. McCluskey, Public Wow Director Prepared By: Harry Watson, Transit Manager Reinie Jones, Transportation Techni 'an David Elliott, Administrative Analyst y7 SUBJECT: SLO Transit Fare Increases CAO RECONEMU*iDATTONS By resolution, 1) enact the following fare increases for SLO Transit effective January 1, 1997: raise the regular cash fare from $0.50 to $0.75 raise the monthly pass price from $16.00 to $24.00 raise the cash fare for seniors, disabled riders, and Medicare recipients from $0.25 to $0.35 raise the monthly senior pass price from $2.50 to $7.50 By motion, 2) cancel the Bus Maintenance Yard Expansion project 3) modify the Bus Acquisition project to purchase two buses instead of three REPORT IN BRIEF SLO Transit has not raised its fares for 16 years. Recent cutbacks in Federal Transit Administration grants and contributions from Cal Poly will cause a $292,300 annual budget tfal shortfall -- nearly one fourth of SLO Transit's annual operating cost. Most of the shorl for 1996-97 can be made up with an additional contribution offered by Cal Poly along with one- time savings available by cancelling the Bus Maintenance Yard Expansion project and buying two new replacement buses instead of three. The remaining shortfall for 1996-97 can be covered with the recommended fare increases. Closing the gap in future years will require service reductions which can be moderated somewhat by the recommended fares increases. The existing fares on SLO Transit are far below the mean and median of fares for other comparable transit systems. Even the recommended fares are well below the mean and median. The recommended fare increases should bring in an additional $24,000 over the last six months of 1996-97 and an additional $63,000 each year afterward. f- � Council Agenda Report- SLO Transit Fare Increases Page 2 DISCUSSION Background SLO Transit-receives nearly all of its annual revenue from four sources: 1) State Transportation Development Act (TDA) grants, about 60 percent of total revenue expected for 1996-97 2) Federal Transit Administration (FTA) grants, about 18 percent of total revenue expected for 1996-97 3) In-lieu fare contributions from Cal Poly, about 12 percent of total revenue expected for 1996-97 4) Cash and pass fare revenue plus other minor revenue, about 10 percent of total revenue expected for 1996-97 Sources 3 and 4 are considered the "local match" or "local support" for the state and federal grants. Over the last ten years Cal Poly contributions have amounted to 55 percent of the local match, while City contributions (fare revenue plus other minor revenue) have covered the remaining 45 percent. The existing SLO Transit fare structure includes the following components: c a regular cash fare of $0.50 c a monthly pass for unlimited rides at a price of $16.00 c a cash fare of$0.25 for seniors, disabled riders, and Medicare recipients c a monthly pass for seniors at a price of $2.50 The regular cash fare and monthly pass price have not changed since 1981. The monthly senior pass price has remained unchanged since it was introduced in 1975. The cash fare for seniors, disabled riders, and Medicare recipients is mandated by federal regulations and must be one half or less than one half of the regular cash fare. How did SLO Transit manage to avoid any fare increases over the past 15 years? A combination of frugal contract prices during the 1980's, the introduction of Cal Poly contributions starting in 1985, and the infusion of FTA grants starting in 1993 ensured that total revenues kept pace with costs from year to year, despite service expansions and diversions of TDA grant revenue to regional transit. With revenue from TDA grants, FTA grants, and Cal Poly contributions sufficient to cover costs, there was no pressing need for fare increases. But this situation has changed dramatically. Because of substantial and permanent reductions expected in both FTA grants and Cal Poly contributions, SLO Transit is facing an immediate financial crisis. Without additional revenues or service cuts, these reductions will cause a $292,300 annual budget shortfall. This �'oZ Council Agenda Report- SLO Transit Fare Increases Page 3 shortfall amounts to nearly one fourth of SLO Transit's annual operating cost, as shown below: Previously Now Expected Expected Federal Transit Administration Grants $455,000 $180,000 State TDA Grants 506,400 603,100 Cash Fares and Pass Sales 96,800 96,800 Cal Poly In-lieu Fare Contribution 240,000 126,000 Other Revenue 2.600 2.600 Total Annual Operating Revenues $1,300,800 $1,008,500 Total Annual Operating Expenditures: $1,300,800 $1,300,800 Annual Budget Shortfall 0 ($292,300) Such substantial revenue decreases present two challenges: 1) eliminating an immediate budget shortfall for 1996-97 and 2) making permanent adjustments to avoid future budget shortfalls. The recommended fare increases would bring in an additional $24,000 over the last six months of 1996-97 and an additional $63,000 each year. (See the "Fiscal Impact" of this report for a discussion of how the recommended fare increases may affect patronage and fare revenue received.) Increasing Fares to He1Q Eliminate the Immediate Budget Shortfall for 1996-97 To help cover the budget shortfall for 1996-97, Cal Poly has offered a