Bridge News

To Comment on Possible Toll Increase

Agenda Item No. 7

To:   Finance-Auditing Committee/Committee of the Whole Meeting of February 7, 2002
From:   Joseph M. Wire, Auditor Controller Celia G. Kupersmith, General Manager
Subject:   APPROVE ACTIONS RELATIVE TO THE POTENTIAL TOLL AND TRANSIT FARE INCREASE

Recommendation

The Finance-Auditing Committee recommends that the Board of Directors approve the following actions relative to the potential toll and transit fare increase:

  1. Authorize development of a technical study examining options and impacts of raising bridge tolls to fund on-going District services and projects.
  2. Authorize staff to undertake a series of informational Open Houses over the next several months to provide opportunities for public input to the development of final staff recommendations regarding any potential toll increase.
  3. Authorize development of a technical study examining options and impacts of increases in bus and ferry transit fares to support on-going District transit services, to be undertaken in late Spring/Summer, 2002.

Background

The Golden Gate Bridge, Highway and Transportation District (District) operates and maintains the Golden Gate Bridge. Additionally, the District operates 277 buses connecting the North Bay to San Francisco (Golden Gate Transit) and five passenger ferries (Golden Gate Ferry) on the San Francisco Bay. These transit services are provided as an alternative to automobile usage and result in approximately 6 million fewer trips across the Golden Gate Bridge every year. The District funds its operations primarily with bridge tolls and transit fare revenue.

The last Golden Gate Bridge toll increase was implemented in 1991. At that time, it was projected that toll revenue would again become insufficient to meet service and project needs within five to six years. It is now more than ten years since the last increase and, through successful management of financial resources, these resources have been sufficient to allow for a longer than projected timeframe between consideration of further toll increases.

During the past ten years, while basic Golden Gate Bridge tolls have remained constant, Bay Area inflation has eroded the buying power of these toll dollars by 3.4 percent annually. Additionally, fuel, insurance, and such non-directly controlled expenses have increased by an average of 5.5 percent annually. Labor costs have increased an average of 5.3 percent annually through this same period. Furthermore, the role of the federal government in funding key capital projects such as the seismic retrofit has decreased substantially, from a routine 80 percent of the total project cost to 50 percent or less. This change has resulted in overwhelming increases in the local funds needed to support major capital projects.

In the current fiscal year, while the original budget projections showed a break-even year in financial terms, the current economic recession, coupled with security challenges and the overall drop in travel, have accelerated the need to address the question of Bridge toll and transit fare increases.

Coupled with the need for additional operating revenues to maintain the present services provided to the public, the District faces increasing demands for capital projects. These projects include such critical needs as the $160 million Phase III seismic retrofit project, the $20 million main cable recoating project, the $35 million Bridge underdeck repainting, and the potential $22 million movable median barrier. Additionally, there are transit-related projects such as improvements to parking facilities and additional ferry berths. These important capital projects, totaling approximately $800 million over the next ten years, only increase the pressure on the limited revenue raised by bridge tolls and transit fares.

Each year of the past four years, there has been an incremental increase in bus and ferry fares, based on the Bay Area CPI. The fifth year of the approved five-year program of fare increases is expected to be implemented in July 2002. This regular process of annual fare increases affecting millions of annual transit riders has proven instrumental to the continuation of the broad spectrum of transit services provided by the District and critical to ensuring that transit passengers help fund the services that they use. In total, approximately 29% of the costs of the District transit service is paid by passenger fares. The remainder is funded by Bridge tolls, grants, and miscellaneous revenue sources including advertising on several transit venues.

Over the past several years the District has successfully managed its finances and aggressively sought ways to stretch those resources through better management practices. Many of the savings achieved have occurred in partnership with labor, including such things as a multi-year pension contribution holiday that has allowed the District to shift more than $18 million to other vital needs of the organization. Other significant areas impacted by this focus on efficiency include a recent decision to maintain a mixed fleet of fast and slow ferry boats. This results in over $5 million in savings over the next ten years. In the past few years, the District has purchased larger buses that carry more passengers per driver so that fewer new staff were required to carry increasing passenger loads.

