Riding to the End of the Line

Can Cap Metro weather the recession, balance its books ... and run the buses and trains on time?

Riding to the End of the Line
Illustration by Jason Stout

"Charging you more while giving you less" – how's that for a snappy slogan?

We suspect it will stick with the catchier "Dump the Pump," but over the next fiscal year, cutting service while raising fares is exactly what Capital Metro proposes to do. That won't be a fun sell to the transit agency's constituents – over the past couple of years, a seemingly unbroken stream of bad news has tested the patience of riders, area politicians, and taxpayers. For many, that patience ran out long ago.

Capital Metro's executives, however, say the belt-tightening is necessary and that their options are limited. Some of Cap Metro's board members say it's long overdue. The agency's critics say it will be balancing the budget on the backs of its work force and the riders who can least afford it. Whichever side you choose, you still have time to give your two cents – but do it now, because by next year, it might cost you three cents.

On Sept. 21, Cap Metro's board will weigh that input in a public hearing and presumably send back the budget for tinkering; on Sept. 28, the board will adopt the final version. Somewhere in there, Cap Metro has to figure out how to balance the needs of transit-dependent citizens and suburban commuters while teetering on the edge of financial disaster.


Scrambling for Savings

Like most public agencies (and private businesses) in a recession, Capital Metro's management is in the unenviable position of having to swim upstream. On the one hand, the agency's revenues have declined sharply over the past year and are expected to dip even further over the next. On the other, Cap Metro not only needs to keep the buses (and eventually, the trains) running with less money but must also rebuild its savings account.

Now, much has been written – both here and in the local daily – about how the agency got under water, and one can certainly make the argument that it jumped in. (See "How Bad Is Bad Enough?," below.) Yet the revenue side is largely beyond Cap Metro's control. While the agency draws revenue from a number of sources, almost three-quarters of income derives from sales taxes. As you may have noticed, the whole damn world, Austin included, is in a major economic recession. When the economy crashes – taking with it consumer spending and thus sales taxes – the effect on public agencies is direct and brutal. In fiscal year 2008, total tax receipts directed to Cap Metro were almost $158 million. Entering FY 2009, Cap Metro planners anticipated they would drop to $147 million – instead they plummeted even more, down to an estimated $140 million. This year planners expect another 5% drop to $134 million; if it holds, that will constitute 72% of the anticipated $185 mil­lion in operating revenue. In the previous two years, the tax supplied 75% and 74%, respectively.

As for the savings, Cap Metro has taken a lot of heat because it spent a substantial part of a $200 million surplus on capital projects – even management has admitted that the spending should have been better controlled. About the time that drawdown on the reserves was done, the economic crisis hit, unfortunately coinciding with a spike in oil prices. Today, the agency's cash reserves stand at a perilous $3.8 million – only about enough to cover a week's worth of operations.

Although the budget could be more easily balanced without diverting some money into the bank, that's just not an option, say Cap Metro execs. "If sales tax goes down 9% instead of 5%, that basically eats up 60% of whatever we say we're going to save up," says Chief Financial Officer Randy Hume. "Right now, year to date it's gone down about 9%, so if everything doesn't do like we project it, we've got to be able to accommodate that. We try to do that in a number of ways, but having a reserve there is most prudent."

The goal this fiscal year is to build up reserves to more than $10 million, with an ultimate goal of $27 million (52 days of operations).


Are You Being Served?

So if building the reserves is "critical," as Hume described it to Cap Metro's board, then something else has to give. The major areas of flexibility: fares, service, and salaries.

A rise in fares has been pretty much inevitable. "Our bus fares are ridiculously low compared to anybody else," Hume says. He has a point: Fare for a single, one-way trip was stuck at 50 cents since Cap Metro's inception in 1985, until last year, when it was finally raised to 75 cents. Last year, the board approved another jump to $1, scheduled to take effect in August 2010. Similar rises would occur in prices for multiple-trip passes.

When initial budget projections earlier this summer showed the agency in danger of a cash shortfall, Hume and company asked that the fare increases be accelerated to January 2010. After some public backlash, Cap Metro board member and Austin Mayor Pro Tem Mike Mar­tinez requested that the agency explore using federal stimulus money to cover the gap, and staff found that $2.6 million of American Recov­ery and Reinvestment Act money previously reserved for the rail startup could be switched over to operations and rescinded the request for the earlier fare bump.

Nonetheless, last year's raise and this year's will bring fare revenues up 15% to $9 million, or 4.9% of total revenues.

