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NJ TRANSIT LAYS OUT PRELIMINARY FY08 BUDGET

Demand for new services projected to set another record

January 23, 2007
NJT-07-008
Contact: Penny Bassett Hackett 973 491-7078

NEWARK, NJ – Citing system wide service growth driven by increasing ridership demand, inflation, and other key cost drivers, NJ TRANSIT Executive Director George D. Warrington today projected an estimated $60 million operating need in FY08 that requires the agency’s Board of Directors to consider an average fare increase of about ten percent.

"Despite our actions to contain costs, basic inflation alone adds $45 million of expense every year before we begin to pay for substantially expanded rail, light rail and bus services," Warrington said.

During the Corporation’s regular monthly Board meeting, Warrington presented a number of revenue and expense assumptions underpinning a preliminary FY08 operating budget. Among those assumptions: that fuel prices will stabilize at current levels; utility costs will continue to escalate; and other growth will be contained to new service and new equipment maintenance only. In fact, NJ TRANSIT expects to keep core service expenses constrained to three percent growth, with new and expanded service growth and above-inflationary cost increases contained to an additional 1.5 percent.

NJ TRANSIT is currently in its third year of record setting-ridership demand, with nearly five percent growth system wide this fiscal year to date. The trend is expected to continue at a slightly more moderate pace next year, consistent with regional economic forecasts for continued job growth, with ridership approaching 900,000 passenger trips daily for the first time in the Corporation’s history.

NJ TRANSIT said its cost projections include 40,000 more hours of bus service added this year to meet demand and growing costs for private bus carrier contracts. The Corporation also expects to operate 600,000 more car miles for expanded rail service to accommodate more riders, as well as support new yard and maintenance facilities and personnel to service 30,000 additional seats on 120 new multilevel rail cars that will be delivered by the end of FY08. Rail service growth, fleet expansion, and manpower and materials to maintain new equipment, account for more than $14 million of cost growth, while bus and light rail service growth is projected to add $3 million next fiscal year.

Light rail increases are generated by 11 new daily trips on the River LINE to accommodate the more than 17 percent ridership growth projected for this year, the first full year of Newark Light Rail service, and additional contract costs to operate the Hudson-Bergen Light Rail system.

Warrington said the agency has worked hard to hold down cost growth to near inflationary levels despite the addition of new services, by cutting $20 million in expenses in FY07 through benefit savings, and headcount and administrative expense reductions, as well as by generating commercial revenues from leveraged leases, advertising, and the sale of excess property.

But Chief Financial Officer Charles Wedel warned that while the Corporation will continue to aggressively pursue non-fare revenue opportunities, leveraged lease transactions and one-time sales of property added nearly $20 million in commercial revenues this year that will be non-recurring in FY08.

"The economics of this business, experienced by transit agencies across the country, are that passenger revenues cover less than 50 cents of every dollar of cost to provide transportation as a matter of public policy. While record-setting ridership brings in more fare revenue, it does not keep pace with the cost for new services that are added to meet demand," said Wedel.

The preliminary FY08 budget forecast assumes that the State will provide NJ TRANSIT the same level of operating support it is receiving this year – including the $22 million increase Governor Corzine provided in the budget for FY07. The Corporation also assumes a continued freeze on the level of capital funds transferred to cover operating expenses at FY05 levels for the fourth consecutive year.

Warrington said that he expects to provide the Board members with a specific proposal of fare adjustments at their February meeting. Public hearings and information sessions will be held between February 28 and March 8 in Paterson, Trenton, Camden, Hoboken, Newark, Somerville, Summit, Manalapan, Atlantic City, Hackensack, Toms River, New Brunswick, and NYC. Any fare change would take effect June 1, about two years after the last fare adjustment.

NJ TRANSIT is the nation's largest statewide public transportation system providing nearly 857,000 weekday trips on 240 bus routes, three light rail lines and 11 commuter rail lines. It is the third largest transit system in the country with 162 rail stations, 60 light rail stations and more than 18,000 bus stops linking major points in New Jersey, New York and Philadelphia.