Monday, March 12, 2012

Toward a way to pay for a transit system

For almost half a century, Port Authority of Allegheny County, metro Pittsburgh's public transportation system, annually faces the question of figuring out how to pay the bills for the coming fiscal year. Their accounting staff crunch the numbers, calculating salaries, fuel, pensions, repairs, health care, maintenance, etc., on the expense side, and fares, tax subsidy expected, and the odd nickel and dime from advertisements on buses, on the revenue side. By law they must make ends meet. Some years are easier than others. Recent ones have not been easy.

This year, the hangman's noose awaits. The governor is not going to ride in on a white horse and save the day. This governor and this legislature have decided it is not going to fund transit, and there's precious little hope things will change. "Can't fund your local transit system? Not the state's problem, we can't pay our own bills, let alone yours. Fix it yourself."

So, let's do that. Never mind Harrisburg. I hate to say it, but they might be doing us a favor. Maybe we should figure it out ourselves. That said, I herewith put forth a plan for doing just that.

A review of some facts, with very rough numbers:
* It costs roughly $330 million to run the system the way it was designed.
* There are about 100,000 warm bodies who ride the system, however counted. Call it 110K with the occasional riders, just to make numbers divide nicely.

$330M / 110K people = $3K/year for each of those bodies, if the entire system was paid for strictly out of fares. That is far and away too much for one person to pay to use a transit system. But just for sake of argument, that shows the scope of the problem. If no tax subsidy and no employer or university or company underwrote any cost, each rider would be out $3K. This is still cheaper than owning and maintaining a car, but not by much.

To make clear, I am talking about running the system as it was designed to run, before routes and runs were cut in March 2011. Drivers have the same wages and benefits as what they have under the current contract, or at least that number is the same, for sake of argument here. No cuts to anything.

The goal here is in finding an acceptable balance among fares, tax subsidy, ad revenue, and corporate and university help. Within the realm of tax subsidy, there are various potential levels. Right now it is being done entirely by state and county subsidy. Federal and city/municipal numbers do not enter into it. The problem has been that the state has routinely been asked to kick in 60% or better of the cost, and that isn't going to happen anymore.

Rather orthogonal to this discussion, it would help if more people decided to rely on the transit system on a regular basis. If there were 165K instead of 110K riders, the out-of-pocket expense would be $2K, not $3K, per person, per year. Because demand would be higher, so would expenses, but we'll leave the number crunching to the experts. Just accept that the overall cost per rider would be less, the more potential riders there are. That's a long-range goal.

Now for some bright ideas. I'll start with fare policy, then move on to revenue sources.
* Remove the zone system. Just one zone. It either pays to run a bus to the hinterlands, or it doesn't. (Edit: Port Authority did propose a premium on long-haul trips from the outer suburbs in 2010, and the idea has merit.)
* Revamp transfers to use a timed-expiration system. Pay one fare, use that for two hours, whether you ride one bus or five to get where you're going.
* $2 fare, whether you ride one bus or five in that two hours.
* $6 all-day fare, whether you ride two buses or 10.
* $1,000 annual pass, unlimited riding. $500/6mo, $250/3mo, $85/mo, $25/week.

The point of this is to support using a system which requires multiple trips to get from A to B. Make fare payment a non-issue.

Now for some revenue.
* I am expecting that 1/3 of the cost will come from voluntary fares, whether at the farebox or a prepaid pass. That's not far from reality. Easily within reach, no real change.
* Get another 1/3 from various tax sources. I would do it with real estate taxes, focusing more on land than buildings. That's less than we're getting now. The mix of taxes will have to change, and I'm being intentionally vague, but 33% instead of 65% of the pot from current tax sources.
* For the remaining 1/3, I expect companies to chip in, big time. We already have Pitt and CMU contracting to allow their communities to have unlimited access to the system.

To get this rolling, I would impose an avoidable tax on all companies, assessed on employee headcount. Without avoiding it, companies would pay $500 per year (numbers are negotiable) per employee to the county to help pay for transit; that's about $42/month or $2/workday. This can be avoided by arranging with the transit company to purchase monthly bus passes for their employees, using part of the employees' regular earnings but pre-tax. This way, the employee gets a pre-tax benefit, anyone in the family can use the pass if the employee decides to drive to work every day, and PAT gets the full value of the fare paid. Alternatively, the employer can simply buy the passes outright and give them to employees, taking a tax write-off on the cost of the fare paid. Federal tax law already supports this.

The main thing is to put pre-paid fare out on the streets in large amounts, preferably in the hands of people who might not otherwise use the system. In doing this, companies would come up with $110M. That's only about 110K passes; at least twice that many people work inside city limits each workday.

The real main thing, of course, is to pay for a transit system when the state will not.

This, I think, will get the job done, raising $330M annually.

We all know what we have to lose by NOT doing this.