one-time additional contribution of $43,000 (beyond the base level of $126,000). To supplement this offer Public Works recommends postponing the Bus Maintenance Yard Expansion project (for a one-time savings of$168,000) and purchasing only two replacement buses instead of the three now planned (for a one-time savings of $60,000). These one-time actions would narrow the gap for 1996-97 to $21,300. The recommended fare increases would raise $24,000 over the last six months of 1996-97, enough to close the remaining gap. To summarize: Additional One-time Cal Poly Contribution $ 43,000 Savings from the Bus Maintenance Yard Expansion Project 168,000 Savings from the Bus Replacement Project 60,000 Additional Revenue from Fare Increases 24.000 $295,000 This amount would fully cover the $292,300 shortfall for 1996-97 and would avoid the need for any service reductions until July 1997. There are two important reasons to refrain from yr Council Agenda Report- SID Transit Fare Increases Page 4 immediate service cutbacks. First, they might compound the reduction in riders that may occur with the recommended fare increases. And second, they would require more substantial changes to the printed schedules on fairly short notice. Increasing Fares to Moderate Future Service Reductions Without additional Cal Poly contributions or fare increases beyond existing levels, avoiding future budget shortfalls would require eliminating the following transit service effective July 1, 1997: Half-hour Service on Route 4 $ 66,000 All Service on Route 5 136,000 Off-season Trolley Service (September to May) 22,000 Tandem Service (Extra Sections) During Peak Hours 25,000 Evening Service 19,000 Weekend Service 22,000 $290,000 Additional fare revenue could preserve service which would otherwise have to be eliminated. For example, the recommended fare increases would bring in an additional $63,000 each year, enough for SLO Transit to continue operating tandem, evening, and weekend service. An ad hoc Council subcommittee is meeting with Cal Poly representatives to establish an appropriate level for Cal Poly's annual contribution. Any additional amounts beyond the base level of$126,000 could also preserve service or ensure that Cal Poly riders could continue to ride for free. A moderate fare increase for non-Cal Poly riders (as recommended) would show a good faith effort by the City to help resolve the current financial crisis. Effects of Possible Service Reductions o Eliminating half hour service on Routes 4 and 5 would reduce convenience for Cal Poly riders from the Laguna Lake area and cause crowding on remaining buses. o Eliminating the remaining service on Route 5 would leave service in one direction only between Laguna Lake and Cal Poly. c Eliminating trolley service would affect parking and traffic congestion downtown. c Eliminating tandem service would affect riders within two miles of Cal Poly where buses now reach capacity during peak hours. o Eliminating evening service would cut out the least patronized portion of the schedule but Council Agenda Report- SLO Transit Faye Increases Page 5 would also affect daytime riders who would not have a ride home in the evening. G Eliminating weekend service would affect non-Cal Poly riders who depend on transit for work and shopping. Comnarision to Fares for Other Similar Transit Systems The following table compares existing and recommended fares for SLO Transit to fares for other comparable municipal transit systems. Monthly Monthly Senior/Disabled Senior Pass Cash Fare Pass Price Fare Price Monterey $1.50 $45.00 $0.75 $22.00 Santa Barbara $1.00 $45.00 (1) $0.50 $22.50 (l) Merced $1.00 $40.00 $0.50 $5.00 Santa Cruz $1.00 $40.00 $0.40 $14.00 Simi Valley $1.00 S40.00 (2) $0.35 $15.50 Na $1.00 $38.25 (1) $0.50 $18.00 (l) Yuba Ci $1.00 $37.50 (1) $0.50 $18.90 (1) Santa Rosa $1.00 $32.00 ................::.:. $16.00 ....................................... Santa Maria $1.00 $30.00 $0.50 $15.00 Visalia $0.75 $28.00 $0.55 $60.00 (3) Fairfield $0.75 $26.00 $0.35 $13.50 Redding $0.75 $25.00 $0.40 $21.00 Chico $0.75 $25.00 $0.35 $11.00 Lompoc $0.65 $26.33 (1) $0.35 $13.50 (1) Lodi $0.50 $20.00 $0.25 $10.00 Mean (average) $0.88 $32.07 $0.45 (4) $15.42 (4) Median (middle number) $1.00 $31.00 $0.45 (4) $15.25 (4) SLO T®nsit(e=is ' $0.50 $16.00 $0.25 $2.50 SLO Tran-at(Umposed) SO-75 S74-00 SO-315 S7,50 (1) 45 rides (2) 50 rides (3) dial-a-ride (4) dial-a-ride fares not included in calculations r� Council Agenda Report- SLO Transit Fare Increases Page 6 All systems listed in the table lie in urbanized areas with less than 200,000 population, and all receive FTA grants. As shown, the existing SLO Transit fares are far below the mean and median of fares for other comparable systems. Even the recommended higher fares are still well below the mean and median. CONCURRENCES On September 18, 1996 the Mass Transportation Committee reviewed the financial prognosis for SLO Transit and in concept approved increasing fares by up to 100 percent to limit service reductions. The adopted Short Range Transit Plan recommends raising fares. The Trienniel Performance Audit for TDA compliance also recommends raising fares. FISCAL E IPACT The recommended fare increases should bring in an additional $24,000 over the last