Maintaining Transit Effectiveness Under Major Financial Constraints (2014)

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94 1. Financial sustainability for a publicly funded transit system is defi ned as a service plan that can be continued for at least 5–10 years based on conservative revenue and expense estimates. Sustainability requires a dedicated funding source with a minimum 10–20 year term, highly competent fi nancial and operational management, and solid elected offi cial and com- munity support. When present, these three sustainability elements are self-reinforcing. However, if any one component is missing, the system is at risk and cannot be considered sustainable until all components are restored. (Northern Arizona Intergovernmental Public Transportation Authority) 2. In addition to maintaining an appropriate amount of emergency reserves, a fi nancially sustainable transit system incorpo- rates the principles outlined in Question 6a: slow and steady service improvements and customer focus. Simply put, if we can’t afford to do something above and beyond our current level of service, we wait until additional resources fl ow in or we actively seek out special grants. With the fact that we are using taxpayers’ money always top of mind, we take a very com- monsense and fi nancially prudent approach to running the day-to-day operations. We scrutinize every major purchase and at times rule out “wants” in favor of “critical needs.” This approach lends itself to providing the tools needed to achieve such a system, which becomes a reality with continuous monitoring. (Long Beach Transit) 3. Financial sustainability means there is a long-term (5-year+) fi nancial outlook that includes expenditure and revenue fore- casts that appear feasible, attainable, and sustainable. (The Bus) 4. Ensuring that the costs of providing transit do not exceed all revenue. Costs and revenues are monitored to achieve this goal. (New York City Transit) 5. A fi nancially sustainable transit system is a system with a dedicated and balanced revenue stream. Tools needed are a menu of dedicated revenues to fund the operating and capital needs. With public and legislative support, I feel it is realistic to obtain. (UMASS) 6. Financially sustainable is defi ned as an agency that has the resources to provide the service today and into the future. It would have funding resources that are dedicated to transit without having to be appropriated annually at the state and federal level, and have a local source of funding that does not have to be renewed every 5 years. It would also have tools to expand operat- ing and capital funding as demand for transit grows. (Capitol Area Transportation Authority) 7. Identifying performance standards/benchmarks for subsidy per rider or boardings per mile. Having revenue generated from a variety of sources, which do not sunset, to mitigate economic downturns and minimize dependence on a single revenue source. The state legislature must act to allow the agency to diversify its revenue sources, which at this point is very unlikely. The legislature is also hesitant to authorize tax measures that do not sunset, so every 20 years the agency is essentially in danger of losing all of its revenues. (Valley Metro) 8. A fi nancially sustainable transit system would feature suffi cient growth in public funding and operating revenue to cover reasonably increasing operating expenses without one-time fi xes and a fully funded capital program to achieve and maintain a state of good repair. In the Chicago region, transit is funded by a dedicated sales tax and real estate transfer tax; fi nancial sustainability would require consistent regional economic growth to support tax revenue for transit, regular fare increases linked to CPI, labor contracts with modest wage increases and work rule improvements, pension reform, effective manage- ment of fuel expenses, a stable state fi scal outlook, and an increased federal and state commitment for capital funding. While it may be possible to achieve each of these requirements as a stand-alone item, the probability of achieving all of them con- currently is very low. (Chicago Transit Authority) 9. Ability to provide a level and quality of service to meet the needs of a community. Ability to maintain equipment and facili- ties in a state of good repair. Ability to retain a qualifi ed, professional workforce. Ability to keep transit fares affordable. (Utah Transit Authority) APPENDIX D Additional Responses to Survey Question #7: “Please Identify What You Think a ‘Financially Sustainable’ Transit System Is, What Tools You Need to Achieve Such a System, and How Realistic It Is to Obtain Such Tools.”

