COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COUNCIL COMMITTEE ON TRANSPORTATION AND PUBLIC UTILITIES - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, 04/03/01 10:14 a.m. - - - RES. 000142 - Authorizing the Committee on Transportation and Public Utilities to hold hearings into student transportation costs. RES. 000597 - Authorizing the Committee on Transportation and Public Utilities to conduct comprehensive comparative research into the state of the City's transportation and public utilities systems and hold hearings into the same. PRESENT: COUNCILMAN W. WILSON GOODE, JR., Chair COUNCILWOMAN JANNIE BLACKWELL COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DAVID COHEN COUNCILMAN FRANK DICICCO COUNCILMAN RICHARD T. MARIANO COUNCILMAN ANGEL L. ORTIZ COUNCILWOMAN MARIAN B. TASCO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 4/3/01 PUBLIC TRANSPORTATION, UTILITIES I N D E X Res. 000597 Jack Leary, General Manager, SEPTA. . . . . . Res. 000142 Jack Leary, General Manager, SEPTA. . . . . . 29 Christian DiCicco, SEPTA Board Member . . . . 50 Phil Goldsmith, Interim CEO, School District 76 Sandra Dungee Glenn, School Board Member. . . 76 Rhonda Chatzkel, CFO, School District . . . . 94 John Lombardi, Administrator. . . . . . . . . 102 Transportation Services, School District Shelly Yanoff, Director, PCCY . . . . . . . . 115 Crystal Reddenberg, Building Representative 121 West Philadelphia High School Susan Oh, Student Staff Member. . . . . . . . 123 Philadelphia Student Union Richard Weishaupt, Esq., Attorney for . . . . 127 Community Legal Services 3 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 P R O C E E D I N G S
Good morning. This is a Committee on Transportation and Public Utilities hearing to consider Resolutions 597 and 142. This hearing is called to order, a quorum is present. For the record, in attendance are Committee members Marian Tasco, Angel Ortiz, and Frank DiCicco. Also present are Councilwoman Blondell Reynolds Brown and Jannie Blackwell and myself. The clerk will please read the title of Resolution 597.
Resolution 000597, a resolution authorizing the Committee on Transportation and Public Utilities to conduct comprehensive comparative research into the state of the City's transportation and public utilities systems and hold hearings into the same.
Mr. Leary, please approach the witness table. (Witnesses come forward.)
Good morning. Please state your name for the record and proceed 4 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 with your testimony.
Good morning, Mr. Chairman and members of the Committee on Transportation and Public Utilities and members of the City Council. My name is Jack Leary, and I'm the General Manager of the Southeastern Pennsylvania Transportation Authority. And joining me this morning at this table are Board members Christian DiCicco, Miss Jettie Newkirk, and Assistant General Manager Frances Jones. S. public transportation systems. And, Mr. Chairman, Council staff should be commended for their work and with the direction and the preliminary findings of the study. This is very comprehensive and well done on a very complex undertaking. SEPTA is the fifth largest transit authority in the nation, serving some 220 square miles, including the City of Philadelphia. We operate a complex, multi-modal system, offering a greater variety of vehicle types than any other 5 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 system in the United States. We have already provided for your review and use more detailed information covering the period fiscal years 1996 to 2000. With the exception of the base fares, all of the information submitted was derived from the National Transit Database Report that SEPTA prepares annually for the Federal Transit Administration. Given the complexity of the material and the comprehensive list of items requested, I should like to provide just a brief summary highlighting some key points and some key issues. First, on the issue of SEPTA delivering more service. Between 1996 and the year 2000, service delivery was improved, as evidenced by an increase in annual passenger miles, from 1,302,000,000 miles in fiscal year 1996 to 1,391,000,000 miles in fiscal year 2000. 7 million miles in fiscal year 2000. The number of active vehicles available 6 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 for service also increased from 2,550 in fiscal year 1996 to 2,790 in fiscal year 2000, resulting, again, in an increase -- in a percent increase 5 in vehicles available for maximum service. 6 During this period, SEPTA made fleet 7 improvements, purchasing new buses and subway 8 cars. years in fiscal year 2000. years in 1996, this means SEPTA is providing newer vehicles for improved customer service. 8 years in fiscal year 2000, and this is with the addition of the new Market Frankford cars. Now, our fare revenue has also increased. During this five-year time period, SEPTA's fare structure remained the same. 7 million in fiscal year 1996 to $293 million in fiscal year 2000 reflects an increase in actual ridership. For each of these years, ridership 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 increased by approximately 2 percent, with an overall 9 percent increase over the four-year period. Now, operating funds remained relatively constant during this period. Between fiscal year 1996 and fiscal year 2000, passenger revenues increased by 9 percent, and the total of federal, state, and local operating subsidies increased by 6 percent. However, within this time, SEPTA was able to effectively leverage these resources to increase service levels to meet the needs of growing customer markets. Since fiscal year 1996, we have also reduced the size of our organization by 1300 employees. These reductions, however, came primarily as a result of attrition and early requirement, and no segment of SEPTA employees lost jobs during this time. With effective resource management, we have been able to institute cost control measures while improving overall productivity. 8 million in fiscal 8 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 1 million in fiscal year 2000. Many significant multi-million dollar projects began construction, including several in Philadelphia, such as the new Frankford Center Transportation Complex, the Market Street elevated reconstruction project in West Philadelphia, as well as infrastructure and safety renewal programs.
