SR-1000-001-02 (6)
BBB:SN:DF\TRANS\ADMIN\COUNCIL\transitfinancestudysession.doc
Council Meeting: 02-26-02 Santa Monica, California
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Study Session on Big Blue Bus Funding and Analysis of Current
Fare Structure
Introduction
The report presents information regarding the Big Blue Bus’ funding structure
and the need for adjustments to the existing fares. It recommends that the City
Council give direction to staff to conduct a public hearing on May 14, 2002 for the
adoption of fare modifications.
Background
The Big Blue Bus is an enterprise fund of the City receiving no general fund
dollars. It is funded from a combination of local, state and federal transit
subsidies, passenger fares and other locally generated revenues. The Los
Angeles County Metropolitan Transportation Authority (LACMTA), the regional
programming agency for most transit funds, distributes transit subsidies to
eligible recipients. The Big Blue Bus is eligible to receive both formula and
discretionary funding from the LACMTA.
In FY 2001-02, the Big Blue Bus was allocated over $42 million in funding for
operating and capital purposes (Attachment 1). Almost 70% of this amount is
1
distributed on a formula basis, through the Formula Allocation Procedure (FAP).
Three subsidy sources are allocated using this methodology: Transportation
Development Act (TDA), State Transit Assistance (STA), and Proposition A
Discretionary funds. TDA and STA funds were established from State gasoline
taxes, to subsidize transit operating and capital expenses. Proposition A 40%
Discretionary funds are generated from a one-half percent countywide sales tax
approved by Los Angeles County voters in 1980. Seventeen transit systems
within Los Angeles County, including the Big Blue Bus, are eligible to receive
funding through the FAP. These subsidies are considered formula funds
because, by statute, they must be allocated annually to “included municipal”
operators using the prescribed FAP methodology. The LACMTA has greater
discretion in how non-FAP funds are distributed (Attachment 2).
In 1990, Los Angeles County voters approved Proposition C to generate another
one-half percent countywide sales tax for transit. The Big Blue Bus receives
approximately 14% of its regional funding from the Proposition C (40%)
Discretionary fund program and 2% from the Proposition C (5%) Transit Security
program.
The Big Blue Bus also receives federal revenues, which may only be used for
transit capital purposes. Section 5307 Funds are distributed to each urbanized
area by formula and then the LACMTA allocates the funds by a capital allocation
procedure. Approximately 15% of funds allocated to the Big Blue Bus in FY2001-
02 came from the capital formula program. Congestion Mitigation & Air Quality
2
Program funds are programmed at the LACMTA’s discretion, but distributed
using different formula methodologies. A third capital funding program, Section
5309, is distributed on a discretionary basis through Congressional allocations for
specific projects as part of the Federal Transit Administration annual budget.
Annually, the Big Blue Bus receives less than 1% of its funding from this source.
In FY 2001-02, the Big Blue Bus applied approximately 60% of its annual funding
to operating expenses and 40% to capital improvements. The LACMTA requires
a 38% local contribution for transit operating expenditures. The local operating
revenues that may be used to meet this requirement include passenger fares,
advertising revenues, lease revenues, Getty Center reimbursement, operating
interest earnings, and Proposition A Local Return (Attachment 3).
Big Blue Bus operating expenditures are typical for a public transit agency
(Attachment 4). More than 70% of expenditures are made up of labor and fringe
benefits (Attachment 5). The remaining costs are divided among materials and
supplies, utilities, casualty and liability costs, taxes, leases and miscellaneous
expenses. Capital expenditures fluctuate from year to year based on the
programming of projects (Attachment 6).
In 1997, the City adopted its first Big Blue Bus Service Improvement Program
(SIP). The SIP showed a tremendous demand for improved Big Blue Bus
services. New lines were added and service levels on existing routes were
improved to relieve overcrowding on the system. Also, adjustments were made
3
to meet the demands of increased traffic congestion found throughout the Big
Blue Bus service area. The improvements have resulted in a 46% increase in the
number of system service hours to customers (Attachment 7). Based on
recommendations in the current SIP, service may grow by an additional 12% by
the end of FY2003-04.
The cost of providing transit service has steadily increased since the last base
fare adjustment in 1983. Since that time the average cost per passenger has
increased from $.66 to $1.49 (Attachment 8), more than doubling in 19 years,
without an increase in cost to the rider.
