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Cincinnati Metro: Budget forecast 'depressing as hell,' says transit board member

Cincinnati Metro: Budget forecast 'depressing as hell,' says transit board member
Posted at 11:53 AM, Jun 19, 2018
and last updated 2018-06-19 12:42:14-04

CINCINNATI -- A deep dive into Cincinnati Metro's financial affairs confirmed what transit administrators and trustees have feared for years: If ridership doesn't increase, the bus service will continue to struggle with budget deficits for the foreseeable future.

That was one of several observations and conclusions from Tuesday morning's meeting of the Southwest Ohio Regional Transit Authority's Board of Trustees meeting, when analysts presented their findings of an external audit of Metro's finances.

"This is depressing as all hell," trustee Peter McLinden said. "I think I've had more fun at a funeral."

At SORTA's request, the Cincinnati USA Regional Chamber and the Cincinnati Business and Cincinnati Regional Business committees contracted consulting firm EY -- which has offices in Cincinnati -- to perform the audit. Representatives from the firm warned board members that Metro does not have an easy road on the way to filling a looming $184 million budget gap.

"We didn't identify a lot of low-hanging fruit -- quick fixes where we just say, 'Do this and you'll save $3 million,'" said EY analyst Rob Tague. "There's not a lot of opportunity here."

For Tague, there is no one simple solution, but he pointed to bus ridership as critical in working toward solvent finances for Metro. He also drew other conclusions Metro leaders already suspected to be true: Metro's aging fleet, flat fare rates, rising maintenance costs, and rising labor costs are all contributing to the projected deficit.

And Metro's funding model hasn't changed in decades.

"Most of these are not a magic bullet," Tague told the board. "I think the best way to fill this gap is less ridership decline."

Since 2012, Metro has seen an average of roughly 3 percent per year. Tague called this a "hefty" decline.

As far as new sources of funding, Tague didn't get very specific -- say, a new sales tax levy. He did observe, though, that Metro needs to find a way to increase its capital revenue -- that is, what it spends to buy or build new things, like new buses, for example.

That's because, right now, operational costs are eating into Metro's ability to invest in new buses and new routes of service.

IN DEPTH: What could a sales tax do for Metro bus service?

One of two sources of federal money Metro receives each year comes from the Federal Transit Administration in the form of an Urbanized Area Formula Grant -- colloquially known as a 5307 grant. Traditionally, 5307 funds go toward capital expenses, but SORTA's financial director David Riposo told the board Tuesday that Metro is diverting "99 percent" of "those funds to cover operational expenses.

"We're diverting as much as is allowed by federal law," added SORTA CEO Dwight Ferrell.

"The mass majority has not been going to replace buses," board chair Kreg Keesee said.

Nearly 30 percent of Metro's 300-plus bus fleet is considered too old by industry standards, Metro warned last fall. Tague explained how Metro's inability to replace its aging buses is not only hurting reliability, but it's also increasing maintenance costs and putting extra strain on the fleet's newer models.

"So, our new buses are getting older quicker," Keesee said.

As for covering operational costs, Metro aims for the industry standard of 20 percent of that money coming from fare box revenue. EY's analysis showed that through 2017, Metro was achieving this benchmark, but stands to fall short in 2018.

SORTA officials have tossed around the idea that fare increases would be necessary going forward, and Tague confirmed that the fare structure needs to be revisited at least, even if only to introduce a dynamic fare structure.

"Even if, maybe, fares only increased during rush hour or peak ride times," he said.

All of EY's budget projections assumed fare would increase incrementally to $3.30 by 2028. Local bus fare costs Metro riders $1.75 now. As WCPO previously reported, some worry fare increases would hurt low-income riders who rely on Metro to get to and from work and run errands.

Metro has not increased its fare structure since 2009. A Metro fare increase would require approval from Cincinnati's City Council.

"We can't do this on our own," Keesee said.

It wasn't all doom and gloom out of Tuesday's meeting. Board member Gwen Robinson thanked Tague for the report and said, "There's opportunity here."

For Keesee, the report provides further proof of Metro's urgent need for a new source of funding.

"This shows us that these deficits are real," he said. "Truly, we're not crying wolf. They're real."

Tuesday morning's meeting was board members' first opportunity to see the analysis, and Keesee directed them to review the information for further discussion.

The board has until early August to submit a sales tax levy proposal to fund Metro for it to appear on November's ballot. The board's next meeting is Tuesday, July 17 at 6 p.m. It will be the board's last regularly schedule meeting before the deadline to submit a ballot proposal.

Pat LaFleur reports on transportation and mobility for WCPO. Connect with him on Twitter (@pat_laFleur) and on Facebook.