Recently, SEPTA staff had the opportunity to review draft text of the comparative analysis study being undertaken at the request of this committee. This preliminary document contains 1998 statistical information about SEPTA, so I'm pleased to be able to provide our most current data to ensure consistent comparison of transit properties provide across the country. There are, however, some unique nuances to SEPTA's operation during the five-year period that we would just like to highlight for the study to take into consideration. For example, our vehicle overhaul program is completed, using in-house resources and utilizes capital dollars transferred into our operating budget. In 1997, SEPTA's paratransit 9 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 service was an in-house operation, where most transit properties used external resources. And in 1998, we had a 40-day work stoppage. We would like our staff to have an opportunity in another forum to share this information with the committee and with those individuals completing the study. Thank you, Councilman Goode, for the opportunity to speak today, and I'd be happy to try to answer any questions you may have, and I have key members of our staff with us that may also help in that endeavor. Thank you again.
Thank you for your testimony, Mr. Leary. Could you pull the mike closer to you.
I have a few questions. First of all, thank you for the update in terms of the data you've submitted, with more current data since 1998, but I have some questions regarding performance measures in the transportation industry and how SEPTA stacks up. In the draft report submitted to this 10 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 committee in anticipation of this hearing, we compared SEPTA among transit agencies in the 4 largest cities in the United States. As part of 5 this analysis, we compared each agency's service 6 efficiency, cost effectiveness, and service 7 effectiveness. We found that in various 8 categories, SEPTA tended to have a lower-than- 9 average efficiency and cost effectiveness but a 10 higher-than-average service effectiveness. "Service efficiency" is defined as operating expenses per vehicle, revenue, mile, or hour; and "cost effectiveness" being defined as operating expenses per passenger mile or per passenger trip; and "service effectiveness" as being defined unlinked passenger trips per vehicle, revenue, mile, or hour. Could you explain why this is and what SEPTA is doing to improve these performance measures. In other words, SEPTA seems to be delivering service very well but at a very high cost. Why is that?
Well, Mr. Chairman, it's very hard to answer a question like that without actually looking and going into the data and 11 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 comparing the specific data for the specific mode. If it would be appropriate for the committee, I'd like to get back with a specific response to that question rather than just off the top of my head try to answer it. Generally speaking, when SEPTA is compared, both the cost of the delivery of service and the effectiveness of the delivery of service, SEPTA rates very high among transit properties in its peer group, with the exception of New York, of course, because New York is the unusual situation, given the volume of people they carry. But given the direct comparison of data, I think you'll --
Well, without comparing it to specific cities, although that is what this hearing is about, there is a standard set within your industry, and there are measures set and you submit data to the industry so that it can be compared among other agencies. You've submitted updated data to us, but what does that data represent comparatively? I mean, do you think those numbers are good or are they actually 12 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 good?
Well, when I went through the study or heard the study, Mr. Chairman, I was pleased at the comparisons that SEPTA -- how SEPTA compared with the others. Again, the multi-modal nature of SEPTA creates a situation where the costs and effectiveness of SEPTA are blend together. So in making these comparisons, you have to take the SEPTA rapid transit system and compare it to the Boston, Los Angeles, Chicago rapid transit system. And likewise with the bus system, likewise with the light-rail system, likewise with the commuter rail system. When it all gets blended together, it's difficult to make the comparison with a property that doesn't have that multi-modal nature.
