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Why is the bus system deficit so large and what are the city’s options?

Is the transportation department worth keeping? Ideas to cut the cost of the city-run bus service have been talked about by city officials for several years now. However, the most recent audit of the city’s finances, which showed significant negative balances for both the general fund and the transportation fund, has ignited increased scrutiny of the department to the point that some sort of action now seems likely to happen soon. Although there’s been no official decision made yet, I believe residents need to understand the basics of how the finances for the transportation department work, how the system is used, and what options to cut taxpayer costs are available.

How is the transportation department funded?

In addition to bus fares, the department utilizes several sources of revenue including federal, state, and city funds. Revenue from bus fares alone are not nearly enough to cover the total cost of operations. The graph below shows the total amounts of federal, state, and departmental income (from bus fares, advertising, and other miscellaneous income) over the three most recent years that have been audited so far.

Even with state and federal aid, the city has to use money every year from the general fund to fully cover the expense of running the system. The general fund is where our city property taxes go, and is used to fund the police, fire, and recreation departments, among others. According to the city’s budget document, transfers from the general fund have been required to balance the transportation department’s budget for at least the past 12 years. Transfers have varied from as low as $69,000 in 2005-2006 to as high $304,000 in 2013-2014.

I recently spoke with Transportation Director Fabrizia Rodriguez to learn more about the bus system, and I asked if there is any way that the department can “break even” or generate at least enough revenue as to not require a transfer of property tax dollars from the general fund.

“The direct answer is no,” she answered. “Public transit never really breaks even.”

She explained further and said, “So the state money – quarterly we send a report in and we tell them how many miles we drove, how many riders we had, and they give us ‘x’ dollars per mile per rider. That never changes.”

“But then at the end of the year, I do my annual report and the federal government, they want to see how much did we spend, how much did the state give us, how much did I collect in fares and sponsors…and then they say OK, so what’s you total deficit after all that’s said and done? I’ll pay you half.”

“So you see how you can never really break even. So the more money we make, through fares, and recruiting sponsors, the smaller the deficit, the smaller the federal aid.”

In other words, in order to actually make the department self-sufficient, revenues would have to increase enough to not only to cover the required general fund transfer, but also to cover the loss of federal funding that would result from that. Departmental income would have to roughly quadruple, which doesn’t seem like a likely scenario. According to auditor reports, departmental income has seen a steady decline over the past three years, coming in at $135,925 in 2013-2014, down to $85,987 in 2015-2016, and although 2016-2017 numbers have not been audited yet, the city controller’s office estimates departmental income will be approximately $72,000 for that fiscal year.

Even so, Rodriguez said she has applied for $50,000 in extra federal money to support employment costs, and approximately $1 million in grant funding to replace vehicles which are not necessarily in bad shape but have “aged out” according the Department of Transportation standards.

How did the transportation fund balance go so far negative?

The fund balance is essentially the difference between the assets and liabilities of a fund. Every year the balance is increased or decreased based on how much the fund’s revenues exceeded, or fell short of expenses. Below is a chart detailing the past six years of revenues, expenses, and the budgeted vs actual general fund transfers. From it we can see that the deficit is mainly due to the lack of any transfer from the general fund in three different years.

Had the budgeted general fund transfers actually taken place, the transportation fund balance would be negative $161,282 rather than negative $761,019. However, that would also have made the general fund balance deficit even greater than it is currently stated. Although it may sound like a case of “six of one, half a dozen of another”, I do think it’s important to understand that the transportation department deficit is primarily due to the inability of general fund revenues to support it, rather than expenses and revenues for the department running wildly outside of what was expected. While revenues have been in decline for several years, city officials have cut expenditures in the department accordingly. The question comes down to deciding whether we want to continue to support the system with our city tax dollars.

How does the bus system benefit the city?

According to Transportation Director Fabrizia Rodriguez, the system is crucial for low-income individuals and families who need transportation to work, shopping, school functions, and medical facilities.

“Getting rid of public transit [would be] a couple steps back for individuals who are trying to spend their money on things that they need versus a car. I might second guess whether I should get a job or not, if I can’t get there or if half my check will go [to car expenses],” said Rodriguez.

Rodriguez supplied statistics for the system from July 2017 to September 2017 which showed a total of 5,871 rides provided during that period. 2,204 of those rides were given to participants of the city’s summer camp, and 183 rides were given at Italia Fest.

She said that the Greater Amsterdam School District has been supportive of the system by purchasing tickets for students to use to attend extra-curricular activities. She also said both St. Mary’s Hospital and Nathan Littauer Hospital have saved the department several thousand dollars by printing bus schedules.

Rodriguez also said that a good public transportation system is one factor that developers consider when deciding where to build. She cited a recent decision by Dollar General to build a distribution center in neighboring Town of Florida.

“The type of individuals that they are going to get as employees are individuals that are going to rely on [public] transportation to get there,” said Rodriguez.

While the Dollar General facility is not open yet, the system does currently offer service to the nearby Target Distribution Center and Beechnut factory, as well as service to the various shopping centers on Route 30.

Montgomery County Business Development Center CEO Ken Rose said that when talking to developers, “one of the items that [comes up] in a discussion is the availability of public transportation for their workers, being a positive if there is a route adjacent to the facility that can be utilized by the workers.”

The county-run bus system Montgomery County Xpress (MAX), currently does not have stops to the Town of Florida facilities, however Rose said, “when we discuss this with sites outside the City of Amsterdam, we mention the MAX with them and that there would be the possibility of modifying those routes if the demand warrants it.”

