Article published by the Austin American Statesman.
Hard times ahead for Cap Metro; bus service cuts possible
By Ben Wear
AMERICAN-STATESMAN STAFF
Monday, Sept. 19, 2011
The Capital Metro board, under a state mandate to increase its financial reserves, probably will approve a 2011-12 budget later this month that instead will decrease agency savings by $500,000 to $1.5 million. Then the real money problems start. The result could be further cuts in bus service.
The transit agency, beset by increasing fuel prices, stagnant bus ridership, a rail line with modest usage and a legislative requirement to change its labor structure, is facing something of a budgetary time bomb.A new federal requirement that freight railroads and commuter lines install "positive train controls" — much-expanded remote monitoring with capability of shutting down a train from afar — could cost the agency as much as $40 million over the next four years.
An aging bus fleet, with almost two-thirds of vehicles at or one year away from recommended retirement, will cost millions more in the next few years. And the financial impact of that agency restructuring, which will involve Capital Metro over the next year hiring private companies to operate all of its bus routes and was intended to save money, could boomerang into added costs instead if federal regulators side with Capital Metro's union in an ongoing dispute.
Board member Frank Fernandez, who leads the panel's finance and audit committee, said the new federal train mandate is the most immediate threat. "For 2013, that's what is going to destroy our budget," Fernandez said at a board meeting last week.
The proposed budget for 2011-12, which starts Oct. 1, is already a problem. The agency expects to bring in about $206.1 million, about three-fourths of that from the 1 percent sales tax that is the agency's financial bulwark. That's about $22.6 million less than this year's revenue, principally because of a $19 million drop in anticipated federal grants.
Spending, including a historically modest $20.6 million on long-term capital needs, would be $206.6 million. That would decrease the agency's current $21 million in savings to $20.5 million by next September.
The actual spending picture is worse, however, because the proposal budget contemplates pushing into 2012-13 about $1 million of spending for severance and payments for accrued vacation and sick leave to employees expected to be laid off in the restructuring by next August. Because that could cause those fired workers to lose or delay unemployment benefits, at least some board members said it would be better to take the hit this coming budget year instead. "I'd say that's not the way to go," board member John Langmore said. "We're not saving, we're just deferring."
Deciding against the deferral option would mean dipping into savings by $1.5 million in the coming fiscal year. But the Legislature, in a law passed this spring, required that Capital Metro by 2016 have at least two months of operating costs in reserve, or about $30 million. And because the law as written does not allow the agency to use any of that money for temporary cash flow shortages during the year, agency finance chief Billy Hamilton said Cap Metro would actually need as much as $45 million in reserves.
Capital Metro also expects to spend about $2.4 million in the coming year on the labor restructuring effort, $15 million in commuter rail operating costs and train car debt service and — in a foreshadowing of the trouble to come — $500,000 for early engineering work on positive train controls.
Congress, in the wake of a collision between a freight train and passenger train in Southern California that killed 25 people, passed what was called the Rail Safety Act of 2008. Among the law's provisions, it required positive train control. The engineer of the commuter train in the California accident had sped past a track stop signal — he was found to have been texting at the time — and investigators concluded that remote control of both trains could have avoided the collision or minimized the speed at which it occurred.
Capital Metro, other commuter rail operators and freight railroads across the country now face what the agency's rail operations chief Melvin Clark calls an "unfunded mandate." Designing, buying, installing and debugging the cutting edge, wireless technology will cost $30 million to $40 million by the 2015 federal deadline, Capital Metro estimates. "It will be extremely difficult to get a waiver, or get it delayed," Capital Metro president and CEO Linda Watson told the board.
"We are still at a place where we need to grow our reserves," Langmore said. "Forget the statute, just as a responsible public agency we need to do that. ... I would err on the side of cutting services."
bwear@statesman.com; 445-3698
Hard times ahead for Cap Metro; bus service cuts possible
By Ben Wear
AMERICAN-STATESMAN STAFF
Monday, Sept. 19, 2011
The Capital Metro board, under a state mandate to increase its financial reserves, probably will approve a 2011-12 budget later this month that instead will decrease agency savings by $500,000 to $1.5 million. Then the real money problems start. The result could be further cuts in bus service.