But specifically with regard to bus and heavy rail, we found that service efficiency and cost effectiveness was lower than in other cities. We found that service effectiveness was higher while their service efficiency and cost effectiveness was lower.
Mr. Chairman, I'd have to 13 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 get back to you. I just -- off the top of my head draw -- I can't didn't draw that same comparison. So I'd have to get back to you.
Okay, I'll move on. The City of Philadelphia currently contributes over $60 million in subsidy to SEPTA on an annual basis. Could you briefly describe what this subsidy is used for and how that amount is determined.
Mr. Chairman, that is determined to be the proportionate share of the total subsidy for the City of Philadelphia, the level of service provided in the City of Philadelphia. That money is used to match the State, the Commonwealth of Pennsylvania, and to draw down the maximum amount of revenue available to us from the Commonwealth of Pennsylvania. The total of the Commonwealth's subsidies, the City subsidy, and the revenue collected is converted into -- 100 percent of the dollars are converted into the delivery of service. At the beginning of the year, we're required to submit, as you know, a balanced budget 14 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 based on subsidies and revenues anticipated to be generated from the service. In three of last four years, we have in fact turned back a slight surplus in each year, three of the last four years. So, essentially, the short answer is, the City's appropriation is used to match the maximum amount -- leverage the maximum amount of revenues from the Commonwealth of Pennsylvania for service to be delivered in the City of Philadelphia.
Through a formula, the amount's worked out through a formula, and our finance staff and budget staff work with the City staff to determine what's available and what is needed to support the level of service. And then that number is generated and provided to us.
Okay. For the record, what percentage of SEPTA's operating expenses are recovered through fare revenue? In our 1998 figures, it showed it was roughly 37, 38 percent. In terms of more recent data, what is 15 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 that percentage?
Actually, we achieve 50 percent each year. And in fact, we are required under our enabling legislation and by law to achieve a 50 percent cost recovery ratio.
And would you please tell us how SEPTA compare to peer agencies in expense recovery. Are there different standards for different cities?
Again -- yeah, again, there are different standards in different cities. And generally, I would say to you that SEPTA is on the high end of the cost recovery ratio, at 50 percent. You have other cities that make a very cognizant public policy decision to keep fares artificially low. I'm thinking of Boston, for example, with a cost recovery ratio of, I believe, in the 30 to 34 percent range. And then you have properties like San Diego that have a different budgetary structure and report a cost recovery 16 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 ratio of 80 percent. But in San Diego, for example, many of the costs of providing that transit service are covered by city government. So, as I mentioned at the very beginning of this, your staff did an excellent job of trying to delineate a apples-for-apples, an exact comparison of data, because in fact, it's very different in each city. SEPTA incorporates the cost, for example, in its budget of its police department; other cities provide that cost to the transit property. I mean, that's just one example of how it's very difficult to make the direct comparisons.
Okay. It's my understanding that SEPTA currently has the second highest fare in the United States, while it's the fifth largest system. Why is that?
You know, when I first arrived four years ago in Philadelphia, the first thing that was brought to my attention is SEPTA had the highest fare in the United States. Very few people, Mr. Chairman and members of Council, pay that fare, because SEPTA also has the highest discount structure in the United States. 17 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 The base fare today is $1.60 but a token is discounted by 28 percent to $1.15 per ride. Now, the passes, the weekly passes, the monthly passes, the tokens, everything is very, very heavily discounted. So to answer your question specifically, SEPTA does not have the highest fare in the United States. There are transit properties in the country today that have a $2 base fare structure. It's just the -- a sort of a rumor or that was established years ago and just sort of stuck that SEPTA is the highest fare in the country; it is not. At $1.60, it's somewhere between the middle of the transit group and maybe even a little on the lower side of the transit group.
I believe New York is now $1.75; Pittsburgh is at least 1.60, if not $1.75. Many of the California properties are all in the $1.75 to $2 range. Mr. Chairman, if you'll hold on, I think we have that data with us. It's in the 18 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 report. Yeah, Atlanta -- the full cash fare -- oh, here we go. Yeah, Atlanta is $1.75, Los Angeles is $1.55. And just let me make the point. Even in Los Angeles, their cash fare is $1.55, but 50 percent of the users of the system pay the cash fare. In Philadelphia, the cash fare is $1.60, but only percent of the users pay the $1.60. 10 So everybody in Philadelphia knows, and let me 11 say, we encourage it, you know, don't pay the cash 12 fare, take advantage of the discounts, buy the 13 passes, buy the weekly passes. They're more 14 efficient for us to handle and they're more 15 customer-friendly for our customers to use. In San Diego, it's $2.00; Pittsburgh is $1.60; the Port Authority in New York is $1.06; Los Angeles is $1.55; Atlanta is $1.75.
