NJ Transit’s Plan to Close $80M Budget Gap: Increase Fares and Cut Back Service

Meir Rinde | March 4, 2015 | Transportation
Riders will most likely beef, but higher fares should prove steadier source of income than budget diversions that have been used since 2010

NJ Transit
The hundreds of thousands of passengers who ride NJ Transit buses and trains every day will likely see their first across-the-board fare hikes in five years as the public transportation agency prepares to address an $80 million budget gap. The move comes despite a proposed boost in state funding and a plan to reduce spending by $40 million through service cuts and adjustments.

The transit system’s financial challenges have simmered on the back burner for years. While fares have remained flat, NJ Transit’s unions have been working under expired contracts, a number of rail expansion projects remain stalled, and the state has slashed its subsidy to the agency as Gov. Chris Christie seeks to balance the budget without raising taxes.

At the same time, Christie has kept NJ Transit funded by diverting money from two sources: NJ Turnpike toll revenues that had been promised to the ARC Hudson tunnel project he canceled, and the Clean Energy Fund, which is supposed to use money from a utility-bill surcharge to promote renewable energy and energy efficiency. He’s proposed keeping the transfer from the Turnpike unchanged at $295 million and boosting money from the Clean Energy Fund sharply to $62 million in the next fiscal year.

While riders are sure to complain about more expensive bus and rail tickets, a fare hike will provide a steadier source of funding than the diversions Christie has relied on, said Martin Robins, the former deputy executive director of NJ Transit and director emeritus of the Alan Voorhees Transportation Center at Rutgers University.

“This is at least a way to face the music in the short term,” Robins said of the expected increase. “It’s actually coming later than it probably ought to have come. If you look at how they are funding public transit operations, you realize how many significant gimmicks are being used to do that. What they really are doing is creating a totally unsustainable situation.”

Robins noted that diversions of Clean Energy money have faced criticism and that the Turnpike Authority’s five-year program of sending toll money to NJ Transit expires next year. The future of the toll transfers is unclear, though some officials have proposed making them permanent by merging the Turnpike with NJ Transit and the Department of Transportation.

“Within the next year or two, there are going to be some very, very serious questions about how they’re going to fund public transit,” Robins said.

A potential backlash

Any fare increases or service adjustments will have to be discussed at public hearings over the next few months, as they were when NJ Transit last raised prices five years ago.

In 2010 the agency raised rail and some bus fares 25 percent, hiked local bus fares 10 percent, eliminated off-peak rail discounts, and reduced schedules on some lines. The average increase was 22 percent, but riders of off-peak trains saw their fares soar as much as 47 percent. NJ Transit’s annual fare collections rose $105 million or nearly 14 percent after the changes.

The agency expects to take in $928.6 million from fares in the current fiscal year. Starting from that higher base, raising an additional $80 million a year would require bringing fare revenues up only 8.6 percent.

However, the five-year gap since the last increase suggests the agency might approve a bigger hike this year to avoid going through the process again soon. (With the exception of the period from 1991 to 2001, when there were no fare hikes, increases generally used to happen every two or three years.)

Whatever the increase, Robins said it could provoke a backlash from riders who can ill afford any new expenses given the slow growth of wages in New Jersey. He encountered such opposition recently at a focus group NJ Transit was running for a potential new service offering, he said.

“I was amazed at the resistance to paying an increased amount for transportation services,” Robins said. “People don’t feel secure enough to do the things they want to do with their lives. That’s a very significant pall that goes over all of this.”

Veronica Vanterpool, executive director of the Tri-State Transportation Campaign, said transit riders will end up bearing more of the burden for the state’s rickety transportation funding structure, even though they as a whole earn much less than people who travel by car.

“This is an issue of equity,” she said. “We’re talking about significant portions of people’s incomes dedicated to transportation. And it’s not just those on low income; it’s people who are on fixed incomes as well. So we’re talking about our seniors who rely on Social Security, for example. We’re talking about students who are working part time and going to school fulltime.”

“It’s exactly this sort of diversity in populace that the state would want to retain and support, and this (fare hike) is exactly the opposite of that. It’s a backward approach to strengthening the economy in all these different ways,” she said.