At the same time, the District has aggressively moved forward with the seismic retrofit project. This accelerated schedule led to substantial completion of Phase I, a $71 million project, and the start of Phase II, at $157 million, by the end of 2001. To accomplish this, for the first time since the Bridge was constructed, the District entered into debt as it borrowed $61 million to accelerate the pace of the critical retrofit project. In addition, the District has implemented new sources of revenue, particularly in the areas of advertising. Recent efforts have expanded the use of shelter and kiosk advertising space to generate approximately $900,000 in additional revenue each year. A Bridge cafŽ was built and today generates approximately $750,000 in revenue annually. Improved merchandising in the Bridge Gift Shop has resulted in increased revenue as well.

Concentrated efforts to pursue federal and state funding of major projects have resulted in $75 million in federal funds for the seismic project and, for the first time ever, a state allocation of $50 million for this same project. Innovative approaches to pursuing grant funds have improved the DistrictÕs ability to stretch its resources over a longer time period.

In order to control costs today, a hiring freeze is in place and both major and minor capital projects are being deferred in order to help close the gap on a current budget year shortfall of $7 million. Also, transit services continue to be scrutinized to ensure they are cost effective and productive. While the District has placed revenue into operating reserves to help address short-term financial problems such as a one-year recession, reserves are not able to solve the financial problems of the future.

Each year, the deficit facing the District increases substantially. Preliminary estimates place the deficit at $15 million next year and by the end of five years, the deficit will be a total of approximately $250 million. By the end of ten years, the cumulative total will reach a projected $640 million. These deficit estimates assume that the District continues to be successful in obtaining matching grant funding from the federal and state government for many major capital projects. If the anticipated matching grant funds are not forthcoming, the DistrictÕs financial deficit will be correspondingly greater.

As previously noted, the District has aggressively addressed the impending funding deficit in various ways over the past several years. The time has come, however, to consider ways to address this problem that has been staved off for several years but now faces the organization. The focus on increasing toll and fare revenue will not in any way reduce staff efforts to achieve savings that allow us to stretch our limited resources. On-going review of transit routes and schedules will continue to focus on ensuring that routes meet appropriate transit service standards.

The specific actions recommended to the Committee include the following:

  1. Authorize development of a technical study examining impacts of raising tolls to fund on-going District services and projects.

If approved to move forward, staff will prepare a technical analysis report based on several toll rates:

1) Status Quo - $3 for FasTrak and cash-paying two-axle vehicle customers
2) $4 for FasTrak two-axle vehicle customers and $5 for cash-paying two-axle vehicles
3) $3.50 for FasTrak two-axle vehicle customers and $4 for cash-paying two-axle vehicles
4) $3.50 for FasTrak two-axle vehicle customers and $5 for cash-paying two-axle vehicles
5) $5 for FasTrak and cash-paying two-axle vehicle customers

The axle rate for vehicles with more than two axles would continue to be one-half of the two-axle toll rate in each scenario. The toll rate for qualifying persons with disabilities would continue to be half that charged to FasTrak customers, as is current practice.

The technical analysis report will examine the revenue impacts of each scenario and will identify other impacts associated with any toll increase. A toll increase for the purpose of funding the business operations of the District is not subject to the California Environmental Quality Act (CEQA) process but many similar issues will be addressed through this analysis report:

  • Golden Gate Bridge Traffic and Toll Revenue - estimates of changes to current and future traffic and revenue resulting from a range of toll options under consideration.
  • Golden Gate Transit Patronage and Fare Revenue - estimates of changes to current and future transit bus and ferry patronage and revenue resulting from a range of toll options under consideration.
  • Social and Economic Effects - possibilities for financial hardship to Bridge users and disproportionate impact on minority populations using the Bridge.
  • Land Use Impacts - possibilities for undesirable impacts on current land use and the land use plans of Marin and San Francisco counties resulting from a higher bridge toll.
  • Air Quality - estimates of changes in regional vehicle emissions resulting from changes in travel patterns.
  • Energy - estimates of changes in regional fossil fuel consumption resulting from changes in travel patterns.

