FutureStructure

Transit Fares Only Partially Cover Public Transportation Costs

Although transit systems are expected to collect just a fragment of operating costs from passengers, there is a built-in accountability mechanism requiring they hit certain targets or risk losing state funding.

by Shea Johnson, Daily Press, Victorville, Calif. / May 30, 2017
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(TNS) -- In March, more than 237,000 passengers rode Victor Valley Transit Authority buses. The agency collected nearly $300,000 in revenue from passengers, but the costs to operate the transportation system throughout the High Desert? About $1.85 million.

So how does a public transit authority get by when it spends an average of $7.83 per passenger who will give back only $1.26 in fares?

It is in no way unique, but the authority is significantly reliant on federal and state funding to bankroll operations, beginning each fiscal year knowing that passengers will cover just about one-sixth of the cost of a trip.

Only a sliver of the more than 1,800 U.S. mass transit systems in 2013 reported fare revenue exceeded operating expenses, or about 2 percent of them, according to The Hamilton Project, an economic policy initiative at the Brookings Institution launched in 2006.

Metro rail systems, meanwhile, all operated at a loss during that same year.

"Like roads, mass transit is not self-sustaining: both roads and mass transit require a combination of user fees and other government funding to pay for operations, maintenance, and expansion," The Hamilton Project authors wrote in a May 2015 paper titled, "Racing Ahead or Falling Behind: Six Economic Facts About Transportation Infrastructure in the United States."

Instead, government subsidies keep systems like VVTA afloat. In the agency's $32.2 million fiscal year 2017-18 draft budget, officials project $18.2 million in operating revenue, of which just $3.1 million is tied to passenger fares.

A far bigger chunk, about two-thirds or $12.4 million of anticipated operating revenue, is expected to come from the Local Transportation Fund, one of two major funding sources included in the 1971 Transportation Development Act. The other, the State Transit Assistance Fund, feeds VVTA money for capital projects.

Measure I, the voter-approved half-cent sales tax in San Bernardino County, supplies $1.5 million more in operating revenue. Remaining income comes mostly from federal sources.

The funding framework is similar with VVTA's $14 million capital budget, except passenger fares there are not a factor.

"Well, when you think of the public library, you don't think of it making a profit; it's funded with grants," VVTA Executive Director Kevin Kane explained. "So this is just another public program that's providing opportunities for people."

Two of VVTA's main goals are to provide as many services as possible while also meeting what's called a "farebox recovery ratio" — the percentage of fares covering operating costs.

Although transit systems like this one are expected to collect just a fragment of operating costs from passengers, there is a built-in accountability mechanism requiring they hit certain targets or risk losing state funding.

For VVTA, it's 15 percent. In March, the agency reported 16.04.

"If we were running this as a for-profit," Kane said, before pausing. "First of all, I don't think anybody would go into it because of all the federal restrictions."

Still, as a bonafide public service, there is evidence that transit systems across the U.S. are worth their subsidies.

In a 2014 report by EDR Group for the American Public Transportation Association, the study found that $1 billion in public transportation investments could generate up to 50,700 jobs.

And public transportation is inherently a safety net for the economically disadvantaged and disabled. Eighty-nine percent of VVTA riders, in fact, are transit dependent or choose not to own a car, according to an agency survey in March 2016 of 2,176 riders.

For Americans with Disability Act passengers, 70 percent were not licensed drivers, while 59 percent reported medical care as their predominant trip purpose.

VVTA, like any other transit agency, also has an opportunity to give back to the communities in which they operate. Kane was cognizant of buses' impacts on roads.

Any agency that doesn't utilize all of its Local Transportation Fund, yet still meets all its service needs, can send unprogrammed funds back to jurisdictions for street and road maintenance.

He estimated that VVTA had provided $70 million in such funding over several years and about $5 million in 2017.

"We have been very, very forward in looking for ways to improve mobility options and reduce our costs at the same time, and that's a bit of a trick," he said. Then, later: "We're known for thinking out of the box."

Those unconventional services include donating retired ADA vehicles to nonprofits in return for those organizations agreeing to handle certain agency ADA rides; paying mileage for neighbors to transport passengers; and readying to launch the "VVTA Watch" app, where users can report incidents or bus problems directly to dispatch.

In 2015, VVTA merged with Barstow Area Transit, and Kane said they've been able to bolster performance and technology there, and VVTA is seeking a $5 million bond to construct a new facility there. Since then, data shows a steady decrease in passengers per revenue hour for most routes, but Kane said this trend is expected as more services are added, increasing total revenue hours.

He acknowledged that total ridership throughout the system had been down "slightly" this year, but nothing to cause alarm. About 3,800 fewer passengers rode in March than the same month the year prior when nearly 241,000 passengers were counted.

One point of emphasis moving forward, however, will be the agency buses' promptness, as Kane called on-time performance "one of our biggest problems operationally."

"It's going to continue to deteriorate as traffic builds," he said. "As ridership increases, what happens is your dwell time — which means the time it takes for riders to get on the bus — increases. As traffic increases, everything gets slower."

The agency targets a 95 percent on-time rate, which is defined as less than 10 minutes early and less than 30 minutes late for ADA paratransit. For all other routes, it's not a second early and less than five minutes late.

In February, the agency reported a 100 percent on-time rate among 13,449 ADA rides sampled. The Ft. Irwin route (97 percent) also reached the goal. Yet the BV Link (81), fixed routes (78) and county routes (77) missed the mark.

If routes prove to be continuously late, the agency will seek to analyze why and consider fixes.

But at the job for 19 years, Kane believed that VVTA, in sum, had made strides since the days where its fleet consisted of refurbished, white-painted school buses. Still, one element of the nature of the business remains uneasy to stomach.

"How'd you like to be in a business where your best customers' biggest goal in life," he said light-heartedly, "is to not have to use your product anymore?"

©2017 Daily Press, Victorville, Calif. Distributed by Tribune Content Agency, LLC.