But at $1.15, let me say, we are very much at the low end of transit fares around the country.
I have other questions. Do other members of the Committee have questions at this time? Councilman Ortiz. 19 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597
Good morning, Pam. The sun is out today. Mr. Leary, do these other cities have discounts? I mean, I imagine that all of these other cities also give discounts on their fares to people, elderly and so on. Don't they?
Yes. Most cities have some sort of a discount. I would say to you, Councilman, generally speaking, I don't know of any city that has as many discounts as the SEPTA system. Now, that may have something to do with the fact that we are so multi-modal. I mean, we have every mode. Only Boston is close to SEPTA in terms of the many modes. New York, for example, has buses and heavy rail, and that's it.
But New York has -- New York also offers the students free transportation, does it not?
Um, I honesty -- I don't know. I'd have to look it up in my notes.
It does. 20 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597
I don't believe it's free. Maybe the student doesn't pay, but someone pays the --
The students rides free. Somebody always pays, Mr. Leary.
Someone always. You have -- you make a statement in your testimony here on at the end bottom part that you said you are doing what is possible within the parameters of enabling legislation which prohibits us from providing free service to any customer market. What does that mean?
On the next resolution, and I am planning to make a more detailed statement, a formal statement to that and explain each one of those.
But it's about students and -- 21 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597
You mean, I got to wait to ask questions about the tokens until then? Thank you. You know, I'll wait for the token questions. I'm sorry, okay?
For the record, Councilman Rick Mariano has joined us. Are there any other questions from members of the committee?
Would you pull the mike a little bit closer. 22 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597
Okay. Determining the fares is based upon two general principles and has been seen over the years in the transit industry as the best balance to achieve the maximum amount of ridership and generate the maximum amount of revenue. If you raise your fare too high, you lose ridership; and, therefore, your cost recovery is in danger. We watch it very carefully. As you know, we have been, and I report it to you every year as part of the budget process, a very aggressive campaign to improve ridership and to improve revenue. We've been very aggressive about advertising and redesigning the bus routes to try to focus on major designations. And we have been very successful. This year, we will carry 13 million more people than the previous year. We have been very successful because we have been able to keep the transit fares as low as possible. We have not had a fare increase, for example, in six and a half years. It's all contributed to bringing people back on the system. We very carefully try to balance the revenue to be generated to the number of riders 23 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 that we can attract, and it's that equation that helps you determine what the most optimum fare is, the optimum are for attracting the largest number of riders.
And at what interval do you do fare increases? When you do a fare increase, is it for five years, for ten years, uh. . .
Mr. Chairman, I'm not sure that I would want to commit to that because you never know where your expense structure is going. As you know from our budget hearings, we have had this last year some very unusual expenses. In our business, one of the big expenses is diesel fuel. We buy 15 million gallons of diesel fuel every year, and diesel fuel went from 51 cents a gallon to $1.01. I mean, that's an enormous increase. So when you're faced with expenses growing at that rate, it's at that point in time that you have to reconsider the cost -- the revenue generation ability from the fare. As I said, it's been six and a half years since there's been a fare increase. As you know, we are seriously studying the potential of a 24 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 fare increase for next year, a process that will begin in the not-too-distant future. But it's -- I would say to you that SEPTA has been very fortunate in the sense that we have not had to raise the fares for a large number of years, many years.
At what rate do you see operating expenses increasing over the next five years incrementally?
Mr. Chairman, if you'd hold on for just one moment, I want to check with our finance people. (Mr. Leary confers off record with colleagues.)
Mr. Chairman, we're projecting about a 3.5 percent per year increase each year over the next five years.
If I just might add, for the last five years, we have been able to contain those expenses to approximately 1.5 percent. So we have been very successful. As you know from the budget hearings, we have been very successful 25 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 at containing costs, restructuring our organization and reinventing the way we do business to try to improve the effectiveness of the dollars we invest in transit. It's been very successful for the last five years. It's just that this past year, the combination of medical expenses, prescription drugs, diesel fuel, natural gas, some of our -- some of the cost components of delivering the service that are outside the control of SEPTA have just, as you know, from discussions, it's been no 13 secret that medical costs have increased 125 percent the last couple of years. I mean, that kind of cost increase is just not something you can deal with. And we don't expect that to occur in the out-years anyway.
