Archive | Budget Cuts

Pensions and budgets, and cuts. (Oh my).

On the heels of all the CRC goings-on down in Salem (and in various council chambers in Vancouver and Oregon City), TriMet yesterday tossed a little gasoline in the fire with some dire predictions for transit levels a decade hence. While its outlook for FY14 is essentially flat–no service restorations, no further cuts, depending on how things go; it made the claim that unless further “contract reform” were to take place, it might find itself in the position of only being able to offer 30% of the service hours that are currently offered, in 2025.

Contract reform, of course, being a nice way of saying “pay and benefit cuts for union personnel”.

TriMet also noted that without additional funding, no MAX expansions beyond Portland-Milwaukie are likely any time soon. How an expansion of the Yellow Line if and when the CRC is built would be affected is unclear–though most of the new service would be in C-TRAN territory, and the expectation is that such service would be funded by C-TRAN (a prospect which is not greeted warmly by many Clark County residents).

This claim has gotten quite a bit of pushback. ATU 757 now has a new website to contest the agency’s PR offensive (if nothing else, it’s good to see the union engaging in a little PR of their own; something that was missing under Jonathan Hunt’s tenure as union pres). MAX FAQs reprinted a blistering critique of the agency; Al continues his criticism unabated, and OPAL is skeptical (Facebook page). Cascade Policy Institute, which has been making similar claims for years now, has yet to chime in on the day’s events, but we expect their indic?v? tibi sic any time now.

And as always, Portland Afoot and Joseph Rose are on top of things.

So what to make of this?
Heck if we know.

The pension crisis is real…

Ignoring the particulars of TriMet, the “pension crisis” is a real problem. According to estimates, the total of unfunded state and local pension liabilities in the US is nearly $2 trillion. This doesn’t include Social Security, Medicare, or private-sector pensions.

A lot of this is driven by a combination of health care costs, Baby Boomer retirements, shrinking tax bases, boondoggles, and financially-unwise actuarial commitments; but many public agencies have long not bothered to fund pension debt, instead paying it out on as a pay-as-you-go basis. In some cases, generous pension were awarded to public employees in lieu of current pay/benefit increases–a political win-win in that employees’ effective compensation increases, and administrators don’t have to raise taxes or cut services (at the time) to cover it. TriMet’s issues are, in many ways, not unique. The City of Portland has $3.3 billion in unfunded pension obligations–a figure that dwarfs TriMet’s deficit, though Portland has a bigger tax base to draw from. PERS has been a drain on local government coffers for quite a while, as many retirees are collecting generous benefits awarded during the go-go 1990s, when the fund was making guarantees of 8% annual returns and such.

Whether these benefits are deserved or not is largely irrelevant, as is the question of whether or not current taxpayers should be morally on the hook for debts incurred by prior generations. They represent contractual obligations of the agencies in question–and under current law, the only way for agencies to get out of them is via municipal bankruptcy. (Some cities have gone through Chapter 9–a proceeding where retirees generally do get to take a haircut, as bondholders are generally given first priority). And communities that have large mountains of such debt may face the prospect of a public services death spiral that may accelerate such an outcome–as voters decide to either move to lower-tax locales, and/or refuse to vote for taxes on the grounds that such taxes are no longer paying for public services. The Beaverton School District, for instance, is seeing its PERS payments skyrocket–but hasn’t been able to pass an operating levy in recent years–many taxpayers (including many parents with children in the district) object to a higher tax bill without corresponding improvements in service.

In some ways, many local governments will have increasing difficulty without intervention (good or bad) from Uncle Sam. Such intervention could take many forms, including a) further health care reform (particularly reforms that drive down the cost of medical care, and which replace various Cadillac employer plans, something that Obamacare did not do); b) a federal bailout of distressed local governments (Uncle Sam can raise taxes uniformly, and can print money); c) giving retirees a haircut via legislative act (while the states cannot impair contracts via legislation, Congress can). At the present time, there is no political consensus for any of these; OTOH there have been more whispers of inter-generational sniping in national politics–it wouldn’t surprise me if in a few years, more and more young political aspirants start demagoguing about transfers of wealth to retirees. Such commentary is already not uncommon on the topic of Social Security, after all.

…but how bad is it really for TriMet?

