Though ridership is going up and sales-tax revenue is going down, Capital Metro has largely managed to avoid the kind of deficit crunch that has beset the city and school district. However, while the transit authority has enough revenue, and then some, to cover its expenses, its board of directors has long been under political pressure to operate Capital Metro as if it only collected three-quarters of a cent in sales tax, and not the full penny it actually collects. To stay within this 75% threshold, the agency’s FY 04 budget, presented to the Capital Metro board of directors on Monday, proposes dipping into operating reserves to the tune of $5.5 million.
Like everyone else that relies on sales tax — including the city and the state — Capital Metro has seen a steep decline in revenue for nearly two years. The agency expects to take in $104.4 million in sales-tax revenue in FY 04 — a slight improvement over this year’s actual receipts but nearly 10% less that it had expected in last year’s budget. Sales tax makes up more than 77% of the transit authority’s total revenue; passenger fares make up less than 3%. Increases in other revenue sources — freight-rail operations, federal grants, and income on investments — offset the sales-tax drop to leave Capital Metro with an overall 2.8% revenue decline from the current year.
On the expense side, Capital Metro’s budget-scrubbing has included using automated passenger counters to get better data on ridership and accordingly planning to slightly reduce services on less-used routes. “None of these are drastic,” says Capital Metro chief financial officer Cynthia Hernandez, and changes — such as reducing a route frequency from 15 minutes to 17 or 18 — should “have minimal impact on the customer.” Most of these changes would be implemented in January. These and other efficiencies helped a little, but couldn’t offset a 15% jump in Capital Metro’s health care costs and previously contracted salary increases with the agency’s unionized employees. They’re getting a 4% raise; nonunion employees will get 2.5% raises.
All told, the agency’s $114.7 million in spending would translate into 80% of the sales-tax revenue. Board members balked, the agency says, at additional service cuts, fare increases, or smaller pay raises as strategies to bring the budget below the 75% target. “We’ve tried to make sure to maintain a service level to attract ridership, and keeping the fare reasonable and affordable helps the economy,” says Capital Metro CEO and President Fred Gilliam, who adds that other expenses — converting buses to ultra-low-sulfur diesel fuel and running fare-free on ozone-action days — are worth the price. “We’re committed to being as pollution-free as we can,” he says.
Gilliam and Hernandez anticipate that, as it has since 2001, the board will consider using the 25% surplus in Capital Metro sales-tax revenue to fund transportation projects in member jurisdictions. The board will conduct a public hearing on the budget Sept. 17 and vote on adoption Sept. 29.
This article appears in August 29 • 2003.