David Lawson’s recent post very nicely laid out the contrasting views of Metro general manager Kevin Desmond and Council member Rod Dembowski regarding the need for Metro’s proposed 2015 and 2016 service cuts. Higher forecast sales-tax revenue and Metro efficiency improvements have raised the issue, and the disagreement now has centered on two reserve funds.

Generally speaking, there are two important questions to answer: (1) is the current service level (annual service hours) sustainable in the long term?, and (2) is there sufficient reserve to respond to un-anticipated, shorter-term dips in revenue? If current service IS long-term sustainable, it seems unfortunate to cut service levels in order to sort out reserves.

In any event, I think it might be useful to take a look at the numbers.  I reviewed the most recent Metro proposed financial plan (see p. 776 of this download, reproduced below) and estimated what the plan would be without the proposed 2015-16 service cuts.

The results suggest that the cuts are NOT necessary.  Even without the cuts and with an unusually large capital spending program in 2015-16, Metro’s overall reserves would increase from now to the end of 2020.  So Metro looks to be long-term sustainable with current service levels.

On the other hand, the Council and Executive DO face the task of developing a policy for the RSR – what fraction of a year’s operating expense should it have? – and sorting out how to achieve and maintain that level.


I started with the summary financial plan:

That proposal includes cuts, totaling 249,000 hours annually, previously agreed to be introduced in early 2015 and early 2016. I adjusted the plan to the additional cost of keeping those hours, and adjusting the Revenue Stabilization Reserve accordingly. The adjustments are very simple – $136 per hour of service, with 3% annual inflation starting in 2015. This  overstates the impact, as it ignores the revenue loss that offsets savings from the cuts.


A bit of explanation:

  • Cash flow – total revenue minus total expenditure. Includes an unusually large capital program in 2015/16
  • Ending fund balance – includes ALL reserves
  • RSR – Revenue Stabilization Reserve, in case of revenue dips
  • RFRF – reserve for fleet replacement (the main capital expense)
  • Ending un-designated fund balance – any balance not designated to a  specific reserve

Assuming the proposed 2015-16 cuts:

And if there are NO cuts:


  • Metro includes a sizable ($171M) undesignated fund balance as of 2020. It would be good to understand why, and in particular why it would not be applied to the RSR.
  • Without the cuts, the RSR is not increasing, which might cast doubt on sustainability. However, the Ending Fund Balance IS increasing, due to increasing fleet-replacement reserve and the large undesignated balance in 2020. This DOES support the position that Metro is financially sustainable without the cuts.
  • Metro refers to modeling of a moderate recession in the future, but provided no specifics in the budget proposal.
  • I don’t believe these results settle the disagreements over necessary reserves, but they do suggest that Metro is long-term sustainable without further service cuts.
  • Entrenched positions make the discussion difficult. My take is that Rip Van Winkle (having missed all the fun of the past year) would wake up, look at this, and say “You guys need to sort out your reserve funds” but would NOT say “You guys need to cut service or you’ll run out of money.”


44 Replies to “Are Metro’s planned cuts necessary? A quick look at the numbers”

  1. Jim, thanks very much for doing this analysis.

    I have to say my feelings are not quite as rosy as yours looking at the same numbers.

    It’s important to be aware that these numbers are based on OEFA forecasts that do not assume there will be any recession until 2020, and that assume fairly solid growth until then.

    Under those economic circumstances, I tend to feel we should be steadily building the RSR to a substantial size. Large reserves would be necessary in a recession, given the volatility of sales tax receipts. Instead, your no-cuts numbers show it more or less steady, with the exception of the unallocated funds in 2019/20. The total reserve numbers are less important — they are largely driven by fleet replacement, which will go through a peak in 2016, but will need to ramp up again around 2019 or 2020.

    Of course, I’d much rather build the RSR and avoid cuts at the same time by improving revenue a bit. But I think there is justification for cutting service a bit right now to avoid dramatic cuts, which would be necessary with only 15% of a year’s sales tax receipts in reserve, if a recession did happen sooner than expected.

    1. David, thanks for the thoughtful reply. Do you have – or can you point me to – details of recession-based scenarios? It’s hard balance unspecified “dramatic” cuts that might be in store against known cuts that are on the table now.