Back to TriMet. A big problem which the agency has had, for the past few years, is a lack of transparency–which makes it easier for the agency’s critics to doubt its official line, or even accuse it of rigging the numbers. It won at the ERB last year by essentially pleading poverty, and claiming that the ATU’s offer would devastate it (and its riders); it could be trying to build a public case for another round of cuts in the next contract. Or, there could really be a wolf among the sheep.

Another question for the agency is–how long has it been concerned about the issue? A cynical person might note that TriMet downplayed its financial issues until PMLR funding was secure and construction underway–a good question would be what has changed between 2009 (when the Great Recession was underway, and the financial meltdown of 2008 fresh on everyone’s mind) and now. (Other than the occupant of the general manager’s chair; four years ago, Neil McFarlane had yet to be promoted).

Another important line of inquiry: what forecasts, economic and population, drive the model? Depending on how one thinks the economy will do in the next ten years, what will happen to the metro area population, what will happen to the price of gas, and how will full implementation of Obamacare affect healthcare costs, may have a big impact on TriMet’s finances. Obviously, nobody can predict the future with any certainty, but some of the assumptions I have to question–particularly the assumption that healthcare costs will continue to rise exponentially. Were that to be the case, I would expect that at some point in the near future a political crisis would result, with harsher measures than Obamacare being taken, before the healthcare sector is permitted to swallow the entire economy.

And of course, there is the equity question: Assuming this is all true, who should bear the brunt of this? Taxpayers? Riders? Current operations workers (whom are being targeted with benefit cuts)? Former workers (who, as noted above, are largely untouchable absent a bankruptcy or Federal intervention)? Management and non-operations staff? Vendors, suppliers, and contractors? Right now, most of the cuts have been borne by riders–who are experiencing worse service and higher fares–and by current employees (union and non-union). TriMet has limited power to raise taxes to offset increasing costs.

A few other questions, for thought:

  • If some community were to withdraw from TriMet and form their own transit district (like SMART did)–do they get to start fresh with a clean balance sheet? Or would the be required to shoulder a pro-rated share of TriMet’s pension obligations? And pursuing that line of questioning to its conclusion–could the agency be whittled down to nothing but a bag of IOUs?
  • I wonder who the audience is, for TriMet’s remark that future capital projects might be imperilled. For many of the agency’s critics, who view such projects (rail in particular) as pork-barrel politics rather than sound expansion, this is would be viewed as a feature and not a bug; I doubt that very many riders or taxpayers place a high priority on future MAX expansion, particularly during an age of relative austerity. That this was explicitly mentioned is a thing that makes you go hmmmm….
  • This might be the start of a (long overdue) conversation on just what TriMet’s purpose really is, and what goals it should be focusing on. Putting accusations of patronage aside–TriMet is tasked (as part of overall regional strategy) with various things such as reducing greenhouse gasses, social service to various disadvantaged communities (many of whom are expensive to serve), assisting with land use tranformation, and other goals only tangentially related to moving people around the city. While many of these goals are laudible; should TriMet and its limited operational base be serving so many masters, or should deployment of services for reasons other than efficient transport be funded elsewhere?

City of Portland engages in outrageous $2M power-play against TriMet.

In a move which apparently came as a complete surprise, Portland mayor Sam Adams has proposed levying/hiking various fees on TriMet, related to things like benches and shelters. The amount of the proposed fee hike is 8000%, or about $2M; intended to cover the cost of the YouthPass program, which was cut by TriMet in the latest round of budget cuts, after the Oregon Legislature last year stopped funding for the program. State funding ended in 2011, and TriMet has been subsidizing the program for the past half-year.

TriMet reports that it was caught off guard by the measure, and is studying its options.

Thoughts after the jump:
I’ll be blunt. This is an outrageous maneuver by the City of Portland, for many reasons. The YouthPass program is highly defensible, and ought to be funded somehow; but this is NOT the way to do it–a power-play like this has the potential to be incredibly damaging to regional co-operation in the future. Whether or not the city of Portland will follow through with this, or this is just a negotiating ploy, remains to be seen. It’s interesting to note that the item was put on the “consent agenda” for Wednesday’s city council meeting (the consent agenda is for routine and uncontroversial matters to be passed in one motion, without having to waste time to consider and vote on each one individually). This means that either it has unanimous support of the City Council–which would surprise me, especially for an acrimonious proposal such as this one–or Adams is bluffing.

