Questions
and Answers
about
AC
Transit Finances
and
The
Transportation Sales Tax
by
Steve Geller (stgeller@home.com)
Revised
November 20, 2000
This is a Q&A presentation to provide a simple
summary of AC Transit finances, and to inform the public about the Transportation Sales Tax and Measure B.
This is information was gained from the ACTA
Expenditure Plan, other public documents, AC Transit staff and discussions with
other transit advocates. The AC Transit
finance figures were current as of 1998, but may have changed a little by now.
Q: Where does AC Transit get its operating
revenue?
In round numbers:
67% Subsidies
22% Fares (including BART transfers)
11% Other (advertising, interest, etc.)
----
100 %
Q: What are AC Transit’s expenses?
In round numbers:
70% People
-- Salaries, Benefits, Pensions
8% Fuel,
Lubricants, Tires, Supplies
7%
Utilities, Taxes, various services
6%
Paratransit
3%
Insurance
6%
Interest and other expenses
---
100%
Q: How do AC's revenues from fares compare with
those of other bus districts?
AC's 22% from fares is less than SamTrans (25%) or
MUNI (30%).
Both MUNI and SamTrans have a lower basic
fare. MUNI has the most riders, and
the lowest fare (still $1/ride).
Q: Does AC Transit make a profit?
No, not in the ordinary business sense. Municipal bus systems everywhere require an
operating subsidy, and they mostly depend on federal grants to buy buses.
Some years, the revenues plus subsidy slightly
exceed expenses; in this sense, AC Transit made a “profit” last year (fiscal
1998).
Q: How much
of the revenue "Subsidies" is taxes?
In round numbers:
39% State
Tax redistributions
19% Local
Property Tax
6% Measure
B 0.5% sales tax
2%
Paratransit subsidy
1% other
grants and subsidies
---
67%
Q: Why such a big subsidy? Can't AC just increase fares to cover
expenses?
AC Transit fares were increased a little -- from
$1.25 to $1.35 -- starting October 1, 1999.
Some people were not happy about that.
A proposal to raise MUNI fares not long before, was quickly retracted.
Because AC Transit is a public agency – a transit
district -- raising fares is not a simple economic decision. AC Transit is not part of a city government
like MUNI, which can call on San Francisco’s general fund. AC Transit is governed by an independent
board of directors, elected from the district.
The Metropolitan Transportation Commission (MTC),
which dispenses the government money, pushes the transit districts to raise
fares when fare revenue falls below about 30% of operating expenses. This policy is similar to that in other
urban areas. (There is a state law that
requires something like a minimum 25% fare box recovery)
In most European countries, gas costs $3 to $5 per
gallon; most of that is taxes to support transit. MTC has permission to impose up to 10 cents/gallon of gas tax,
but their polling tells them that even in the Bay Area, people won’t pay more
than 2 or 3 cents. Of course now,
people here are facing gas prices pushing past $2/gallon, and wailing for OPEC
to pump more, to get the prices down.
A large number of AC's riders are low-income
people. Any fare increase will hit them
hardest. It might be possible to
increase fares to the point where fares cover operating costs, then have a
subsidy scheme for the low-income riders.
But any direct subsidy of poor people, such as a discount pass, would
require a political decision, and funds to cover the subsidy. Some people think that a "means
test", to qualify for the pass, might turn into a bureaucratic mess.
More basically, people don’t want to pay the true
costs of public transit. They are not
willing to just make transit free, but they are willing to be taxed locally to
pay some of the subsidy, particularly if the bulk of the subsidy comes from the
federal government.
Ideally, transit should be seen as a public service
available for people to travel around in the urban area, without contributing
to car congestion. Instead, transit is
perceived as a service to get (other people’s) cars off the road, and as a
social service for those who aren’t able to drive a car.
If most people used transit, there would not be
such a need for subsidies.
Q: Are there any places where public transit is not
subsidized?
Toronto, Canada has something like 70% of commuters
riding public transit. Their subsidy
must be very low.
Hong Kong public transit fares are a little higher
than in the Bay Area, but nearly everyone rides public transit there, so there
is no subsidy.
Q: Where does the money to buy the buses come from?
That's "capital", a separate category
from expenses.
Capital comes mostly from the Federal Government
and, here in the Bay Area, from bridge tolls.
If AC had to buy buses out of the money it takes
in, there would be a lot fewer buses.
Can AC reduce expenses?
Sure, but it would have to come mostly from the 70%
of expenses which are labor costs. That
means either cutting salaries or laying off people. AC might have some "fat" in their administration, but
it isn't much.
Q: Why did AC Transit cut services in 1995 and 1996?
Since 1988, all over the country, the federal
government has been steadily reducing its support for the operations side of
bus transit.
Starting in 1990,
the Americans with Disabilities Act
(ADA) went into effect. AC was required
to provide Paratransit. This means that persons who can't use fixed
route services and who live within ¼ mile of a regularly scheduled service,
must be provided with service they can access.
This is a good idea, but unfortunately, the government did not provide
any extra money to pay for it, so Paratransit took money away from regular bus
service (some $5-8 million/year).
Finally, in
1995-1996, AC Transit had to come up with something to cut. They did their best, mostly cutting evening
and weekend service and combining some lines.