Martinez was pleased with the shift in stimulus money, but others were not. The Down­town Austin Alliance, a strong supporter of the much-troubled and endlessly delayed Leander-to-Downtown rail line (the MetroRail Red Line), worries that not spending the money on construction of additional rail sidings and station enhancements will further set back the launch.

"The diversion of funds is misguided from both an economic and a transportation perspective," the DAA said in a position paper. "The intent of the federal stimulus money ... is to create jobs and stimulate the economy. Capital improvement projects like the Red Line enhancements best serve that interest. ... The new proposal – to use a one-time funding source to temporarily cover ongoing expenses – represents bad fiscal policy."

Similar sentiments were expressed by board member and Leander Mayor John Cowman at the Aug. 31 board meeting. "It makes me feel like I'm a Wall Street banker giving myself a bonus," Cowman complained. "What happens next year at this time? ... We're going to have to do something with our fares. This is a one-time fix."

Martinez actually agrees that fares must come up – "our fare box recovery rate is very low" – but calls the expanded sidings "bells and whistles ... something we need to do, but not a dire emergency."

Push-back is also coming from the opposite direction – an organization calling itself the Bus Riders Union of Austin argues that fares should be eliminated altogether, while board member Mike Manor has proposed that certain transit-dependent passengers receiving government services and earning below a certain income level receive free passes, good for up to a year and renewable. The no-fare idea isn't completely radical – Cap Metro tried it for 14 months in 1989 and 1990, and while ridership went up, it brought other problems, including homeless passengers overstaying their welcome.

As for Manor's idea, Martinez says he's "interested" and plans to meet with Manor, but "another component to that question is: If we truly want a multimodal mass transit system, how are we going to pay for it moving forward if we don't start seeking fares from some of the folks that we now give heavily discounted and/or free services to? ... If we're going to be a social service provider, then let's say that, and let's let the public know and let them know how much it's going to cost."

A subtext to this entire debate is a real or perceived conflict between suburban and urban commuters. Members of Amalgamated Transit Union Local 1091 (which represents Cap Metro vehicle drivers and mechanics) have long criticized MetroRail as being little more than a shiny display toy for Cap Metro management – and a diversion of money from the fixed route bus service and MetroAccess (service to customers with disabilities). Those services are used by an overwhelming majority of Cap Metro customers, compared to a relatively small number who will use the Red Line. In the Cap Metro parking lot, some union members show their disdain by openly sporting "Kill Rail" bumper stickers on their cars.

For his part, Hume rejects the notion that the needs of transit-dependent, "nonchoice" urban riders are being subordinated to those of a smaller number of Leander suburbanites who likely also have cars. "Seventy percent of the budget is bus operations, and 17 percent is MetroAccess," Hume notes. "Rail is less than 5 percent." (ATU 1091 President Jay Wyatt alleges, however, that some rail expenses are hidden in other parts of the budget.)

Cowman points to the 2004 referendum that authorized the rail system. "The union has a beef with the voters, not Capital Metro," Cowman says. "The union leaders are misguided and misdirected."


Cuts or Castrations?

Riding to the End of the Line
Photo by John Anderson

"Cap Metro literally depends on 'rainfall,'" Martinez said, referring to the sales tax. "When the economy is bad, you have to cut services. There really are very few ways of tightening your belt in an organization like Cap Metro."

One cut has already been approved – the 'Dillos, those green-and-brown faux trolley cars used as Downtown circulators, will be "suspended" after Oct. 2, and their return seems unlikely.

Hume says his staff hasn't completely settled on what other routes to trim or eliminate, but the budget predicts a 2.22% drop in fixed-route service hours (the regular bus routes that make up about two-thirds of Cap Metro's service). In service miles, that's a drop of 11.8% in fixed routes and 6.74% overall. Hume says they'll be targeting less-used routes. "We were averaging two riders per hour on the 'Dillo, and everywhere the 'Dillo goes and stops, we have a fixed-route service," Martinez says, repeating management's rationale for killing the circulator. "So I felt like if we had to cut service somewhere, that was the most appropriate place to do it."

Some observers aren't as accepting of the staff explanation, however, and charge that management set up the 'Dillo (and other routes) to fail. For example, in a recent ATU 1091 press release, Wyatt charges that "Capital Metro ... makes bus routes unproductive through mismanagement and waste, as in the handling of the 'Dillos, and now wants to cut unproductive service."