  • The immediate reason: The City is taking on the wrong target. If the mayor really wants to play hardball on this issue, he ought to go after the source of the problem: the state Legislature, which ended its support for the program in 2011, but which continues to subsidize suburban yellow bus service. Mayor Adams (and Portland Public Schools) could easily make a credible threat to Salem: Restore YouthPass funding, or PPS will replace it with yellow bus service, which the state is required to support under Oregon law. YouthPass is cheaper to operate than equivalent levels of yellow bus service, so restoring YouthPass funding would cost taxpayers less than having to support yellow busses in Portland. Of course the Legislature could try and exempt Portland from the yellow bus subsidy–screwing over PPS seems to be a popular past-time in Salem–but the optics would look far worse (including to those who don’t care much about public transit) than the current state of affairs.
  • Where does Portland think TriMet will get the $2M? Unlike some transit advocates outside of government, who seem to think that TriMet is hiding the ball with its budget crisis (and cutting service in preference to cutting various alleged items of pork-barrel spending), the City of Portland likely has far better visibility into TriMet’s finances. Either it know where the bodies are buried (to paraphrase Norma Paulus), in which case it ought to be forthcoming about this, or it knows that there aren’t any (and perhaps doesn’t care). In addition, it’s entirely fair to point out that a good portion of TriMet’s operational commitments are on capital projects that Portland has either championed, or operates outright (such as the Streetcar).
  • If Portland gets away with this move–and especially if this results in service cuts outside of Portland–who’s next? If TriMet further cuts suburban service, will suburban communities then respond with retaliatory fees of their own, or threaten to withdraw altogether? Could this lead to an end to regional transit service, as each city looks to operate their own agencies (or not), lest a dime of “their” tax moneys subsidize so much as a revenue-minute of service outside of their borders–with crosstown trips requiring paid transfers at every municipal boundary, with little co-operation on matters like schedules?
  • The last time TriMet was subject to a power play of this sort, depending on what rumors you believe, the result was WES. (Washington County, with its strong industrial base and relatively low number of service hours, likely subsidizes the agency with payroll tax revenues collected within).

Even OPAL, which has been sharply critical of TriMet over the years, has come to the agency’s defense on this issue, which Jonathan Ostar called “concerning”. Regardless, this sort of power play can’t be good news. Local governments around the country have been suffering under the combined weight of loss of federal support, decreased tax revenues due to the recession, increasing pension and healthcare expenditures, and increasing levels of anti-government activism. Many of these wounds are self-inflicted, but have been building up for a long time. If the response of governments to the funding crises is going to be to try and screw each other over, nobody is going to win (except perhaps the Brothers Koch and their ilk), and everybody is going to lose–in particular, those who depend on the government for their education, transportation, or other vital services.

Hat tip to Al M, who got there first in the open thread.

Some (more) friendly advice for TriMet

As noted in the Open Thread, TriMet’s board approved the agency’s Fiscal Year 2013 budget at today’s board meeting, a somewhat controversial proposal that included the abolition of Free Rail Zone, a fare hike and a flattening of the fare structure, and another round of service cuts. The good folks at OPAL were out in force, advocating for their alternate budget which included (as the big ticket items) a significant reduction in TriMet’s Streetcar subsidy, and a far smaller contingency plan.
I have my concerns with the OPAL proposal–in particular, reducing the contingency fund does not strike me as wise, given the uncertainty around TriMet’s labor situation. Were the contingency fund to be reduced and then TriMet to lose, an additional $5M or more in service cuts would have to be imposed. If TriMet prevails, the money not spent this year can be used to offset necessary cuts next year, or even restore service. And a good argument can be made that the Streetcar contribution represents a contractual obligation of TriMet that can’t be cut. (Whether this was a wise idea in the first place is another matter, but that’s water under the bridge).

However, TriMet would be wise to treat presenters at its board meetings with greater respect, even if it ultimately rejects their advice. The agency seems to have developed an affinity for procedural shenanigans to cut off debate that they don’t want to hear, such as trying to exclude the OPAL proposal from consideration as it wasn’t on the agenda. Perhaps its the case that the board made up its mind long ago, feels that further discussion of the matter is a waste of everybody’s time, and is only holding a public forum due to the requirements of open meetings law–but this no way to run a railroad. The people of OPAL are TriMet’s friends and customers. Unlike some others who show up and testify at TriMet board meetings, OPAL wants to improve the agency and its service, not undermine and/or abolish it.

