Facts on Finances

With plenty of confusion out there about Capital Metro finances, staff gave the Board an update at yesterday’s meeting. The Board also received a favorable annual financial audit from an independent auditor, as one of the required elements of the agency’s FY2008 Certified Annual Financial Report. Learn a bit more about both the audit and the budget presentation here.

In Fact Daily posted the following story about our finances this morning:

McCracken, Cowman defend Cap Metro decisions
By Kimberly Reeves
In Fact Daily

Board members Council Member Brewster McCracken and Leander Mayor John Cowman went out of their way to defend the financial decisions of the regional transit agency yesterday, saying Capital Metro was being prudent and responsive to unanticipated problems of dropping revenue and rising expenditures.

Much of the talk was a response to a recent article by transportation reporter Ben Wear in the Austin American Statesman, which accused the agency of going on a capital spending spree on rail lines and park-and-ride lots that depleted the transit agency’s reserves. At yesterday’s meeting, agency officials vigorously refuted implications the agency had been less than prudent with its expenditures, saying it had met all its obligations and payments.

While Wear wrote the agency owed various local jurisdictions up to $110 million, officials insisted the transit agency is current with its fiscal obligations. Capital spending was, as Wear wrote, upwards of $300 million over five years, but sales tax revenue for that same time period was $783 million, the agency’s financial staff noted in a pre-board meeting briefing.

Agency officials were so firmly committed to their numbers – and that recent dips in reserves were do to unexpected bumps in the economy that the agency had and would continue to deal with – that officials said the agency was open to a state audit and had requested a review by the State Auditor’s Office.

During yesterday afternoon’s board meeting, McCracken offered his own soliloquy about the solvency of the transit agency, saying capital project expenditures now were funded separately from the recent growth in operating costs the agency had faced. The agency was not caught flat-footed, McCracken said. Instead, agency staff had constantly hammered at the need for operating budget restraint.

In 13 months, Capital Metro saw unprecedented fuel costs growth, from $11 million to $27 million, McCracken said. Among transit agencies, Cap Metro had seen some of the lowest fare box recovery and the lowest fare prices in the state. The decision to stop Build Greater Austin – given the growing operating expenses — was a tough but wise decision. And the board had finally taken a hard, but critical, vote on fare increases in an effort to address the rising operational costs.

Yesterday, Capital Metro announced a voluntary buyout program for agency employees as a potential cost-savings measure. Talking to a television crew outside the meeting, Cowman said he continued to be a proud member of the board of Capital Metro, a board that continued to be fiscally prudent.

“We have to make some tough decisions,” Cowman said. “We’re all facing shortfalls, all over the United States. We look for solutions. We accomplish those solutions. We’re a solution-based company.”

As sales tax and ridership goes down, the transit agency would make adjustments, McCracken said. That’s the only way to respond to tough economic times. And although the local union presented the board with a petition at its last meeting to remove CEO Fred Gilliam, after yesterday’s board meeting Cowman expressed continued confidence in Cap Metro’s top leader, saying that Gilliam had done – and continued to do – an excellent job for the agency.

In his comments, McCracken implied recent changes in the agency’s financial team were necessary for the agency to move forward. The improvement of the financial team, under the current leadership, had improved dramatically. The agency also had worked to create a separate capital budget so that operating expenses and the agency’s capital budget could be kept in perspective.

“That’s what happens when operating expenses increase faster than revenues,” McCracken said. “We started to lose our capital reserves. We had to cancel bus purchase orders. With the creation of a capital budget, we’re able to prevent the total erosion of our capital expenses before operating expenses eats it all up.”

Capital Metro also had been through a thorough peer review process from CAMPO with favorable results, McCracken said. That was like having a tough physical, twice over, to try to diagnose any problems with the agency. McCracken said he was confident the agency would implement many of the changes recommended by CAMPO in the coming months. Still, people are critical about Cap Metro right now.

“We get criticized – and people get mad at us – for spending money on a rail system after they told us to build it. Can you imagine what it would be like if they had told us to build it and we hadn’t spent the money?” McCracken asked his colleagues. “It’s hard to do something like a new rail system… Are we going to have to make some significant and important financial reforms into the future? Definitely.”

