I was astounded to read today, on Cleveland.com, "RTA increasing fares 25 cents on Tuesday to offset higher fuel costs [1]". RTA is raising public transportation rates for the second time in less than a year, bringing our fare to $2.25. The PD casually reports: "The new cash fare of $2.25 is in line with other transit agencies nationwide"... and "The fare increases are tied to the price of diesel fuel and are set to expire next April 1. But the total 50-cent increase is expected to be made permanent in April by the Greater Cleveland Regional Transit Authority board, which is facing a $20 million deficit next year."
The chart above shows trends in such RTA rate increases, as reported on Cleveland.com and the RTA website, correlated to the price from refiners to retailers for diesel fuel, from 1983 to 2009, from the US Energy Information Administration [2]. If this reflects the real foundations and drivers of the economics of our REGIONAL TRANSIT AUTHORITY, our public transportation is not sustainable into the forseeable future... in fact, rates appear to be increasing exponentionally.
The Plain Dealer writers and editors of Cleveland.com justify nearly 20% rate increases to "offset higher fuel costs", yet this data indicates diesel fuel costs have decreased significantly in the past year.
Cleveland.com reports many disturbing facts about the current RTA condition:
Regarding RTA revenues:
By this summer, it had become apparent that more money was required after the national economic downturn led to an unexpected decline in sales tax revenue, which provides close to 70 percent of RTA's budget.
Regarding what RTA and so customers are paying for fuel, it appears our price is higher than at any pump:
The fare increases last year and again Tuesday were approved by the board as fuel surcharges and were to remain in effect only as long as RTA paid more than $3 per gallon for fuel.
Even though fuel prices declined this year, RTA was locked in a contract to purchase fuel at $3.17 a gallon. The cost of fuel will go below that April 1, so the increase in 2008 and the increase Tuesday will end unless the board votes to keep them.
Board members have told RTA officials that the public's expectation was that the fare increases were to be a short-term solution to rising fuel prices, and they said they won't agree to make them permanent unless they are convinced the agency has done everything internally to cut costs.
"If not, we are really deceiving the public as to why they were put in place," said board member Dennis Clough, mayor of Westlake.
From reviewing the latest RTA Annual Report available online, for 2007, it appears that this article on Cleveland.com and the RTA leadership and board are already deceiving the public.
In 2007, fuel and utility costs (including electricity for the rapid transit, diesel and natural gas for buses, and even utilities for the organization, I believe) were only $25,919,960 - 10% of total operating expenses... and down 1.4% from 2006. Labor and fringe benefits were $ 173,796,848 - 68% of total operating expenses... which rose 3.6% over 2006. It will be interesting to see these numbers for 2008 (shouldn't they be out now?!?!)!!!
Considering diesel costs are a fraction of total RTA fuel and utility costs, which is only 10% of total operating expenses, even significant spikes in diesel prices - even a doubling of prices - should not justify system-wide rate increases for 20% over one year... at most, the related direct economic impact would be a few %. In fact, diesel prices and so fuel costs should have decreased since mid-2008.
From the RTA 2007 Annual Report, about performance in 2007:
Sales Tax Revenue was $1.2 million below projection. The weak performance continues a seven-year trend caused by slow economic growth in the region. Unfortunately, this trend is projected to continue in the near term.
Operating Revenues exceeded the budget in some categories while falling short in others. In total, revenue increased 2.7 percent, to $6.8 million. In spite of that, however, revenue fell short of budgeted estimates by more than $3.5 million by year end. Passenger Fares increased by 7.1 percent, but was under budget by about $2.1 million. Similarly, Sales Tax increased by 1.8 percent, but fell short of budget by $1.2 million. These two sources of revenue provide about 85 percent of the Authority's funds.
Operating Expenses, led by surging fuel costs, continued to cloud the financial picture last year. However, early proactive action taken by RTA to control operating costs helped to offset spikes in diesel fuel.
Based on all this information, and media misinformation, the questions for the day include where is the 2008 Annual Report, what are the latest financials for RTA, why are we paying $3.17 per gallon for diesel until April, 2010, are we paying that price for all our diesel fuel or just some contracts (is all our diesel currently costing over $3/gallon), what have we paid over the last 10 years, versus best market prices, and has RTA "done everything internally to cut costs", including addressing the 68% labor and fringe?
Most important, based on your observations, is RTA suustainable for the future, under current leadership, and in what condition?
About RTA: Organization
Board of Trustees
 [3] |
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| Board of Trustees (Back row left to right) Jane Campbell; Nick �Sonny� Nardi; Edward J. Kelley
(Middle row left to right) Dennis M. Clough; Julian A. Rogers; Valarie J. McCall; Leo Serrano;George F. Dixon, III (Front row) Jesse O. Anderson; (Not pictured) Jerry N. Hruby, William W. Patmon Jr. |
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| George F. Dixon, III [4] Board President Restaurateur |
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Edward J. Kelley [5] Board Vice President Mayor, City of Cleveland Heights |
| Jesse O. Anderson [6] President, Disabled Rights Task Force, Inc. |
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Bill Cervenik [7] Mayor, City of Euclid |
| Dennis M. Clough [8] Mayor, City of Westlake |
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Valarie J. McCall [9] Chief of Government Affairs, City of Cleveland |
| Nick "Sonny" Nardi [10] Veteran Labor Leader |
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William W. Patmon Jr. [11] political consultant & analyst |
| Julian A. Rogers [12] community activist |
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Leo Serrano [13] Executive Director, Office of Institutional Advancement Cleveland Metropolitan School District |
| Attachment | Size |
|---|---|
| 2009-05-12-FuelHedging.pdf [14] | 69.44 KB |
| RTARates2.jpg [15] | 49.48 KB |