ITHACA, N.Y. — The agreement binding the City of Ithaca, Tompkins County, and Cornell University to support Tompkins Consolidated Area Transit (TCAT) has gone through negotiations, and is set to be considered by all three parties before being signed.
There is one major amendment among the proposed changes to the 15 year contract. Currently, if TCAT were to run at a deficit, the City of Ithaca, Tompkins County, and Cornell University would be compelled to fill that budgetary shortfall in equal thirds. Those involved in negotiations have said in public meetings that Cornell has argued for that article to be changed to allow the three parties to determine if they would be willing to or not.
The proposed change takes on significance as TCAT looks ahead at rapidly increasing costs, which could result in a potential deficit of up to $3.7 million in its 2024 operational budget.
The bus company is projecting that their 2024 expenditures will grow to $20,779,313 — a 38.7% increase over its 2021 expenditures. TCAT’s fund balance, which are excess revenues accumulated over the years, will be servicing these increased costs, but by 2024 this pot of money is projected to decrease below $300,000 from having been at $10,249,560 in 2020.
The looming budget deficit was described as “dire” by TCAT Board of Director members Dan Klein and Jennifer Dotson at the board’s last meeting on Aug. 25.
These figures come from a budget projection presented to the TCAT Board of Directors at their last meeting by TCAT’s Controller, Julie Ellis-Grove. The projections are considered a working product, and changes from month to month. The message that TCAT is sticking to is that a lot can change with these numbers in a matter of months.
Ellis-Grove told the TCAT Board of Directors on Aug. 25, “Trying to predict what’s going to happen in 2024 right now is almost impossible. So this is kind of our best-guess-projections of what we’re seeing.”
TCAT does have emergency funds — a pot of money separate from the fund balance — which are projected to grow to $10,389,657 by 2024. These funds could be used to plug that gap, but the scenario spells out an early indicator of financial difficulties facing TCAT as it recovers from the impacts of the pandemic and faces increasing costs.
TCAT General Manager Scot Vanderpoool wrote in an email to the Ithaca Voice, “The reserves can be used to address a deficit. However, the true story or scenario is one of concern. The fact that we are running at a deficit will eventually catch up with us at some point.”
A matter of “agency”
Currently, approval of the Transportation Agreement is being quickly tracked through the local government.
The City of Ithaca’s City Administration Committee met on Aug. 24 and moved the Transportation Agreement on to be considered by the city’s full Common Council. The current Transportation Agreement is set to expire on Oct. 9, and in order for the Common Council to approve it before then, it would have to do so at one its next two regularly scheduled meetings, which are on Sept. 7 or Oct. 5.
The Tompkins County Legislature is tentatively scheduled to review the Transportation Agreement at its Facilities and Infrastructure Committee meeting on Sept. 15, and then at a full meeting of the Legislature on Sept. 20 or Oct. 6.
At their Aug. 24 meeting, City Attorney Ari Lavine framed an explanation behind Cornell’s amendment to Transportation Agreement to committee members.
He said that by giving TCAT’s underwriters a choice to fill a budget deficit at the transportation company is a matter of “agency.” It would allow the city’s Common Council to choose how to spend its funds, rather than give TCAT’s Board of Directors full discretion when TCAT is facing a deficit.
City of Ithaca Alderperson Jorge DeFendini raised the point that by requiring a consensus from TCAT’s three underwriters to close a budgetary deficit, it essentially gives a “veto power” to each of the individual parties to prevent the gap from being filled.
Responding to this, Lavine said, “I think someone can use the description ‘veto power’ if they want and, alternatively, you can describe it the way I just described it. I think they’re both true. […] The alternative way to describe it is that this is providing agency to each of the three underwriters to evaluate their own budgetary outlook.”
The article requiring Cornell, the county, and the City of Ithaca to fill a budgetary deficit has been a part of TCAT since it was formed in 1998.
Tompkins County, the City of Ithaca, and Cornell University originally came together in 1990 agreeing to design a regional transit facility that would be able to take the place of the three bus services each party was running at the time. The aim was to save energy and reach more people as the area readied for potential development.
The Transportation Agreement binding the city, the county, and Cornell together was last seriously negotiated before it was signed in 2005. It was extended for one year in 2021 to avoid going over the contract in the second year of the COVID-19 pandemic.
The driver shortage
TCAT is projected to see a 38.7% increase from 2021 to 2024 in its expenditures. In the short term, TCAT is projecting expenditures to increase by 14% from 2022 to 2023, jumping from $16,589,222 to $19,240,105.
The quickly increasing expenses from 2022 to 2023 come down to factors like a 20% increase in TCAT’s insurance costs, a 9% increase in fuel from 2022, a 6% increase in the cost of parts — but a big unknown is also an increase coming from wages and benefits for employees. TCAT is currently in contract negotiations with its drivers and mechanics and the union they’re represented by, Local UAW 2300.
In an email, Vanderpool wrote of the increase in operation costs that, “Wages and benefits are going to be a big part of this – I won’t provide specific numbers because we are currently in negotiations with our labor union.”