So you expect operating expenses to increase incrementally at 3 percent a year for the next five years, and it's my understanding and it is rumored that you are considering a fare increase. Would a flat fare increase actually equal some of those incremental increases over the next five years?
Yes. We would try to 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 project the revenue increases from a fare increase and project a continuation of rebuilding ridership over that period of time. Again, our strategic plan for the next five years, we would try to balance and project revenues that would equal the cost of delivering the service, and that's really the objective, given that by law we're required to submit a balanced budget.
I think I was more specifically not trying to tie you down to a number yet.
But if operating expenses are going to increase 3 percent a year and you can't necessarily foresee more than five years, I'm really asking the question, is a flat fare increase going to be based upon the sum of those incremental increases?
Yes. It would very much be tailored to what the expected increases would be. Now, keep in mind, the fares only represent 50 percent of the cost of delivering the service. So we would very much try to balance the fares with the expected increase in costs and structure 27 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 the organization's future to be a fiscally responsible future, at least in the short term, projecting revenues that would balance expenses. I think that is the -- sort of the fiscally responsible way of approaching this issue.
Okay. I believe Councilwoman Blackwell has a question, but I will wait for her and ask another question. For the record, could you please tell this committee which portion of SEPTA's fiscal infrastructure are owned by the agency and which are owned by the City?
Mr. Chairman, that would on the surface appear like a very simple question, but it's very, very complex. There is a complex system of leases and lease-backs involving both rolling-stock subway station structure. And to be perfectly honest, off the top of my head, I can't tell you other than those general categories where specific ownership is. It's gotten more complicated even in recent years, as those assets have been -- what's the right word. Their useful life has expired, they have been replaced. They have been replaced, 28 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 597 in many cases, with federal funding that introduced the federal ownership or federal -- well, I guess ownership's the right word of 80 percent in some cases. So it's a very complex response to that. It will take the best Philadelphia lawyers to figure that out.
Do you know offhand how many lease, leaseback agreements there are regarding physical infrastructure?
I would encourage both the 29 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 SEPTA staff and City staff to put aside several years in terms of research, formulating solutions and alternatives to find a way to do this. I mean, it wouldn't be too soon to start this year.
Okay, thank you. Are there any other questions from members of the committee? (No further questions.)
Thank you for your testimony and for answering the questions. I look forward to the follow-up information in finalizing this report. I think most of the people that have come here today have come to considering Resolution 142, so let's move forward. The clerk will read the title of Resolution 142.
Resolution 000142, a resolution authorizing the Committee on Transportation and Public Utilities to hold hearings into student transportation costs.
Mr. Leary, would you please proceed with your testimony on 142.
I thank you, Mr. Chairman. And good morning, Councilman Goode and members of 30 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 the committee. And members of the City Council, again, my name is Jack Leary. For the record, I'm the general manager of the Southeastern Pennsylvania Transportation Authority. And joining me at the table are Board members Miss Jettie Newkirk and Board member Christian DiCicco. And I've invited also the Treasurer of SEPTA to join me, Faye Moore, with Frances Jones and counsel (inaudible). And, again, we have other members of the staff in the audience as we get into the question-and-answer period. Supporting the welfare and future of our children is an issue of concern, and SEPTA applauds the Council's comprehensive fact-finding approach to assist the School District of Philadelphia, establish a realistic and viable student transportation policy, one which could well become a model for all school institutions, for other school institutions within our service region. SEPTA offers an important support service to students who must travel to area schools by providing access to transportation. The Authority School Initiative is comprised of 31 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 two main elements: sale of fare instruments and delivery of revenue service. In all, we spend almost $40 million annually to provide approximately 100,000 daily trips -- and these are unlinked trips -- for over 30,000 children in the City. I'd like to take a minute now to describe SEPTA's activities on a typical school day. Students use our service -- buses, trolleys and subways elevator lines -- to travel to and from school. On average, 20,000 student trips are provided on the Market-Frankford and Broad Street subway lines, and almost 80,000 daily student trips are taken on some 41 City transit bus and light-rail lines operating on routes that pass area schools. In addition, on school days, targeted service provides 87 buses that operate with schedules specifically