More on the RTD Budget Deficit Due to Increasing Ridership

The previous article on RTD’s budgetary woes garnered a comment:

Fuel costs --> Why isn't RTD doing more to mitigate the risks of changes in this? The tools are out there, why aren't they using them?

As for the fares, those programs have always been there. Did RTD not raise the prices on those when they raised fares? If not, that's horrible. High school econ students could see not proportionally raising the prices on those other passes would make the all-you-can-eat passes even more attractive.

As for the employer pass, aren't some of those very cheap because the employer is paying a big chunk?

The answer to the first question lies in Thursday’s Rocky Mountain News story:

Each year, RTD locks in per-gallon prices for diesel fuel. Last year, its contract was for $2.07 a gallon. This year, it's up to $3.20, after RTD had budgeted for $2.62.

Fuel has increased everyone’s operating costs, and the reasons are various. In any rate, it seems Pollyannaish for RTD to estimate $2.62 per gallon when the service station price was over $3 per gallon all of last year. However, fuel in the budget is only the proverbial straw that broke the camel’s back.

While RTD did increase prices on all tickets and fares last January, fares still account for only 20 percent of RTD operating revenue. The discount passes that RTD sells to the general public range between $720 and $1728 per year. The employer pass, dubbed an Eco Pass, appears to be causing some of the problems.

To get the benefits of the employer pass, the company must get a contract with RTD based upon business location and the number of employees. This pass allows unlimited RTD ridership for a yearly rate. The cost of these passes ranges from $38 per person per year for a business employing more than 2000 employees to $344 per person per year for a business employing between 1 and 24 people near DIA. Therefore, the discount from the general public regional fare ranges from 80 to 98 percent.

RTD is caught in a conundrum of being a government agency. It needs riders, and subsidizes them (mostly for political reasons). It publicizes the Eco Pass, an Orwellian reference to green piety, and offers them at rates less than some of the monthly passes. Now RTD loses money on fares due to its success in attracting ridership.

RTD has two choices in this matter. Either it can eliminate the Eco Pass discounts and raise fares to more accurately reflect the cost of service, or it can request extra money from the taxpayers. Which one is RTD more likely to choose?

By Civil Sense

Comments

[Allen]

Good numbers.

So the question is, what do they mean by "lock in". I would assume that if they were using futures they would have a much better idea of what they're costs were going to be. Southwest Airlines is a good example. Just don't buy into the media's view of they're doing it to save money. That's not their reason; they do it for insurance. IIRC going into 2008 they knew 80% of their jet fuel would cost the equivalent of $51 / barrel for them. If RTD is using futures, it doesn't seem like they're hedging much.

The drawback of that tool is that it ties up cash. I think Delta Airlines hedged about 20% of it's fuel needs for a bit until a couple years ago when they declared bankruptcy. Would RTD have the cash?

So maybe it's just some sort of contract with a supplier based on some sort of base rate that varies depending on the NYMEX contract price or some Colorado diesel index? Maybe. But if that's the case could this then be another example of them being overly optimistic in their budgeting? Seems like it could easier to take the risk of being too far off and deal with it later as a "it's not our fault; it's out of our control" than to have to deal with those cuts up front. I suppose that answers that last question, doesn't it?

It seems insane that they're able to give those costs on that sort of a discount. Aren't they obligated in some form to make sure fares make up at least 20% of their budget? More so, I can't believe that I was stuck paying $8 PER round trip to take the LRT while others are out there paying peanuts. Why? Because my employer didn't do some paperwork with RTD to get a special pass?

I still don't buy into that pass itself causing the problem. The first is how many of them are there? How much of a jump in sales of them have they seen?

I was thinking the pass wouldn't make that much of a difference. Despite all the hoopla over the ridership increase most of the buses and trains run empty. But maybe they it does. Except for a couple of routes, for every bus that's 80% full during the morning rush hour, it's making a run the other direction empty or nearly so. And that's only during a couple hours in the morning and a couple in the afternoon. Rest of the day it's even less. So if they're having to add extra buses because of an increase in ridership, it's because they're full during those few times. Otherwise most of the time they have extra capacity to spare. It's going to more or less cost them the same to run an empty bus as a full one.