The proposed budget for King County Metro released last month indicates an agency preparing for a prolonged and deep decline in ridership. Fare revenue projections have been lowered by at least one third through at least the middle of the decade. While the budget authorizes the restoration of most suspended service if ridership does return, capital investments are ramped sharply downwards and will constrain Metro’s capacity to serve more customers.
In a comparison of the current budget proposal with the adopted budget of two years ago, the decline in expected fare revenue is striking. The forecast for the 2021-22 biennium is reduced by half. Even in the 2023-24 biennium, fare revenue is anticipated to be 34% less than the earlier projection. It grows just 7% in the biennium after that. Metro’s view appears to be that, after an initial rebound as pandemic fears ease, bus ridership is on a permanently much lower path.*
The shortfalls in fare revenue over the next six years are larger than the loss of tax revenues. County sales tax revenues are expected to be off 10% in the 2021-22 biennium, and off 7% in 2023-24, relative to the projections of two years ago. That seems manageable, but because sales taxes make up more than half of Metro’s revenues, the dollar impact is nevertheless large; a $142 million shortfall in the next biennium, and $102 million in the biennium after that.
Despite the extraordinary decline in ridership, the budget authorizes slightly more bus operations spending than the previous budget. The Executive’s statement, however, clarified that while the budget includes appropriation authority to add back currently suspended service, the actual pace and scale of restored service will depend on demand. So the true spend rate may be much lower depending on decisions made in next year’s service changes.
For budget purposes, Metro’s working assumption is the STBD will expire without renewal. If, as is more likely, voters do approve STBD taxes this November, the effect will be on the order of a couple of percentage points more bus hours with corresponding funding from Seattle.
With large decreases in fare revenue and sales tax revenue, and perhaps a much lesser reduction in operations, what gives? The gap in the budget is made up with slower capital spending and leaning into reserves.
The capital spending plan is reduced dramatically. Just three RapidRide lines are now funded (G, H, and I lines). Metro is assisting but not funding SDOT work on a fourth (J line).
Metro is continuing work on expanding the South Base including construction of the South Annex Base by 2027. Efforts to acquire site in South King County for a new base are suspended indefinitely. That base was scheduled to open in 2030 with space for 250 buses, and would have relieved Metro’s persistent capacity constraints.
Metro is drawing down on reserves, particularly in the 2021-2022 biennium. The Executive has signaled how, without more revenue, the drawing down of reserves will constrain Metro’s financial position after 2024.
That could delay the planned recovery in Metro capital spending in 2025. Fully $494 million of the adjustment to capital spending in the 2019-2024 budgets comes out of fleet capital. Two-thirds of planned fleet investments through 2024 are deferred, but Metro targets a return to normal fleet investments in 2025.
Are we also setting Metro up for a capacity crunch? In recent years, the low capital investments through the last recession constrained Metro’s ability to provide more service in good times. Even with the ample budgets of the recent past, it simply takes years to build bases. Slow-rolling base expansion is consistent with the planned slowing of fleet purchases. But what if high ridership does return? The base capacity issues of recent years may extend into the 2030’s.
* This understates the decline in Metro fare revenues somewhat. The more recent budget incorporates the Marine Division beginning 2021. If those fare revenues were excluded, the anticipated loss of legacy Metro fare revenues would be larger.