Cowman, who says rail service has strong support in the north, also bristled a bit at newspaper accounts over the weekend that said the start of MetroRail service was postponed indefinitely. Indefinitely implies no particular start date, Cowman said. There will be a start date for MetroRail, and it will be soon, Cowman said.

Work on the rail lines would be complete next week, Cowman said. While MetroRail faced a delay due to operator problems – the reason for the recent postponement – that problem would be resolved. It’s a positive thing that Capital Metro has caught a problem in advance and addressed it, not a negative thing, Cowman said.

11 thoughts on “Facts on Finances

  1. M1EK

    The article and the comments here and elsewhere are just as irresponsible if not more than the supposed hack job by Wear, given that nobody has directly rebutted his claim that the additional (much of it unplanned) spending out of reserves on commuter rail has precluded making good on commitments to local governments in a reasonable timeframe.

  2. Erica McKewen

    Actually that’s not true. Capital Metro is current on all of its financial obligations, including those to the City of Austin. Further, we’ve stated–to the board, to the city of Austin, and publicly–that we remain committed to fulfilling those obligations. What our finance dept. has requested of the city is to set up a mutually agreed-upon payment schedule so that both departments can effectively budget for the regional mobility projects each year.

  3. M1EK

    “reasonable timeframe” implies “soon” to me given that the city has projects they counted on this funding for. Setting up a payment plan now based on future revenues to make up for the reserves you already spent on commuter rail, including but not limited to the $45M you originally promised to seek from the Feds, doesn’t directly contradict anything Wear said in his article.

  4. vindobonensis

    Thanks for the article. Some of the items mentioned in the article are clearly debatable, such as the fuel cost increase (actually 48% down for FY 2009 budget, from $23 million to $12 million).

    As a side note, I found it interesting how inconsequential Metrorail fare revenue will be to CM’s budget. For example, the 66% increase in insurance cost for the updated budget is about two year’s worth of Metrorail fares. In hindsight, was it really necessary to make the Metrorail fare structure so complicated? (Two zones, local vs. circulator bus connection, metro pass vs. metro plus pass, vending machine dispensing change for cash on a card valid for only two weeks, …)

  5. M1EK

    Vin, I have kind of the opposite concern about fares – as shown by my analysis of timetables, the only people likely to see any time benefit from commuter rail are those living farthest out – i.e., those in Leander (OK), and those living in Cedar Park (not OK).

    If Austin residents, even those few living near the suburban park-and-ride at Lakeline, get no benefit compared to express buses even though they pay more than 90% of the tax load to support this system, while Cedar Park residents, who pay 0% to Capital Metro, get some small benefit, shouldn’t we be paying more attention to the fares charged each group?

    I need to run the same exercise with the Howard station, and Round Rock, which is more challenging since there’s no parallel express bus service from that same park-and-ride, but you might see similar issues there.

  6. lOcO aUsTin

    No Rail (yet) , No Money (left), No Security (not even a whisper)…

    This month many have opined on the problems at Capitol Metro. I will not deny that these are large problems, but I will insist that the current management has the skill set to see the agency through this period.

    On rail, give them a break, this is the first rail project for this outfit and they will need time to develop a depth of experience. Austin needs to be patient and give them the time to do it well.

    On the capital cost of building the rail sucking up the financial reserves, there is some criticism due here. When building infrastructure Capitol Metro leans to the style side rather than utilitarian functionality. One only needs to look at the transit centers to know that architects have far too much involvement in the design. Passengers using these transit centers are not protected from wind or rain. As a bald man I do thank them for the shade provided. However on cold and wet days these are worthless. As such too much was spent on style and the money was really wasted.

    Capitol Metro needs to quit going for the style points and look more at what is practical. It would be cheaper and have really be useful.

  7. vindobonensis

    M1EK, I agree with you on the cost sharing issue, but either way the fare revenue will be a small portion of the Metrorail cost (about 5% according to my calculation), unless you make thouse who board at Lakeline and Leander pay about $10 a ride. The 50 cent zone difference will probably recover 1-2% of Metrorail cost. The ones who will be most disadvantaged by the two zone fare are those who travel to or from North Austin.

    My bigger concern than the two fare structure are actually the fare rules for switching from bus to rail and reverse, which will probably mostly be an issue for Austinites (Leander, Lakeline, Howard will have Park and Ride).

