By Wes Starratt, PE, Senior Editor

When the economy turns sour and heads into a downturn such as we are now experiencing, the effects are widespread. Fewer jobs mean fewer commuters, and fewer commuters spell economic trouble for the entire transit industry: buses, trains, and ferries.

Even in normal economic times, the fare box rarely pays much more than half of the cost of operating a transit system. The remainder is paid for by various subsidies, ranging from sales taxes to bridge tolls, as is the case with the bus and ferry system operated by the Golden Gate Bridge Highway and Transportation District.

So what can a transit district do as its fare box revenue drops because of a decreasing number of passengers? One answer may be to look for higher subsidies, but that may not be easy in an economic downturn. That is certainly the case when the subsidy is from bridge tolls, which are down because of fewer commuters driving to work. You can raise the bridge tolls, and in the case of the Golden Gate Bridge district, that has already been done.

If transit subsidies can’t be increased, the only solution is to decrease transit service or increase transit fares, or both. Everyone agrees that is a poor solution, but it may be the only solution. It is obvious that increased fares and decreased service is likely to put commuters into their automobiles unless those commuters find that increased gasoline and parking costs outweigh the increased transit fares.

In the long run, the solution to the transit conundrum may have to wait until the economic cycle brings everyone back to work. Tom Bertken, Executive Director of the Bay Area Water Transit Authority, reflected that optimism in a recent comment, "I am very optimistic about the future of the ferry system. The current reduced patronage levels on the ferries is tied to the cyclical nature of our economy. But, I see that ferries will be very important in the future to help relieve our traffic congestion."

From a peak patronage in fiscal year 2000/2001 to the current fiscal year, Vallejo Baylink ferry patronage has dropped by more than 16 percent. To make up the financial loss, Baylink has instituted a 6 percent fare increase without any decrease in service.

During the same period, Alameda-Oakland ferries experienced a 4 percent drop in ridership, while the Harbor Bay ferries had a 16 percent drop. Neither fares nor schedules have been changed, but under terms of the existing contract, the operator, Blue & Gold, has been forced to take responsibility for the decrease in fare box revenue. Blue & Gold’s contract has been completed, and the City of Alameda has issued requests for proposals for a new cost-plus-fixed-fee contract that would insulate the operator from downturns in ferry ridership. Contenders for the new contract include Blue & Gold, Harbor Bay Maritime, Red & White, and Hornblower. Proposals are due on May 27th, with the future operator to be selected shortly thereafter.

From Tiburon, the privately operated, no-subsidy morning and evening commuter service of Blue & Gold experienced a drop of 13 percent in ridership from 2001 to 2002, while the largely tourist-oriented service to Sausalito dropped by only 7 percent. Blue & Gold’s chief, Ron Duckhorn commented to us that, "Raising fares and cutting service are probably counter-productive. Rising expenses preclude us from increasing either. This is a wait-and-see game. Advertising might help, but who in the Bay Area does not know that, in many commute corridors, ferry service is an option."

The granddaddy of high-speed commute ferry service in the Bay Area is the Golden Gate Bridge, Highway & Transportation District. We talked with Celia Kupersmith, the General Manager of the District, about the District’s problems and its efforts to find solutions. Our focus was on the ferry system and not on its extensive bus service in Marin and Sonoma counties, which is also experiencing decreasing ridership.

CK: It is extremely serious. We would never step in and downsize bus transit services by approximately one third unless we had a very serious problem that absolutely had to be solved. We don’t want to do it. We simply have no other option. (Financial figures show that the District is facing a $202 million five-year short fall.)

The ferries are a small piece of our total revenue, but we have seen a drop in the ridership on the ferries (for Larkspur for 2000-3, the drop was -7.9 percent; for Sausalito for 2000-3, it was -25.6 percent), on the buses (for 2000-3, it was -8.4 percent), and in the traffic on the bridge (southbound weekdays for Aug 01 – Aug 02, it was -3.2 percent). All of those together have hit at a very bad time. Our problem is not unique. We are in exactly the same situation as all of the other large transit systems in the Bay Area.

BC: How much of the financial problem is actually due to the bridge?

CK: With the economy stalling the way that it has in the past few years, we have seen traffic across the bridge decrease. That means less money coming in, and that is our primary funding source for all of our programs.

CK: Let’s take seismic retrofitting. The first phase of the seismic retrofit was the North Approach. That was a $70 million project, 100 percent locally funded…by increasing tolls to $3 in 1991. When that $400 million project is completed, we are assuming that only $70 million will have been paid by local dollars.