The transit agency, beset by increasing fuel prices, stagnant bus ridership, a rail line with modest usage and a legislative requirement to change its labor structure, is facing something of a budgetary time bomb.A new federal requirement that freight railroads and commuter lines install "positive train controls" — much-expanded remote monitoring with capability of shutting down a train from afar — could cost the agency as much as $40 million over the next four years.
An aging bus fleet, with almost two-thirds of vehicles at or one year away from recommended retirement, will cost millions more in the next few years. And the financial impact of that agency restructuring, which will involve Capital Metro over the next year hiring private companies to operate all of its bus routes and was intended to save money, could boomerang into added costs instead if federal regulators side with Capital Metro's union in an ongoing dispute.
Board member Frank Fernandez, who leads the panel's finance and audit committee, said the new federal train mandate is the most immediate threat. "For 2013, that's what is going to destroy our budget," Fernandez said at a board meeting last week.
The proposed budget for 2011-12, which starts Oct. 1, is already a problem. The agency expects to bring in about $206.1 million, about three-fourths of that from the 1 percent sales tax that is the agency's financial bulwark. That's about $22.6 million less than this year's revenue, principally because of a $19 million drop in anticipated federal grants.
Spending, including a historically modest $20.6 million on long-term capital needs, would be $206.6 million. That would decrease the agency's current $21 million in savings to $20.5 million by next September.
The actual spending picture is worse, however, because the proposal budget contemplates pushing into 2012-13 about $1 million of spending for severance and payments for accrued vacation and sick leave to employees expected to be laid off in the restructuring by next August. Because that could cause those fired workers to lose or delay unemployment benefits, at least some board members said it would be better to take the hit this coming budget year instead. "I'd say that's not the way to go," board member John Langmore said. "We're not saving, we're just deferring."
Deciding against the deferral option would mean dipping into savings by $1.5 million in the coming fiscal year. But the Legislature, in a law passed this spring, required that Capital Metro by 2016 have at least two months of operating costs in reserve, or about $30 million. And because the law as written does not allow the agency to use any of that money for temporary cash flow shortages during the year, agency finance chief Billy Hamilton said Cap Metro would actually need as much as $45 million in reserves.
Hamilton anticipates a $4.7 million increase in fuel costs over what turned out to be an unrealistically low number in the current budget. It assumed fuel could be bought for $2.31 a gallon, whereas the actual cost for much of the past year was well above $3 a gallon.
Capital Metro also expects to spend about $2.4 million in the coming year on the labor restructuring effort, $15 million in commuter rail operating costs and train car debt service and — in a foreshadowing of the trouble to come — $500,000 for early engineering work on positive train controls.
Congress, in the wake of a collision between a freight train and passenger train in Southern California that killed 25 people, passed what was called the Rail Safety Act of 2008. Among the law's provisions, it required positive train control. The engineer of the commuter train in the California accident had sped past a track stop signal — he was found to have been texting at the time — and investigators concluded that remote control of both trains could have avoided the collision or minimized the speed at which it occurred.
Capital Metro, other commuter rail operators and freight railroads across the country now face what the agency's rail operations chief Melvin Clark calls an "unfunded mandate." Designing, buying, installing and debugging the cutting edge, wireless technology will cost $30 million to $40 million by the 2015 federal deadline, Capital Metro estimates. "It will be extremely difficult to get a waiver, or get it delayed," Capital Metro president and CEO Linda Watson told the board.
As for the buses, 126 of them are at least 12 years old, the typical lifespan of a transit bus, with another 130 within a year of retirement age. Watson said the agency intends to buy 20 to 30 buses a year for five years, starting with the 2013 budget year. Such buses typically cost $350,000 to $400,000 each, depending on the length of bus, with federal grants covering 80 percent and local agencies the rest. The cost to Capital Metro in local money, depending on what it buys, would be between $10 million and $20 million through 2017.
Like many other transit agencies, particularly those that have spent heavily on rail, Capital Metro will probably consider cutting the hours of bus services going forward as a way to trim spending. The proposed budget assumes a 0.6 percent decrease in hours for Capital Metro's main bus routes and a 4.2 percent cut in University of Texas shuttle bus hours, but a 3.3 percent increase in commuter rail hours.
"We are still at a place where we need to grow our reserves," Langmore said. "Forget the statute, just as a responsible public agency we need to do that. ... I would err on the side of cutting services."
bwear@statesman.com; 445-3698
0 comments:
Post a Comment