Around state, transit systems are facing bad scenarios

As with Metro, smaller transit agencies are facing adjustments and cutbacks. Some have sought voter approval for higher taxes, and more may go in that uncertain direction.

A Whatcom Transit Authority bus rolls through Bellingham (2007).

A Whatcom Transit Authority bus rolls through Bellingham (2007). Joe Mabel/Wikimedia Commons

The best that can be said about the fortunes of Washington's local bus systems, in these lean years of recession, is that managers are learning how to cope with adversity.

“We're sort of bouncing along the bottom,” says Richard DeRock, general manager of Link Transit, which serves the Wenatchee area. “We didn't have a whole lot of reserves coming into this recession. We've been burning through them not quickly, but a lot faster than we expected.”

With 21 routes, 55 vehicles, and a budget of $10.3 million, Link is “small- to mid-sized,“ in DeRock’s words, and in many ways typifies Washington's local transit operations. It does however cover 3,500 square miles of territory — the state's largest transit service area. Its fares do not exceed $2, even on the longest routes, and passengers defray only 6 percent of operating expenses; the stateside average is 12 percent. As with almost all the state's local bus systems, a sales tax component levied within the service area provides the bulk of operating revenue – 76 percent of it, to be precise. And when the economy sags, sales tax revenues droop, too, necessitating some hard decisions.

Link's sales tax receipts plummeted 13.5 percent between 2008 and 2009, and have dropped about another 1 percent this year. In northwestern Washington, the Whatcom Transportation Authority's (TWA's) sales tax income has fallen almost 12 percent since 2008. Bremerton-based Kitsap Transit saw 17 percent of its sales tax funding evaporate in 2008 and 2009.

In a more high-profile situation, Metro Transit in King County is looking at its options for cuts and efficiencies, with a task force's report being unveiled at noon today (Nov.5) and going to the King County Council on Monday (Nov. 8). But similar challenges face smaller agencies around the state.

“All of (Washington's) systems are trying to make adjustments first before having to go out to the voters to ask for a sales tax hike,” says Geri Beardsley, executive director of the Washington State Transit Association, which represents 25 providers. State law limits transit agencies to a .9 percent sales tax component. Four agencies, including King County Metro, have already reached that limit, while several others, including Kitsap Transit, which stands at .8 percent, are getting close to it.

“We could only go .1 percent higher — if we dared ask the voters for anything right now,” says Richard Hayes, Kitsap's executive director.

The adjustments Beardsley refers to can involve raising fares, reducing services, or reshuffling routes to squeeze more service out of each revenue dollar. Early in 2009, Kitsap, for example, bumped its basic fare up from $1.50 to $2 and pruned services by 17 percent - precisely the drop in sales tax receipts. Promptness of action removed the need to dip into cash reserves, Hayes reports.

“By mid-2009 we were back to a sustainable level of operations. We gained a lot of revenue, but we probably lost 15 percent of ridership. Having the commuter base has made things better than it might be elsewhere in the state. A high percentage of the people in Kitsap are well employed in Seattle and can afford the higher fares.”

Deferring capital investments, such as for new buses, can also improve the arithmetic. Plenty of other public agencies rely on local sales taxes, too, so asking voters to dig deeper in hard economic times is clearly the last resort.

Still, Beardsley notes, two of the three agencies that sought sales tax increases earlier this year received them. For Bellingham-based WTA, the one agency that saw its request get the thumbs-down, it was demographics that proved fateful in its first attempt.. In Bellingham, 65 percent of voters approved the proposed .2 percent hike in the tax. Sixty percent of the WTA service area's population lies outside the city, however, and doesn't get nearly the transit coverage — and there the referendum garnered only 35 percent support. 

Bellingham formed its own transportation taxiing district and passed a measure on Tuesday that it will use to restore some service cuts.


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Comments:

Posted Fri, Nov 5, 9:22 a.m. Inappropriate

From the piece:

“Like transit operators across the country, Washington's providers find themselves in a tough spot.”