It is important to note that the Bridge Board took an action approximately one year ago that says that we will not do any more work on the seismic retrofit of the bridge unless someone else pays 100 percent of the costs. So, our financial problems are not caused by the seismic retrofit of the bridge. My highest priority is getting funding for the seismic retrofitting project, because it absolutely has to be done, but we don’t have the money to do it.

Regarding bridge maintenance, we have aggressively assumed that 80 percent of the cost of every major maintenance project on this bridge will be paid by either the State or the Feds. We have set those costs outside of our financial problem, but even with that aggressive assumption, we still have a very serious financial problem.

CK: Security costs are what I call "Post 9/11 costs." Insurance has become more expensive (increasing from 15 percent to over 100 percent, depending on the type of insurance). Security is more costly, and that has made a bad situation even worse. We are spending more money at a time when we have less money coming in. We added 12 patrol officers to our bridge security team. That was approximately a $1 million/year expense. Fortunately, we do not pay for the National Guard or the California Highway Patrol.

CK: The board has not discussed that issue, which has been raised by the Marin County Transit District. It’s been estimated that a $0.50 increase in the Fast Track toll would raise about $5 million per year (or $20 million over five years), so it would not reduce the need to take action on bus and ferry service. We have a $202 million shortfall cumulative over five years. And we have said that $57 million of that will come from revenue increases (and $145 million from service reductions). The fare increases (for bus and ferry service) that we have proposed to date will not make that money. So, we still have a lot of money to raise before we are able to reduce the $145 million that is projected to be saved by reductions in bus and ferry services.

CK: When we were going into the toll increase process a little over a year ago, we were asked what it would take to raise the toll high enough so that we would not have to make service reductions, staff layoffs, salary freezes, hiring freezes, and all that sort of thing that we are now in the middle of. And the answer was that it would take an $8 toll. At that time, one board member out of 19 said that that is what we should be doing. The other 18 said "No" we shouldn’t be doing that, and they voted for a $5 toll increase. Of the 19 board members, 16 voted in favor of the $5 toll, and four voted against the $5 toll, only one of which said that he voted against it because he did not think that it was high enough. The others publicly stated that they thought that the $5 toll was too high.

CK: Not one hundred percent correct, no. We are doing a major restructuring of our bus service with some very serious reductions in service on the bus side and a small fare increase. On the ferry side, we have approved a fare increase, effective July 1, that is very substantial and reflects the fact that our ferry fares have been much below market, compared with other ferry fares within the Bay Area for similar services. (Editor’s note: Effective July 1, the discount fare for commuters will increase from $2.60 to $3.50, or by 35 percent, and full cash fares on weekdays from $3.25 to $5.60. Weekend fares remain at $5.60 for adults.)

As we get further into the next year, we will be looking at our ferry services as well in terms of possible changes to increase efficiency and reduce costs. Right now, we cannot proceed because of a combination of David Clark’s passing (we don’t have anybody in his chair, although there will be a national search for someone of comparable caliber.) and with the Mendocino out until probably mid to late October followed by at least six weeks of sea trials. Thus, the Mendo is not going to be available for service until December or maybe January. Since we don’t have a second fast ferry and we have a vacuum of leadership, we can’t move as fast in that area as we have been able to on the bus side.

The board has told us that their intent and their direction at this time is that the cuts on the ferry system will be more of a tightening up and a refocusing and restructuring of services to reduce our costs, but not as substantial a decrease of service as is being experienced on the bus side. So on the ferry side it is a combination of a restructuring that we will be developing plus the fare increases. On the bus side, it is a service reduction with a smaller fare increase.

BC: What about the decrease in ridership that the increase in fares will cause?

CK: We know from studies that have been done around the country on transit fare increases that, as you raise fares, you are going to hear some people say, "This is too expensive, I’m not going to do it." However, parking rates are going up in San Francisco along with fines for parking violations. There are a lot of things that may cause passengers to rethink a decision not to use the ferry. They know that the ferry is a wonderful way to commute on a beautiful boat across San Francisco Bay. We have assumed that we will see some ridership drop-off, but we are hoping to see only a bit of drop before it kicks back up again.

Transit ridership is cyclical. Eventually, it is all tied to jobs. It is very much driven by the state of the economy. When there are fewer jobs and less people working and unemployment rises, you see a drop in transit usage. But it will come back, and you have to be aware of that. At this time, it is as bad a situation as you can ever imagine because it has hit so very, very hard. All of the Bay Area transit systems are struggling to respond to the dramatic drop in revenues and to increases in expenses. The Bridge District is not unique.