The bottom line is that reducing expenses means
reducing bus service, or cutting "quality of service" -- which AC did
before cutting services in 1995-6. It
meant cutting maintenance, for example, resulting not only in visibly dirty
buses but in buses that broke down way too often. It meant not hiring new administrative staff, even when
needed. It meant District computer
systems got way outdated. Some of
what's happened since has been catch-up.
Q: Has AC Transit improved its service?
Starting October 10, 1999, AC Transit
restored some weekend and evening services and started 24-hour “Owl”
service on some of the major lines.
Including prior service restorations, AC Transit
restored about 2/3 of the service that was cut in 1995-1996.
Q: Where did AC Transit get the money for these new
services?
The 10-cent fare increase probably covered 25% of
the cost of the new services.
The federal government decided to pay more of the
Paratransit costs; this freed up some operating funds. But the Metropolitan Transportation
Commission, which passes out the federal dollars, has still not transferred all
of this money that it can.
There were some other increases in outside
funding. And there was a surplus in
AC’s reserve account.
AC Transit basically went out on a limb, and
approved a 2-year budget instead of the usual 1-year. The 2-year budget covers
the new services, and some internal improvements. There will be a budget review at some point, and the AC Board
retains the option to cut back some services if it’s costing too much.
This funding won’t last beyond 2 years. This is where the transportation sales tax
comes in.
Q: What is
the Transportation Sales Tax?
Alameda County collects a sales tax of ½ of
1%. This revenue is used for
“transportation”. Most of it goes to
highways and fixing streets. BART
expansion projects get a lot of it. AC
Transit now gets 6% of its revenues from the sales tax.
Q: What is Measure
B?
The current 15-year authorization for the ½ percent
sales tax expires on March 31, 2002.
In the June 2, 1998 election, Measure B was on the ballot in Alameda County, to re-authorize the
tax for another 15 years.
It did not
pass.
Q: Why didn't Measure B pass in 1998?
Taxes which go into the general fund may be
approved by a simple majority. Measure
B designates specific projects; such a tax must have a 2/3 majority (67%).
In 1998, Measure B got more than a simple majority
(58% county-wide), but not the required 2/3 (67%).
The results were fairly even; a simple majority was
achieved in all cities (nowhere was the “yes” vote less than 52%), but the largest majority was only 63%
(Emeryville, Pleasanton Township).
Berkeley voted 57.3% yes in 1998. Albany voted 61.7% yes.
The tax is a huge revenue source; for transit
operations alone, it now generates $6.5 million/year; in the measure that
failed, the figure was $11.7 million.
Measure B had a lot of things on it besides buses. Environmental groups, including the Sierra
Club and the Environmental Defense Fund, actively opposed passage, because too
much was going to highways and sprawl and not enough to transit and growth
management.
The Sierra Club also wanted to see more transit
funding going to mid-county bus service, which is worse shape than service in
north-county.
Q: What happened to SCA3?
Senate Constitutional Amendment No. 3 (SCA3)
proposed an amendment to the Constitution of the State, by adding a new Article
XIXB, titled TRANSPORTATION IMPROVEMENT AND MAINTENANCE.
Effectively, this amendment provided a way to pass
Measure B with a simple majority vote.
As it applies to Alameda County, the amendment says
that an extension to our 1/2 % transportation sales tax may be approved by a
50% voting majority, if ACTA has previously passed an expenditure plan, and the
tax will be extended for 20 years (not just 15).
SCA3 passed the Senate, and got a majority in the
Assembly, but not the required 2/3.
Later on, the Governor said he wanted to forget
about SCA3, probably because school bonding still requires a 2/3 majority.
Some of those who opposed SCA3 have suggested that
the transportation sales tax could be less, if all of the gas tax went to
highways. This policy would be the
opposite of that followed by most European countries, which fund much of their
public transit from their gas taxes.
Anyway, SCA3 appears to be dead.
Q: Was
Measure B on the November 2000 ballot?
Indeed it was.
Alameda County passed with with
81% “Yes”.
The Alameda County Transportation Authority (ACTA)
formed an Expenditure Plan Steering Committee to decide how the revenues from
the proposed tax will be spent. The
members of the committee are senior political leaders, including several East
Bay Mayors.
ACTA and the committee received recommendations
from the Bay Area Transportation and Land Use Coalition (BATLUC), which
includes the Sierra Club, Environmental Defense and the Aliiance for AC Transit
/ Bus Riders Union.
ACTA eventually passed an expenditure plan which
included a lot of what BATLUC proposed.
This plan was passed by the voters as Measure B.
All of the groups that
opposed Measure B last time were
part of the coalition in November 2000.
Here are some specifics of the new Measure B expenditure plan:
· It’s for 20 years, not 15.
· $591 million for Public Transit, including BART and AC Transit.
· $20 million for county-wide Express Buses (new in the 2000 plan)
· $76 million (5% of the plan) for bicycle and pedestrian programs, with no deductions for capital projects
· $149 million for Paratransit (11% of the plan), including a 1.5% increase in paratransit funds for seniors and the disabled (to redress the 1998 plan’s low funding in south and east county).
· $30 million for AC Transit in Central County – for night and weekend service and increased frequencies in Hayward, san Leandro and unincorporated parts of Central County.
· Restrictions on BART extension: sales tax funds may not be used for the proposed BART-Warm Springs (Fremont) construction, until the project receives full funding to connect to Santa Clara County. But funds “may be used for project development, right of way, design and station site development before full funding is secured”. This is big money - $165 million.