"We understand that some trips are unproductive, or low ridership, but that is not the fault of the riders, it is the fault of the planners," echoes Glenn Gaven, both a bus driver and member of the riders union. "In the 'Dillo example, the transit authority purposefully castrated the service and then declared it unproductive." There's certainly a case to be made for that position. Until 2008, there were five 'Dillo routes covering Downtown and more, reaching north into the University of Texas campus, south down Congress and Barton Springs Road, west to MoPac, and east to Pleasant Valley. All free.

Cap Metro then chopped the routes down to two, running north-south on Congress and east-west along Fifth and Sixth. By this point, ridership was at eight passengers per hour; then Cap Metro imposed 50-cent fares, and that number dropped to two.

The decision also seems strange considering that the 'Dillo will be vanishing right when (eventually?) MetroRail starts delivering commuters to the Convention Center, at the southeastern end of Downtown. The need for a Down­town circulator to get those passengers to jobs elsewhere – say, at the northern end of Downtown, such as the Capitol and UT – would seem obvious. Cap Metro planners don't appear overly concerned, saying they will coordinate fixed-route buses to hit the Down­town rail station when the trains arrive.

Of course, if you really want to get "lean," you have to cut the meat. In the case of Capital Metro, that's the payroll – in its income statement for 2009, the "salaries & benefits" category made up more than half of the agency's total expenses. It's also where Cap Metro's budget is less than transparent and where the agency tries to pat itself on the back where it least deserves it.

First, this requires some explanation: Tech­nic­ally, none of those drivers you see operating Cap Metro vehicles is officially a Cap Metro employee. They are actually employed by one of three labor subcontractors: StarTran, Veolia, or First Transit. This arrangement works around conflicts between state and federal law – basically, state law forbids Cap Metro (a quasi-state agency) from collective bargaining with labor unions, while federal law requires collective bargaining if the agency is to get federal funding. Thus, the employees are supposedly bargaining with entities other than Cap Metro. (Yes, it is ridiculous, and a peer review recently recommended "streamlining" this arrangement – although that would presumably require a political sea change at the Capitol.) While drivers and mechanics for all three subcontractors are represented by ATU 1091, most of the jobs – and the best-paying ones – are within StarTran, the one that Cap Metro directly created.

Hume has tried to make it appear that management is taking one for the team, while leaving the union workers untouched – nonbargaining administrative employees are getting no pay raises this year, and 37 vacant positions (of 303) are going unfilled. Meanwhile, StarTran employees are getting 1.5% raises in January and July, as their contract stipulates. (Also worth noting: The budget slashes travel expenses – perhaps an indirect response to grumbling that Cap Metro CEO Fred Gilliam spends too much time on the road.) The overall result: An impressive 2.6% reduction in "salaries & benefits," translating to $5.3 million in savings without sticking it to the lowest-rung workers.

But here's the rub: Among the unionized workers, "salaries & benefits" only covers the StarTran employees. Go a few lines down, and you'll notice a rise of $1.2 million in the category "purchased transportation." That covers, among other things, the services of Veolia and First Transit – and over the past few years, Cap Metro has been shifting some of its routes to those subcontractors, which don't pay as well as StarTran.

Wyatt has unapologetically slammed this practice as "union-busting" – indirectly undermining wage scales established by contract. Hume is at least frank about what is going on. When asked if this was nothing more than cutting wages, he gave a blunt "yes." He justifies this by adding: "But we've tried to plan that so that we're not eliminating somebody that's currently working. We've tried to do it through attrition. We've actually tried to avoid layoffs." Hume points to a recent situation where about a dozen employees would have been laid off when some fixed-route service got cut, but the agency found jobs for them in the lower-paying MetroAccess (transit service for the disabled). "They didn't lose their jobs," Hume says. "They're just doing something different."

Needless to say, Wyatt doesn't see it that way. "That's a slick way to cut employee wages," he says. "They're cutting these fixed-route operators' wages by bringing them into [MetroAccess] and claiming that they're helping them. These are slick people.

"Look at how much money they're going to save," Wyatt says, describing the employee shifts as hurting individual workers while doing little to save the agency money. "These people are taking a 30-something or 50-something percent wage decrease by moving over there. Twelve people. What kind of [savings] is that? Who are they bullshitting?"


Discount Combination Plate

Of course, at press time all of this budgetary detail is only "proposed." On Monday, the board will wrap up the public input period, and on Sept. 28, it takes a vote on the final product.

But in fact, how much wiggle room will the board have to dispute staff recommendations and make changes? Whether you view the agency's current predicament as self-imposed, caused by outside forces, or a combination of the two, the bottom line is that Cap Metro has its back against the wall. Demand more spending, and the attempt to build a cash reserve might vanish. Demand more cuts, and somebody's ox gets gored – quite possibly somebody who desperately relies on public transit.

