For 1995-96, the Mass Transportation program will account for approximately 6.8 percent of the department's total expenditures. The budget proposes $420.1 million in program expenditures, which is $41.8 million (9 percent) less than estimated current-year expenditures.
Figure 13 summarizes the Mass Transportation expenditures by program elements. The largest elements of the program provide capital outlay funds for rail transit capital and intercity rail. In 1995-96, the budget proposes a 35 percent reduction in rail transit capital expenditures. This is mainly due to the depletion of bond funds available under Propositions 108 and 116. The budget also proposes a 50 percent increase in the expenditure level for interregional public transportation. The increase includes an augmentation of $24.3 million for intercity rail operations and $26 million for interregional public transportation capital expenditures.
Currently, intercity rail passenger services are provided on three main corridor routes on a contract basis with Amtrak. (These are referred to as state-supported or 403(b) services and are provided pursuant to section 403(b) of the federal Rail Passenger Service Act.) These routes are the San Diegan, the San Joaquin, and the Capitol. Figure 14 shows the current number of daily round trips on the three routes.
In addition to providing for the operation of the service, Caltrans also plans for the capital improvements needed to upgrade the corridors for service expansion. Capital improvements include (1) acquisition of rolling stock (cars and locomotives), (2) maintenance facility and station improvements, (3) track and signal improvements.
The state's share of operating costs for intercity rail services has been increasing, and the state has little control over these costs. The state's operating costs per passenger vary by route, and range widely in amount.
The state and Amtrak each pay for a portion of the operating costs of the service based on a formula which takes into account the amount of fare revenues generated and the operating cost of service. Depending on the service, the state's share of costs varies. Current law also requires each route to attain a 55 percent farebox ratio--that is, passenger fares must cover at least 55 percent of operating costs--by the third year of service in order to continue to receive state operating funds.
Amtrak's Participation in State-Supported Routes Wanes. Under federal law, Amtrak determines and allocates operating costs to the various routes. Historically, Amtrak's share of the operating costs has ranged between 30 and 35 percent of the operating costs of each service. However, as Figure 15 shows, Amtrak's contribution has declined over time while the state's portion of the operating subsidy has risen accordingly. As a result, from 1992-93 through 1994-95, with no expansion in service (in terms of round trip trains per day), total operating expenses paid by the state increased from $22 million to $30.8 million while Amtrak's share has remained constant at $5.7 million. Our review further shows that as of 1994, no additional federal funds are allocated for Amtrak to pay for any new services. Consequently, the state has to pay for all the operating costs of any new service not covered by fare revenues.
Amtrak's Latest Plan Will Cost State Even More. Recently, Amtrak announced that it will discontinue the Capitol service beginning April 1, 1995. If the state wants to continue the route's three daily round trips, it will likely have to increase its subsidy above the $7.9 million it is currently paying. Caltrans indicated that it could cost the state an additional $1 million to continue that service through October 1995.
State Has Little Control Over its Share of Costs. In addition to allocating costs, Amtrak also sets passenger fares. This limits Caltrans' flexibility to change fares in order to attract more riders or to improve cost recovery. The department maintains that fares on some services in California are set artificially high, thereby resulting in low ridership and low fare revenue return. Because Caltrans has little control over its share of costs, it is difficult for the department to budget for intercity rail service.
Subsidy Per Passenger Ranges Widely. Depending on the operating costs charged by Amtrak, total ridership and passenger fares, the state's operating cost (subsidy) per passenger for each route varies. Figure 16 shows the per passenger subsidy from 1992-93 to 1994-95. As the figure shows, subsidy per passenger may increase even when service on a route achieves a higher farebox ratio. For instance, per passenger subsidy for the San Diegan would increase to $4.30 in 1994-95 despite a projected higher farebox ratio than in 1993-94. Additionally, even though the San Joaquin achieves a higher farebox ratio than the Capitol, subsidy per passenger for the San Joaquin in the past two years has been significantly higher.
We recommend that $2.9 million in the current year for the expansion of intercity rail service be reverted to the TP&D Account because the expansion will not occur due to a shortage of equipment and a lack of system capacity; consequently, the funds will not be needed in the current year.