None of the local revenue sources mentioned is anticipated to significantly
increase over the short term, to help meet the 38% requirement. As a result, if
Big Blue Bus farebox revenues do not increase it is likely that the Big Blue Bus
will be unable to sustain a 38% operating return ratio in FY2002-03 and beyond
(Attachment 9).
Big Blue Bus staff received feedback from the community on potential fare
adjustments by conducting seven public meetings from January 25, 2002 to
February 7, 2002 at locations throughout the Big Blue Bus’ service area. Given
transit fares in other areas of the county, customer feedback on the proposed
changes has been favorable.
4
Discussion
A fare elasticity model was used to determine the financial impacts of six funding
scenarios. The model is the result of research which has shown a consistent and
proportional relationship between ridership and fare structure. The Simpson
Curtin rule is that a 10% increase in fare results in a 3.33% ridership decline.
This rule was applied to all six alternatives.
Of the six alternatives, two appeared preferable. The first is the elimination of
free local transfers and the introduction of a $2 day pass for regular adult fares.
This alternative allows the system to maintain the current fare structure, but
requires passengers who need to transfer to one or more buses to pay an
additional fare at each boarding. The operational strength associated with this
adjustment is driver time spent issuing transfers will be saved at each bus stop. A
negative associated with this alternative is the 100% increase in the cost of a trip
for the 16% of Big Blue Bus passengers who transfer within the system. The
introduction of a $2 day pass was intended to offset the impact of eliminating free
transfers to passengers who transfer more than once.
A more equitable alternative is to increase the base fare from $.50 to $.75 and
make comparable adjustments to the other fare categories as shown in the chart
below.
5
Fare Type Current Proposed
Regular $.50 $.75
Senior & Disabled $.25 $.35
College Card $.40 $.60
Line 10 Express Regular $1.25 $1.75
Line 10 Express Senior and
Medicare Card $.60 $.75
Line 10 Express Disabled $.25 $.35
This fare alternative distributes the burden of the fare increase to all riders. It
maintains the existing policy of free local transfers. Finally, it allows the BBB to
meet revenue requirements for the foreseeable future. The alternative will make
it possible to maintain and improve upon the high level of customer service
provided by the BBB. The most recent line-by-line analysis showed our customer
satisfaction rate at 98%.
In addition to the local fare restructuring, staff proposes that the City Council
authorize the Big Blue Bus to join a countywide effort to implement a regional
fare media. The first phase of this strategy is a region wide transit pass. The
media would be priced to attract those patrons who regularly use more than one
6
transit system. The regional pass could be in place as early as July 1, 2002. It
also serves as a precursor to the regional smart card technology which
automatically accounts for all trips, provides reliable reimbursement for each
transit company, enhances regional integration and transit service
seamlessness. The smart card technology should be in place by 2004.
With the proposed fare adjustment the Big Blue Bus base fare will continue to be
among the lowest in the region. The three other largest operators in Los Angeles
County all charge at least a $.90 base fare with the regional operator, the
LACMTA, at $1.35 (Attachment 10). The Big Blue Bus also remains competitive
with agencies that operate express service (Attachment 11).
Budget/Financial Impact
This report presents information to the City Council about fare increase
alternatives essential to secure regional transit funds. Proceeding with the public
hearing will have no financial impact. Should the Council ultimately determine
that fare adjustments are warranted, the five-year projection and FY 2002-2003
revenue budgets will be appropriately modified.
Recommendation
City staff recommends that the City Council give direction to staff to conduct a
public hearing on May 14, 2002 for the adoption of Big Blue Bus fare
adjustments.
7
Prepared by: Stephanie Negriff, Interim Director of Transit Services
David Feinberg, Acting Deputy Director of Transit Services
NOTE – SEE CITY CLERK’S OFFICE FOR ATTACHMENTS
Attachment 1 : Local, State and Federal Transit Subsidies
Attachment 2 : Formula Versus Discretionary Transit Subsidies
Attachment 3 : Local Operating Revenues
Attachment 4 : Operating Expenditures
Attachment 5 : Revenue Service Hours Versus Labor Hours
Attachment 6 : Capital Expenditures
Attachment 7 : Actual and Projected Growth in Service Hours
Attachment 8 : Change in Average Cost Per Passenger 1983-2001
Attachment 9 : Historical and Projected Local Revenue Returns
Attachment 10: Base Fare Comparison with Other Operators
Attachment 11: Express Fare Comparison with Other Operators
8