Monday, January 25, 2021

Metro to maintain service cuts despite $300M sales tax windfall

In what might be properly called a bonanza, Metro’s Board of Directors will hear a report on Thursday informing them that the agency is on pace to receive sales tax revenues nearly $300 million above what they had budgeted back in September. As the largest U.S. transit agency west of the Mississippi River, one might think such news would be welcomed within Metro as an opportunity to provide relief to the hundreds of thousands of bus riders who have had no choice but to bear with the agency as it slashed service in the face of fiscal uncertainty. So how is it possible that instead the likeliest course of action seems to be that the Board will approve a staff recommendation that restores none of the eliminated service – and even that unscheduled additional service cancelations will continue to be the norm?

Well, let’s back up. Local governments across the county, state and country are struggling mightily. Without the immense power afforded to the federal government to literally print money, or (generally speaking) even that of the federal and state governments to levy taxes on personal income, cities have been put in an extremely dire situation. The City of Los Angeles, for one example close to home, has approved massive worker furloughs and will potentially follow those up with layoffs in order to stitch up a $600 million hole in an already reduced budget. So Metro’s windfall is noteworthy and, frankly, strange.

Metro is in this fortunate position for three reasons. One is that sales tax revenue has been less affected by the Covid downturn than originally imagined. Characteristic of the extreme inequity that has suffused this unusual recession, entire segments of the population have found their ability to buy goods unchanged by the pandemic. A robust ecosystem of delivery services and online shopping – not to mention the malls, which as of this writing remain open – have enabled consumer spending to remain vigorous over the last year.

That leads us to the second reason: Metro is uniquely dependent on sales taxes. Locally generated sales taxes make up more than half of the agency’s annual budget. Compare that to the struggling City of Los Angeles, where sales tax accounts for 8% of the $7 billion general fund and even less overall.

And lastly there is this: A majority of Metro’s revenue comes from sales taxes because Angelenos have democratically elected – four separate times! – to tax itself to fund the agency. All public offices belong to the people, but, truly, none more than Metro. The very financial solvency of the transit operator is owing to a public that has affirmed and reaffirmed that transit should be a priority.

It is for these reasons above all that Metro now finds it has $282 million to allocate that it had not been expecting. But, surprisingly, increasing service from the bone-deep cuts approved in September does not appear to be a priority for staff. In fact, despite claiming that $59 million of the surplus would go to “Bus/Rail Operations and State of Good Repair,” none of the money is recommended for increasing service in a presentation put together by staff. Instead, the recommendation has it going to maintenance, infrastructure, and recruitment.

When Metro’s Board of Directors approved service cuts as part of its 2021 budget last September, they also approved a motion calling for ongoing staff reports on how the agency could get back to its pre-pandemic baseline. That motion stated plainly: “maintaining [the service cuts] for the remainder of the fiscal year is not acceptable for riders nor is it consistent with the agency’s strategic priorities.” But, despite this clear direction, staff have come back with a recommendation that flies in the face of the wishes of the Board and the riding public.

Staff provides little in the way of acceptable support for this recommendation. In an informational report, staff indicates that the economic recovery has stalled out and that ridership is trending down, despite 400,000 trips still occurring each day on the bus system alone. They also suggest that stricter stay at home measures have led to more individuals forgoing transit trips, but they neglect to mention that the same increased severity in the pandemic has also increased the need to protect the many riders who do not have that choice.

Perhaps most troublingly, staff have ruled out the expenditure of nearly all of the surplus sales tax $223 million of it as untouchable for the purposes of increasing transit service. This is because the money is instead going to offset lost revenues from fare sales (since most bus riders are riding for free still), advertisers, tolls, and parking. We will set aside for another post that Metro claims to be seeking to move to fare free service, and that this reluctance to fund service without farebox recovery portends very negative things for free service. Rather, most telling is the advertising revenue.

The staff report indicates that Metro’s ad revenue is down because its “advertising contract has been temporarily modified to provide relief to the vendor by reducing their payments.” The relief that the agency is refusing to riders it is instead providing to large advertising corporations. Bus riders, whose lives are on the line during the pandemic, are being asked to subsidize a reduced contract for profitable corporations. The Board of Directors should forcefully reject the recommendations of staff.

It has already been a long and difficult winter in Los Angeles, with the feared second wave of the Covid pandemic arriving with shocking ferocity. Throughout the region, hospitals are filled to capacity, the number of confirmed Covid cases has skyrocketed, and deaths from the disease have followed their wrenching upward trend. All of this has taken place in the context of local economic shutdown measures that have never equalled the intensity of the precautionary safer-at-home measures of last spring.

In marked contrast to the quiet and deserted streets of March and April, Angelenos now leave their homes into a city where many of life’s daily routines have resumed something like a normal ebb and flow. People are running errands. The streets are filling up with traffic from single occupant cars. And, of course, many hundreds of thousands of mostly lower-income Angelenos are riding Metro buses, mired in that same traffic, trying to get to jobs they need to make ends meet.

It is not lost on these bus riders that the extended waits and crowded services they are now facing as a result of the decisions made on their behalf by Metro. Nor is it lost on them that their communities are likely to be the hardest hit by the vicious second wave of Covid. But that fact seems to go unremarked upon within the walls of Metro headquarters.

In four separate votes, Angelenos have supported the sales taxes that have kept Metro afloat even in the most strenuous of economic times. Those votes were not to give Metro an unconditional grant, but to invest in its potential. Metro owes Angelenos and it owes riders in particular to make good on that potential and to prioritize restoring transit service.

Our 2020 - 2022 Strategic Plan

by Investing in Place

Response to today's Motion: Restoring Bus Service

by Investing in Place