Service Expansion Will Not Materialize in 1994-95. The 1994-95 budget included approximately $14.8 million to expand the intercity rail service. This includes $13.5 million for operating costs and $1.3 million in equipment costs. Caltrans anticipated that increased service expansion would improve ridership and farebox revenues, thereby reducing its share of operating costs. However, Caltrans now indicates that service expansion will likely not occur in the current year because of delays in (1) the delivery of the California Car (a rail car specifically manufactured for California intercity and commuter rail service) and (2) track and signal improvements needed on the San Joaquin and the Capitol routes.
eCaltrans Redirected Funds Anticipated for Service Expansion. However, Caltrans indicates that only $2.9 million of the $14.8 million appropriated remains available. This is because the department has redirected the remaining $11.9 million to pay for higher operating costs charged by Amtrak for existing services in the current and prior years as well as to fund some minor capital projects. Accordingly, we recommend that $2.9 million be reverted back to the TP&D Account.
We recommend the adoption of Budget Bill language that requires the department to notify the Legislature when funds are reallocated for intercity rail service uses.
Our review shows that, over the past three years, Caltrans has redirected funds that were appropriated for proposed service expansion to other intercity rail purposes. For instance, from 1992-93 through 1994-95, $34 million was provided for service expansion. However, no expansion was implemented for various reasons. Instead, approximately $23 million was redirected to fund higher operating costs on the three routes. Another $2.5 million has been redirected in the current year to pay for some minor capital improvement projects.
While current law authorizes the redirection of funds, the Legislature is not advised of such redirections and, therefore, is not informed of the actual level of service being provided and the associated costs. In order that the Legislature is apprised of changes in the use of funds for intercity rail service, we recommend adoption of the following Budget Bill language (Item 2660-001-046):
The California Transportation Commission shall not allocate to the Department of Transportation any other funds, in excess of $28.8 million provided in this item, for operation of existing intercity rail service, without prior written approval of the Department of Finance, and no sooner than 30 days after notification in writing to the chair of the fiscal committee and the chair of the Joint Legislative Budget Committee, or not sooner than whatever lesser time the chairperson of the joint committee, or his or her designee, may in each instance determine.
We recommend that $14.3 million requested for the expansion of intercity rail service in 1995-96 be deleted because the department is unable to provide any ridership projections that justify the service expansion. (Reduce Item 2660-001-046 by $14.3 million.)
The budget requests $43.1 million in 1995-96 to support intercity rail operating expenditures. The amount includes $28.8 million to fund existing services and $14.3 million requested to expand service as follows:
In support of the request, the department states that service frequency has to reach a threshold level before ridership would increase sufficiently for the route to meet the 55 percent farebox ratio requirement. However, the department is unable to provide any ridership projections for 1995-96 to justify the expansion of service. Without these ridership projections, it is not possible to determine how the expanded service would perform in terms of farebox return and what the state's costs per passenger would be. Consequently, it is not possible to assess whether the request is justified.
Ridership Would Have to Increase Significantly if Subsidy Per Passenger Is to Stay at Current Level. If the department's proposed service expansion were adopted, our analysis shows that in order for the state's cost per passenger to remain at the 1994-95 level, ridership would have to increase significantly. For instance, ridership would have to increase by about 81 percent for the Capitol service. Based on the growth in ridership in the past three years, it is questionable if ridership will increase by this amount. Consequently, state subsidy per passenger would increase further.
Analyst's Recommendation. Lacking any ridership projection for the three intercity rail routes for 1995-96, we think it is imprudent to make a business decision to expand services. Accordingly, we recommend the request for $14.3 million be deleted.
The failure of the 1992 and 1994 rail bond measures created a funding gap in the intercity rail capital program. Highway funds now provide the main source of state revenues to fund intercity rail projects. The Legislature may want to direct the CTC to reexamine the funding priorities of highway and rail projects based on their relative cost-effectiveness.
