NJ Transit Fare Hikes A Result of ‘Perfect Storm’

Christopher Hann | May 4, 2010
With a projected budget shortfall of $300 million, NJ Transit says it has no choice but to cut services and boost fares by 22% on average

Add NJ Transit to the list of the recession’s victims, with the mass transit system seeing a sharp drop in use since ridership peaked at 1 million riders a weekday in late 2008. That decrease in ridership, along with a 20 percent cut in state subsidy has resulted in sweeping service reductions and bus fare and train fare increases systemwide of 22 percent on average.

The increases took effect May 1.

“This crisis is simply a function of the economy,” NJ Transit Executive Director James Weinstein said recently. “Ridership is down because fewer people are working. In a different time, you could probably turn to the state. But the state has an $11 billion deficit. We don’t have a lot of options.”

Yet the root causes of NJ Transit’s budget woes extend far beyond a decline in the number of commuters using the system over the past 16 months. Transit experts point to an accumulation of factors over the past two decades that have conspired to bring NJ Transit, the largest statewide public transportation system in the United States and the third-largest overall, to the brink of financial crisis. They point to the national recession, as well as a dramatic decline in state subsidies to NJ Transit. They indicate that the lack of regular fare hikes also has contributed to NJ Transit’s troubled fortunes.

Credit: NJ Spotlight
A New Jersey Transit light rail train pulling into Newark's Broad Street Station.

Meanwhile, concerns are growing about the impact the fare hike will have on those who rely on NJ Transit as their only form of available transportation.

The Perfect Storm

“It’s sort of a perfect storm at this point,” said Jon Carnegie, the executive director of the Alan M. Voorhees Transportation Center at Rutgers University, which studies transportation planning and policy issues.

That storm has left NJ Transit facing a projected $300 million deficit while preparing to levy one of the largest fare hikes in the agency’s 25-year history. Although originally proposed as a 25 percent across-the-board increase in ticket prices for all bus and rail lines, the agency scaled back the hikes for about half of its customers, but they remain on average about 22 percent across the vast system, officials said. What’s more, some off-peak train fares have risen more than 60 percent.

“We had a $300 million hole in the budget, and a statutory requirement to balance the budget, and this frankly was the way we had to proceed,” Weinstein said at an Assembly budget hearing this month.

Under the modified plan, riders on the system’s light rail and local bus lines, representing 52 percent of NJ Transit’s overall ridership, would see ticket prices raised 10 percent, while riders on long-distance and interstate buses and all train lines would see fare hikes on average of 25 percent.

Weinstein said public hearings protesting the original plan had an effect. “After the hearings it was clear to us that the impact on the most transit-dependent was more than they could bear,” he told the Assembly committee this month.” I think we have addressed the most difficult and challenging problems for people.”

A Tax Increase by Any Other Name

Still, not all were pleased. Assemblyman John Wisniewski (D-Middlesex) said Governor Chris Christie and NJ Transit have not gone far enough to help NJ Transit riders, many of whom rely on the agency’s trains and buses as their only mode of transportation. “This is a small step in the right direction for bus riders,” Wisniewski said in a statement, “but this remains a tax increase by another name for mass transit riders who have no choice but to use NJ Transit daily to get to work.”

Plainfield resident Barbara Kerr agrees. Kerr takes the NJ Transit train to the PATH system in Newark every day on her way to her job at a Manhattan-based nonprofit. She is seeing the price of a monthly pass go from $154 to $193, in addition to the fee for the PATH train.

“Last year, my office experienced deep personnel cuts and those of us who survived received a bare-bones salary increase,” she says. “Things still don’t look great this year, so I don’t expect a wage increase to be able to cover my new monthly commute.”

What’s more, Kerr says she and fellow commuters have trouble understanding why the Christie administration is reducing service (one of her morning rush hour trains is being cut) in addition to raising fares. “I know a bunch of people who are talking about driving to work now. How is that going to help road congestion and pollution?”

Martin Robins, a former director of the Voorhees Center and a longtime consultant on New Jersey transit issues, said a 25 percent rate hike can have unforeseen consequences. “I think that 10 percent, with reasonable intervals, has been acceptable to people,” Robins said. “I think 15 percent seems to push the limit. I think 25 percent can cause results that no one can predict.”

The recession and attendant state budget crisis has certainly meant reduced state aid for NJ Transit. Under Christie’s budget proposal, the state’s general fund would provide $276 million to NJ Transit in the fiscal year that starts July 1. That represents a drop of 20 percent from the $348 million the state spent on mass transit just two years ago. Overall, NJ Transit’s proposed operating budget of $1.7 billion represents an increase from the current budget of $8 million, or less than 1 percent. “What you’re seeing is a substantial reduction in state support of NJ Transit between (former governor Jon) Corzine’s last year and Christie’s actions,” Robins said. “These are the kind of steps that contribute to a crisis.”

Irregular Fare Hikes

Robins said he believes the absence of regular fare hikes have contributed to NJ Transit’s current problems. The proposed fare hike would be the fourth in eight years, but there were no fare hikes for nearly 12 years starting in July 1990. As governor, Christie Whitman, who said she considered a fare hike a tax, vowed never to raise NJ Transit ticket prices.

Economically, Robins said, the 1990s was a decade of prosperity, a time when the transit system was flush and fare hikes were deemed unnecessary. Nonetheless, he said, “It’s often said that they should have a fare increase every two years, to keep up with the arithmetic.”