coordinated with the school day. While these services run -- excuse me. m. m. timetables are designed to provide transportation to and from Philadelphia schools. These schools include: 32 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 The Bartram High School at 67th and Elmwood; Leeds Middle School at Mt. Pleasant and Wilson; Olney High School at Front and Duncannon; Roxborough High School at Ridge and Fountain; Saul High School for Agricultural Services at 7800 Ridge; George Washington High School on Bustleton Avenue; Rush Middle School at Knights and Fairdale; Gratz High School at 18th and Hunting Park; and Jones Middle School at Anne and Mifflin Streets, just among others. Combined these routes generate over 800,000 service miles to and from school destinations annually. The majority of students taking public transit use special school tokens and transfers. The School District of Philadelphia purchases these fare instruments from SEPTA as part of a bulk sales program for resale to students. The Philadelphia Archdiocese, Philadelphia charter schools, and selected school districts in Delaware and Montgomery Counties also participate in this sale program. million in tokens and 33 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. million in transfers. 15 and 40 cents for transfers. Through their student sales program, the School District of Philadelphia further discounts the already-discounted price of a token to 90 cents. The District also provides school tokens free of charge to approximately one-third of its students, based upon the criteria in their individualized educational plans. Now, what is the cost, the breakdown for the $40 million figure I spoke about a few minutes ago. The Authority spends $26 million to operate the regular service and $14 million to operate the targeted services.
We generate $13 million in revenue from the tokens and transfers used on the regular service, and $3 million from the targeted services, for a total of $16 million. 30. 15. The token represents about 50 percent of the cost of delivering that service or the subsidy. 34 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 Now, who helps pay for these costs? SEPTA covers the $24 million not subsidized by tokens and transfer revenues out of its annual operating budget. 5 million. The District then receives $5 million in reimbursement from the Pennsylvania Department of Education, as allowed by the State's public transportation reimbursement program. As you can see from these basic cost and subsidy calculations, providing public transportation services for a student population as large as the City of Philadelphia's is an expensive undertaking. And as we are all aware, the question is not simply the ability of any one party to underwrite these costs but to establish a comprehensive policy to address the transportation needs of students. As I recently testified during the Council's operating budget hearings, although we have exercised fiscal diligence and discipline to maximize the effectiveness of our resources and 35 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 expand service levels while holding expenses in check, we have been faced with skyrocketing costs in a couple of key areas, and as part of the previous discussion, I mentioned them: diesel fuel prices, natural gas prices, prescription drug costs, just to make a few. Compounding all of this is the disappointing news that the Governor's budget submission does not provide SEPTA with an increase needed to meet even our normal 3 percent inflationary costs. Under State law, we cannot present an unbalanced budget. And with the prospect of $43 million in increased costs, we must work to find responsible solutions to these issues by looking at all possible avenues to increase revenue sources, increase our subsidy funding, and decrease expenses. Now, some of these choices may be difficult, including the prospect, as we spoke about a few moments ago, the prospect of a fare increase, the first in over six years. None of these decisions will made without careful study and full opportunity for public comment. However, definitive action must 36 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 be taken if we are to sustain current City service levels, including those provided to school children. While the focus of this morning's hearing is the School District of Philadelphia, the largest within the SEPTA service region, there are other systems: the charter and parochial school systems in the City and districts in the four surrounding counties within our operational network. We are obligated under law to ensure that all SEPTA initiatives provide equal protection to those live and work within our diverse service region; therefore, as mandated by our enabling legislation, any programs, policies or tariffs put into place to address the transportation needs of Philadelphia school children would also apply to all of these other districts and systems as well. It is our understanding that under State law, the School District of Philadelphia has assumed the burden of responsibility for providing children with transportation to and from school. To offset the financial burden associated with 37 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 this activity, public transportation fares qualify as a 100 percent allowable expense for the School District, and there is no funding cap imposed for reimbursement of transportation costs. Today the State reimburses 67 percent of the cost incurred by the School District of Philadelphia for each dollar spent on public transit. As such, we would hope that one of the solutions would be to seek additional funds for the School District's budget.
