sr-042710-9ac7®
City Council Report
City of
Santa Monica"
City Council Meetingi April 27, 2010
Agenda Item:
To: Mayor and City Council
From: Stephanie Negriff, Director of Transit Services
Subject: Big Blue Bus Fare Restructuring and Strategies to Reduce Structural
Deficit
Recommended Action
Staff recommends that the City Council:
1. Hold a public hearing in accordance with Federal Transportation Administration
Circular 9030.1 C; and
2. Approve changing the Big Blue Bus base fare from $0.75 to $1.25 and other
discounted fare adjustments shown as Option 1 in Attachment B to be
implemented on August 29, 2010; and
3. Authorize the City Manager to negotiate and execute an agreement with Los
Angeles County Metropolitan Transportation Authority (Metro) to participate in
the Rider Relief Transportation Program.
Executive Summary
The Big Blue Bus operating budget will have a structural deficit over the next five years
due to State and County transit subsidy reductions and increased operating costs. The
recommended fare proposal increases base fare from $0.75 to $1.25, raises rates in
other discounted fare categories and introduces a 30-Day Pass, which will provide
greater mobility and simplify boarding. Participation in Metro's Rider Relief
Transportation Program will help reduce the impact of fare adjustments by providing
subsidies for passengers whose household income levels meet certain requirements.
The recommended fare structure will increase fare revenue by $2.5 million in FY10-11
and $3.4 million per year beginning in FY11-12 and is a consistent component of short-
term strategies to close the budget gap. Long-term corrective efforts are necessary to
successfully address a projected structural deficit.
1
Background
The Big Blue Bus (BBB) is required to maintain a balanced budget. Historically,
operating expenses are paid from local revenues consisting primarily of passenger
fares, advertising, lease, local return, and charter revenues, and subsidized with funding
allocated by the Los Angeles County Metropolitan Transportation Authority (Metro). Los
Angeles Metro allocates funds to BBB and other regional and municipal transit
operators which are derived from countywide sales taxes dedicated for transit as well as
subsidies derived from the State Transit Assistance fund (STA). In FY10-11, the Big
Blue Bus's expenditures will outpace revenues. Without the implementation of short-
and long-term strategies to reduce the structural deficit, including increased fare
revenue, use of one-time monies, allocation of new local return funding, capitalization of
labor costs, restoration of State funding, operational efficiencies and deferral of capital
projects, BBB will have a negative fund balance projected to range from $6.1 M in FY10-
11 to $16.OM in FY14-15 (Attachment A).
Discussion
In August 2009 a fare restructuring committee comprised of Big Blue Bus and City
Finance Department staff began an analysis of fare restructuring alternatives. As the
State funding. landscape became more uncertain, staff began to also look at short- and
long-term strategies to address the department's projected structural deficit.
Restructuring Passenger-Fares
Passenger fares are the. primary controllable source of operating revenue for the Big
Blue Bus. A significant component in the strategy to address the BBB's structural deficit
is generating more revenues from passenger fares. BBB's fare revenue, which makes
__ _ up 20% of the total_operating_ revenues, has.. not kept pace with increases in fuel and.
other transit costs The current Big Blue Bus base fare of $0.75 is the lowest in the
County and is equal to only one other transit agency in the County. Adjustments to Big
Blue Bus fares were last approved by City Council on April 10 2007 and May 14, 2002.
2
Two fare restructuring .options (Attachment B) to reduce the funding shortfall were
analyzed and presented at community meetings throughout the BBB service area.
Option 1 features a $1.25 base fare and a $0.60 Senior/Disabled/Medicare fare and
would generate approximately $3.4 million in per year in additional revenues. Option 2
proposes a base fare $1.50 and a $0.75 Senior/Disabled/Medicare fare and would
generate approximately $4.2 million per year in additional revenues. There are presently
no transit agencies in L.A. County with a base fare at this level, although the Metro base
fare will increase to $1.50 on July 1, 2010 and base fares of $1.50 and higher exist in
other areas of the State (Attachment C).