The technical report is expected to be complete in mid-April and will be presented to the Finance-Auditing Committee upon completion. A complete schedule for the proposed process is provided in Attachment A to this report. The schedule is designed to result in a Board decision regarding any proposed toll increase in early July, following a late June Public Hearing. Under this schedule, the toll increase, if approved for implementation, would become effective November 1, 2002. It could also be implemented as late as January 1, 2003.

  1. Authorize staff to undertake a series of informational Open Houses over the next several months to provide opportunities for public input to the development of final staff recommendations regarding any potential toll increase.

Staff is proposing to undertake a series of public Open Houses to facilitate involvement in the development of solutions to this funding challenge. Throughout this public process, several opportunities will be available for the public and the Board to make suggestions on ways to address the financial challenges of the District. Two rounds of evening public open houses will be held in Marin, Sonoma, and San Francisco counties. Several staff members will be at each open house to assist in answering questions in an open and informative atmosphere. Meetings will be publicized in local media and information materials will be presented in a clear, user-friendly manner so that people can understand easily and positively participate in the process. A formal Public Hearing will be held at the conclusion of the process to hear final comments on the staff recommendation, as developed through the Open House process. If approved, the first Open Houses will be held in late March/early April.

  1. Authorize development of a technical study examining impacts of increases in bus and ferry transit fares to support on-going District transit services, to be undertaken in late Spring/Summer, 2002.

Staff proposes to undertake a similar process to examine potential bus and ferry fare increases. A timeline and process for future bus and ferry fare increases will be presented to the Board in March/April 2002 for implementation in July 2003, following the fifth year of the current fare increase program. Consideration will be given to establishing higher fares for premium services as well as regular increases to current bus and ferry fares.

Fiscal Impact

There is no specific fiscal impact associated with authorizing staff development of technical studies examining opportunities and impacts of toll and transit fare increases, as the work will be undertaken by District staff. There will be some fiscal impact associated with the public Open Houses for meeting room rentals, production of public information materials, and limited staff over-time to attend evening meetings. A final project budget has not been established at this time, pending finalization of plans for the Open Houses. Funding is available in the Fiscal Year 2001-2002 budget for such expenses.

ATTACHMENT A

Project Timeline

February 2002

  1. Present toll increase process overview to Finance-Auditing Committee on Feb.7
  2. Present recommendation to implement 5th year of bus and ferry fare increases, effective July 1, 2002, to the Finance-Auditing Committee on February 21

March

  1. 1. Hold evening public Open Houses in San Francisco, Marin and Sonoma Counties in late March/early April

April

  1. Present proposed process for undertaking development of future year bus and ferry fare increases to Finance-Auditing Committee on April 11
  2. Present summary of general comments and ideas received at the Open Houses to the Finance-Auditing Committee on April 25
  3. Present technical analysis report to the Finance-Auditing Committee on April 25

May

  1. Present staff recommendation regarding tolls to the Finance-Auditing Committee on May 9
  2. Hold evening public Open Houses in San Francisco, Marin, and Sonoma Counties in late May/early June
  3. At the May 23 Finance-Auditing Committee meeting, formally call a formal Public Hearing for an evening meeting in late June

June

  1. Prepare summary of Round #2 Public Open House comments and suggestions, revise technical report and recommendation as deemed appropriate, and present final recommendation to the Finance-Auditing Committee on June 13
  2. Hold formal Public Hearing on staff recommendation at evening meeting of Finance Committee in late June

July

  1. New bus and ferry fares become effective July 1, 2002 under the five year program of fare increases
  2. At July 11 Finance-Auditing Committee meeting, take action on staff recommendation
  3. On July 12, the full Board of Directors will be asked to take action on the recommendation from the Finance-Auditing Committee and to establish an implementation date, as necessary

Cost Savings and Cost Containment/Efficiency Initiatives
Potential Toll Increase Public Outreach Proces
Positions Not being Filled under Hiring Freeze