One possibility might be to further cut capital spending, the thing that helped deplete the reserves in the first place. But board members surely will be reluctant to carve into next year's $21.7 million in desired capital spending, since two-thirds of it can be covered with grant money – money that might go away if the projects are canceled. And staff is already chopping out a seemingly crucial bit of capital spending – new buses. A good portion of the bus fleet is nearing the end of its anticipated 12-year life span. Hume says Cap Metro's director of vehicle maintenance assures him another year can be squeezed out of the current buses – but this expense likely can't be avoided in FY 2011.

And if the economy continues its downhill slide and sales tax revenues fall even further, then what? Cap Metro has taken out a $10 million line of credit as a buffer against such a situation, which it fortunately hasn't yet had to tap. But the drop in sales tax revenue from 2008 to this year's budget is already more than that.

Cowman, for one, doesn't sound eager to challenge the staff's calculations this year but shares Hume's belief that Cap Metro needs more diverse sources of revenue, especially more fare money. "We do have a balanced budget, fortunately or unfortunately," he says. "I am satisfied with the side order of grits. I wish we didn't have to dip into the $2.6 million stimulus monies, but looking at the situation, that is what my fellow board members, I feel very strongly that's what they want to do. It's what I will go along with.

"We need to take a hard look next year, because it could be twice as hard if we don't have sales tax revenues jumping up or items that help the revenue side of the equation. We're going to have to do something – it's like if you put it off today ... what's that commercial? You can change the oil today or do an engine overhaul tomorrow."


How Bad Is Bad Enough?

We need to back up a bit and make a slight correction to the record. Back in the spring, I detailed Capital Metro's three-pronged problem: its failure to get commuter rail up and running, its dwindling financial reserves, and its disastrous public image (see "What's Wrong With Cap Metro ... and What's Right," April 24). A section of that story dealt with what I believe was some unfair coverage by the Statesman, although it carried a perhaps misleading subhead: "Going Bankrupt? Not Really." In fact, as I noted in the text, Cap Metro does indeed have severe financial problems, and in retrospect I wish I'd caught that subhead in the editing process and changed it.

My beef with the daily was its depiction of that very real crisis as being purely the consequence of incompetence (and too much capital spending), without sufficient emphasis on things beyond Cap Metro's control: namely, a worldwide financial meltdown and an enormous spike in fuel costs. Those are not insignificant factors. While Cap Metro's revenue comes from a number of sources, it is overwhelmingly dependent on sales taxes from its member communities. In 2008 they accounted for 75% of revenues, and by the end of fiscal year 2009 (which ends this month), it's expected they will have supplied 74%. Which brings us to FY 2010, which begins Oct. 1. Current Cap Metro predictions are that sales tax revenues will plunge even further, down to $134 million – now only 72% of revenues.

And while fuel costs aren't even close to the biggest expense the agency has (that would be salaries and benefits), it did cost the agency $15.8 million in FY 2008, a spike from $9.9 million in FY 2007. It dropped back down to $10.5 million in 2009. Current Cap Metro guesstimates are that fuel will jump back up to $13.8 million in FY 2010, but who really knows how the oil market will behave?


Further Information:

To download and read the proposed FY 2010 Capitol Metro budget, go to www.capmetro.org.

A public hearing on the budget will be held Monday, Sept. 21, 5pm, at 2910 E. Fifth. Bus routes 17, 300, and 4 stop nearby.

A note to readers: Bold and uncensored, The Austin Chronicle has been Austin’s independent news source for over 36 years, expressing the community’s political and environmental concerns and supporting its active cultural scene. Now more than ever, we need your support to continue supplying Austin with independent, free press. If real news is important to you, please consider making a donation of $5, $10 or whatever you can afford, to help keep our journalism on stands.

Support the Chronicle  

READ MORE
More by Lee Nichols
Game Changer
Game Changer
A new football culture for Austin bars

Oct. 23, 2015

Beer Flights
Beer Flights
Celis: welcome home

Aug. 17, 2012

KEYWORDS FOR THIS STORY

Capital Metropublic transit, Capital Metro, ATU 1091, Fred Gilliam, Jay Wyatt, mass transit, Red Line

MORE IN THE ARCHIVES
NEWSLETTERS
One click gets you all the newsletters listed below

Breaking news, arts coverage, and daily events

Can't keep up with happenings around town? We can help.

Austin's queerest news and events

Updates for SXSW 2019

All questions answered (satisfaction not guaranteed)

Information is power. Support the free press, so we can support Austin.   Support the Chronicle