      1. Well, there isn’t an alternate scenario from OEFA, but we can extrapolate from past results.

        Metro’s sales tax revenue dropped approximately 15% in nominal dollars from 2008 to 2009 as the Great Recession took hold. It then resumed a normal rate of growth from the lower baseline. If we imagine the same thing happening in (say) 2018, there would be an immediate hole of about $90 million annually in the Metro budget from lost sales tax revenue. We could also expect smaller drops from fares and other revenue sources, so let’s imagine that we’re looking at a sustained $100m annual shortfall compared to no-recession projections. Obviously the agency would adjust to that shortfall over time, but I think it’s fair to project that it would take at least three or four years to do so — Metro is still trying to compensate for the hole the Great Recession put in its budget after five years. In that light perhaps $539m in RSR is more than necessary, but I think it’s equally clear that $152m isn’t enough.

        Late edit: A $100M shortfall in 2018 that could not be backfilled by RSR would probably leave us looking at a cuts package similar in size, or a little larger, to the original 650,000-hour proposal from Metro for 2014-2015.

      2. The 2008 recession is an historical outlier – I doubt the community is truly prepared to build a reserve that avoids all cuts for even the most extreme downturn. Metro’s budget proposal discussion mentions a “moderate” recession, and I’ll forage further and perhaps bake a “moderate” recession version of this calculation – to put a number on how dramatic the consequence would be in that case. Stay tuned!

      3. I would expect to see a recession as large as the 2008 recession again fairly soon, based on macroeconomic principles. It would be wise to plan for such.

        Such severe recessions have been common since the Industrial Revolution. The lack of such recessions from 1940-2007 is, in fact, the historical outlier.

        We probably won’t have one *worse* than the 2008 recession, though, unless politicians manage to add extra special stupidity on top of the existing mismanagement of the economy. So the 2008 recession is a good modeling point.

        As a result, you want about a $500 million reserve fund.

      4. If we make it another five years without a recession, and if we start at least making headway in restoring Glass-Steagal and breaking up the too-big-to-fail banks, and if Republicans don’t shut down the government again and Washington state doesn’t pass another Eyman initiative, then we can be more sure a 2008-style crash isn’t around the corner. But it would be foolish to assume that now; wait five years to see if the recovery really lasts.

      5. It is also worth noting that what matters (for this discussion) is the economy of the region, not the economy of the country, or the world. The last recession hit everyone, but it hit other areas a lot harder than it hit us. We have an unemployment rate similar to the late 90s, while other areas aren’t doing as well. It would take much for the opposite to happen. We could easily experience a major downturn while other areas of the country barely notice.

      6. Ross makes an excellent point. What if Climate Change accelerates strongly, catching up the past fifteen years of relative flat line temperature change, because the ocean heat sinks get filled up? I would expect that leisure travel by air would be considered “low-hanging fruit” in the rush to reduce emissions.

        Now, Seattle has certainly diversified since the 1970’s Boeing “Will the last person to leave Seattle please turn out the lights?” recession, but it won’t be unscathed.

        But there are things which can be done to make the system run more efficiently. Once Link gets to Angle Lake, I’d remove all mid-day, evening and weekend express service to and from points south and southeast of there. Work out some way for ST to honor transfers from Metro even for occasional riders who don’t have an Orca.

        Ditto when Link gets to Northgate, although much of the area inside King County north of Northgate already transfers there so the benefit won’t be as great.

        Finally, listen to the complainers about “empty buses”. If people in a certain neighborhood really don’t use the bus for anything except home-work-home trips, don’t irritate them with big vehicles running through their neighborhoods any time except the commuter peaks.

        I know about the howls of pain from one or two people along 32nd NW, but the agency has a responsibility to use taxpayers funds efficiently and fairly. Forcing crush loads across Denny Way in order to accommodate the folks on 32nd NW is a bad use of public assets.

        So far as the 8 goes, maybe it is time for that gondola. But that’s not a Metro solution; it would be pure SDOT.

    2. Considering the number of people nationwide who are either out of work, have given up looking (not lazy but working “off the books”, or making miserable wages- why does anybody think we’re not in a Depression now?