The bus and train services providers here have revenue structures that are different, and far worse, than in peer regions. The heavy sales taxes for transit employed here aren’t how others do it. People here are being abused, and the peers don’t do it that way. Maybe next time C. B. Hall graces us with his thoughts on transit he could try explaining why that might be.

The heavy sales taxes for transit here are stacked on top of other sales taxes, giving us the most regressive taxing regimen in the country. It is designed to take food off the tables of the most-economically vulnerable families. This kind of tax burden is meant to hit those with the least the hardest. It also acts as an economic anchor, by depressing consumer spending and curbing small business job growth (which is how regions ordinarily are able to pull themselves out of recessions). Yet you listen to people quoted in this story and they are plotting when and how to increase sales tax rates.

Regressive general taxing only should be used for transit in modest amounts. That is how all the peer bus and train service providers do it. In terms of taxing practices, Metro and Sound Transit are off-the-charts bad. Those targeted to be impacted the greatest by the aggregate 1.8% sale tax they impose are the economically disadvantaged and poor families.

It’s not just that sales taxes are the wrong way to pay for transit. A glaring problem setting us apart from the peer regions is individuals and families are taxed far too much for bus and train service.

Transit services providers in other regions do very well with far more modest levels of taxing and bond selling. There’s no reason this region should be any different. The only local taxing for transit should be in line with what the peers haul in, and it should not exceed what’s needed for reasonable operations and capital costs.

Metro, Sound Transit, and the transit governments in Pierce and Snohomish counties expect to haul in something on the order of $1.3 billion in local tax revenue this year, the vast majority of which will be sales tax revenue. All their peers do a great job providing good bus service and expanding train systems for their people and businesses with far less annual local tax revenue:

- TriMet (Portland) - $233 million;

- DART (Dallas/Fort Worth) - $385 million;

- San Diego Metropolitan Transit System - $100 million; and

- RTID (Denver) - $241 million.

There is no good reason for this discrepancy.

A reasonable estimate of the local taxing this year on the average family of 4 in the 91% of King County that also is in the ST district is about $455. That is far higher than any place else. For example, there is no sales tax, car tab tax, or property tax imposed by TriMet. Instead, the only local taxing TriMet does is impose a progressive tax that causes a negligible financial impact on employers. That modest tax impacts the biggest employers the most.

That Portland-area peer doesn’t target people and families with transit taxes at all, unlike here where “more is better” when it comes to heavy and regressive general taxes.

Too much tax, and the wrong kind of taxing, are the defining characteristics of how transit around here is paid for. Why are the peer regions taxing so much less for transit, and using less regressive taxes? We need to learn from transit financing practices elsewhere and improve what is going on here. The individuals quoted in this piece seem oblivious to how the revenue-raising by peers is more modest and fair to people everywhere else.

crossrip

Posted Fri, Nov 5, 2:12 p.m. Inappropriate

How can you say TriMet doesn't impose a property tax? They just had a bond measure, backed by property taxes, defeated at the polls.

And while a payroll and self-employment tax may sound just fine (with a rate increasing to 0.6918% on January 1, 2011), it seems a little silly to have that discussion when I-1098 just failed here -- even in King County.

Mickymse

Posted Fri, Nov 5, 2:37 p.m. Inappropriate

Good question. If you look at page 79 of the TriMet 2010 Transit Investment Plan you can see the pie chart of revenues. No property tax is shown there.

A newspaper article said that some 1990 bonds TriMet issued were “backed” by some kind of property tax, but again no property tax revenue is shown on that revenues chart.

The bond revenues shown on that pie chart (15% of the total) refer to “pass through” bonds and revenue bonds . . . maybe the property tax is used just to service those?

