Committee Chair Dow Constantine (kuow.org)
Committee Chair Dow Constantine (kuow.org)

The last agenda item in the June 17 Regional Transit Commitee meeting was a review of Metro’s financial policies.  The report itself (.doc) was even more boring than it sounds, but there were some interesting comments and ideas from the committee afterwards.

The much-publicized $105m Revenue Fleet Replacement Sub-fund surplus could fund Metro’s deficit through the end of 2010.  Committee members seemed to latch on to that as meaning they could avoid any pain, but of course it merely postpones the day of reckoning.  Metro service volume will not recover to 2008 levels for the better part of a decade barring a permanent new source of revenue, as Chair Dow Constantine pointed out:

It is remarkable how much you can throw in, in terms of money transferred from fleet replacement, in terms of new revenues, and still not make a huge dent in the number of service hours we’re faced with potentially having to cut.


The February 2010 25-cent fare increase will bring Metro to 25% farebox recovery.  30% recovery would require a further 50 cent increase.  Sammamish Councilmember Kathy Huckabay said she was strongly in favor of such an increase if it meant keeping today’s service, and ending the Ride Free Zone if that resulted in any savings.

Both Huckabay and Constantine were interested in coming up with a way to provide discounted fares for low-income riders so that they could raise fares more freely, but Metro General Manager Kevin Desmond pointed out there was no mechanism in place to administer this.

King County Councilmember Jane Hague asked for input on using the County’s new authority to increase property tax by 0.0075% for transit.  Unhelpfully, Seattle Councilmember Jan Drago (1:19:30) is “adamantly opposed to going back to the voters for  a property tax increase.”   Ms. Drago is apparently unaware that a vote of the people isn’t necessary for that levy.   Constantine, on the other hand, said that a Property tax increase “has to be a part of the conversation.”

Shoreline Mayor Cindy Ryu was enthusiastic about pursuing a transportation benefit district to a enact a vehicle license fee.  Constantine replied that “The King County Council is planning on having a discussion [with] all options available… The Transportation Benefit District necessarily involves a regionwide discussion with all of our cities.”  He also pointed out that a license fee, unlike an MVET, as a flat per-vehicle fee, and therefore isn’t progressive.  To enact a TBD, 60% of the cities, representing 75% of the population, must agree.

Drago also brought up Metro’s rainy day fund, reducing the cost of Metro service, and general govt overhead.  King County Overhead consumes 8-9% of Metro’s operating budget.  Some of that is for services like IT, but some of it is a general government fee levied on all County departments for the privilege of being administered by it.

Cost of service reductions are difficult to realize, since blatant inefficiency tends to be attacked when it is detected.  Moreover, extensive bus service is inherently inefficient, as low-productivity routes tend to be the last to be added.  The quickest way to make big productivity gains is to allow massive service cuts.

Coverage of the other portions of this meeting are here and here.

38 Replies to “Metro Financial Policies”

  1. “Cost of service reductions are difficult to realize, since blatant inefficiency tends to be attacked when it is detected. Moreover, extensive bus service is inherently inefficient, as low-productivity routes tend to be the last to be added. The quickest way to make big productivity gains is to allow massive service cuts.”
    Martin, your commentary is off-target, in my opinion.
    1. ‘Blatant inefficiency’ ignores all the routine inefficiency inherent in Metro. Your setting the bar too low. Also your conclusion in the 2nd sentence.
    2. ‘Low productivity routes..’ ignores the laborious process Metro planners go through every several years to match needs with resources, through the 6-year planning cycles required by FTA. Often, new services are far more productive as a result.
    3. ‘Massive cuts’, as you seem to be resigned to, in order to increase productivity, seems to look for quick improvements to the scorecard numbers, rather than focus on the real problem — that is, too little revenue for the cost of current operations.

    It seems to me, the solution is multifold. Reduce system inefficiencies, increase revenue, and size the system according to available resources, And the sooner the better.

    1. 2. Only intra-subarea. Not inter-subarea. There are routes in Bellevue and Redmond that would never compete against more Seattle service. That’s the big problem here.

    2. Mike,

      Clearly, in any system, some routes are more productive than others. If you have a bus system more extensive than most, as we do, we’ll have more routes. It would follow that marginal additions are almost by definition low-productivity ones. Hence, Metro’s higher cost of service.

      My point isn’t that massive cuts are a good idea because they’ll improve efficiency, it’s the opposite: that cost of service is a bad metric! We do poorly on it because we offer so much service.

      1. You’re likely referring to the standard economic concept of diminishing returns, in which the marginal value of additional quantities of a good generate lower marginal benefits. While this pattern applies to most goods and likely applies to some metro routes, transit systems are highly influenced by what are called network effects, in which the completeness of the network makes every part of the network more valuable.