Both options 1 and 2 eliminate intra-agency bus transfers (BBB to BBB) and retain inter-
agency bus transfers at $0.50, with a reduced $0.25 Senior/Disabled/Medicare rate. All
prepaid fare types for both options 1 and 2 are the same. In addition, both options
include several strategies designed to make transit easier to use and more efficient,
while still increasing revenue. For example, pre-paid fare media would be priced to be
the most cost-effective option for frequent riders to incentivize cashless boarding, which
in turn increase the operating speed of the system. A 30-Day Pass which offers the
equivalent to a half-price discount on the Day Pass would be introduced. In an effort to
simplify the fare structure, both options include one $4 system-wide Day Pass, instead
of separate local and express day passes. The number of places where passengers
could purchase discounted pre-paid fare media with proof of eligibility would increase.
All riders will still have the option of using the monthly EZ Transit Pass, good on all
regional transit non-express agencies including Metro Rail in Los Angeles County. In
addition, in response to community feedback, a "Baker's Dozen" fare is proposed to
offer 13 bus rides for the price of 12, with no expiration date.
The fare proposal shown as Option 1 in Attachment B would reduce the structural deficit
by $2.5 million in FY10-11, a pro-rated amount, and $3.4 million per year thereafter and
make the-.Big Blue Bus' fares comparable to other large systems in Los Angeles County
including Metro. Staff recommends changing the Big Blue Bus base fare from $0.75 to
3
$1.25 and other discounted fare adjustments shown as Option 1 in Attachment B to be
implemented on August 29, 2010.
The fare restructuring options would affect SMC and UCLA riders. The recommended
option includes an implementation timeline that allows staff to gather SMC student
ridership data, consider implications of fare changes, and complete negotiations with
SMC and UCLA.
Loss of Funding and Rising Costs
The Big Blue Bus has historically relied on State funding and allocations of transit -
dedicated sales tax revenues. As is the case in many transit agencies the economy has
negatively impacted available funding. Statewide, transit systems have experienced
State subsidy reductions in excess of $3 billion through the diversion of transit funds to
other State general fund programs since 2004. These diversions have resulted in a loss
of approximately $3-6 million to the Big Blue Bus annually. In 2007, the California
Transit Association pursued a legal remedy to return $1.2 billion of diverted funds to
their original transit purpose. This effort was ultimately successful, although given the
deepening State financial crisis, it remains to be determined when the State will return
these funds or whether the State will refrain from diverting these funds in subsequent
years. In January, the Governor released a proposed budget that recommended
circumventing the court's ruling.
Last month, the Governor signed into law the "gas tax swap" package, restoring partial
funding to the STA program. Based on the allocation information received from Metro,
the Big Blue Bus will receive approximately $3.1 million in STA funds for FY 2010-11
and $2.6 million in FY 2011-12. The STA funds remain vulnerable to future diversions
unless additional funding protections are put into place. The City Council has adopted a
resolution endorsing the Local Taxpayers, Public Safety and Transportation Protection
Act. A coalition of local government, transportation and transit advocates recently filed
this constitutional amendment with the California Attorney General's office for potential
4
placement on California's November 2010 statewide ballot. Approval of this ballot
initiative would close loopholes and change the constitution to further prevent the State
from "raiding" tax revenues dedicated to funding local government, including local
essential services, redevelopment or funds dedicated to transportation improvement
projects and mass transit.
In addition to the uncertainties of State funding, the Big Blue Bus is grappling with
increasing operating costs. Fuel costs have risen. Operating costs have grown as the
agency has had to deploy additional buses to maintain the same service frequency in
the face of mounting traffic congestion and delays. And, in the coming years, ,labor
costs are expected to ,outpace revenue growth, and become a contributing factor in
structural deficits.
Like the BBB, the City as a whole is looking strategically at ways to balance the
organization's budget. Strategies, which were presented to Council on January 26,
2010, include organizational efficiencies, operating budget reductions, prioritization of
service delivery, and increased cost recovery. Absent balancing the BBB's FY10-11
budget and successfully addressing the long-term structural deficit, service reductions in
the range of 30,000-40,000 hours will be unavoidable. All services would experience
cuts and some would be reduced to hourly "lifeline" services. Without at (east the
recommended Option' 1 fare increase, the amount of service reductions would double
and some services would have to be completely eliminated.
Fare restructuring and additional measures to mitigate the structural deficit are
necessary to avoid significant impact to community mobility. Three short-term
strategies are presented below. All include restructuring fares based on Option 1.
Probable Scenario for FY10-11
The probable scenario for the next fiscal year makes the following assumptions, which
result in closing the gap and balancing the BBB's budget from FY10-11 through FY12-
5
13 (Attachment D). At the present time, staff believes this is the most likely scenario and
are utilizing it for budget planning.