The state should instead consider imposing a fee on businesses whose employees depend on mass transit as well as other fairer sources of new revenue, she said.

Rising labor costs

Christie did not mention transportation in his budget address last month, to the disappointment of those hoping to hear his thoughts on rejuvenating the nearly depleted Transportation Trust Fund, which pays for highway and transit projects. But his published budget summary indicated a fare hike was being considered.

“To meet its operating needs in fiscal 2016 and beyond, including escalating employee health premiums and other costs, New Jersey Transit is currently evaluating a range of savings and revenue-generating options that may include the first fare adjustment since May of 2010,” the summary said.

NJ Transit subsequently announced it had already identified more than $40 million in spending reductions for the new fiscal year that starts July 1. But it still faces an additional budget gap of $80 million and “will be putting everything on the table, including fare and service adjustments,” spokeswoman Nancy Snyder said.

“Costs have been rising for the last five years and continue to rise,” she said. “For instance, this year, health insurance, workers compensation, pension, and other benefit costs are up as are expenses for transportation and other contracts.”

NJ Transit’s total budget, which also includes federal funding, advertising revenues, and other monies, is just over $2 billion for the current fiscal year. [ Labor costs make up 58 percent of spending. The $1.17 billion budgeted for salaries and wages in fiscal 2015 represents an increase of more than 4 percent from last year and 13 percent from five years ago.

Projections for fiscal 2016 are not yet available, but labor costs could spike if NJ Transit finally starts signing new union agreements. Snyder said contracts with the agency’s 20 unions have all expired, including police and union contracts that ran out in 2010 and rail contracts that expired in 2011. New agreements could include tens of millions of dollars in retroactive raises.

The higher expenses also include $147,400 a year for the new position of chief of policy and strategic planning. The job was recently created] for Michael Drewniak, Christie’s departing spokesman, and will bring him a nearly $14,000 increase from his current salary.

The governor’s proposed budget would actually boost the state’s total contribution to NJ Transit to $390 million, representing a $22 million increase. Most of that would come from a jump in Clean Energy funding from $33 million to $62 million. The state’s main subsidy from tax revenues would drop from $40 million to $33 million, a far cry from the $285 million allotted in 2012 and the peak subsidy of $348 million in 2009.

A downward spiral

It’s not clear where NJ Transit will target the service adjustments that will accompany fare increases, though they could include cuts to the Atlantic City train line, which has seen reduced demand, according to Lester Wolff, a director at the nonprofit New Jersey Association of Railroad Passengers.

Wolff warned that moves by NJ Transit that reduce the availability or convenience of transit lines could push more people to drive instead, exacerbating congestion and highway maintenance costs.

“They’re being forced into a situation where they have to cut, but then you start going into that spiral where you cut service and the trains and buses become more uncomfortable,” he said. “You start going into that death spiral where eventually people say, well, if I’m going to have to do this, I may as well just get in the car and drive.”

“When you provide service you gain passengers. When you cut service, it just drops off. It’s unreliable. People like to have clockwork service. If it’s 18 minutes after the hour, or 48 minutes after the hour, you know you’ve got a train at your station. Unfortunately, NJ Transit, they try to maintain some semblance of it but it’s just been very hard to do,” he said.

Wolff said he was also disheartened by the prospect of cuts to a transportation network that should instead be growing into new areas and spurring economic growth.

“Nothing new gets built,” he said. “There are things in the pipeline that have been delayed for years now.”

They include the extension of the Hudson-Bergen light rail into Bergen County, which businesses and real estate developers in the area have been advocating for years. A proposed light-rail line reaching from the River Line in Camden down to Glassboro also remains in limbo, as neither the Delaware River Port Authority nor NJ Transit has so far been willing to take ownership of the project, Wolff said.

NJ Transit spokeswoman Snyder said the agency has made some improvements recently despite keeping fares flat for five years. It’s implemented new technologies like a mobile app to buy tickets; added buses and made other changes at the Port Authority Bus Terminal schedules to reduce wait times; and, in January, started one-seat train rides from the Raritan Valley to New York, she said.

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