With that in mind, some longer-term advice for the agency. Some of this is stuff I’ve written before, but it bears repeating.

Constrain capital projects

Notice that I’m not saying “stop” or “embargo” or “moratorium”. “Constrain” is a less restrictive term. But there are specific issues–real and perceived–with parts of the region’s capital spending on transit–which have caused some critics of the agency to regard all capital spending as suspect.

Major capital projects ought to be subject to the following conditions.

  • To the extent that projects depend on either TriMet’s operating revenue and/or bonding authority, they ought to have a positive return on investment. Buying new busses is an example of an obvious win–it’s far more cost effective to keep a fleet within its service life than it is to scrape along with busses that break down all the time, may not have parts available, and lack modern amenities (or need to use wheelchair lifts for ADA compliance). This is even true if the agency has to borrow money to buy the vehicles.
  • Conversely, if a project is funded mostly or solely from grant monies, be very mindful of what strings may be attached to those grants, particularly if the service is not expected to serve a great number of riders. Many FTA grants for new capital projects require continuous operation of the service for a long period of time, which reduces the agency’s ability to respond to downturns or other adverse conditions. And if the project is a boondoggle–a certain Washington County commuter rail line comes to mind–this can be an expensive mistake to make. If TriMet is to make service commitments, it should ensure that it is on routes/corridors where it expects to need to provide that service. A key objection to the Streetcar subsidy is that TriMet might choose to reduce service on the Streetcar corridors to implement budget cuts, on the grounds that it’s a lower-priority service, but is prevented from doing so and thus has to cut bone instead.
  • Projects should not result in reduced or less attractive transit service for the majority of affected users. This doesn’t mean that routes should never be reconfigured, but adverse effect should be minimized–particularly loss of service altogether, loss of service span, or significant reductions in speed or frequency. If one-seat rides are replaced with transfers, then the transfers ought to be timed or frequent.
  • Projects that are being primarily for reasons other than improving transit service or efficiency (such as economic development, garnering Federal grants, land use/placemaking, or improving environmental outcomes), in particular, need to be done in such a way to avoid adverse effects on existing transit service and customers. Many elected officials, not charged with operating TriMet, seem to like leveraging the agency for FTA grants. While this often has a net benefit for the overall economy–FTA grants are essentially “free money”–the political sponsors of these programs may not always be mindful of the potential impacts on those who depend on the service. In the worst cases, they may not care–they may not have transit riders as part of their constituency (or riders may be constituents who can be easily marginalized). As the transit provider, TriMet needs to act as gatekeeper to ensure that it projects are in the best interests of the riders that it is charged to serve. TriMet, first and foremost, is in the transportation business, and its primary focus needs to be getting people from A to B.

More transparency, please
This should go without saying, but sunlight is the best disinfectant. Anywhere there’s a black box, there will be people wondering what is hiding inside the box. Other than Human Resources data or information concerning ongoing negotiations, bids, etc.–there’s very little information at TriMet that merits secrecy. TriMet is not the State Department; nor is it a public corporation that needs to keep trade secrets safe from competitors. As much internal planning, forecasting, and other data as possible should be made public–and “made public” ought to include “downloadable from the Internet”. This includes things like primary source data for published reports, so others can check the agency’s work. No need to spend money on fancy web infrastructure–simply putting this up on an FTP site will suffice; those of use in the activist/journalist business will be happy to assist with cataloging and arranging the interesting stuff.
A Culture of Ridership
This topic heading may sound too buzz-wordy (management-speak is full of platitudes about cultures of this or that), but it’s an important point, and one that it can be argued, subsumes all the others made in this article: TriMet needs to focus on its riders. Period. Not on being a conduit for federal funds. Not on transit oriented development. Not on technology. TriMet needs to focus on ridership and service. Other goals may be important, particularly environmental outcomes (and transit plays a big part in this!) but these are things that TriMet should not be the owner of. TriMet needs to own transit–that, and nothing else, is its raison d’etre.