1. Fare restructuring Option 1
2. Restoration of partial STA funding
3. Operating efficiencies
4. Additional capitalized labor
5. Use of one-time monies
6. Allocation of all of the new Measure R Local Return funds
Possible Scenario for FY10-11
The possible scenario for- the next fiscal. year makes the following assumptions.
However, this scenario assumes significant legal, advocacy, and legislative outcomes
that are beyond the City's control.
1. Fare restructuring Option 1
2. Success of the California Transit Association's efforts, restoring full STA funding
3. Operating efficiencies
4. Additional capitalized labor
5. Use of one-time monies
6. Allocation of all of the new Measure R Local Return Funds
Optimistic Scenario for FY10-11
The optimistic scenario for the next fiscal year makes the following assumptions. Like
the possible scenario, the optimistic scenario assumes significant legal, advocacy, and
legislative outcomes that are beyond the City's control.
1: Fare restructuring Option 1
2. Success of the California Transit Association's efforts, full current year STA
funding, as well as recovery of STA funds diverted in prior years
3. Operating efficiencies
4. Additional capitalized labor
5. Use of one-time monies
6
6. Allocation of all of the new Measure R Local Return funds
Long-Term Mitigation of the Structural Deficit
Forecasting for the Big Blue Bus provides unique challenges, since a majority of the
Bus' funds are not controlled by the City, but are available from Metro in the form of
grant subsidy funds per a formula share allocation or are generated from sales taxes
collected in the County of Los Angeles, both of which are influenced by the same
economic factors plaguing the nation. Even with the recommended fare restructuring,
the recovery of ongoing STA funds, increased use of local return funds, and additional
capitalization of labor, .the BBB's five-year financial forecast projects significant
operating deficits in the out years due ih part to labor costs. As is the case citywide,
costs for CaIPERS retirement contributions are expected to rise significantly over the
five year period.
Corrective action and long-term strategies to close the gap are necessary and will begin
in FY10-11. Staff will continue to utilize the Department's Advanced Fleet Management
System (AFMS) to seek operating cost savings through rigorous analysis of schedules
and operating practices and seek other operational efficiencies: In addition, acost-
benefit analysis of Big Blue Bus operations is under consideration as part of its line-by-
line analysis. Capital projects that include the use of fund sources that could be used for
operating purposes may be considered and BBB may look to innovative advertising to
.generate additional revenue. In addition, staff may suggest pursuing federal legislation
to extend the fuel tax credit on natural gas and will continue working at a countywide
level to identify regional strategies to address budget shortfalls with other impacted
transit agencies.. Should it become evident that other strategies will not achieve the
desired results or if countywide subsidies continue to decline, service reductions may
become a last resort.
Fare Subsidy
To help reduce the financial burden of the proposed fare adjustments, BBB
7
recommends participating in Metro's Rider Relief Transportation Program (RRTP). The
program provides fare subsidy coupons to eligible riders who use BBB fare media.
Eligible riders include adult regular riders, Senior/Disabled/Medicare, K-12 grade
students. and college/vocational students who are pre-qualified by a participating
community-based agency. Students who participate in other subsidized programs such
as UCLA's "BruinGO" or Santa Monica College's "Anyline Anytime" Program would be
ineligible for participation. RRTP subsidy coupons are available to Los Angeles County
residents whose household income levels meet certain criteria. For example, a one
person annual household income of under $25,000 could be eligible to participate.
Public Outreach
Pursuant to Federal Transportation Administration Circular 9030:1 C, the City has
adopted a public comment process which requires public input and a formal public
hearing prior to fare modifications. Asa result, the evaluation of fare structure
alternatives was presented at 17 community meetings including a series at:
• Palms Rancho Park Branch Library
• Santa Monica Main Library
• Fairview Branch Library, and
• Montana Branch Library
During the same period, the BBB presented the two fare structure proposals to
meetings of the:
• City of Santa Monica Commission for Senior Community
• Santa Monica Chamber of Commerce
• City of Santa Monica Disabilities Commission
Bayside District's Land & Asset Committee, and
Pico Neighborhood Association
BBB. promoted attendance at the community meetings by:
• A blast to BBB email subscribers
• An insert in all City water bills, and
• Information flyers at various locations such as several main libraries, City Hall,
and Ken Edwards Center
8
On the interhet, meeting information was posted on the:
BBB website
City's website, and
Santa Monica Convention and Visitor's Bureau website
Financial Impacts & Budget Actions
The implementation of the recommended Option 1 rate increase would increase BBB
fare revenues by approximately $3.4 million per year beginning in FY11-12 based on a
price. elasticity model for each fare category. If a fare increase is approved by Council
the projected increased FY10-11 revenue of $2.5 million will be included in the BBB's
FY 2010-11 Proposed Budget.
