June 27 Finance Report with the Staff Recommended Toll Increase

Agenda Item No. 4

To:          Finance-Auditing Committee/Committee of the Whole
Meeting of June 27, 2002
From:          Joseph M. Wire, Auditor-Controller
Celia G. Kupersmith, General Manager
Subject:          APPROVE ADOPTION OF GOLDEN GATE BRIDGE TOLL OPTION G: $5 CASH/$4 FASTRAK AND RELATED ACTIONS

Recommendation

The Finance-Auditing Committee recommends that the Board of Directors approve implementation of Golden Gate Bridge Toll Option G: $5 Cash/$4 FasTrak as summarized below and detailed in the attached ordinance, effective September 1, 2002.

1) Basic Auto Rate (2-axle): Cash $5.00; FasTrak $4.00

2) Axle Rate (per axle if more than 2) $2.50

3) NO change to Toll Rate for Persons with Disabilities with valid Golden Gate Bridge District identification card

4) NO change to free hours for Motorcycles and Carpools (3+). Hours are: weekday (except holidays) 5 am to 9 am and 4 pm to 6 pm.

Summary

Today's staff recommendation comes as the culmination of a process that began in late November 2001, when the Board of Directors met in a workshop to discuss the financial condition of the District. On February 7, staff recommended that the District begin a formal process of toll increase analyses with an extensive public outreach component included. A series of twelve toll options were identified for study, ranging from a status quo/no change option to a maximum toll rate option of $5 for all two-axle vehicle crossings. Staff studied the financial impacts of each option as well as the environmental impacts of each. Concurrently, staff developed a ten-year needs assessment that clearly demonstrated and catalogued the District's financial needs over this period. The revenue-producing capacity of each toll option was then considered in light of the needs assessment.

Throughout the analysis process, there were numerous opportunities for public review and input on the topic. As of June 19, more than 5000 comments were received by means of traditional and non-traditional outreach efforts on behalf of the District. It is interesting to note that about 46 percent of the comments received regarding the auto toll rate expressed support for some form of toll increase. The largest number of comments received were in opposition to a potential bicycle and pedestrian toll. The potential toll increase was on the agenda of 10 publicly noticed Committee and Board meetings and for the first time ever, six Open Houses were held spread over three counties (Marin, Sonoma and San Francisco) to allow opportunity for increased participation in the process.

After extensive staff and public review of the District's financial needs and the various toll options to help address those needs, the staff recommends that Toll Option G: $5 Cash/$4 FasTrak be approved for implementation on September 1, 2002. This option makes a significant contribution to the financial needs of the District, reduces the degree of service reductions, provides a discount to regular users of the Bridge by means of FasTrak, and supports regional efforts to improve air quality, reduce congestion, and provide mobility options.

Background

Golden Gate Bridge Highway and Transportation District (District) operates the Golden Gate Bridge as well as Golden Gate Transit and Golden Gate Ferry services which are provided as an alternative to automobile usage, resulting in approximately 6 million fewer trips across the Golden Gate Bridge every year. The District funds its multi-modal operations primarily with tolls and transit fare revenue.

The District is facing a serious financial crisis due primarily to four reasons. First, the District has not raised tolls since 1991 and during the past eleven years, inflation has eaten away at the buying power of these toll dollars. The $3.00 toll implemented in 1991 now buys only $1.80 worth of goods and services. We have lost 40¢ of every dollar to inflation.

Second, costs have increased even faster than inflation. While inflation has averaged 3% over the past eleven years, cost growth has averaged 4.5% over that time. Much of this cost increase has been due to factors out of our control such as fuel prices, insurance costs, and materials and supplies. For example, insurance costs have increased fifteen to over one hundred percent, depending on the type of insurance. The dual impact of inflation eating away at an unchanging toll rate, coupled with rising costs, has contributed to our crisis.

Third, the District is now facing several very expensive capital projects. The 65-year old Bridge is in good condition overall but due to its age is facing several major maintenance projects. These include repainting the main cable ($19 million), repainting the north end ($33 million), and repairing the bridge deck floor beams and trusses ($65 million). And the completion of the third phase of the seismic retrofit project ($160 million) remains a high priority. In past experience, major maintenance projects were considered regular business activities and grant funds were not available. In the case of the seismic retrofit, grant funds are available but may cover only half the cost of the full project. In the past, the federal monies routinely funded 80% of a project. Today, that number is closer to 50%, which leaves a significant shortfall. We now expect to have to come up with tens of millions of dollars extra to complete projects.

Fourth, an on-going economic slowdown here in the Bay Area has negatively impacted revenues, while security responsibilities are heightened following the September 11 terrorist attacks. The recession has resulted in less state sales tax funding for transit operations (down $4 million), and security costs have greatly increased, both for security systems and personnel.

In summary, next year's budget totals $132.3 million. Current revenues for next year total $104.1 million, leaving a shortfall of $28.2 million. If the Board adopts Toll Option G: $5 Cash/$4 FasTrak, effective September 1, the shortfall is reduced to $6.2 million. The last toll increase occurred in 1991 and that $3 toll has lasted for 11 years instead of the five years that was studied at the time. The District has known for several years, however, that its existing revenue streams are not sufficient to continue the current levels of service. In an effort to begin keeping pace with rising costs, in 1998, the District instituted a 5-Year Annual Transit Fare Increase Program. Additionally, during the past three years, a wide range of cost containment strategies have been implemented. Grant funds have also been received in record amounts and from new sources as the District sought help to fund projects and stretch limited resources.

