VTA Connections

Budget Update

Dear Friends of VTA:

In recent months, VTA has experienced an unprecedented decline in operating revenues.  VTA, along with transit agencies across the state, has been hit hard by the fallout from the international financial crisis, which produced double-digit unemployment, widespread home foreclosures, and a significant fall in the stockmarket.  Following more than three consecutive quarters of flat revenue receipts, VTA has faced declining sales tax revenues since June 2008.  In February, the State Legislature and Governor adopted a budget that completely eliminated State Transit Assistance (STA) funding for transit operations beyond 2008, delivering yet another staggering blow. 

Although VTA has worked hard to establish a healthy operating reserve to smooth out temporary downturns in the economy, it is not possible to draw on this source indefinitely.  Eliminating STA without identifying an alternative source of support for transit operations has created a permanent structural deficit for transit agencies that can not be bridged on an on-going basis through one-time “solutions” such as drawing on reserves, or waiting for local revenues to pick up.  At the Federal level, Congress has taken bold steps to fortify the nation’s sputtering economy, and VTA anticipates receiving $47.3million in federal stimulus funding to support our capital projects, however, this does not address the problem in our operating budget.  Even with some indicators suggesting the economy is responding to the recent injection of cash and support for financial institutions, it will take time for local businesses to recover and tax revenues to flow.  We are by no means out of the woods, and must plan our finances cautiously, anticipating that recovery will not come soon.

As we are preparing our two-year budget plan, VTA is projecting a $28 million deficit in FY10, and $50 million deficit in FY11, due to this continued hit to revenues.  To narrow this widening gap, VTA has already taken steps to reduce expenditures, including implementing an administrative hiring freeze, limiting travel and contract expenditures, and evaluating business practices to identify cost savings.  Earlier this month, the VTA Board approved bus service plan modifications that will redeploy resources to areas with greatest demand, including limited reduction of routes where service has not met minimal ridership levels.  On the revenue side, we are actively engaged at the state level, along with our partner transit agencies and other stakeholders, in exploring all possible options for replacing our STA funding.  Despite these efforts, we do not expect any relief from the State in the short term. 

These responsible and prudent steps to respond to declining revenues have reduced our budget deficit, nevertheless, there is still a substantial gap between our projected operating expenses and projected revenues for the next two years.  To preserve our core transit services, as well as to advance our capital program, while minimizing the need for drastic operational changes, including staff reductions, I am recommending a number of additional strategies as part of the proposed budget.  These measures will not be easy or without pain, but will be balanced and designed to support our vital services, and fulfill our agency mission, until a long-term solution to our revenue situation can be achieved.

At a VTA Board Budget Workshop on April 24, I will recommend that we adopt these strategies to reduce expenditures as well as steps to increase revenues.  Specifically, I am recommending that we work with our collective bargaining units and all employees to develop contract modifications that will generate approximately $28 million in labor savings over the coming two years.   Various scenarios could include furloughs, deferrals of wage increases, and increased contributions to health and retirement plans.  VTA currently has open contract discussions with SEIU, AFSCME, and TAEA, and anticipates discussions with our largest union, ATU as part of this budget process.  Further, I will be recommending that the Board allocate $4 million in federal capital funds to cover preventive maintenance costs, and reduce “premium” paratransit service levels that currently extend the hours and service area above what is required by law. 

Although VTA has achieved record ridership increases in the past year, in part due to the changes we have made in service frequency and routes, as well as the addition of express services, it will be necessary to implement fare increases to help address the operating deficit.  I am reluctant to recommend this change in a time when so many residents are struggling to balance their own budgets, however, after months of work in developing this budget proposal, I am convinced that we cannot address the current budget deficit without revenue adjustments, unless we intend to make significant cuts to service levels and implement major reductions in workforce.  The fare increases, if adopted, would apply to all fare media, including our EcoPass program.

The economic troubles of the State and our Country are not expected to improve in the near term.  We must not wait for a “miracle” or windfall; rather, we must lay a new foundation and adjust our operations to work within the resources we can reasonably anticipate will be available in the next two years.   These steps, although painful, are equitable and shared by all.  They will enable us to postpone reductions to service, which would seriously impact thousands of county residents who depend upon VTA to commute to work, attend school, and keep their medical appointments.  If there is any “silver lining” in this budget plan, it is the solid confirmation I have gained from discussions I have had with staff in these difficult months, that VTA employees remain committed and focused on our mission of serving our county.  I am confident that we will be able to work together to craft agreements that will meet VTA’s immediate budget needs, as we continue to work with our statewide partners to achieve a long-term solution.

Thank you for your continued support for VTA.  As always, I welcome your input and encourage your participation as we move forward.

Michael T. Burns
General Manager

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About VTA
Santa Clara Valley Transportation Authority (VTA) is an independent special district responsible for bus, light rail and paratransit operations; congestion management; specific highway improvement projects; and countywide transportation planning. As such, VTA is both an accessible transit provider and multi-modal transportation planning organization involved with transit, highways and roadways, bikeways and pedestrian facilities.