crossrip

Posted Fri, Nov 5, 2:49 p.m. Inappropriate

Crossrip, here you go again with your criticism of our transit tax system. In your complaint against the Municipal League report you seemed to blame the transit operators for their taxing systems. As I am sure you know the taxes used are those authorized by the state. They reflect our failing tax system which is perhaps the most regressive in the country since it relies on a property tax (limited to 1% annual increases), sales taxes and B&O; taxes on gross sales. It would be hard to construct a worse system. Not only is it regressive bus also incompetent to support critical services. Most states have an income tax and many help support local transit. In the 70s we were able to construct one of the strongest tax system support for public transit. It depended on local votes approving a sales tax to get access to the motor vehicle excise tax collected in the local area. This in effect was a state contribution which was lost by one of the Eyman initiatives. Even so, local voters have usually approved necessary increases in the sales tax to sustain or enhance their transit service.
What peer agencies have for a tax base is irrelevant because their state structures
are so different. Incidentally few people would define Portland's payroll tax on businesses and self employment as "progressive" but it doesn't require a vote and is levied by the transit board none of whom are elected. Simple and effective but irrelevant here since we usually require votes. If you were serious about tax reform you would have supported initiative 1098 or at least lobbied the legislature.
When the American Public Transit association started looking at quality of transit service the first winner in the medium large category was Metro transit. Pierce was honored later. We have good systems with ongoing problems aside from the loss of their revenue base but these are being worked on. And Metro provides a broader level of service than most of its peer agencies with support for carpooling, developing employer support, "guaranteed ride home" and other transit enhancements which must be considered in comparing operating costs. It's easy to jump too quickly when comparing peer data, I am not hiding under a pseudonym . Aubrey Davis

Posted Fri, Nov 5, 3:02 p.m. Inappropriate

"“Some of our long-distance commuter service is standing room only,” DeRock reports. “We have people riding 50 to 65 miles wondering if they can get a seat."

The other issue here is, should we be encouraging people to live 50 to 65 miles away from where they work? This doesn't seem sustainable to me. By providing mass transit to these far away exerbs we are inviting farms and forests to be torn down and replaced with houses.

It's not that I want everybody to live in a cubbyhole apartment or condo but when we provide mass transit to far away places we make living there possible.

These problems are not just revenue problems but are also land use problems.

GaryP

Posted Sat, Nov 6, 9:25 a.m. Inappropriate

"In your complaint against the Municipal League report you seemed to blame the transit operators for their taxing systems."

No Aubrey, the legislators, and the lawyers who handed them those draft statutes to enact, are to blame for the transit taxing system. I've never suggested otherwise.

I disagree with your proposition that what the peers do is "irrelevant". The managements of ST and Metro deserve blame for putting forward taxing measures on ballots that call for excessive taxing using regressive types of taxing, and for not spending tax revenue wisely. We can see that by comparing the amounts of tax revenue the peers use to what the bus and trains service providers here use. That is a glaring display of local poor management of public funds.

Why the discrepancy on that score? What you allude to (Metro's "support for carpooling, developing employer support, 'guaranteed ride home' and other transit enhancements) are expenses that don't come anywhere close to explaining realities such as how TriMet does not need to target families with any direct taxes whereas here the average family of four in the 91% of King County also in the overlapping RTA district pays about $455 per year in (mostly) regressive sales taxes for transit. That's a function of local government spending practices, not what the state legislature did in terms of authorizing taxes.

I disagree with a number of your characterizations of what went on "in the '70's". Old-Metro was an unconstitutional government, and it was ruled illegal in 1990. That modest sales tax for transit approved then did allow (via political horse-trading) a portion of the state MVET to be used for transit, but not that much of it when compared to the 1.8% sales tax for transit the local bus and train providers here now have. Also, Gary Locke and the legislature did away with the state MVET, not voters.

You note "When the American Public Transit association started looking at quality of transit service the first winner in the medium large category was Metro transit." That's an industry group Aubrey, it could not care less about whether too much tax is being imposed, or whether a different kind of financing scheme would be more equitable.

"Crossrip, here you go again with your criticism of our transit tax system." You pimped the passage of ST2, with a guest column in the Times. The financing plan for the $18 billion of capital spending ST is to undertake will continue through 2052. That is because of the tax collection pledges to bondholders. About $8 billion in bonds are to be used in that financing plan, requiring ST to confiscate about $85 billion in taxes through 2052 (or so). Do you disagree with any of that? How could you POSSIBLY have written a guest column touting ST2 when it calls for that kind of abusive financing plan? And no Aubrey, "the legislature said ST could do that" is not an excuse.

crossrip

Posted Sat, Nov 6, 10:38 a.m. Inappropriate

Aubrey:

The public can tell very little about how the managements of Sound Transit and Metro operate in terms of providing transit. What we know about the revenue side are bad facts. TriMet does not need to target families with any direct taxes, whereas here the average family of four in the 91% of King County also in the overlapping RTA district pays about $455 per year in (mostly) regressive sales taxes for transit.