      However, since Washington State west of the Cascades is doint so much better than areas the map shows in red- if I were them, for fury that they can’t share in our economy. But the fact that Seattle has to be this hesitant and scared is more damning than either present figures and predictions.

      There are plenty of officials being paid to plan for the worst, and well they should. But to me, best chance of preventing the worst is to start presenting the voting public with some concrete ideas as to how transit could be better with present resources. Best use of funds available makes raising more money a lot easier.

      Reason I’m not laying off the lame operation of the Downtown Seattle Tunnel is that it’s such a perfect example of my subject here. An investment that expensive should not waste a single operating minute- BTW, any ideas on what a wasted minute down there costs?

      Or anything else anybody can name? Mayor Murray’s “dis” of speed and reliability should not “be allowed to stand.” Anybody want to call him on it in public over a non-underground example of curable waste?

      Seattle is a rich city, in a rich region. In these circumstances, one good move is to start getting together with the rest of the region- not easy. Just mandatory. But main job at hand hereabouts is not enduring poverty, but persuading comfortable people that money spent now will lead to a better future- not just a continued bad one in fear of worse.

      Mark Dublin

    3. The other, equally important point is the growth assumption — approximately 4.9% sales tax increases every year. The county assumed 5.75% when Transit Now passed in 2006, so the new rate is more sober. What if growth averages only 3% a year in the sales tax? That’s a pertinent question even if you don’t think the 2018 recession will be as severe as the 2008 recession.

      1. Throwing money at a problem is the republican perspective, though party leaders prefer the public believe otherwise. City Councilor ShamaSawant supposedly socialist perspective on the $15 minimum wage isn’t a real solution. No big city transit system I’ve seen is as inexpertly complicated as Metro/Sound Transit. Seattle isn’t getting its money’s worth with Metro. Grace Crunican is spending BART money like it doesn’t matter how it’s spent, making $300 grand a year for her part pretending to be competent. I warned Seattle about Ms Crunican after she was fired from her Oregon State DOT position (violations federal ADA and state code) and landed on her cat claw feet there, to be similarly fired in 2009, her main screwup Bertha which everyone still believes won’t be a cataclysmic catastrophic disaster undermining building foundations forcing evacuation and demolition. In the big future earthquakes, toppling the most vulnerable, unsuspecting victims inside. Metro is just another example of the confidently incompetent pretending to do everything possible to make a transportation system work like it should.

  2. One question is how much beyond rate of inflation (thus sales tax income) will the price of diesel fuel increase? The steep fuel increase a few years ago nailed TriMet pretty badly.

    Also, have there been any delay in fleet renewal that would need to be made up during the recovery years? The new trolley wire project?

  3. Recession or not, service cuts are necessary, for service improvement more than cost cutting. Metro operates far more buses than necessary along oddly inefficient routes. I question the new hybrid fleet purchases. Hybrids are great, but their lengths are old standards for route options. An all-battery electric standard bus is still a cumbersome vehicle except on freeways. On the stop-go routes, hybrid is more fuel efficient on a shorter wheelbase. The trolleybus fleet is still neglected though the service appreciated and patronage loyal. Metro is overall the worst transit system design I’ve ever seen. And Sound Transit doesn’t add as much as is possible with light rail. Hooray! A 3rd mega parking garage for the airport. More to come! The median stations streetcar line on 1st Ave is problematic. Patrons jumping from curb bus stop to median streetcar stop is a quantifiable public safety hazard. The 4th/5th Couplet option are curb stations; safer all round. Anyway, that’s my 2-cents worth. Pull the plug on Bertha.

    1. Any time anyone says “X is the worst transit system [I’ve seen, ever, etc],” my thought can only be “at least you haven’t seen Havana’s.”

      1. Or Lusaka’s (although that’s more of an ad-hoc sort of thing–still, it’s used as such).

      2. Isn’t it true, though, that through people’s own ingenuity, Havana keeps cars from the early fifties on the street, but with every piece of the operating system replaced by something home-made? Does anybody there do that with buses?

        Just curious.


      3. Mark: The government ordered brand new (terrible) buses a few years back so there hasn’t been a need. Before though I think that very much happened. And then there was the camello, a truly horrific thing:

        For what it’s worth, Metro has never come close to operating one of those monsters.

