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Fleeting Success

GRTC is having a banner year, but it's facing a dire financial outlook in 2009.



John Lewis should be celebrating, but instead he's stuck at City Hall late on a Tuesday trying to explain to 60 angry customers why the GRTC Transit System must eliminate four of its bus routes.

From the tone of the questions, you'd never know that GRTC was closing out a banner year. Last month 1 million riders got on board, the largest volume in the bus company's history. Ridership climbed while fuel prices increased, but the record came even after the fuel fever broke. The American Public Transportation Association took notice too, naming GRTC the best midsized transit system of 2008.

Lewis, its president and chief executive, recently began construction on a new South Side bus depot that will free up for sale or development its bus depot in the Fan, off Robinson Street, which is valued at about $5 million. And then there's the crown jewel: Main Street Station, which is scheduled to become a transportation hub with the bus line as an anchor in Shockoe Bottom.

These successes stand in stark contrast to this late-night City Hall meeting, at which Lewis lays out an all-too-plausible-scenario where he has to shut the whole thing down. Demand is at an all-time high, but expenses are quickly outpacing revenues — a sure-fire recipe for failure.

“In March we're going to start costing more money to operate than we bring in,” Lewis says. The problem started nine months ago, shortly after the system locked in its annual fuel-purchasing contract (because it uses so much, it buys in bulk). The fuel that had cost GRTC $1.03 per gallon in 2005 was up to $2.61 in 2008, a 253 percent increase. In March, Lewis projected a $4 million shortfall for the 2008-2009 fiscal year, which runs July 1 to June 30.

Another business would have more latitude to react: raise fares, borrow money, cut back routes that aren't working and add runs on lines that are popular. Lewis, however, can do none of those things himself.

“So all these meetings are just a way to try and get [City Council] to do something?” asks a rider with a European accent who regularly takes Route 16, which threads through the Fan by Virginia Commonwealth University to downtown.

“That'd be nice,” Lewis says, smiling.

Fare increases require approval from City Council and Mayor L. Douglas Wilder has opposed them in the past. Each bus route — every turn, every stop — exists as a city ordinance and would require a council vote to cut a line, a politically dicey proposition at any time and downright off-limits in an election year.

As for borrowing, the city's budget contribution is renegotiated annually, clouding financial forecasting and making it impossible, Lewis says, to secure loans or credit lines. Although he has access to large pots of state and federal money for capital improvements — those millions for construction on the Main Street Station transfer center and the South Side depot — Lewis must look elsewhere for operating funds to pay salaries and for mechanical upkeep and fuel.

So in an effort to plug the projected $4 million hole, Lewis asked City Council in March for an extra $2 million for the coming fiscal year. It gave him $1.6 million for a total contribution of $11.4 million. To make up the rest, Lewis set about cutting expenses and after some tweaks here and there, found he could raise the extra $2 million by cutting the four lowest performing routes. City Council didn't approve the route cuts.

The reason was simple, Councilman Bruce Tyler says: It was election season.

“Council decided to slow down the pace,” Tyler says. “I did not make that decision. You can talk to [Council president and former-mayoral candidate Bill] Pantele. Obviously nothing was going to get done until the election was over.”

Not that Tyler, on the opposite end of the philosophical spectrum, is particularly excited about sending more money to GRTC.

“When do you say look, enough is enough?” he asks. “When do we start doing things smart and stop driving the middle class out of the city of Richmond. We have to be more creative than to say, ‘The only thing I can do is stand in front of you and tell you I need more money.’” Two of the four bus lines Lewis has proposed cutting run through Tyler's district.

In the past six years, the city's contribution to the system's operating budget has more than doubled from $5.4 million in 2004 to $11.4 million this fiscal year. The growing ridership has increased the amount collected in fare boxes, too. As a percentage of the cost to operate a bus line, the $1.25 each rider pays covers close to half of the operating costs to run the buses. Although contributions from the city and bus riders have increased, other costs have grown more quickly.

GRTC's expenses have swollen from $31.5 million in 2004 to $46.7 million this year. Wages have steadily risen per a union agreement, and combined with growing health-care costs and government-mandated disabilities services, expenses were outpacing revenues even before the post-Katrina oil spike. 

Weeks after the election, the bleeding budget has yet to be addressed by the mayor or City Council. Last week, Lewis was able to avert an immediate crisis by signing a new fuel contract at $2.69 per gallon. (GRTC buses run on an industrial diesel mix and the recent contract goes into effect in April.) While more expensive than the last contract for $2.61 a gallon, he gets a better price than he expected.

“It is very important to note that we were only able to get a six-month contract rather than the normal year,” Lewis says of the current contract, “so the market is still very volatile and could change dramatically next year.” While the current contract solves some financial issues in the short term, the possibility of higher fuel costs by midyear could put GRTC back at square one.

In the meantime the fate of the four bus lines remains in question. “We just need a decision,” Lewis says. S

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