        The effect can be seen most obviously with Link Light Rail. Everyone knows that the initial segment is going to have modest ridership, but projections expect a 3-fold increase in ridership once U-Link is complete and a substantial boost beyond that once the rest of the system is in place. This is despite the fact that U-link amounts to a mere 20 percent increase in system size. Of course the segment between UW and downtown is the most productive in and of itself, but if we had ONLY built downtown to UW it would also be of little value. Essentially, each extension makes all the existing track more valuable because you can get to more places. Thus, the network adds up to more than the sum of its parts. As such all networks go through a long phase of increasing returns, in which additional routes actually increase the productivity of existing routes because they feed potential riders into the system. For example, the routes from downtown to UW (the 70 series) seem to be really productive, but without all the routes south of downtown that feed people into the south end of these routes, the 70 series alone would be unproductive.

        This presents the danger of a downward spiral, in which service cuts not only eliminate ridership on the routes you cut, but eliminate ridership on other routes due to the network effect. You then end up with less revenue than you thought you would and have to make more cuts leading to still more declines in ridership until you suffer the fate of the streetcar systems of yesteryear.

        This issue applies to all routes, but it definitely applies to some more than others. There are no doubt many routes where their cost well exceeds their benefits even if you include the network effects and these routes should be cut. My point is merely cautionary, cutting the wrong routes could break the entire system.

      2. Well spoken, and very true. The cut portions of routes are justified by having a TRANSFER opportunity available. The network suffers overall because riders hate to transfer.

      3. Yes transfers are to be avoided if possible, but not all transfers are equal. I generally don’t mind transferring so much if the transfer is in my direction of travel and if the route I’m transferring to is both frequent and reliable. Essentially the transfer isn’t so bad if it doesn’t incur a huge cost in travel time.

        This is also why riders don’t mind rail to rail or bus to rail transfers so much but don’t generally like rail to bus or bus to bus transfers.

  2. “Transportation Benefit District necessarily involves a regionwide discussion with all of our cities.”

    I’m confused, couldn’t Seattle just enact a TBD for Seattle service and ask for a bit of tax money to increase the service levels?

    1. No, see the link. Taxing authority inherits from the state government – the Governor vetoed the ability for a municipality like Seattle to even ask voters for an MVET TBD.

      I’m not sure which municipality types can ask now. Perhaps the County can.

      1. 60% of the cities in King County would have to approve and those would have to account for 75% of the population. By my count King County has 39 municipalities which means at least 18 would have to approve the TBD.

        The good news is the larger cities are the ones most likely to approve a TBD, the bad news is I’m not sure there are 18 municipalities who’d go along with creating a TBD.

      2. No, that’s not correct. Cities can impose TBDs. What the governor vetoed was authorization for transit agencies to ask voters for a license fee for transit. If Seattle wanted to impose this fee and use it for transit, theoretically they could but it would require a complicated arrangement with Metro, or Seattle setting up its own transit system.

      3. It gets even more complicated.

        Seattle can set up its own TBD without voter approval, collecting up to $20 per car. As you note, they’d need some new arrangement with Metro to use the money for Seattle-only service, which means they’d need some political common ground with the folks outside Seattle to hammer out that agreement.

        If King County later adopts a TBD, with or without voter approval, Seattle’s TBD remains in place, and King County’s TBD fee has to credit Seattle TBD residents for the Seattle TBD fee.

        In other words, any city that wants to go first can permanently divert that funding from any future county-wide TBD.

        More than one suburban King County city is currently considering a city TBD.

      4. OK, so the TBD stuff is even more confusing than I thought.

        Still County or City TBD it still is more money for transit. In Seattle’s case the money can be used to pay for some of the lost Metro service or for streetcars. For Bellevue they might be able to use some of the money for that Link tunnel they want.

      5. It’s more complicated still – but not necessarily in a bad way.

        TBD’s are very flexible. They can be created by counties, they can be created by cities, and they can be created for groups of cities or a defined service area that included parts of cities. They could be a good way for Seattle to tax itself, or for a subarea to form a taxing district.

        They can access several different revenue mechanisms. Some of those can be enacted without a public vote (and some people assume that means only those tax mechanisms are feasible). Others can be enacted with a vote within the proposed taxing district.

        What I’ve wondered, and haven’t gotten a good answer to, is whether they can be used to fund ongoing operating expenses. TBD’s were set up as a way to fund capital projects, and they are supposed to go away once those projects (and their financing, if any) is paid off. The language seems squishy enough (to me, a non-lawyer) not to know whether an ongoing tax can be enacted using this method and applied to operating expenses.