Rose commented further and said, “Good public transportation is important for any community to help with its growth and in making it attractive for new and existing residents. How you define what good is would really depend on if the needs of the community are being met, which would be a whole other study and if those needs could be met with greater efficiencies and a more comprehensive service. A transportation study investigating the existing services, future demand and alternatives should really be considered before making any decision in relation to the city’s current system.”

Rodriguez said she believes the transportation is also an important part of attracting young professionals to the city. Referring to the various downtown and waterfront festivals held over the summer, she said, “We’ve done a lot of things here to really attract younger individuals, professional younger individuals to re-locate here. But unfortunately there are still not enough jobs here for younger professional people, so they’re going to Albany, they’re going to Saratoga.”

The department recently added daily routes to Schenectady and Albany. She said the Albany route is used by anywhere from 10-20 people per day.

“I hope our leaders are looking at the big picture,” said Rodriguez.

What are the alternatives?

Some of the options that have come up in conversations with local officials so far are forming a wider, regional transportation system that spans Fulton and Montgomery County, joining the Capital District Transportation Authority (CDTA), or having the city utilize a private company to run the system.

I reached out to Mayor Michael Villa to find out how he is approaching the issue. He stressed that the department would not be shut down unless there was something else put in its place first.

“We would never just close up the doors, sell the buses, and there’s not going to be an option. That simply would not happen,” he said.

No decision on the department has been made yet, however Villa said that his office is in talks with the Department of Transportation as to what monies would have to be paid back, in the event the department was shut down, on some of the vehicles and equipment that were purchased with federal funding, and over what time period the amount would have to be paid back. He is also eyeing the bus garage as a possible replacement to the deteriorating department of public works building.

In regards to the idea of joining a regional transportation department, Villa said, “You’re giving up control, and you’re still responsible to another agency that’s not in the city. I don’t know. Everything’s on the table, but I haven’t been convinced that’s the best option for the city.”

His response seemed to indicate that discussions on the regional system were heading in the direction of having one existing department expand to handle the entire region.

Rodriguez, who has attended meetings about the regional concept, said, “One of the ideas is to have just one lead agency handle the whole region. So it would be basically more state dollars going to them in the hopes that they would survive themselves.”

The late former alderman Ed Russo had been an outspoken proponent of the regional system, but had also mentioned during a recent interview that he was in favor of Amsterdam taking over the system rather than Gloversville, which also operates a city transportation system.

In regards to joining the CDTA, Villa said that Montgomery County would have to take the lead with that idea as the authority would require raising the mortgage recording tax as a source of revenue.

The only other option left, other than to continue operating the system as it is, would be to bring in a private company to run the system for the city. Villa said one of the options he is considering with council members is to put out a request for bids for such a company with goal of completely eliminating the need for city property taxes to fund the system. However, it is unclear how such a company would receive federal funds without the matching local funds.

In regards to this idea Rodriguez said she was not sure how a system run by a private company would be funded either. However, she pointed out the while the city employs union workers to drive the buses, a private company could cut costs by hiring non-union drivers and paying less in salary in benefits.

Villa said he is hoping to have a decision made by February of 2018, before the next round of budget discussions begin.

About Tim Becker

Tim Becker is the owner of AnthemWebsites.com LLC which publishes The Compass. He serves as both editor and a writer.

3 Responses to Why is the bus system deficit so large and what are the city’s options?

  1. Robert N. Going says:

    I can answer one question, how much would the city have to pay back? The answer is zero. First, any pay back would be based on the current market value of the assets (building and buses primarily), not the amount of the grant. This could be satisfied by either transferring the buses to another subsidized system OR just turning them over. The bus garage likewise would become the property of the entity owed by simply handing it over. If the city wants to keep it for DPW (a good idea in my opinion) it would pay either the amount due back from the grants OR the fair market value, WHICHEVER IS LOWER.

    Now what I,d like you to do is take the entire cost of the system, subtract the fare revenue and divide it by the number of rides. That will tell youhow much it is costing the taxpayers to subsidize each ride. I think you will be amazed.

    My knowledge on this matter isderived from conversations I had with State Transportation Dept officials when I was Corporation Counsel and facing these same problems.

    • Tim Becker says:

      Yes, the mayor mentioned that transferring the vehicles to another entity may be a possibility.

      As far as calculating how much each ride is subsidized, I’ll leave that math to someone else if they want. What I might suggest we ask ourselves is whether we believe that public transportation is a necessity to our community or not and look at the overall economic impact of either keeping or changing the system. I mean we don’t bother calculating how much each fire call or police call costs because we all agree that is an essential service.

      I admit, I have two cars, so it’s not immediately essential for me. But I understand it is essential for others in order to get to work, get to medical appointments, etc. It’s difficult to quantify how much that is worth and how it affects the overall economy of the area.

      However, if a private company can come in and provide the same level of service without using any local tax dollars, that would be great.

  2. Steven says:

    CDTA is a viable option that would save the city and county a collective $1M. Nobody has wanted to do it before because Brown’s Busing has the MAX contract and they are buddies with the county folk. But CDTA would allow residents of Amsterdam to access a direct ride to Albany that would be significantly cheaper than the current park and ride options. There are other benefits to CDTA as well.

    By the way, the county doesn’t have to RAISE the mortgage recording tax per se, they just need to allocate a small percentage of it towards CDTA funding. The net is still a gain.