From what we can tell about how the local transit operators spend money it looks like some of the following bad management practices might account for that abusive discrepancy in tax confiscations. There must be reasons ST board members and the KCC are imposing excess amounts in comparison to their peers. I'd suggest they are:

- selling too much long-term debt because of the fees bond sales generate for their friends,

- pledging too much tax revenue as security for long-term bonds (“locking in” excess tax streams that way is viewed in their circles as an unmitigated good),

- overspending for private-sector goods and services from favored providers,

- paying too much to other governments (for access and use rights, services, and for contributions to joint projects),

- failing to terminate certain projects, and parts of projects, in a timely manner,

- not hiring good enough managers, and failing to terminate poor-performers,

- using lax contracting practices,

- failing to manage contractors strictly enough,

- failing to utilize appropriate budgeting practices,

- relying too heavily on tax revenue (instead of grant/fare revenue),

- failing to utilize appropriate financial recordkeeping, management, and disclosure practices, and

- not completing projects in a timely manner.

There are examples already of ST engaging in each of those harmful practices, and the scathing SAO report about contracting practices at King County shows corresponding bad management there. That SAO performance audit of King County couldn't even be completed because documents couldn't be located. The potential for far greater abuses going forward is manifest, in light of the staggering amounts of tax revenue ST and Metro confiscate, and the complete absence of any taxing caps, spending caps, bonding limits, or project completion deadlines limiting the managers of those transit services providers.

Those types of bad local government management around here relating to transit could explain the excessive tax collections by the managements of ST and Metro. Their peers need far less taxing. You try to blame the statutory "tax system": "Not only is it regressive bus also incompetent to support critical services." What’s incompetent is the management of ST and Metro. They are hauling in four and five times as much tax revenue as their peers. You explain it Aubrey – why are they unable to deliver bus and train infrastructure and services as their peers do, with FAR less taxing. The fact that it is mostly regressive taxing should mean they’d be extra-careful with how they use that kind of revenue. Instead, they are spendthrifts with tax revenue that hits the worst off the hardest. Are there good reasons for that, or are they just abusive?

crossrip

Posted Mon, Nov 8, 9:49 p.m. Inappropriate

The biggest challenge for transit agencies is that they've built a cost structure that is no longer sustainable. Their revenues are mostly from sales taxes, which have dropped to 2005 levels and haven't changed much. On the expense side, their union employees have contracts that pay them COLAs and at least in some places pay increases for miles driven, too. These two raises are far exceeding the depressed revenues, forcing the dipping into reserves, and the reserves are running out. The unions are making it more challenging, as they're not willing to give up much that they've gained. Add to this that many senior employees are staying employed vs. retiring and hence fewer newer (a.k.a. less expensive) employees are in the mix. Further, while non-unionized employees have seen their salaries frozen, prior to that they were at least at some of the agencies receiving a COLA as well as a longevity increase, both going to all staff, which tends to depress performance and innovation to the lowest denominator. Generous health care benefits at some agencies have further added to the growth of expenses. Transparency is fairly good at Metro and to some extent Sound Transit in terms of having staff reports, meeting audio and video online. It's a bit tricker to navigate through their thicket of expenses, though, and agencies could stand to break down some of the complicated gibberish for the common citizen. For instance, particulars behind their major expense areas, such as compensation details and budget vs. actual costs of major projects, would help the public - their owners - gauge the decisions being made by their management. The latter are the folks who were surprised by what was looked at as well as the findings from their performance audit, no surprise here because external viewers weren't married to the status quo. Metro's outside auditors finding over half of the then-$100 million shortfall is nothing to sneeze at. All taxpayers would benefit from further transparency and agencies having and putting into effect the recommendations from external performance audits.

bricsa

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