Last month, alert readers noticed that ST’s quarterly ridership report showed a steep jump in cost per boarding.
With boardings up a bit and the number of trips essentially flat, this implied an alarming increase in ST’s unit costs. The good news is that a big chunk of this is a mere accounting illusion. The medium news is that some of it is one-time expenses. The bad news is that some of it is an increase in unit costs going forward.
First, the accounting change. Q3 expenses did jump $9.7m, or 53% from 2017 to 2018. However, $2.4m of that is simply due to a change in accounting. In September 2017, ST decided to move some agency overhead costs for the entire year 2017 from operations to the new capital projects. Therefore, that month operations got a massive credit for the entire year’s overhead charge. The chart below shows that 3Q 2017 was abnormally low, which inflates year-on-year growth.
More importantly, ST is spending an additional $1.7m on spare parts to overhaul the Link fleet, which is entering its second decade. A further $2.6m is going to the elevator/escalator problem, spending most riders would agree is long overdue.
About $2m is going to more staffing. ST’s Kimberly Reason shared some of the reasons:
- Additional maintenance staff for the fleet refresh and future growth.
- Operations taking responsibility for bits of Northgate Link and East Link that are already done.
- Testing for new tunnels and prepping for the DSTT staffing to be 100% Link.
- “Many of our craft positions entail extensive training and certification requirements, which requires early hiring.”
Part of the issue is that ST is taking on operations costs for segments that don’t have any riders yet, which raises cost per rider. The remainder is inflation, insurance, and “other expenses.”