        I’ve also wondered whether a TBD could be crafted to appeal to a cross-section of people (say, transit, sidewalks and potholes) and packaged as an initiative.

      6. On what a TBD can fund, excerpts from the AWC’s TBD FAQ at http://www.awcnet.org/documents/TBDFactSheet0907.pdf

        What transportation improvements
        can be funded by a TBD?

        A TBD can fund any transportation improvement contained
        in any existing state or regional transportation plan that is
        necessitated by existing or reasonably foreseeable congestion
        levels. This can include maintenance and improvements to
        city streets, county roads, state highways, investments in high
        capacity transportation, public transportation, transportation
        demand management and other transportation projects
        identified in a regional transportation planning organization
        plan or state plan.

        Can a TBD fund maintenance and
        preservation activities?

        Yes. A TBD may fund the operation, maintenance, and
        preservation of the programs and facilities noted above.
        Additionally, maintenance and preservation activities are
        noted in many state and regional transportation plans. For
        example, preservation of existing transportation facilities
        is the number one priority within the Washington State
        Transportation Plan. Eliminating the backlog of asphalt
        pavement projects and maintaining chip seal paving, along
        with many other maintenance and preservation activities, are
        specifically noted as priorities in that Plan.

        However, keep in mind that any transportation improvement
        also needs to be “necessitated by existing or reasonably
        foreseeable congestion levels”. Consequently, not
        every street, road, transit program, etc. will qualify as a
        transportation improvement.

      7. One important point on this, to qualify for TBD funding, a facility has to be in someone’s transportation plan.

        If you’ve ever read through the transportation improvement plans of any city or county, you’ve probably noticed a huge laundry list of projects that nobody really expects to happen any time soon. But they have to be in the plan, or else when someone comes to town offering stimulus dollars or a new grant program or some other new funding source, you have to get the project into the plan before you can even apply for the money.

      8. All of this ignores an enormous potential source of revenue, at least in Seattle: the general fund. The city currently allocates hundreds of millions a year to SDOT, most of which goes to road projects of various kinds. Unlike WSDOT money, the source of SDOT’s cash is general city taxes, not the constitutionally protected gas tax. There is no law of any kind that prevents Seattle from taking money it is currently spending on road projects and diverting it to transit funding.

  3. First, having worked in government, I got a chuckle out of this one: “Cost of service reductions are difficult to realize, since blatant inefficiency tends to be attacked when it is detected.”

    Second, it looks like the problem is in the cost structure, which seems to be growing out of control relative to revenue, and even inflation. All labor costs. Per the report:

    Costs of Service
    • The financial policies call for the cost of providing bus service to grow “at or below the rate of inflation and if they are projected to exceed this amount, the Transit Division shall explain why and provide the Council with options for reducing hourly costs to the rate of inflation.”
    • As the Muni-League observed in its November 2008 Review of Metro Transit, “the cost per hour of service increased 32%…..from $99.94 in 2000 to $131.72 in 2007, significantly faster than inflation.”
    • In the materials accompanying budget proposal transmittals, the Transit Division generally includes a discussion of cost growth, as with the 2007 budget proposal:
    – “Annual inflation is assumed at 2.8%. For financial planning purposes, operating costs are projected to grow above inflation by .5% in 2008 and beyond. Primary factors are flex benefits, workers compensation, insurance and wage growth above inflation….”

    1. Interesting to observe is the average growth per year is about 4.5 percent. Most of this could be attributed to wage increases and benefit costs. One can wonder why the cost is so much higher than the surrounding agencies. Much is due to Metro’s long deadheads and heavy bias towards commuter service.

      If the single run peak trips were largely eliminated, and part-timers allowed to do 6 hour runs, the cost would drop a significant amount.

      Of course, this won’t happen.

  4. I noticed the Sammamish Councilmember had no problem suggesting an end to the Ride Free Area. I hope she intends on asking the City of Seattle Government about that before pushing it to a vote. I think it should be discussed, but first proposed by the city where the RFA is, or it would look like a suburbanite dictating to the big city.

    1. Seattle pays for the RFA. If they get rid of it, Seattle just wouldn’t have to pay anymore.

      1. I don’t think that is correct Ben.
        The last time I checked, the Downdown Assn pays Metro, and that was less than $100,000 a year, some many years ago. I don’t think it has ever gone up, and surely the lost revenue in the RFA must be many, many times the amount collected. When your bleeding cash, everything has to be on the table for a reasonable discussion to take place.
        But like I said, its been awile since I checked on it, and I would be curious if anyone has the real info, and could share the numbers.

      2. “surely the lost revenue in the RFA must be many, many times the amount collected.”

        There’s really no evidence of that. I wouldn’t speculate.