Given the operating dollars currently expended by SEPTA to support student transportation, given our financial constraints and our obligation to balance the budget, while struggling to address many cost increases, we are doing what is possible within the parameters of our enabling legislation, which prohibits us from providing free service to any customer market. These concerns notwithstanding, students are an important segment of SEPTA's overall customer base, and we are committed to working with the School District of Philadelphia, the Philadelphia City Council, legislative officials, and all other advocates interested in 38 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 working together to find solutions to the challenge of establishing a transportation policy. We stand ready to lend our professional resources to this committee to assist in reviewing and analyzing the information developed from this hearing. Mr. Chairman, thank you again for the opportunity to speak, and I'd be happy to try to answer any questions you may have or provide any information you need to help with this very difficult issue. Thank you again.
Thank you, Mr. Leary. I have a couple questions before I return to Councilman Ortiz. The first is for the record. How many tokens or transfers does the School District from SEPTA on an annual basis? Not the cost, but actually how many tokens and how many transfers. (Mr. Leary confers off record with colleagues.)
Mr. Chairman, we're doing some quick math here, and we may be off a little bit so we'll get to you the exact number, but 39 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 we're talking about 1 million 3, and constantly repeating, constantly cycling through the system several times a year.
Is the School District largest single purchaser of tokens and transfers?
Well, what is SEPTA's largest client beyond the School District?
I believe the general customer base of the system; the daily commuter would be the largest client group.
No, as an institution, the school department has to be -- has to be the largest, yeah.
Okay. Councilman 40 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 Ortiz?
Yes. Explain to me that last sentence in : "Given the operating dollars currently expended by SEPTA to support student transportation. . ." It's down at the bottom of on your testimony.
Yes, sir. Specifically given the operating dollars currently expended by SEPTA?
We're looking at a total cost of $40 million for providing the service. Is that the number you're referring to? There's $26 million of costs provided throughout the regular service system and $14 million for that targeted system. And some of us have referred to in the past the targeted system being the 400 buses, those buses that go out to the particular schools every day.
Have those buses just specifically -- I mean -- and once the school 41 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 day is over, those buses don't run any longer?
That's -- that's correct. Councilman, we are prohibited by both State and federal law from providing school bus services, so we are very careful to describe them as "targeted services," but the truth of the matter is, they begin their run at the high school and they finish their run at a major terminal for the students to get off.
But they are open -- these routes are open for the general population to use, the general public to use.
Right, they're open. They're not -- you just plan your route so that students are able to make use of public transportation and reach their schools.
But these targeted routes are a part of your public transportation strategy in terms of the --.
-- overall population. 42 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142
Okay? So you cannot -- that is not a subsidy. I mean, that is part of being able to market public transportation to people and make it accessible.
I would say to you, sir, generally that is correct, but there are 87 bus routes that if we went out today, I think you would find that the 100 percent of the customer base on that route is a high school student.
Given the fact that the school system, and you stated, is the largest customer, institutional customer that you have, you don't provide any -- any discount to them other than what you provide to the average customer that travels on public transportation. You sell 'em the tokens at $1.15.
So that is not a thing that you have instituted in terms of the students.
That is correct. I believe 43 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 that that token -- the general population is required to buy two at a time. The school department -- we sell them to the school department for individual sale. But given that it's the highest discounted media that we have, you are correct.
And we have the -- probably the largest segment of poor families in the Commonwealth of Pennsylvania (inaudible). How do students in Pittsburgh are able to ride the public transportation system over there at no cost to them and how do they do it? And why can't we here?
I'll answer the second question first: We can't. And the first question is, the Board of Education purchases monthly passes for the students in Pittsburgh at a cost of $40 per pass per month.
-- purchases monthly passes 44 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 for the students in Pittsburgh at a cost of $40 per pass per month.
Yeah. Now, the token purchased by the school department is given, blending transfers in runs about to $24 a month, so it's a much better 11 deal buying tokens the way the school department 12 is buying them today than buying the monthly 13 passes. And we've had this conversation several 14 times, and we'd be more than willing to sell 15 monthly passes. It's not the best deal for the 16 school department. 17
So it's the school 18 system -- the public transportation does not give 19 -- does the public transportation give a subsidy 20 to the Pittsburgh school system for their tokens? 21
Our data indicates that they provide the pass for the student. 45 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142
And let me just say, this is data that was provided to us by the Daily News Editorial Board on March 13, 2000. It must be correct. (Laughter.)
I see the Daily News reporters smiling. They're usually correct. They did a great editorial today, so I've got to commend them on it. So what you're saying to me is that we here -- that your system is very much just like Pittsburgh.
