TriMet's Budget: The Big Picture

February 10, 2010

Due to the continued economic recession and declining payroll tax revenues, TriMet faces a $27 million budget shortfall for our fiscal year that begins in July*. Stimulus funds of $7.2 million and a 5% administrative cut, including a salary and hiring freeze, will make up $18.5 million of the shortfall. We propose to make up the remaining $8.7 million by a 5-cent fare increase and reductions to bus and MAX service. We are also exploring WES frequency reductions of up to 15 minutes and/or reducing hours of operation.

Imagine trying to balance your family's budget when you don't know how much income you're going to have. Because payroll taxes make up 55% of TriMet's income, that's the position we're in. Each year, we do the best we can to project what our income will be, but the recession and double-digit unemployment directly impact payroll taxes, which translates into less income for TriMet. Unemployment also affects ridership. In the past 6 months, bus ridership has declined 10 percent overall and nearly 16 percent during rush hour, which means additional lost income.

Last year, we realized our budget was out of balance by $31 million due to lower-than-expected payroll tax revenues. We made up this shortfall through a combination of internal cost-cutting (hiring and salary freeze, executive furloughs and reduction of TriMet staff by 120 employees) totaling $10.5 million and MAX and bus service cuts resulting in $17.5 million savings.

A recent reassessment of our income projections compared to actual income shows that payroll receipts are down $15 million and passenger revenues down $8 million. To maintain fiscal stability, we again need to reduce expenses—this time to the tune of $27 million. The cuts we've already made ($50 million since 2001) have reduced our options for future cuts—we've already cut the easy things. Our remaining expenses are largely determined by factors beyond our control, including contract commitments, fuel prices and Portland's rate of economic recovery.

What's the plan?

Our Board of Directors recommends these adjustments to our FY11 budget:

• Adding federal stimulus funds: $7.2 million
• Reducing administrative costs: $11.1 million
• Strategic reductions in bus, MAX and possibly WES service: $8.7 million

The criteria for service cuts are:

• Least impact to riders
• Low-ridership bus lines
• Low-ridership trips on bus lines and MAX
• Alternative service available nearby
• Available vehicle capacity

As we developed the proposed service cuts, we focused on how ridership has changed. Wherever possible, we've adjusted service levels to better match actual rider demands.

Background Information

How TriMet is funded

Like most transit agencies, the money allocated to TriMet for building our transit system is different from the money for operating it.

TriMet's operating funds pay for the day-to-day administration and operation of bus and rail service, and most of the cost to replace and rehabilitate vehicles, equipment and aging infrastructure. We receive about 55% of our operating funds from a payroll tax paid by businesses located within the TriMet district boundary. Another 21% comes from fares, which is typical for transit agencies. When unemployment goes up, revenue from the payroll tax goes down, which means less money for TriMet operations.

Our capital funds pay for rail construction projects such as WES Commuter Rail, MAX Green Line and the Portland-Milwaukie Light Rail Project. These funds come from a different pool of money, largely in the form of grants from the federal government, and are often allocated many years in advance. We also receive a small amount of state and federal money for other capital improvements. By law, these funds are designated for capital investments only, so we can't use them to pay for day-to-day operations.

What steps has TriMet taken to avoid service cuts?

Before considering cuts in service, we've taken a number of steps to reduce costs and improve efficiency throughout the agency. This includes an $11.1 million reduction in administrative costs not directly related to service.

Can you increase fares to balance the budget?

The TriMet Board has recommended a 5-cent fare increase, effective in September 2010. (The last fare increase was September 2008.) However, the additional income from this increase was factored into the budget before the $27 million deficit was calculated, so won't help reduce the deficit.

What about ridership?

The ongoing recession, double-digit unemployment and previous cuts to service have affected transit ridership. Bus ridership has been declining since March 2009, and in the past 6 months, has declined 10 percent (nearly 16 percent during rush hour and nearly 5 percent systemwide). MAX has also seen a drop in ridership since March, but it has been boosted since the Green Line opened in September. As we looked to propose cuts, we focused on how ridership has changed and how we could better match service to current ridership demand.

 

* TriMet's fiscal year begins July 1 and ends June 30.