95 10. A fi nancially sustainable transit system is an agency that provides a level of service that can be maintained for a 5-year period based on a conservative fi nancial forecast. It is not an agency that makes continuous small cuts each year. You need accurate and reliable fi nancial forecasting tools, a fi nancially responsible CBA, and a plan for slow growth. It is realistic to achieve if that is your philosophy. (Salem Kaiser Transit) 11. A “fi nancially sustainable” transit system is one that prudently aligns ongoing operating costs with available ongoing resources and takes the necessary steps to protect its fi nancial liquidity by building and maintaining reserves. VTA has several policies that work in combination toward developing and maintaining a fi nancially sustainable transit system. The Financial Stability Policy (FSP) was developed by an Ad Hoc Financial Recovery Committee in response to precipitous declines in FY 2009 sales tax revenues and alarming defi cit projections subsequent to adoption of the FY 2010 and FY 2011 Biennial Budget. The FSP provides guidance on expenditure prioritization in development of Biennial Operating Budgets and associated fi nancial plans. In addition, the FSP includes key principles to establish a framework for policy direction to the Board of Directors and staff during the creation of the biennial budget and when addressing the structural defi cit in VTA’s operating budget. The FSP was adopted by the Board of Directors in December 2010. In addition to the policies noted previ- ously, VTA has both an Operating Reserve Policy and a Sales Tax Stabilization Fund Policy that guide the maintenance of a prudent level of reserves which serve to protect fi nancial liquidity. (Santa Clara Valley Transportation Authority) 12. A continuous and stable funding source is the primary tool needed to maintain and sustain a transit system. It is diffi cult but should be possible to obtain dedicated funding as long as the community agrees that existing and planned transit service is needed. The community should be willing to support long-term transit funding if the expectation is clear and the service delivered matches that expectation. The service area for funding may be smaller than desired at fi rst but could increase over time with effective transit service delivery. (Gainesville Regional Transit System) 13. A fi nancially sustainable transit system is one that can provide service to meet the needs of growing customer demand with balanced projected revenue and expenditures streams. The primary tools needed are reasonably accurate and reliable cost and revenue projections. (Omnitrans) 14. A fi nancially sustainable transit system would be one that could provide safe, reliable, and frequent bus transportation to a community at a reasonable fare that competes or is more advantageous than the cost to operate automobile. With farebox recovery at a minimum of 25%, a sustainable transit agency will require signifi cant fi nancial support from local and regional governments, as well as state support. Dedicated funding would be advantageous as a backstop to the government support. The other necessary component is for the agency to have access to reasonable amounts of capital funding (federal, state, and local) to enable the agency to maintain and replace its operating fl eet within a reasonable useful life. Without government support, a sustainable transit agency would not exist. (Nashville MTA) 15. A “fi nancially sustainable” transit system would keep its costs within an acceptable range relative to revenues. Operating margins would improve over time, resulting from continuous operating cost containment and operating revenue expansion. Tools needed would include an appropriate set of fi nancial goals, targets and performance measures, along with supportive policies and collective bargaining agreements. (Akron Metro) 16. A fi nancially sustainable system is one in which fi nancial resources are such that services provided to customers are not at risk of reduction or elimination in a short or intermediate time frame because of adverse development of fi nancial variables such as unexpected changes in revenues, expenses, capital requirements, debt obligations, etc. A fi nancially sustainable system is able to produce a balanced budget on average over the long term by funding, from current revenues, all service extension/expansion, current expense and expense obligations, current capital expense, reserves for preservation of capital infrastructure, reserves for growth in capital infrastructure, debt service, and reserves for unanticipated adverse fi nancial developments. Tools/skills needed to achieve such a system include: • Fiscal prudence and literacy among elected governing boards and executive leadership. • Integrated fi nancial plans including short term (1–3 years); intermediate term (3–6 years); and long range (6–20 years). • Funding sources that are reliable, stable, indexed to growth in demand, and dedicated to the public transportation mission. • Tools to better manage growth in the overall cost structure and particularly the cost of employment: wages, benefi ts, and unfunded mandates for new and expanded employer-paid programs. Also, better tools are needed to manage abuse and fraudulent use of these programs, as in chronic abusers of paid leave, workers compensation and FMLA benefi ts. (Community Transit)

96 17. A fi nancially sustainable transit system has access to predictable, dedicated, growing sources of funding that, when com- bined with fares and other revenues, are suffi cient to reasonably meet the needs of its riders and other constituencies. The tools needed to attain this goal include the establishment of strong community support, the maintenance of solid relationships with funding partners, the adherence to sound service level and fare revenue policies, and Board and management commit- ment to prudent stewardship of available resources. These tools are obtainable, but it takes a lot of work over a long period of time. (Centre Area Transportation Authority) 18. A fi nancially sustainable transit system would be characterized as having a broad-based funding structure so that it could survive negative changes in economic conditions without negatively impacting passengers. Tools that would allow such a funding structure include the ability to allocate funding as needed to and from capital to operating purposes as needed based on local conditions. To achieve such a system would require signifi cant changes in federal and state legislation. (Toledo Area Regional Transit Authority) 19. A fi nancially sustainable transit system is one that can operate within its budget and have reserves available in case of emer- gencies. Tools needed are a conservative budget that is realistic and can be adhered to. This requires careful planning and constant observation and analyzing of the routes. (Foothill Transit) 20. “Financially sustainable” is a term that varies in the eyes of the local and state elected offi cials who provide fi nancial sup- port. Educating those offi cials on the need to support transit and defi ne realistic farebox and other local revenue objectives requires a wide variety of tools and venues, including community development; support for those who cannot transport them- selves; comparative comprehensive government subsidy requirements (holistic construction, maintenance, traffi c, police, etc.) for walking, ridesharing, transit, and single-occupancy auto; and realization of non-farebox revenue enhancements from increased property tax values and increased sales tax receipts for properties with transit service. These tools are focused on shaping perspective. Whether these tools are realistic depends on the perspectives of the media, elected offi cials, and key stakeholders, and the willingness of transit offi cials to engage the public. (Arlington Transit) 21. A fi nancially sustainable transit system provides a level of service at a net cost that best meets customer demand for the foreseeable future, while allowing for reasonable variances in funding levels. (North County Transit District) 22. A transit system is fi nancially sustainable when it is not elastic to drastic changes in revenue levels. Its level of service is designed based upon “normal” and reasonably projected revenue fl ow. When there is emergence of new funding, excess funding can be allocated to deferred activities outside of providing the core services, but still in support of its core services. (San Joaquin Regional Transit District)