Intercity Rail Program Short on Capital. In accordance with the Blueprint, about $450 million of capital projects have been identified for the intercity rail capital outlay program. Over the past four years, only $150 million in Proposition 108 bond funds have been allocated for these projects. With the failure of Propositions 156 and 181, the intercity rail capital program is now short of funding by about $300 million. Consequently, the immediate burden to fund these projects is shifted to the SHA which will provide the main source of state revenues for intercity rail projects. The 1995-96 budget proposal includes about-- $18 million in SHA and federal funds for intercity rail capital improvements.
Funding Priority for Intercity Rail Capital Projects. As we discussed earlier (in the Crosscutting Issues section of this chapter), there are not adequate funds to pay for all programmed rail and highway capital outlay projects. Given the demand for funding, the Legislature may wish to establish a funding priority for highway and rail projects that balances safety and expansion of the transportation system. For example, the Legislature may want to direct the CTC to reexamine the funding priorities of highway and rail projects based on their relative cost-effectiveness.
We recommend the adoption of supplemental report language requiring Caltrans to provide the Legislature annually as part of the budget request, an intercity rail operating plan that defines the program's goals and provides three-year projections of the following factors for each route (1) ridership, (2) passenger fare revenues, (3) operating expense and loss, (4) total state cost, and (5) 55 percent farebox break even ridership levels.
Intercity Rail Lacks Business Plan. Under current law, Caltrans is required to prepare a biennial rail passenger development plan for submission to the Legislature, the CTC, and others. Among other things, the plan is required to include (1) actual, estimated, and proposed operating expenditures, (2) the costs and funding sources of intercity rail capital needs, (3) an evaluation of the past performance of each route in terms of meeting the 55 percent farebox ratio, (4) a recommendation for a five-year plan of services to be provided, and (5) a discussion of fare policies and practices among other things.
Our analysis, however, indicates that the department is not required to project service demand and set performance targets on each service route. As a result, the department cannot compare actual operations against these targets to evaluate performance. Similarly, the department does not project the level of ridership necessary to achieve the 55 percent farebox recovery ratio based on projected operating costs per route and projected Amtrak fare requirements.
Without these operating measures and targets, it is difficult for the Legislature to determine whether proposed services are cost effective and justified. Accordingly, we recommend that the following supplemental report language be adopted:
The department shall provide annually, as part of its budget request, a rail operating plan that defines the program's goals and provides by route, three year projections of (1) ridership, (2) passenger fare revenues, (3) operating expenses and loss, (4) total state cost, and (5) 55 percent farebox break-even ridership levels.
We recommend a reduction of $3.2 million in the rideshare program because the department's program proposal for 1995-96 justifies an amount lower than that requested in the budget. (Reduce Item 2660-001-890 by $3.2 million).
The rideshare program provides access to and information about carpools and vanpools as an alternative to commuting alone, and promotes nonsingle occupant vehicle alternatives to commuting such as buspooling, public transit, bicycling, walking and telecommuting, in order to reduce traffic congestion. Under ISTEA, federal highway funds can be used to support rideshare programs, without having to provide any state matching funds. However, the program must meet overall program goals established by the Federal Highway Administration (FHWA) as well as various reporting requirements in order to be eligible for federal funding. Additionally, Caltrans has to submit annually a program plan to the FHWA for approval. (Otherwise, the federal funds will be available for highway purposes.)
The 1995-96 budget proposes expenditures of $40.6 million in federal funds for the rideshare program. This is 13 percent higher than actual program expenditures in 1993-94. Our review indicates that for the current year, the FHWA approved a program level of $37.4 million. Discussion with Caltrans' staff further indicates that the program level for 1995-96 will be similar to that of 1994-95--$3.2 million less than requested in the budget. Accordingly, we recommend the amount be deleted.
We recommend a reduction of $500,000 in order to correct a technical budgeting error. (Reduce Item 2660-001-042 by $500,000.)
Caltrans proposes to redirect $500,000 from its New Technology Research Program in order to provide planning and startup funds for a Center for Transportation Innovation. This proposal appears to be consistent with statutory direction. However, Caltrans erroneously budgeted the $500,000 as an increase, rather than a redirection; therefore, we recommend that this amount be deleted.
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