PURPOSE:
To obtain SEPTA Board approval of the Fiscal Year 2004 Operating Budget, Fare Increase and Service Reductions.
DISCUSSION/BACKGROUND:
On April 7th, SEPTA released the Fiscal Year 2004 operating budget proposal. The budget proposed an authorized spending level of $888 million, or an increase of $42 million over the adopted Fiscal Year 2003 operating budget. The increase was primarily attributed to additional expenses in the areas of labor, health care and prescription drug benefits, inflationary increases in material and services contracts, and propulsion power. Unlike Fiscal Year 2003, when State Act 3 funds were allocated to the operating budget and used as a one-time fix to balance the operating budget, this option does not exist in Fiscal Year 2004.
With transit recieving inflationary increases of 3 percent in only two of the last eight years and a 6 percent cut in the operating subsidies in the approved State Fiscal Year 2004 budget, state subsidies are now at levels allocated in Fiscal Year 1996. With this subsidy and expense level, staff was faced with a deficit of $55 million in Fiscal Year 2004.
To meet the requirement of a balanced budget and its adoption prior to the beginning of the new fiscal year, a series of severe measures were considered to close the budget gap. The closure strategy consisted of the following measures:
Staff reviewed every expense line item in the Authority's operating budget to identify expense reductions. The goal was to reduce expenses without negatively impacting the service quality. Expense reductions were considered in the areas of a freeze on material and services expenses, reduction in injuries and damages expenses, and labor savings. A target of $15 million was established.
To increase revenue, a fare increase was proposed. The proposal would maintain the existing base fare of $2.00. The price of tokens and transfers would increase 10 cents with tokens going from $1.30 to $1.40 and transfers from $0.60 to $0.70. The price of weekly and monthly passes would increase. The cost of a City Transit Division weekly pass would increase from $18.75 to $19.50 and a monthly pass would increase from $70.00 to $73.00. Regional Rail passes would also increase, with the cost of a Zone 3 weekly increasing from $34.50 to $37.00 and a monthly pass increasing from $126.50 to $134.00. Finally, fees for parking would double.
The final measure proposed service reductions. Based upon service standards already in use as part of the Authority's annual service planning process along with the criteria of ridership, availability of alternative service, and service frequency, staff proposed service reductions in all operating divisions. These reductions would impact all areas within SEPTA's five county service region. The reductions are summarized according to one of the following categories:
With this budget proposal, staff was aware of the hardship that reduced service and higher fares would have for the thousands of loyal SEPTA customers throughout the region, especially the less financially capable, and people who are dependent on SEPTA for mobility. However, the Authority has reduced expenses by more than $400 million over the last seven years. To cut further expenses to balance the budget is not a viable option and the above noted strategies had to be considered.
The proposed budget was considered at public hearings in the afternoon and evening on May 12th in Doylestown, May 13th in Media, May 14th in West Chester, May 15th in Norristown, and May 19th in Philadelphia. More than 1,000 individuals attended the hearings and more than 200 individuals spoke at the hearings. In addition, more than 800 letters and emails were recieved. The outcry from the public and elected officials was overwhelming, with virtually all testifying in opposition to the service reductions. On the other hand, there were few comments in opposition to the fare increase.
Furthermore, a number of individuals and representatives of business and civic organizations presented in their testimony the need for additional state subsidies for public transportation and a long-term solution to SEPTA's operating budget crisis. Based upon the testimony presented at the hearings, the hearing examiners (Judge Murray Goldman (Retired) and Ronald DeGraw) issued a 70 page report and recommended the following:
Since the release of the budget proposal, Congress has passed legislation in Washington that provides to Commonwealth of Pennsylvania with $900 million in Fiscal Year 2004. This additional funding along with many other budget issues are being actively discussed in Harrisburg. As the Governor and legislature continue to discuss the closure of the Commonwealth's Fiscal Year 2004 budget, we are hopeful that additional funding for public transportation will be considered during these discussions.
RECOMMENDATION:
As a result of the testimony presented at the public hearings, the report and the recommendtations of the hearing examiners, and pending the final outcome of the Commonwealth's Fiscal Year 2004 budget, staff recommends the following actions:
These changes are further described in Attachment A.
As a result of these actions, staff is proposing a $41 million budget contingency. At this time, staff does not recommend adoption of the fare increase proposal or any additional service reductions. With the state budget process not yet complete, we believe it would be premature to adopt a budget that includes such drastic measures. Upon completion and final adoption of the Commonwealth's Fiscal Year 2004 operating budget, the amount of State subsidies would be known. Based upon this information, staff would present to the SEPTA Board at its July, August, or September meeting an action plan to reduce the budget. If sufficient, additional resources are not made available, fare increases and additional service reductions would be considered as options to balance the budget.
IMPACT ON FUNDING:
Pennsylvania Act 26 of 1991 requires SEPTA to adopt a series of Service Standards and performance evaluation measures by the start of each fiscal year. The proposed standards are incorporated into the Fiscal Year 2004 Operating Budget Proposal, thereby allowing for public inspection and comment during the public hearings.
Pennsylvania Act 26 also requires a resolution authorizing approval to submit the Asset Maintenance Spending Plan to the Pennsylvania Department of Transportation. It also requires a resolution authorizing approval to file an application for a State grant and the providing of a local match.
The Fiscal Year 2004 Operating Budget proposal includes an Act 26 Asset Maintenance subsidy level of $41.7 million. The State General Fund subsidy level is $176.0 million and the local subsidy level is $58.7 million.
ALTERNATIVES:
1) Adopt the Fiscal Year 2004 Operating Budget.
2) Adopt the Fiscal Year 2004 Operating Budget with amendments.
RECOMMENDATION:
It is recommended that the Board adopt the amended Fiscal Year 2004 Operating Budget as proposed, authorizing expenditures of $875 million during Fiscal Year 2004, adopt tariffs making neccesary changes, and further direct staff to present a plan for finalizing the budget upon completion of the Commonwealth's Fiscal Year 2004 Operating Budget.
DATE: 6/13/03
RECOMMEND APPROVAL: /s/ (Faye L. M. Moore; General Manager)
Page created Thursday, 20 June 2003
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