        One place Cubans do get very creative in the bus is in seating: the crowding far exceeds almost anything you’ve seen, and you have to be careful walking around lest you kick a child!

      4. Anthony Bourdain’s Parts Unknown has fantastic documentation of basically volunteer rail workers maintaing what’s left of Congo’s rail line by hand. Then in Myanmar he rides a rather frightening train that is known to derail somewhat regularly. They talk about losing wheels en route. Amazing photography and insightful context too.

    2. Yes, restructures would make the system better – I’m sure you can hear the cheering in the background. But that doesn’t require actual reduction in service hours, just redeployment of those already in the budget.
      Restructures and cuts are different things (though related) and we should be as clear as possible about that. If I was not, I apologize!

      1. Exactly. You can cut duplicative service without cutting service hours. There are areas all over greater Seattle I’ll bet that are screaming out for better service & do to duplicative routings, they cant get it.

    3. Any critical rating of transit around Seattle has to take one thing into account: Seattle has less level transit right of way than anyplace else on earth except maybe the hill towns in Portugal.

      Granted, some of them run old-fashioned streetcars up and down those hills- might be good to compare performance with First Hill line after it starts service.

      Even San Francisco, where most of the city is vertical, runs its streetcar and light rail routes on what level ground remains. True, as a trolley driver, I wish we could send Metro’s whole trolleybus crew for training with MUNI. Good practice to finish a very steep grade with a left turn through a switch with a ten foot dead-spot.

      But in general, Seattle’s topography makes difficult and expensive routes that in the rest of North America would be flatter and cheaper.


      1. “Seattle has less level transit right of way than anyplace else on earth except maybe the hill towns in Portugal.”

        Take a visit to Houston. Transit centers, bus bases, and one light rail line that somehow managed to get its own lane. That’s it. Seattle’s doing pretty well in that regard by comparison.

      2. What I meant was, Seattle’s trolleybus is negected by vehicle more than by route. Trolleybus as an excellent hill climber should have their routes straightened downtown. Passing overhead could be removed. This would minimize turns and overhead. Low-floor, multi-door entry, shorter wheelbase just for downtown routes. With Streetcar on Broadway, put wire on 12th for a trolleybus route and turnaround.
        Take more than one route straight to Western/Alaskan Way. It’s all laid out in the Seattle Circulator Plan you can request from the city copies of the pre-streetcar version.

  4. Based on these numbers, I can see the logic of cancelling the planned cuts.

    Per the appendix table, 2013/4 sales tax revenue is $910M, or $405M per year. As major recession coming in, say 2019, that reduces sales tax revenue by 15% similar to the 2008 depression, would result in revenues $60M per year less than baseline. Per the chart above for the no-cut scenario, at the end of 2018 (ignoring the optimistic yellow bars for 2019) the RSR rainy day fund would be about $150M. This fund would be sufficient to make up the gap for the recession for 2.5 years. If the recession’s effects continued longer than that, service cuts of similar magnitude as those proposed recently would be required in 2021.

    Is it better for Metro to cut $60M in annual service in 2015/6, or in 2021? In the abstract it is a toss up, but by 2021 Link will be expanded as far as Northgate, with Lynnwood and East Link in a near-term horizon. The opening of light rail will allow Metro to shed lots of service in those corridors, which will mitigate the impact of the cuts. I generally lean towards conservative planning, i.e., living below your means, but based on the data in this post it appears the Metro cuts can be responsibly avoided in 2015/6.

    P.S. The impacts of the recession funding crunch scenario I describe above are likely to happen regardless of whether there is an actual recession in that time frame, due to slow attrition in sales tax revenues as retail spending moves online and beyond the reach of sales tax.

    1. Chad, sales tax receipts are slated to be rather higher by 2018 than they are now in the OEFA scenario. For a recession in 2019 you would be cutting from about a $600M/year baseline, so a 15% drop would be more like $90M/year in lost sales tax receipts. And other revenue sources drop as well in a recession, just not as heavily. I think it’s reasonable to say that if you want to cover 2.5 years of lost receipts you need $250M in the RSR. And the Executive’s budget (with 2015 cuts) would bring the RSR to $280M in that timeframe.