And if necessary, TriMet needs to have a management structure which reinforces that. Right now, the TriMet board answers to the governor, meaning there’s a loss of focus on the needs of the Portland metro area. And the board has long consisted of business and political leaders, often with little or no transit knowledge. While many of these folks are certainly competent in their fields, it isn’t a stretch to suggest that many are appointed in large part due to their connections, their status as “community pillars”, and the overall gravitas of their resumes, not because of specific qualifications in the field of public transit or an ability to represent the interests of riders. And in some cases, the appointment may give rise to the appearance of a conflict of interest, such as is the case when real estate interests find themselves seated on the board.

And this, if I may make the suggestion, is an area where OPAL and other rider advocates may help. Metro seems to not be interested in taking over TriMet (though they have legal authority to do so), and legislative changes to TriMet’s organization structure are likewise not on the radar. If an agency which truly represents the interests of riders is the goal, then governance which is congruent with that goal would be a highly beneficial thing.

TriMet publishes proposed FY13 budget

TriMet has published its proposed FY13 budget. I’ll peruse it a bit more myself later tonight, but a few observations courtesy of OPAL after the jump (sorry, Facebook access required for the OPAL link).

I’m not endorsing any conclusion which may be implied by OPAL; however, these are good questions to be asking.

  • Contribution to the Streetcar is $9.3M, prior contribution was $6M. Initial planned contribution was $9.6M, the $300k difference has been portrayed by TriMet as a cut. OPAL seems to regard the Streetcar (and TriMet’s contribution thereto) as a luxury item and a waste of money, and appears to skeptical of TriMet getting too much involved in getting into the land-use business, and appears to be opposed to some (if not all) of this subsidy. The increase is due to the upcoming opening of the Eastside Streetcar. TriMet’s position is that its funding of the Streetcar is essentially the same amount of money that it would take to provide equivalent bus service on the route.
  • OPAL also points out that the agency’s contingency fund is $20M rather than $10M. TriMet includes the following comments in the budget (pages 11-12)–apologies if there are any errors, as the budget PDF disallows copy-and-paste, so I’m typing this in by hand:

    Budget “best practice” requires the establishment of reserves or “contingency” to provide an entity with a source of funds to provide for unexpected costs. TriMet’s FY13 Contingency is $20 million, which represents 1.5% of Total Requirements. Under State law, the use of funds in the Contingency requires a resolution of the TriMet Board before funds can be transferred and expended. If the Contingency Funds are not used in FY13, they become part of the Ending Fund Balance and are available for FY13 cash flow. Given the uncertainties facing TriMet in FY13, including the outcome of a decision by the ERB relating to past union health care costs, uncertainty about future health care costs which result from the labor contract, diesel fuel and the cost of other materials, and the economy, a contingency of 1.5% of total requirements is prudent but very modest
    This level of contingency is expected to provide TriMet with sufficient resources to withstand a modest decline in revenue or modest cost increases compared to budget. Given the uncertainties in the economy and the labor environment, the Contingency is sized to provide sufficient funding for operations in the event of adverse results in the fiscal year.

    The big question: Should they lose to the union, can TriMet keep service levels the same by consuming the contingency fund (at least for FY13), or will another round of cuts be coming down the pipe?

TriMet releases final* FY13 budget, cuts (UPDATEDx2)

Release here.

Appears to have the same stuff as before, with a few other service notes.

* The 9 will only serve Powell Boulevard. The Northeast segment of the 9 will be combined with the 17. This was previously hinted at, but is now official.
* TriMet will add service on lines 4, 9, 33, 35, 44, 76 and 94.
* The final routing of Line 16 in NW Portland will go along Front Avenue, not Yeon Avenue. It will serve Sauvie Island.
* The Montgomery Park branch of the 15 will be extended into the NW Industrial area.
* A new line, Line 11, will serve the Rivergate industrial area.

A few items flagged as “potential” changes: UPDATE:TriMet has confirmed that these changes will occur; they are no longer “potential”.

* The 12 will only run between Tigard TC and Parkrose TC. A new line, Line 21-Sandy/223rd will run between Parkrose and Gresham; the 94 will become an all-day route running between Sherwood and Tigard, and will continue to offer peak-hour express service between Tigard and downtown Portland.
* The 82 and 87 will be combined, and the combined route (the 87-Airport Way/181st) will have all-day service.

Thanks to Cam Johnson for his sharp eye.

UPDATE: The new NW service map is now available from TriMet, here it is.

map-northwest-planned.gif

More details at TriMet’s website here.

* Unless TriMet loses (again) to the union, in which case it’s time to break out the chainsaws.