And you don't provide, just as Pittsburgh doesn't provide, any 46 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 subsidy, extra subsidy that it doesn't give to the average customers.
Sir, I think the answer to the question is that the Pittsburgh Department of Education pays the cost of the transportation and the Transit Authority is made whole -- is not subsidizing the transportation.
It's -- basically the Department of Education in Pittsburgh pays the cost of the transportation.
Well, I just have some information here that says that Pittsburgh School District receives a total State reimbursement of around approximately 40 percent, but included in that amount is public transportation reimbursement at 100 percent of allowable cost. Does that go -- does that --
Yeah, not to the Transit 47 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 Authority, to the School District.
So both transit authorities don't do anything specifically special in terms of the school kids in their cities.
Thank you, Mr. Chairman. Mr. Leary, we're probably going to have a rate increase. I guess that's top secret, but it sure looks like it's going to happen. Since we're going to hit the riding public for a rate increase, why don't we just hit 'em for enough to cover the cost -- not so we go totally free like we would like to see but so, you know, we can get down. I was reading in one of the great papers -- I don't know which one, they both fuzz together for me -- that students would be excepted or someone would be excepted, that the cost is down to like $5 a week, and that might be acceptable, even though we're trying to get to free. 48 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 Have you done any homework or tried to figure out that to try to make this less painful?
Yes, sir, we have actually. And what we've discovered, and it's very clear to us, is that we're prohibited from creating an advantage for any one consumer group.
Even if you don't make it free, as long as you'd be dis --
Okay. Well, I know and I understand you can't make it free for that reason. But if you cut the cost down where it's more bearable instead of what -- what are they paying, $9, $7 a week? (Audience member responds off-mic.)
Is it 7, Shelly? 9. So 5, say we make it 5, can we do something like that? Could we figure -- 'cause then we wouldn't have to do the whole thing for everybody else that doesn't live in Philadelphia, just -- 49 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142
Yeah, one of the -- (Mr. Leary confers off record with colleagues.)
Because the common-sense approach to this so we don't have to keep coming back here and doing this, doing this, and doing this --
Yeah. You know, Councilman, everyone says to us, you know, What's the big deal, why don't you tell us what you're doing in terms of the fare increase? And the reason we can't because is it's so complicated. We're being very, very careful in studying this and designing this so that there is a very careful balance across the board for everybody.
And there's no advantage or disadvantage in real terms to any particular group. And it gets very complicated when do you that.
My point though -- I think you're missing my point. We give them a discount for tokens now, correct? (No immediate response.) 50 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142
You got the nice haircut. I mean, say something. I'm trying to make you important. Your father can't talk to you, I can.
The discount isn't exclusive to the school children; it's available to the general public as well.
Well, it's been a little while since I went to school, but aren't the tokens cheaper if you get the school tokens and we stop doing that?
It's been a long time since I went to school. We don't do that anymore, right?
Student tokens are $1.15 51 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 and general-public tokens $1.15.
Okay, but we're still giving some discount, if not to --
Oh, okay. So they buy 'em for the cost? Are they buying 'em for -- (Unintelligible, parties talking over each other.)
I mean, people are going to -- they're going to bitch about a raise anyhow, so let's make it so we can try to get this somewhere where there's threshold of pain is eased. You know, it's hard for us to come here. I mean, that's what this is all about. We can talk for all night and all day, but it's hard for us to come here and read a story in one of these papers that some kid missed his final exams 'cause he couldn't go to school. 52 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 That's the stuff that makes our life unbearable, because, you know, we're riding around in these fancy cars that they pay the gas and our tires and everything, and we can't give some kid -- I mean, it would be -- I know you got problems for all the things you stated, and I'm sure nobody at that table doesn't want the kids to ride for free, and maybe free is not where we can get to. But if we're going to hit everybody for a rate increase, let's do it at one time and ease that threshold of pain down a little for these school kids so we don't have to read these stories. You know, this is a great job we have here, but then we have to read them stories, then I have to, you know, be all angst over all of that kind of stuff, you know? It makes my life more intolerable. Could we do something like that? (No immediate response.)
I love when they don't answer, just everybody's chatting. And I like you.
No, Councilman, you've been terrific to us. 53 4/2/01 PUBLIC TRANSPORTATION, UTILITIES - RES. 142 You know, we just did some quick mathematics, and we said -- and we'll confirm it. But if you were to say that the regular commuter, that their ticket price would increase enough to cover the student for free --