Weinstein agreed that more regular fare hikes would be more economically palatable for commuters. “When times are good, you may not manage as well as you ought to manage,” he said. “There are many people who believe that a relatively small increase on a regular basis is a sound business approach.”

Scheduled Fare Increases

In his testimony before the Assembly, Weinstein said the NJ Transit board in 2001 had endorsed an index that would set regular fare increases, but it was never implemented. He said it would have raised about $318 million since 2003, exceeding the current budget gap.

It is clearly a preferable way, but when we face the deficit we do now and we need to fill that by statute, you do what you have to do,” he said.

Regular fare increases, for example, would help maintain the percentage of NJ Transit’s operating budget that is generated from ticket sales. Under the current budget, covering the fiscal year that ends June 30, the agency expects to collect $765.5 million in fares, or 43 percent of its operating budget. Weinstein said he’d like to see that figure raised to 50 percent in the future.

Not that Robins discounts the effects of the economic downturn, starting in the fall of 2008, on NJ Transit’s troubles. Since the peak in December 2008, ridership has dropped almost 5 percent.

1 Million Commuters A Day

“The economy has been so deadening on NJ Transit’s ridership,” Robins said. “One of the things that helped NJ Transit on its operating budget was a long consecutive skein of years of growth in ridership. They almost reached a million riders every day. They fell short of that because the recession kicked in. That is another factor—ridership, lost revenue.”

The proposed fare hikes and service cuts come at a crossroads for NJ Transit. In the past decade the agency has been on a building spree.

Among other projects, NJ Transit built light rail lines serving Hudson and Bergen Counties and the Delaware River waterfront; built a new rail line to the Meadowlands Sports Complex; extended Newark’s light rail service to the city’s Broad Street station; and opened the Frank Lautenberg Rail Station in Secaucus, a transfer station linking 10 regional rail lines. Weinstein said NJ Transit is “physically in the best shape it’s ever been.”

All in all, NJ Transit operates more than 2,000 buses, 700 trains and 45 light rail cars over 236 bus routes and 12 rail lines. In the fiscal year that ended last June 30, the agency recorded more than 260 million passenger trips.

Carnegie believes NJ Transit’s expansion has been “important growth.” But, he said, “I think the ongoing challenge with any public transportation service is the need to establish an ongoing operating revenue. The inherent problem with any type of expansion is, are you going to have money to operate the system over the long-term?”

A Dedicated Revenue Source

There is no denying New Jerseyans’ reliance on the statewide transit system. According to a 2007 report by the Voorhees Center at Rutgers, “For the period 1999-2005, overall transit ridership grew 15 percent in New Jersey, nearly twice as fast as the national growth rate of 7.64 %. Both bus (+6.2%) and commuter rail (+21.5%) in New Jersey outperformed the national growth rates.” Figures provided by NJ Transit show that ridership grew by another 12 percent from July 2004 through June 2009.

Yet financing NJ Transit’s multifaceted operations is often a year-to-year proposition shaped by the political winds blowing in Trenton. Weinstein acknowledged that the agency’s funding process could use some stability. “Hopefully, this fare increase will carry the agency for a while,” he said. “Hopefully, the economy will come back and we can grow the system. At some point we probably ought to be thinking about a dedicated revenue source for NJ Transit.”

Weinstein was speaking outside the ninth floor boardroom at NJ Transit headquarters in Newark during the first of three nights of public hearings on the agency’s proposal. Inside, the room was packed with more than 130 people, many of whom had come to deliver often fiery testimony in opposition to the original plan. Another few dozen people listened from an adjacent lobby, and 50 more waited in the ground-floor foyer.

Raise the Gas Tax?

Even after the increases were reduced, the proposed fare hikes and service cuts will affect mostly poor and working-class commuters. According to NJ Transit, nearly three in five riders—57 percent—have an average annual household income below $50,000.

Among those testifying at the public hearing was Lee Lensky, the director of the New Jersey Association of Railroad Passengers, who called the plan “socially unconscionable.” Like others who spoke at the hearing, Lensky questioned why the state has not raised the gas tax—New Jersey’s is the fourth lowest in the nation—since 1988.

“Unfortunately, some will feel more pain than others,” Lensky said. “This will hurt the old, poor, those without cars, and those who voluntarily ride mass transit.”

Speakers also included Democratic Assemblywomen Cleopatra Tucker and Grace Spencer, both of whom represent parts of Newark.

“This is merely another tax by a governor who said he would not raise any tax,” Spencer said. “On the surface it appears a lot of this increase is being directed at urban centers of New Jersey.”

Of course the long-term impact of NJ Transit’s proposal may be impossible to gauge with any certainty at this point. NJ Transit estimates that ridership will decline by 5 percent, which makes it likely that more commuters will opt to drive on the state’s already congested roads, a development that would be counterproductive to the environmental benefits of mass transit. According to the 2007 report by the Voorhees Center, “NJ Transit has calculated that its service eliminates 2.56 billion vehicle miles traveled annually in New Jersey; in 2006, the reduced automobile usage saved an estimated 1.16 million tons in CO2 emissions.”

The state of affairs recalls the findings of another study of New Jersey’s transportation system, this one prepared five years ago by James Hughes and Joseph Seneca of the Edward J. Bloustein School of Planning and Public Policy at Rutgers. Their report was titled “A Transportation-Driven World-Class Economy: New Jersey at Risk.”

“Will New Jersey’s future revisit the past when, in the absence of appropriate investment in transportation, the state suffered economically?” they wrote. “Or will the political courage emerge, as it has before, to craft appropriate policy solutions? No less than the state’s economic future hangs in the balance.”

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