When the Davenport City Council on Wednesday considers raising fares for the city's mass-transit service by 50 percent, it's doing so with the risk that the move could backfire. While the city has estimates on how much revenue the fare increase might generate, history and the size of the hike suggest that the benefit might not be enough to bring the service out of the red.
CitiBus, the city-run transit service, faced an anticipated deficit of $122,000 when the current fiscal year began July 1. The city made a variety of cuts in things such as transit security, advertising, and transit-center cleaning that are expected to save slightly more than $30,000 a year.
To address the remaining deficit, the city council will consider at its August 21 meeting a fare increase from 50 cents to 75 cents per ride. Discounted fares - for young people, the elderly, and people with disabilities - will go from 25 cents to 35 cents, and the cost of a monthly pass will jump from $20 to $25.
That increase is expected to generate $81,000 in extra revenue over the course of the fiscal year. (The new fare would go into effect September 3.)
In the fiscal year ended June 30, CitiBus took in $231,000 from fares and the sales of passes and tokens. The municipal bus service has a budget of $3.7 million, with nearly two-thirds of that coming from property taxes.
The big variable is what will happen to the number of riders with the fare increase. Davenport Transportation Director Byron Baxter said that the national model anticipates a ridership loss of one-third of 1 percent for every 1-percent increase in fares. (CitiBus currently has annual ridership of approximately 960,000 people.)
For the 50-percent fare hike, in other words, CitiBus is basing its revenue estimates on a ridership that would drop nearly 17 percent. (This model says that fare increases provide transit services with diminishing returns; the added benefit to the service shrinks as a fare increase grows.)
The last time the city tried a fare increase, it failed miserably.
In 1986, Baxter said, the city raised fares from 50 to 75 cents per ride. But the number of CitiBus riders dropped sharply, and the fare increase only generated $5,000 in new revenue. The city council rolled back fares in 1987. Baxter called the results "very disappointing."
That experience calls into question the generalized model for calculating the impact of a fare increase on the number of riders. "This little formula is sort of a nationwide average," Baxter said. "It's not tried-and-true here."
But Alderman Roxanna Moritz said she doesn't think the ridership decline will be that steep. She said one study showed that any fare increase will cut the number of riders by 10 percent. "People that utilize the bus system are going to continue to use the bus system," she said.
Even a few months of experience with the new fares won't necessarily make clear the impact of a fare increase on ridership and revenue. "It takes time for [the repercussions of] a fare increase to be really understood," Baxter said. "It's ideal to have a year under your belt."
But even if the city's estimates turn out to be accurate and the new fares generate $81,000 a year, CitiBus would still end up with a deficit of more than $10,000 in the current fiscal year. So why not consider a larger one-time hike to address the problem, or have a long-term plan that incorporates smaller, periodic rate increases to reduce sticker shock?
Baxter said the answer is timing. Any fare-increase proposal requires a public hearing, and starting the process over would make it difficult for the city to implement a fare increase by the end of the year. In May, the city considered a 60-cent fare proposal and held a public hearing, and a new public hearing was required when the fare proposal jumped to 75 cents. "We're in need of implementing something soon," Baxter said.
Moritz said she was under the impression that the rate hike will erase the deficit this year and provide CitiBus with a small surplus in future years.
Alderman Ray Ambrose, who has been a strong advocate for a better mass-transit system in Davenport, said that no matter what the council does with a fare increase, it will soon need to decide whether the bus system is a municipal priority. "Financially, we've got to do something," he said. But he thinks a larger issue is whether the city will give CitiBus the attention it needs - including expanding service to weekends and evenings, and moving the buses from their current facility in Illinois to the city's public-works center. Ambrose said the city should also consider earmarking Community Development Block Grant money for mass-transit service to make up any deficit.
Ambrose supports a hike bringing the fare to 60 cents and dipping into Community Block Grant funds. He said riders are under the mistaken impression that a 75-cent fare would include service expansion.
Some members of the city council asked whether a fare increase larger than the originally proposed 60 cents might allow CitiBus to add service, for instance, extending its hours from 6:30 to 9:30 p.m. weeknights, adding weekend service, or expanding the 12 current routes. But Public Works Director Dee Bruemmer told the Public Safety Committee last week that a fare increase would not generate enough money for extra service.
Moritz said the city council is interested in expanding CitiBus service, and is willing to look at a future rate increase to accomplish that. But the current rate proposal does not include new hours or services.