      1. Don’t forget that a recession doesn’t just mean a 1-year dip in revenue. It also will including low or no sales tax growth before and after and the actual recession part of it can last for more than a year.

  5. This is great news. It would be nice if these next cuts are not in fact necessary.

    But I can see the anti-transit people chiming in: “It’s like Pierce Transit, but bigger.”

    Still, saving bus service is a good end. Maybe the February cuts will remain canceled and not a word will ever be spoken about them, like the “devastating” Pierce Transit cuts were.

    By the way, does anyone know if any more PT cuts are still on the horizon? They did say that they were going to happen eventually, but the last date I heard was June 2015, and that was over a year ago.

  6. To state the obvious to this question: yes, Metro bus cuts are necessary to maintain a functional system in the next recession, which is likely to approximate this one. The above never takes such a recession into account. And, with the STB allowing this piece to be promote to the front page, it suggests an endorsement of bad policy. *SMH*

    1. To be clear, promotion of a Page 2 piece to the front page does not imply endorsement of its viewpoint by “STB” or any STB staffer. Views on the subject matter of this particular piece vary considerably between members of the STB staff.

      Personally, I disagree with Jim’s conclusion here, but I still unreservedly supported promoting the piece. It provides analysis — however imperfect, given the limited data the public has — that no one else has tried to do.

      1. David, any article that goes up on the front page is an implicit endorsement when it comes to publications like the STB. To characterise otherwise is absurd unless there’s some editor’s note to the contrary. Either the STB editorial board supports this or it does not. If it does not, why was it promoted? While I respect both you and Whitehead’s work, I don’t think the judgement to promote this is wise. Discussion for the sake of discussion is not helpful when the longevity of Metro is at stake. The public rely on the work of the STB and when articles like this get posted, it adds credence to bad long-term policy decisions. If the STB editorial board hasn’t made up their minds on the issue, then it’s best to say absolutely nothing instead of allowing opposing views go both widely endorsed. It’s confusing and unhelpful.

      2. “This is a guest post” means exactly that. It is like a letter to the editor. On the other hand, if a comment is promoted to a post, then I think the comment is endorsed by at least one of the writers at STB. I’ve had exactly one of each, and that is the way I felt about them (someone agreed with my comment; someone else thought my guest post was worth sharing (even if they didn’t agree with it)).

        Furthermore, editorial writers disagree within the same newspaper. So just because a columnist writes an editorial doesn’t mean that the editorial board agrees with that position. When the board agrees with the position, it is usually obvious (it contains the words “the board”).

      3. No, articles are the viewpoint of the author unless they’re signed by the STB editorial board, which is usually only election endorsements and a few extraordinarily critical things. That’s how newspapers work: the publisher owns the editorial column, and the rest of the articles are chosen by the editor to be a representative sample of viewpoints. STB staff don’t always agree with each other, and they publish articles on their differeing viewpoints, and we all gain by that. There’s a minimum common denominator because it’s an advocacy blog going in a certain direction, but that is reflected more in who the authors are (are they going in that direction?) than in the minutae of every article. So you won’t see a lot of articles about building more highways and high-speed rail to the exurbs, or extolling the virtues of keeping two parallel routes five blocks apart instead of one frequent route, although I’m waiting for them to appear on Page 2 someday. And sometimes the topic is uncertain and needs a discussion. This article is both a set of recommendations and a question on whether this approach is worthwhile. You can’t ask the question without publishing the article, and then the subsequent discussion may influence the editorial board’s positions. It’s an interative process of continually discovering and refining the truth through imperfect articles, not a “We are perfect and we will hand down the truth as royal proclamations” in every article.