It has now been determined that current revenue streams over the next five to ten years will not be sufficient to fully fund the current levels of service provided nor the necessary capital improvement projects required to maintain and protect District assets. The District's financial needs over ten years total $2.5 billion, or $1 billion more that projected revenues. Over five years, the financial needs total $1.3 billion, $753 million in operating expenses and $545 million in capital expenses. The projected revenue over those five years is $857 million, resulting in a $441 million shortfall.

In response to this shortfall in funding, the Board authorized staff to conduct an analysis of the potential environmental and economic impacts of 12 different toll options including a ³no change" option. The study found that the 11 options that included toll increases would provide additional revenue and have positive impacts such as increased transit ridership, increased carpool usage, reduced auto emission, and reduced fuel consumption. Increase options could create a financial hardship for some. The ³no change" option could significantly reduce transit services resulting in increased traffic, increased fuel consumption and auto emissions, and would also create financial hardship for some.

On May 23, 2002, the Board selected three of the original 12 options, plus an alternative version of the original Option G, for further review. The table on the following page shows the net revenues, in millions, produced by the four options in each of the five years and for the total five-year period.

Toll Option Year 1 Year 2 Year 3 Year 4 Year 5 Cumulative
5-Year
G ($5 cash/$4 FasTrak) $22 million $27 $28 $28 $29 $134
I ($5 cash/$5 FasTrak) $25 million 33 34 34 35 161
J ($5 cash/$3-$4 over 5 yrs. FasTrak) $19 million 25 26 27 28 125
G Alternative ($5 cash/$4-$5 over 3yrs. FasTrak) $22 million 28 33 33 34 149

Summary of Public Involvement

At the start of the toll study process, staff was directed to undertake comprehensive public involvement intended to inform the public about the District's financial needs in the future, to discuss various toll options under consideration, and to seek public input on these options as well as solicit other ideas for examination. Public outreach included:

  • Six informational open houses held in Marin, Sonoma, and San Francisco counties. Various Board members were in attendance at each Open House.
  • Between February 2002 and mid-June 2002, the potential toll increase was on the agenda of five publicly noticed Finance-Auditing Committee meetings (February 7, March 7, April 25, May 9, May 23) and five publicly noticed Board of Directors meetings (February 8, March 22, May 10, May 24, May 30). A convenient on-line comment form was launched in February.
  • On-line registration to receive e-mail alerts about the process was made available and e-mails were issued to those registered announcing the open houses and the formal public hearing.
  • A special website section was established to include all information developed on a potential toll increase.
  • Staff made numerous presentations to community groups.
  • Flyers were sent to individuals on various mailing lists maintained in several District departments' databases announcing the open houses and the formal public hearing.
  • Posters were distributed widely announcing open houses and the formal public hearing.
  • Thirty-seven (37) display ads were placed in seven local newspapers announcing open houses and the formal public hearing.
  • Legal notices were placed in local newspapers announcing the formal public hearing.
  • Numerous print and broadcast media interviews were conducted.
  • Editorial board meeting were held with the San Francisco Chronicle, San Francisco Examiner, Marin Independent Journal, Press Democrat and San Francisco Independent.
  • Staff made guest appearances on various radio talk shows.

The Board held a Public Hearing on June 13 in Marin City, California at 6:00 p.m. to hear and receive formal public comment. There were 105 attendees and 36 speakers at the Hearing. Prior to the Hearing, there were a total of six Open Houses held in three different counties. There were 439 individuals who attended one or more of the Open Houses. Several Board members also attended the Open Houses and met directly with interested members of the public. By means of all of the various mechanisms for making public comment on the proposed toll increase, a total of approximately 5000 comments were registered as of June 19. Updated information on comments received between June 20 and June 27 will be provided to the Board.

Comments received through this process ranged from expressions of support for a specific toll option to opposition of any toll increase. Numerous comments were received indicating a preference for a discount for local or regular users of the Bridge such as FasTrak users. Some comments requested a sunset clause be approved for the toll increase. Concerns were expressed about the potential impact of increased tolls on low income and disabled persons. Concerns were also expressed about tolls being used as subsidy for transit with many indicating a preference for transit service reductions and fare increases. Comments also expressed interested in seeing any toll increase balanced with internal cost cutting initiatives. Comments were also received that called for the District to be disbanded and the Bridge to be transferred to Caltrans ownership and operation. Under this scenario, comments suggested that sales tax elections be held in Marin County and Sonoma Counties to fund the transit services. Other comments suggested that public transit services only be provided if able to cover all costs through farebox revenues.

All comments received have been broadly categorized in Attachment A. Responses to the primary category of comments are included in Attachment B.

Staff recommends that Toll Option G: $5 Cash/$4 FasTrak be approved for implementation, effective September 1, 2002. The selection of a toll increase option does not bring an end to the District's effort to balance its budget over the next five years. In addition to the toll increase, transit fare increases are going into effect on July 1, 2002 and further increases are under consideration. Staff has also prepared a plan for Board consideration that outlines a series of revenue enhancement and expense reduction programs that will be pursued over the coming year to achieve long-term financial stability. This material is covered in Agenda Item No. 8 of today's Finance-Auditing meeting.

Fiscal Impact

Implementation of Toll Option G: $5 Cash/$4 FasTrak, effective September 1, 2002, will generate net revenues of $22 million in Fiscal Year 2003. It is forecasted to generate net revenues of $134 million over the next five years.

Attachments
Attachment A
Attachment B