Additional costs associated with the proposed fare adjustments in this staff report are
unknown at this time. As experience is gained, staff will evaluate whether there are
incremental costs associated with the additional cash collected and prepaid fare media
sold and address those costs in future budget cycles, if necessary.
Prepared by: Stephanie Negriff, Director of Transit Services
Approved:
Forwarded to Council:
~~ ~
Ste li nie Negriff Rod Gould
Dir or of Transit Services City Manager
Attachments: A -BBB Operating Structural Deficit Without Mitigation
B -Current and Proposed Fare Options
C -Comparative Cash Fares
D -BBB Operating Structural Deficit With Mitigation
9
Attachment A
BBB Operating Structural Deficit
Without Mitigation
So
(Sz,ooo,ooa)
($4,000,000)
($14,000,000) -$13,230,141
FY 13-14
($16,000,000)
($18,000,000)
-$16,030,799
FY 14-15
* Includes STA funds
ATTACHMENT B
CURRENT and PROPOSED FARES
Fare Type Current Option 1 Option 2
Regular; Non-Express $0.75 $1.25 ($2.50/RT) $1.50 ($3.00/RT)
Tokens; Non-Express $0.75 $1.25 ($2.50/RT) $1.50 ($3.00/RT)
Student Card (6-18); Non-Express $0.50 $0.75 ($1.50/RT) $0.75 ($1.50/RT)
Senior, Disabilities/Medicare; Non-Express $0.25 $0.60 ($1.20/RT) $0.75 ($1.50/RT)
Regular; Express $1.75 $2.00 ($4.00/RT) $2.00 ($4.00/RT)
Senior, Disabilities/Medicare; Express $0.50 $1.00 ($2.00/RT) $1.00 ($2.00/RT)
Regular & Student (6-18); Interagency Transfer $0.50 $0.50 ($1.00/RT) $0.50 ($1.00/RT)
Senior, Disabilities/Medicare; Interagency Transfer $0.10 $0.25 ($0.50/RT) $0.25 ($0.50/RT)
Regular & Student (5-18); BBB to BBB Transfer $0.50 NA NA
Senior, Disabilities/Medicare; BBB to BBB Transfer $0.10 NA NA
Regular; Non-Express Day Pass $2.50 $4 $4
Senior; Disabilities/Medicare; Non-Express Day
Pass $1.25 $2 $2
Regular; Express Day Pass $3.50 $4 $4
Senior, Disabilities/Medicare; Non-Express Day
Pass $1.25 $2 $2
Regular; Non-Express 30-Day Pass NA $60 ($2.00/day) $60 ($2.00/day)
Senior, Disabilities/Medicare; Non-Express 30-Day
Pass NA $30 ($1.00/day) $30 ($1.00/day)
Regular; Express 30-Day Pass NA $80 ($2.67/day) $80 ($2.67/day)
Senior, Disabilities/Medicare; Express 30-Day Pass NA $40 ($1.33/day) $40 ($1.33/day)
Regular; Non-Express Baker's Dozen NA $15 ($1.15/ride) $15 ($1.15/ride)
Regular; Express Baker's Dozen NA $24 ($1.85/ride) $24 ($1.85/ride)
Senior, Disabilities/Medicare; Non-Express Baker's
Dozen NA $7 ($0.54/ride
)
$9 ($0.69/ride)
Senior, Disabilities/Medicare; Express Baker's
Dozen NA $12 ($0.92/ride) $12 ($0.92/ride)
RT =Round Trip
Attachment C
Comparative Cash Fares
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Attachment D
Fund Balance
Probable Scenario
$z,ooo,ooo
So
$27,544* $569,407* $365,689
FY 10-11 FY 11-12 FY 12-13
($2,000,000)
($4,000,000) -$3,586,237
FY 13-14
($6,000,000)
($8,000,000)
($10,000,000)
-$10,386,895
($12,000,000) FY 14-15
* Includes STAfunds
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Proposal
Goals of Fare Restructuring
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