      3. I guess that kinda makes my point. Shouldn’t there be some evidence about the cost/benefit relationship of the RFA, and who should pay for the service.
        Part of Metro’s current problem is one of too many ‘untouchables’. Maybe that’s a big part of the reason their cost are high, and climbing faster than service plus inflation.
        Having driven all the downtown routes for years, I speculate that 10 to 15 percent of all riders origin and destination are within the RFA, and wouldn’t be surprized if it were 30% in the tunnel. That’s a lot of riders each year.
        I’m not sure how you could calculate the cost savings of not collecting fares downtown, or what the alternatives would cost.

      4. And what of the other agencies who honor the ride free area but are not reimbursed by the City/Downtown Association? The City is getting quite the deal.

      5. Portland is considering abandoning the fareless square, except for MAX and Streetcar. Kind of the opposite of what we are going to have here in 9 days.

      6. Portland’s MAX and Streetcar serves the same function as most of our high ridership, high frequency routes and they function well as a downtown circulator with good coverage. Their Fareless Square buses are already pay as you board so shifting people to the train won’t be too much a problem.

      7. Anyone who thinks that the RFA costs metro one red cent is confused by the difference between marginal and average costs. The only possible marginal revenue from eliminating the RFA would be Belltown Commuters. The vast majority of people do not get on and get off in the RFA. They came from outside the RFA and thus already paid their fare, or more likely they have a regular bus pass. The RFA is a misnomer, implying that people are not paying for the service when they already are. The RFA simply increases the efficiency of boarding. The transaction costs of collecting fares would greatly exceed the revenue generated.

      8. I’m not so sure you can jump to that conclusion without actually crunching the numbers. Yes, boarding is quicker, but with many more boardings in the RFA generated by a free service, more bus trips along the route are required to handle the peak loads generated within the RFA. That cost money.
        Transaction cost ‘could’ be lower than revenue generated.

      9. I see two possible sources of revenue from eliminating the RFA.
        One is by collecting fares from those who make trips only within the RFA during the time a transfer is good. This is everything from those Belltown or Pioneer Square commuters to people who take other modes into the RFA but use metro to travel around the downtown core. A good example would be my co-workers who use metro to get to/from their parking or to run errands during the workday.
        The second is by reducing the number of fare jumpers and increasing fare enforcement. With pay as you leave there are a number of people who will hop a bus and then refuse to pay when they reach their destination. True this may not be all that much revenue directly but it helps cut down on the perception that fare evasion is acceptable.

      10. Excellent points, Chris.
        How about this idea to help with the budget shortfall.
        Eliminate the RFA. All boardings are through the front door, everywhere, all the time. This makes fare evasion dificult, if the driver/fare inspector refuses service to cheaters. Loading will be somewhat slower, but ORCA, and Puget Pass have eliminated a lot of currency transactions. Alighting is all doors, all the time, which is a real time saver on trips leaving the CBD, and might even be a wash for the slower boarding times.
        The system is greatly simplified by having only one rule for payment,(Pay as You Enter) and is consistent with ST tunnel fare policy.
        If getting around Seattle or Bellevue for free is such a big deal, let the cities start their own jitneys, and pay for them with local funds.
        While on the subject of saving money for Metro, here’s another idea.
        Eliminate the zones and peak/off peak fare structure. It’s another source of confusion for riders.
        Instead, have regular bus service that cost X per ride, and premium bus service that cost X plus $1.00, or some other number. The point is this.
        BRT, and long haul, limited stop buses cost more to operate, therefore should charge a premium fare. Short haul, milk runs should be viewed as the baseline bus service, regionwide, and be charged at a flat, single rate. This makes revenue increases in the future more palitable, if Metro can justify charging more, for premium services.
        Just ask your cable/salelite guys how this works.

      11. Mike, my worry about eliminating the RFA is mostly about that First set of choice riders. If the RFA goes away the possible effects either hurt merchants as they choose not to take trips they otherwise would, or traffic is worse because there are more SOV’s downtown.

        On the other hand “board in the front leave in the rear” might actually speed up loading and unloading somewhat.

        I also agree with your other points about fare zones and peak/off-peak. I’d say creating premium services with anything other than Rapid Ride or BRT adds back confusion that was eliminated by simplifying the fare structure though. The flip side is peak express routes are exactly the place where you can get away with demanding a high fare.

      12. That’s sort of what I had in mind. Most routes would be a flat fare all day (trolleys, 255, 150, 101, etc). Routes that are primarily long distance, with few stops, or premium service like BRT, would command a premium fare.
        Those routes would end in an X (158X, 2X, 306X, etc), so that riders would know it’s a premium fare bus, and if time is not a factor, and a milk run is on the way, skip the express and take the local.

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