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Metro predicts even tougher times for next budget

This article first appeared in the St. Louis Beacon, April 17, 2009 - Despite added stresses to its resources brought on by the recession, Wall Street's ailing financial institutions and recent service cuts, the Metro Board of Commissioners today passed a balanced operating budget for fiscal 2010. The $201.97 million budget is for the agency's fiscal year beginning July 1.

The board also passed a $470.99 million capital budget.

Controller Kathy Klevorn noted that the challenges to Metro's budget in the fiscal year 2010 are even greater than the agency had originally predicted. A year ago officials projected a $45.8 million deficit; now, they're estimating $65.5 million.

"What's happened in a year? Things have gotten worse," Klevorn said.

Hits to the budget

The problems include a $4.1 million drop in fares because of 9 million lost boardings because of the service cuts; a $3.7 million loss on fuel hedging; a swap termination fee of $6.8 million on changes in the agency's structured lease transactions.

"Because of the financial market meltdown, we're going to have to remarket our variable rate bonds and that's going to cost us more than we were expecting to pay a year ago," Klevorn said. "A year ago, the markets hadn't melted down yet."

One of the biggest unforeseen hits is the projected loss of $5.1 million in county sales tax revenue due to the recession, Klevorn said.

This budget comes on the heels of a 44 percent slash in service that Metro implemented March 30. The agency said it had to increase fares and make the service cuts after St. Louis County voters rejected a half-cent increase in the transit sales tax in November.

Prospect of state money

If the Missouri legislature approves a one-time infusion of $20 million in federal stimulus money for Metro, the board would need to approve an amended operating budget, Klevorn said.

The $20 million would be used to restore some, but not all, of the service cuts, senior vice president, transit operations Ray Friem said.

Metro President and CEO Robert Baer warned that even if the legislature does come through with $20 million in emergency funds, it won't be the end of Metro's problems. "We cannot let people believe that that solves our problem. It does not solve our problem," he said.

Without new revenue, Baer predicted "more cuts" in 2011. "People need to understand that, too," Baer said.

Detour for capital improvement funds

One potentially controversial way Metro hopes to stave off the projected deficit is to use capital improvement funds for operations, Klevorn said. The agency intends to use 94 percent of its federal "5307" funding for capital improvements to cover operational expenses.

"Using these funds in the operating budget truly takes away from the capital projects that it's meant to maintain," she said.

But the only other option was to cut service even more, she said. "The service level we cut was already tremendous," she said. "That's why we chose this route versus trying to cut even greater than we did."

But putting money for capital improvements into operations will take its toll down the line, Friem said. "Eventually, by not having a robust capital program, you're going to start seeing cracks develop, and again you don't have the resources to go after it."

Metro recently took third place for its maintenance record in an international competition, coming in behind Warsaw and Seoul, North Korea. Metro was the only American transit agency placing in the top five, officials said.

Klevorn said Metro's financial problems stem from a "lack of stable, committed resources" over the past 20 years. And, without a new source of revenue, the situation will continue to decline, she said. "Our resources are flat, declining or they have been eliminated," she added.

The belt-tightening actions get Metro off the hook for more service cuts in the new fiscal year but not necessarily beyond that, Friem said. Without new sources of revenue, more cuts could be in the offing, he warned. "What happens is what always happens. Your revenues are flat. Inflation starts chipping at you. Now what?"

Making the case to the public

Although 486 positions --- mostly bus drivers --- have been cut, Metro is trying to do some "resource shifting" to add a person to help bring the agency into the new technological age.

"Metro is behind the curve on new media," Metro spokeswoman Dianne Williams said. It’s not a question of preserving a bus driver instrrad of adding a public relations person. That person could assist "in bringing back enough money to put a whole lot more than one bus driver back on the street," she said.

"Everyone tells us we've got to get out in the community and tell the people our story," Baer said. Instead of using volunteers, "I don't think it's unreasonable to add one new media person," he added.

"We're looking at improving our public relations with the community," Klevorn said.

Kathie Sutin, a freelance writer in St. Louis, covers transportation. 

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