six months of 1996-97 and an additional $63,000 each year afterward. Typically transit systems experience a decline in patronage after raising fares, almost exclusively among riders who pay cash fares. For this reason Public Works is forecasting a temporary decline in cash fare riders after the recommended fare increases. (That explains the estimate of$24,000 for the first six months versus $31,500 for each six month period thereafter.) Because fares have not been increased in so long and because the recommended fares are still so comparatively low, Public Works optimistically predicts that overall patronage will quickly return to existing levels about six months after the fare increases take effect. TDA regulations require that SLO Transit maintain at least a 20 percent ratio of fare revenue to operating cost. The City's general budget policies state, "As set forth in the Short Range Transit Plan, the City will strive to cover at least 30 percent of transit operating costs with fare revenues." (See page B-8 of the 1995-97 Financial Plan.) The recommended fare increases should yield the following fare/cost ratios: 1996-97 Future Existing Cash Fares and Pass Sales $222,800 $222,800 Additional One-time Cal Poly Contribution 43,000 0 Additional Revenue from Fare Increases 24,000 63.000 Total Fare Revenue $289,800 $285,800 Total Operating Cost $1,300,800 $17076,800 Fare Revenue/Operating Cost (percentage) 22 27 Council Agenda Report- SLO Transit Fare Increases Page 7 ALTERNATIVES 1) Keep fares at current levels. Less fare revenue simply means less service. If fares are not increased, effective January 1, 1997 half hour service on Route 5 would have to be eliminated. Then effective July 1, 1997 the following service would also have to be eliminated: half-hour service on Route 4 remaining service on Route 5 off-season trolley service (September to May) tandem service (extra sections) during peak hours evening service weekend service 2) Raise fares by 100 percent. Doubling fares and raising the senior pass price to $10.00 would bring in an additional $94,000 each year beyond the current level of fare revenue. This additional revenue would allow SLO Transit to continue operating trolley, tandem, evening, and weekend service. Half-hour service on Route 4 and all service on Route 5 would still have to be eliminated. 3) Contribute general fund revenue. SLO Transit used to receive annual contributions from the general fund, but these contributions ceased when the current revenue distribution policy was established. This policy states, "Because TDA revenues will not be allocated for street purposes, it is expected that alternative transportation programs - in conjunction with state or federal grants for this purpose - will be self-supporting from TDA revenues." (See page B-8 of the 1995-97 Financial Plan.) Even if this policy were rescinded, the general fund is already strained, and annual contributions from it would require corresponding cutbacks in other general fund programs. 4) Contribute parking fund revenue. Theoretically an effective transit system should reduce parking demand throughout the City, although this effect has never been documented in San Luis Obispo. Although this situation might justify annual contributions from the parking fund, using the parking fund for this purpose would be a major policy change and would require revising the Parking Management Plan, Financial Plan policies, and accounting policies. Attachment: Resolution g:\trans\wp51\fareincr.agn � - 7 RESOLUTION NO. (1996 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO ENACTING FARE INCREASES FOR SLO TRANSIT WHEREAS, fares on SLO Transit have remained unchanged since 1981; and WHEREAS, substantial and permanent reductions are expected in both Federal Transit Administration grants and Cal Poly in-lieu fare contributions; and WHEREAS, because of these reductions SLO Transit will have to eliminate service; and WHEREAS, additional fare revenue can preserve service which would otherwise have to be eliminated; NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo to: 1. rescind Resolution No. 4565 2. raise the regular cash fare on SLO Transit from $0.50 to $0.75 3. raise the monthly pass price on SLO Transit from $16.00 to $24.00 4. raise the cash fare for seniors, disabled riders, and Medicare recipients on SLO Transit from $0.25 to $0.35 5. raise the monthly senior pass price on SLO Transit from $2.50 to $7.50. Upon motion of seconded by and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was adopted this day of 1996. ATTEST: City Clerk Mayor APPROVED AS TO FORM: 0 �� O p MEETING AGENDA DATE11-. 9_ITEM #= TELEPHONE TESTIMONY on SLO Transit Fare Increase Mrs. Marie Brunty "Please pass the increase. As a 30 year resident of San Luis Obispo I have watched the vast improvements to our very good system. I ask that the City Council protect the bus for us. Because of my age and failing vision, I can not come to the meeting to speak to the Council. Everything has gone up but the bus fares haven't. It's time the fares follow the cost of everything else." kCOUNCIL r IJ AO i* ��UiR i+ FIN UIR �9,ACA0 ❑PRE CHIEF j ATroRNEY Cd PW DIR 5KCLEFLK&Og1C ❑ POLICE CHF: ❑ MGMTTEAMj U REC DIR ❑ READ-ILE ❑ UTI L QIR '-�- ❑ PE HS DIR I J Fuemst _1