CitiBus has been in a deficit for two fiscal years, Baxter said. In the fiscal year ending June 30, 2001, the service lost $205,000. He added that he does not know the amount of the deficit for the year ending June 30, 2002.
CitiBus, the city-run transit service, faced an anticipated deficit of $122,000 when the current fiscal year began July 1. The city made a variety of cuts in things such as transit security, advertising, and transit-center cleaning that are expected to save slightly more than $30,000 a year.
To address the remaining deficit, the city council will consider at its August 21 meeting a fare increase from 50 cents to 75 cents per ride. Discounted fares - for young people, the elderly, and people with disabilities - will go from 25 cents to 35 cents, and the cost of a monthly pass will jump from $20 to $25.
That increase is expected to generate $81,000 in extra revenue over the course of the fiscal year. (The new fare would go into effect September 3.)
In the fiscal year ended June 30, CitiBus took in $231,000 from fares and the sales of passes and tokens. The municipal bus service has a budget of $3.7 million, with nearly two-thirds of that coming from property taxes.
The big variable is what will happen to the number of riders with the fare increase. Davenport Transportation Director Byron Baxter said that the national model anticipates a ridership loss of one-third of 1 percent for every 1-percent increase in fares. (CitiBus currently has annual ridership of approximately 960,000 people.)
For the 50-percent fare hike, in other words, CitiBus is basing its revenue estimates on a ridership that would drop nearly 17 percent. (This model says that fare increases provide transit services with diminishing returns; the added benefit to the service shrinks as a fare increase grows.)
The last time the city tried a fare increase, it failed miserably.
In 1986, Baxter said, the city raised fares from 50 to 75 cents per ride. But the number of CitiBus riders dropped sharply, and the fare increase only generated $5,000 in new revenue. The city council rolled back fares in 1987. Baxter called the results "very disappointing."
That experience calls into question the generalized model for calculating the impact of a fare increase on the number of riders. "This little formula is sort of a nationwide average," Baxter said. "It's not tried-and-true here."
But Alderman Roxanna Moritz said she doesn't think the ridership decline will be that steep. She said one study showed that any fare increase will cut the number of riders by 10 percent. "People that utilize the bus system are going to continue to use the bus system," she said.
Even a few months of experience with the new fares won't necessarily make clear the impact of a fare increase on ridership and revenue. "It takes time for [the repercussions of] a fare increase to be really understood," Baxter said. "It's ideal to have a year under your belt."
But even if the city's estimates turn out to be accurate and the new fares generate $81,000 a year, CitiBus would still end up with a deficit of more than $10,000 in the current fiscal year. So why not consider a larger one-time hike to address the problem, or have a long-term plan that incorporates smaller, periodic rate increases to reduce sticker shock?
Baxter said the answer is timing. Any fare-increase proposal requires a public hearing, and starting the process over would make it difficult for the city to implement a fare increase by the end of the year. In May, the city considered a 60-cent fare proposal and held a public hearing, and a new public hearing was required when the fare proposal jumped to 75 cents. "We're in need of implementing something soon," Baxter said.
Moritz said she was under the impression that the rate hike will erase the deficit this year and provide CitiBus with a small surplus in future years.
Alderman Ray Ambrose, who has been a strong advocate for a better mass-transit system in Davenport, said that no matter what the council does with a fare increase, it will soon need to decide whether the bus system is a municipal priority. "Financially, we've got to do something," he said. But he thinks a larger issue is whether the city will give CitiBus the attention it needs - including expanding service to weekends and evenings, and moving the buses from their current facility in Illinois to the city's public-works center. Ambrose said the city should also consider earmarking Community Development Block Grant money for mass-transit service to make up any deficit.
Ambrose supports a hike bringing the fare to 60 cents and dipping into Community Block Grant funds. He said riders are under the mistaken impression that a 75-cent fare would include service expansion.
Some members of the city council asked whether a fare increase larger than the originally proposed 60 cents might allow CitiBus to add service, for instance, extending its hours from 6:30 to 9:30 p.m. weeknights, adding weekend service, or expanding the 12 current routes. But Public Works Director Dee Bruemmer told the Public Safety Committee last week that a fare increase would not generate enough money for extra service.
Moritz said the city council is interested in expanding CitiBus service, and is willing to look at a future rate increase to accomplish that. But the current rate proposal does not include new hours or services.
CitiBus has been in a deficit for two fiscal years, Baxter said. In the fiscal year ending June 30, 2001, the service lost $205,000. He added that he does not know the amount of the deficit for the year ending June 30, 2002.
