BART plan for dealing with $10M deficit has no fare hikes or service cuts


BART plan for dealing with $10M deficit has no fare hikes or service cuts

BART customers will be happy to know that they won’t see their fares go up or their train service cut thanks to the budget plan General Manager Dorothy Dugger proposed for the upcoming fiscal year.

Despite facing a looming $10 million deficit, Dugger strongly opposed fare hikes and service cuts as the solution to closing the projected shortfall for Fiscal Year 2011 (FY11), which starts July 1.

On Thursday, April 8, BART Board Members will review the $582.1 million FY11 Preliminary Operating Budget, which is balanced.  The budget eliminates half of the projected deficit by tightening BART’s belt and further cutting expenses instead of asking riders to make sacrifices.

"I recommend we keep fares and service intact, as this will position us to regain ridership as the economy begins to grow," Dugger said. "It should be noted that based on recent customer survey data, it is clear that the sluggish economy and the cost of riding BART are increasingly impacting mode choice. Given that 76% of BART’s customers are 'choice' riders, it is important that we work to keep BART as the affordable, reliable transportation mode of choice."

DEFICIT PARTIALLY ELIMINATED THRU BELT TIGHTENING
In February, BART initially projected the continued decline in sales taxes and ridership revenues, which account for about 85% of BART’s operating income, would lead to a $14 million deficit going into FY11. 

"Since February, we have continued to update our budget projections and we now estimate a $10 million deficit for FY11 before the inclusion of any recommended budgetary solutions," Dugger said.

The preliminary operating budget cuts the deficit by $5.4 million through trimming expenses and eliminating 37 operating positions.  Twenty of those positions will be transferred to capital projects funded by the Capital Budget.  Of the remaining 17 positions, nine are vacant. That leaves eight employees in positions slated for elimination. 

"As in the FY10 budget revision, we are committed to achieving the labor cost savings without layoffs by carefully managing and reducing positions through attrition," Dugger said. "Our experience to date with the FY10 process has been encouraging, with placements accomplished or in process for most of the positions that were eliminated." 

RESTORED STATE FUNDING HELPS DEFICIT
The budget proposes to close the remainder of the deficit by using some of the $26 million BART is to receive following the legislation the Governor signed that partially restores public transit funding after a two year drought.  During the past two budget cycles, the State diverted all public transit funding, called the State Transit Assistance (STA), into its general fund.  That’s left agencies like BART with huge holes in their budgets. 

The partially restored STA revenues will be subject to annual appropriations by the legislature. The new legislation results in anticipated revenue of $26 million in FY11 and approximately $23 million in FY12 and beyond.

"While the newly approved STA legislation appears to provide BART with an on-going revenue stream, the funding is more vulnerable to state budget diversions than previous STA revenues that were specifically directed to public transit by a voter-approved constitutional amendment, Proposition 42," Dugger said.  "Given the transit industry’s experience with STA funding and the State of California’s ongoing budget problems, future STA revenues are not a guarantee. The Metropolitan Transportation Commission has cautioned transit operators that the law is subject to change and we should treat the funding accordingly. Due to the uncertainty surrounding future STA funds and the economic recovery, we will continue to emphasize controlling expenses."

REPLENISHING DWINDLING RESERVES
Dugger is also recommending the use of $9 million of STA funding to meet the Board’s policy to keep an annual operating reserve equal to 5% of annual operating expenses.  In this case that would mean the operating reserves should be at $24 million.   Currently the reserves are $15 million. 

"We have previously discussed the need to increase the reserve percentage, but given the uncertain economic climate, restoring our reserves to at least the 5% goal should be a high priority," Dugger said.  "During FY11, it is important that we revisit the operating reserve policy, given the dramatic economic ‘boom and bust’ cycles we have experienced over the last decade."

BART Fiscal Year 2011 Preliminary Budget  (460k .pdf) 

NEXT STEPS
The BART Board will take the next two months to consider the FY11 Preliminary Operating Budget. Here are some key dates:

- May 13, 2010: BART staff gives a detailed presentation to the Board on the proposed budget

- May 27, 2010: Public hearing on Preliminary FY11 Operating Budget, presentation of Capital Budget

- June 10, 2010: The BART Board considers adoption of the budget

Should the Board adopt the FY11 Preliminary Operating Budget, it will take effect July 1, 2010, and end June 30, 2011.