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Testimony Before TriMet Board of Directors Regarding the Proposed FY 2012-13 Budget

 

 

Testimony of John A. Charles, Jr.

 

Before the TriMet Board of Directors

 

Regarding the Proposed FY 2012-13 Budget

 

 

 

April 25, 2012

 

 

 

 

 

There are some elements of the proposed budget that move TriMet in the right direction. I support the proposals to eliminate the free-rail zone and reduce streetcar funding. Rail passengers have been coddled for far too long and these changes will require them to finally put some skin in the game.

 

 

 

Notwithstanding this progress, the budget overall has serious problems that the Board needs to address. The first is the assumption that management will win its protracted dispute with the ATU. Management has been forecasting this outcome for years, and has consistently been wrong. Examples of past predictions include the following:

 

 

 

  • TriMet press release, April 13, 2011: “The FY2012 budget assumes that a new Working and Wage Agreement with the ATU has benefits more in line with peer agencies, and consistent with those contained in TriMet’s July 2010 Final Offer.”

 

 

 

  • TriMet FY 2012 budget message, July 2011: “A critically important assumption upon which TriMet’s financial forecast and the FY 12 Adopted Budget are based is that TriMet enters into a Working and Wage Agreement WWA) with the Amalgamated Transit Union, probably through the binding arbitration process, and that the wages and benefits are consistent with those contained in TriMet’s July 2010 Final Offer….”

 

 

 

  • TriMet press release, October 26, 2011: “The contract expired in 2009 and both parties are now heading to interest arbitration scheduled for mid-January 2012.

 

 

 

  • TriMet FY 13 budget message, April 2012: “…the FY 13 proposed budget includes a $12 million revenue increase/expenditure reduction package, based on the assumption of a labor arbitration decision favorable to TriMet.”

 

 

 

Given that every recent prediction about the ATU contract has been wrong, it might be time to change the forecast. A more prudent forecast would be that the ATU wins, creating a $5 million imbalance for FY 13. Perhaps that should be addressed now in the current draft budget.

 

 

 

The second big problem with the budget is the continued fantasy that rail construction has no harmful effects on bus service. Some board members may not be aware that in February 2011, TriMet succeeded in getting the Oregon Transportation Commission to approve $13 million in scarce OTC “flex funds” for the Milwaukie light rail project, by promising that TriMet will “agree to refrain from requesting Capital bus Program funds for bus purchases for the next three biennia…”  This deal was made even though TriMet had been so desperate for new buses that it had put a $125 bond measure on the ballot the previous November. My testimony to the OTC is attached.

 

 

 

TriMet management simply does not value bus service; all the glamour is perceived to be in the ribbon-cutting ceremonies for new train lines. In FY 13 TriMet will sell bonds for PMLR and thus incur $3 million in new debt service. The agency is already paying more than $25 million in annual debt service for previous light rail bonds. This debt is a major reason why bus service has been cut by 13% in recent years, even though buses move 2/3 of TriMet customers each day.

 

TriMet has never demonstrated that the alleged “operating cost savings” of rail transit offsets the debt service and other “opportunity costs” associated with new rail construction.

 

 

 

There’s a very simple solution: terminate all rail expansion plans. It doesn’t matter how attractive rail may have once seemed; moving forward, the capital costs cannot be justified. It is indefensible to impose service cuts year after year, while spending more than $205 million/mile for tiny expansions of the rail empire (7.3 miles for PMLR and 2.9 miles for the CRC).

 

 

 

A third point is that the proposed budget once again hides the true cost of labor, by planning for another token payment into the OPEB trust fund of $865,760. While this is better than the FY 12 contribution of $410,000, the level recommended by the outside auditor last July was $77.7 million.

 

 

 

The unfunded actuarial accrued liability for OPEB is at least $876 million, and because TriMet is allowed to carry this debt off-book the public naturally assumes that all is well when the agency announces that it has a “balanced budget” each year. This practice of shifting obligations downstream simply sets up a ticking time bomb for future TriMet board members.

 

 

 

While making the full ARC payment of $77 million would be impossible now, a substantial down payment – with the tough decisions it would force right now — would have the medicinal effect of waking up the public to the seriousness of the problem.

 

 

 

Finally, attached is a chart showing the juxtaposition of TriMet’s huge revenue increases since 2004 with the steady decline in transit service.  This is a disgrace, yet the Board continues to accept it year after year, without even considering fundamental changes in strategy.

 

 

Business as usual is not going to work anymore. It’s time for board members to stop acting like victims and start taking control of the organization.

 

 Click here to see February 14 OTC Testimony.

TriMet Financial Resources, 2004-2013 (000s)

 

 

FY 04/05

FY 08/09

FY 10/11

FY 11/12 (est)

FY 12/13 (budget)

% Change 04/05-12/13

Passenger fares

$   59,487

$   90,016

$   96,889

$   104,032

$117,166

+97%

Payroll tax revenue

$171,227

$209,089

$224,858

$232,832

244,457

+43%

Total operating resources

$308,766

397,240

$399,641

$476,364

$465,056

+51%

Total Resources

$493,722

$888,346

$920,044

$971,613

$1,111,384

+125%

 

Note: TriMet payroll tax rate increased effective 1/1/05, and will rise .01% every January through 2024.

 

 Annual Fixed Route Service Trends since 2004

 (light rail, bus, commuter rail)

 

2004

2006

2008

2010

2011

% change

             

Peak veh

625

606

613

618

601

-3.8%

Revenue hrs

143,784

137,973

144,469

133,776

128,435

-10.7%

Vehicle hrs

2,621,657

2,476,114

2,532,453

2,375,802

2,247,113

-14.3%

 

Sources: Annual budget documents; monthly TriMet performance reports.

 

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