      4. You’re assuming that posts only by The Editorial Board are sole times of an endorsement of ideas. That’s blatantly false. As is noted by Mike, the STB is very unlikely to ever write about highways, specifically about expansion of them and focus on SOVs. That would generally be contrary to the philosophy of the organisation. Sharing shades of ideas is one thing, promoting duelling and outright contrary ideas on a controversial issue shows that either the Board is confused or very fractured. The Board absolutely should refrain from covering such issues if there can’t be agreement unless they really don’t care about the issue–and that’s just lazy. This isn’t like a newspaper, which is generally lazy in their work. STB has a mission to enhance the public welfare and advocate for positive change. A newspaper does not. Sharing opposing ideals like the above is harmful, not helpful. More to this article directly, it critically fails to account for actual recessionary forecasts and models. To establish a conclusion as Whitehead in light of that fact really makes this a debate about desires instead of numbers and facts. I really think the STB is underestimating their ability to affect policy and opinion. And no, just because it says “guest post”, does not that the STB hasn’t vetted it and endorsed it, quite the contrary: it means exactly that is has vetted the article and endorsed its contents. I see no disclaimer anywhere that would suggest otherwise.

      5. Stephen, I realize you disagree, but again for the record:

        Yes, we vetted this post to ensure the source numbers are accurate and the analysis does what it says. (And you can see my reaction to the analysis in my early comments in this thread, which were posted well before it was promoted).

        No, the presence of this post does not imply that either the STB Editorial Board (full disclosure: I am not a member) or any particular STB staffer endorses its viewpoint. Views do differ among sincere transit advocates, and our content will reflect that, by design. As I implied in my own piece on the Dembowski/executive branch disagreement, I no longer think opposition to going through with the February cuts is inherently anti-transit or even anti-Metro, considered in light of the latest projections. It just implies a degree of risk tolerance which neither I nor Metro management share.

      6. Stephen,

        You’re free to infer whatever you like about what “STB” thinks from the content of our guest posts, but that may not have any bearing on reality. In fact, STB staff are under no obligation to agree with me or anyone else on anything. The requirement is to write frequently, cogently, and informatively (in the opinion of the board) about transit or land use, and not be a jerk. Now obviously I’m biased to think that arguments we agree twith are more cogent, so the bar for someone who didn’t agree very much would be pretty high.

        For the record, I don’t know what to think about this Executive vs. Council fight. I think independent analysis of this issue is hard to find, and therefore Jim’s contribution is useful. Our readers are intelligent enough to draw whatever conclusions they like.

        STB is not a place where the committee meets and figures out all the right answers, and then issues them to the public. It’s a place where people with an interest in these issues can discuss them and work out the right path for themselves, within the bounds of some shared values that provide a basis for discussion.

  7. I’m impressed by the effort to look at projections! Thanks!

    Was this analyzed by anyone before STBD Proposition 1 was put on the ballot?

    1. This analysis would have yielded very different results when Prop 1 was put on the ballot. At the time the March OEFA projection, based on which Dow Constantine called for 550,000 hours of cuts, was the latest. The July and August OEFA projections sharply improved expected sales tax revenues, and turned the controversy from one over Metro’s immediate cash needs in 2016 into one over the size of reserves to be developed.

  8. Thanks to all for useful comments, particularly “what if” questions. Any financial plan must start from forecasts, presumably the “most likely” forecast. And then reasonable provision should be made for “what if”. Metro sized its proposed reserves for a moderate recession though without releasing details of the calculation. Page 2 has my follow-up with a very simple model of what that might mean. Many of the what ifs here are in that spirit.
    The hard question is what is a reasonable aggregate “what if” and how to deal with it. Too prudent means Not providing service that could be provided. In this case, if I am right, 7 percent of total hours. Not prudent enough means worse cuts in the future. Deciding which is the case needs details, which I hope will be made available – from both sides.

  9. “Metro bus cuts are necessary to maintain a functional system in the next recession, which is likely to approximate this one. The above never takes such a recession into account.”

    This issue got lost in the discussion on whether the article should have been published. But we should consider it on its own merits. How critical is this, and if so what should we do about it? Stephen F says it’s critical, and I also am concerned about it. I’d say that the article’s position and the county’s/city’s position is not wrong but incomplete. So they should have some plan for a recession before 2020 (the period Metro couldn’t absorb without cuts) or a deep recession (like 2008). That implies building up reserves. But there are two opposing factors. One, we can’t realistically save enough for every potential calamity, so we have to stop somewhere. Two, Metro’s budget is already stretched thin, and greater reserves would cut into both current service and severely-needed expansion service. The primary purpose of Metro is to run buses (i.e., service hours), so “cutting now to avoid cuts later” is somewhat absurd.

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