The financial challenges ahead are on the heels of an ongoing driver shortage at TCAT — a problem that forced major service cuts for TCAT’s Fall 2022 schedule.
TCAT would ideally have 85 to 90 drivers, but is currently down to 59 full time drivers and 5 part time drivers, hampering its ability to improve rider numbers, expand routes throughout the county, and build a robust schedule to meet the high frequency routes in the City of Ithaca and on Cornell’s campus.
In a Aug. 15 hearing regarding the service cuts, Vanderpool said that they needed to be made in order to avoid burning out drivers any further. Drivers at TCAT have been mandated to work six days a week. Their work day is regularly between 10 to 14 hours long.
Rider numbers and revenue are rebounding since the pandemic, but the driver shortage threatens to slow the progress being made.
Passenger revenue reached an all time low in 2020 for TCAT. Overall ridership fell by 66% from 2019 levels. Passenger revenue, which is a small part of the TCAT budget, was just at $375,215 in the first year of the pandemic. It popped up to $671,076 in 2021, and TCAT is projecting it will come to $906,091 by the end of 2021. But their projections for 2023 and 2024 level off at $1,017,782 and $939,517, respectively.
Cornell makes a separate payment for the University Bus Pass Program. Cornell pays all or part of the riderships fees for its students, faculty and workforce. The University is currently contracted to pay $3,332,522 for one year of these services, which are highly needed for the tens of thousands of people that navigate to and from and within Cornell’s campus. Parking a car is notoriously difficult on Cornell’s campus, and TCAT fills a vital service on the hilly terrain. About 75% of TCAT riders are Cornell affiliated.
In the last negotiation over the contract for the bus pass program, Cornell did not have to increase its payments to TCAT despite the rising costs the transit agency is facing along with inflation. Cornell’s argument was that they did not want to pay more for fear of a potential decrease in the level of service they would receive — which did materialize.
Normally, Cornell University Bus Pass Program is signed and renewed in three year terms, but the TCAT Board of Directors and Cornell agreed to a single year renewal to see how the driver shortage at TCAT develops.
While the fares alone are not directly a large part of TCAT’s funding structure they do influence state funding.
New York State’s Department of Transportation distributes billions of dollars annually to mass transit systems through its Statewide Transportation Operating Assistance (STOA). STOA funds are distributed based on a formula considering rider numbers and miles traveled. In 2020, TCAT’s total expenditures were $14,763,597. About 37%, or $5,515,910 of that was covered by STOA funds, based off of TCAT’s 2019 numbers.
Due to the impact that the pandemic had on mass transit systems, New York State has moved to use 2019 ridership numbers and miles to calculate the STOA funds it administers, buoying funding for companies like TCAT as they recover. But TCAT is expecting this condition to be withdrawn in the 2024 round of STOA funding.
Ellis-Grove projected that TCAT will receive nearly $4.5 million through STOA in 2024, covering just 21.6% of projected expenditures that year.
Addressing the driver shortage — which is a national phenomenon — will be a key for TCAT to tackle its growing expenditures as well.
Other ways to address the budget deficit
Other than relying on its emergency funds, there are a few viable avenues for TCAT to better ready itself for the hit it will likely take in 2024.
TCAT’s operations budget projections did not include its capital budget — which is a set of funds budget particularly concerned with large investments, like bus replacement for TCAT. Capital Budgets vary more than operating budgets, but TCAT’s operating budget in 2021 was $15,019,935, and its capital budget was $2,179,133.
Ellis-Grove told the TCAT Board of Directors that she did not calculate the capital budget because TCAT was waiting to see if it received a highly competitive $8.7 million federal grant to pay for 6 electric buses and 4 electric minibuses — which it did. (Cue applause.)
The additional funds give some flexibility to $5 million in emergency funding TCAT received through the American Rescue Plan Act, or ARPA. Some of these funds were planned to buy five new buses for TCAT, but now could be used to address for the budgetary challenges ahead in 2024.
But the issue of increasing costs could remain even after that. TCAT Board of Directors have asked for longer term expense and revenue projections.
One source of revenue that can be expanded for TCAT is the shares that Cornell, the City of Ithaca, and Tompkins County pay. The three underwriters currently pay in equal thirds $2,841,641 to TCAT. In 2021, the shares underwriters paid made up almost 19% of TCAT’s budget.
The TCAT Board of Directors was tentatively considering an 8% increase to the share that underwriters pay but, from their Aug. 25 meeting, seem inclined to increase their request. The Board can request an increase in payment from the underwriters every year.
An 8% increase would bring the total contribution from the underwriters to TCAT up to $3,068,972. If that tentative request were to remain, the share that underwriters pay to TCAT would account for close to 16% of the TCAT’s projected 2023 expenditures.
TCAT board member Frank Proto — a former Tompkins County Legislator — indicated that he felt the request was too low. He said, “I am not comfortable asking any of the underwriters at this point, for an 8% increase. I think the budget committee needs to have a more robust discussion before a formal proposal is made to any of the underwriters as to what that percentage might be.”
TCAT Board Member Dotson indicated they would also like to see that number increase, calling an 8% increase “about the minimum we should ask for.”