A Closer Look at Transit Funding

Bus transit services comprise roughly 80 percent of Hampton Roads Transit’s business with an estimated 43,200 boardings on an average weekday across six regional cities. With 299 buses in its inventory, HRT drivers put about 11 million miles on the agency’s collective odometers every year.

Keeping the region’s transit system running smoothly is a daily challenge because HRT faces a regional funding gap that severely restricts its ability to invest in new transit equipment. Soon a key source of revenue used by all transit agencies in the Commonwealth – and a critical one for HRT – will decline sharply.

Evaluating options to address that challenge is the mission of the Transit Capital Project Revenue Advisory Board. Established by the General Assembly to examine the effects of the loss of state transit capital funds, the board is preparing a report due by August 1, 2017. It is expected to identify potential new revenue sources to meet statewide transit needs, as well as new approaches to prioritize how transit capital funds are allocated statewide.

To see why this board’s work is important, consider how HRT currently manages its capital needs.

HRT’s bus fleet averages about 10.5 years old. Nearly 65 percent of its fleet is 10 years old or older; 9 percent of between seven and nine years old, and just over a quarter are less than six years old. The useful life of a transit bus is about 12 years.

Older buses, just like the family sedan, require more maintenance. They also are more likely to break down and that hurts the agency’s ability to deliver reliable, on-time performance, which in turn hurts ridership. Thirty-three buses have between 700,000 and 950,000 miles on the odometer. Keeping them running is a continual issue.

The four incomes that HRT relies upon – farebox, local, state and federal funds – are directed primarily to operations while a small percentage is devoted to capital investment. The three main federal formula funds, which can be used for capital or operating expenses, are mostly directed to bus maintenance. That means the agency relies heavily on grants to make critical capital investments. When grants slow, capital investment lags.

HRT forecasts, for example, that it will be able to fund only $170 million of its $265 million in capital needs over the period FY-2017 to FY-2023.

“Without dedicated revenue, we will continue to have the same fractured patchwork of service you see now,” said Brandon Singleton, HRT’s chief financial officer. “We will operate the same way, and we will not be able to deal with changes in travel demand.”

As with any transportation company, wear and tear on the bus fleet eventually requires one of three responses beyond routine maintenance: replacing the engines, cooling systems and transmissions to extend vehicle life. This is known as a repower.

A second more extensive option involves a complete renovation of the vehicle by stripping it of all major components, including seats, the powertrain, air conditioning systems, etc., and then reassembling it. This is known as refurbishment. And the third is replacement, or buying a new bus.

An agency of HRT’s size should buy about 25 new buses each year to keep the fleet average to between six and seven years old, as recommended by the Federal Transit Administration. A fleet that old on average takes less maintenance and is cheaper to run. Except HRT cannot do that.

With new 40-foot transit buses costing roughly $475,000 each, HRT’s capital funds are inadequate to purchase anything close to 25 new buses every year. That’s why HRT focuses heavily on repowering and refurbishing equipment. But even this approach extends the life of a bus by only six or seven years.

Using the limited capital that it does have, HRT focuses much of its money on repowering or refurbishing its fleet, with a few new vehicles now and then.

As part of their annual operating agreements with HRT, the cities in Hampton Roads provide an annual $2 million contribution to a capital fund. That money is used to match state and federal funds Although it is far from enough to meet the agency’s needs.

When compared to other transit agencies nationwide, HRT receives 45 percent of its funding from local cities – money that comes from their general funds. By comparison, most transit agencies rely on local contributions of no more than nine percent, on average, while the majority of their funding is generated through a dedicated source.

The result is one of a continuous loop of underfunded capital projects as federal funds are flexed to operations, and insufficient capital funds struggle to keep pace with maintenance. Higher maintenance costs brought by older buses limits the ability of HRT to improve essential service and ridership suffers.

Across Virginia, transit plays a vital role connecting workers to jobs, students to classrooms, customers to businesses, and other important trips that support economic vitality and quality of life.

It’s imperative that both regional and statewide transit funding needs are met.