    I don’t want to have to run an optimization analysis in Excel if I have to go from A to B in Austin, deciding whether to pay for bus and rail separately, use a circulator or local bus, get a day pass, etc.

    For example, it turns out that for my planned daily commute I would be best served with a $1 Metrorail ticket every ride. Of course, CM had to make it complicated and not allow me to buy these ahead of time in bulk at the vending machine, and discourage using cash at the vendine machine, which will leave me as the most convenient option to accumulate about 40 CM charges on my credit card every month (thanks for paying the credit card fees, CM!).

  8. Jamie Bemoore


    What credit card fees are you going to incur using the TVMs (ticket vending machine)? Any fee you are charged will be between you and your bank, and Capital Metro cannot be held any more responsible for your personal financial decisions than any other merchant that accepts credit card as a form of payment.

    Also, few transit agencies allow passengers to purchase bulk tickets from TVMs. From other cities that I have lived, these machines validate the ticket automatically upon issue, because the only way to track when a 2 hour ticket expires is to print a time on it at the time of issue. If tickets were to be sold in bulk, the passenger would still need to stop at the TVM before boarding to “validate” the ticket – otherwise Capital Metro would not be able to enforce a ticket with a 2-hour time limitation.

    Lastly, if you are concerned about having to pay “40 CM charges on my credit card every month”, you should consider purchasing a 31-day MetroPlus (2 zone) pass. It is valid on all buses/trains/dillos/etc., and it only costs $36 for unlimited rides.

  9. Jamie Bemoore

    Also, I support Capital Metro's two-zone fare system. This is more equitable than a 1 zone fare system, as people that travel further should pay more. While many Austin residents are not used to zone-based transit fares, this is a very common industry practice. It is also very easy to comprehend – if your trip crosses the zone boundary between Howard & Kramer stations then you will need a 2 zone ticket. If it does not cross this fare boundary, then you only need a 1 zone ticket.

    As such, the MetroRail fare structure is actually well thought out. It is the same structure that other transit agencies use (Dallas-Fort Worth Trinity Railway Express, Denver light rail, etc.) So, while Capital Metro is not perfect, stop accusing them of a poorly designed fare system, as it is anything but that. If you don't believe me, you can research the practices of other transit agencies with commuter rail on the internet.

  10. vindobonensis

    Jamie, I don’t dispute that CM’s fare structure is well thought out; I just contend that it has confusing or unnecessary elements.

    People that travel further don’t necessarily pay more with the two zones, it depends how far away they board from the zone boundary. Also, why do the day and monthly passes (which CM expects most commuters to use) have one price for both zones? Since the Metrorail fare will cover such a small portion of the cost, it will make no meaningful revenue difference to CM whether a 2-hour ticket for all zones costs $1, $1.50 or perhaps $1.25. I guess it’s just to make Austin residents feel like they are getting a better deal.

    Be it as it may, the two zone fare is not my biggest problem with the fare structure (I guess I shouldn’t have listed it first). I’m more concerned about the separate fares for bus and rail, and the distinction between circulator bus fares and local bus fares. I bet most people will find this so confusing that they’ll get a $3 day pass or a monthly pass even if it’s not the most economical option.

    About the credit card fees at the TVM, what I referred to are merchant fees that CM has to pay to my bank whenever I swipe my card. They tend to be more significant for smaller charges (that’s why some places don’t accept credit cards unless you have a minimum charge).

    There’s a validator next to the TVM where you can insert your unvalidated ticket and it will validate it in a few seconds. Instead, to get my two hour pass I’d have to use the TVM (~ 40 seconds) every time I ride and CM will incur more merchant fees.

    I lived in a city with commuter rail for 19 years; TVM’s dispensed all tickets unvalidated and you could buy unvalidated single ride tickets and daily passes for future use. Actually, CM used to offer 20-ride booklets for buses (of course no TVM’s).

    The reason why I’ll probably opt for a $1 ticket instead of a monthly pass is because I’d have to ride for a minumum of 18 days a month to break even, and there are only ~21 week days. Since only three trains go in my direction in the morning and reverse in the evening, chances are I might not take it every week day. I’m considering a stored value card ($12 for $15 rides) instead of credit card option also.

  11. JoJo

    InFactDaily is a pay website. Corporate subscriptions cost $3800+. For 3.8K, I’ll bet I could get them to print pictures of my dog.

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