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Metrolink officials consider rate hike to counter revenue shortfall

The five-county rail agency's board is scheduled to decide this week whether to increase fares by as much as 6%. Some worry that the move would exacerbate a drop in ridership.

November 09, 2009|Rich Connell

Faced with falling ridership, deepening budget woes and increased expenses for safety reforms, officials at Southern California's commuter rail service are considering raising fares for the second time in less than six months.

The five-county Metrolink agency board is scheduled to decide whether to hike ticket prices for tens of thousands of daily passengers by as much as 6% at a meeting Friday.

The potential January increase, on the heels of a 3% increase that took effect Aug. 1, is needed to help make up a revenue shortfall of several million dollars in the current year's budget.

Some worry that boosting fares again -- a one-way ticket from Riverside to downtown Los Angeles could top $11 -- will only exacerbate a recession-driven tumble in ridership.

"My feeling is it's a bad idea to raise them," said Metrolink Chairman Keith Millhouse. "I'd rather be cutting service, perhaps midday trains that are not as well-utilized. With the economy the way it is, I don't want us to lose" more riders.

But other board members say the latest increase may be necessary to get out of a fiscal hole this year. "It's a hard time to do it. We understand it's difficult," said board Vice Chairman Richard Katz, who added that the agency already has scrutinized its spending.

Revenue is down about $6 million from last year largely because of a 15% drop in boardings. Reduced freight traffic along Metrolink lines due to the recession also has cut income. And costs have grown about $1.8 million so far this fiscal year, officials say.

The five counties that created and help fund Metrolink service are struggling with their own budget problems. "They've told us the well is dry," said board member Art Brown, a representative from Orange County.

Moreover, an aggressive series of safety and operational changes in the wake of last year's deadly Chatsworth crash are boosting costs.

A newly negotiated deal to replace the private contractor that provides Metrolink train crews is expected to add millions to expenses starting in July, a Times review found. A tentative agreement with the new contractor, Amtrak, will cost about $30 million next fiscal year, or $3.5 million more than if the current contractor, Connex Railroad, had remained, according to the Metrolink estimates.

The agency's relationship with Connex soured after the head-on collision with a freight train in Chatsworth, which killed 25 and injured 135. Investigators said the wreck occurred seconds after an engineer on a Metrolink train was text messaging on his cellphone.

Metrolink had hoped to replace Connex without increasing costs.

But the rail agency found itself in a weak bargaining position with Amtrak and under a tight deadline to reach a deal before the current contract expired in June, officials acknowledged.

The new agreement reflects Amtrak's concerns about its financial exposure in taking on the Metrolink service, officials said. For example, the deal includes a $2-million non-refundable contingency payment to cover unforeseeable costs, including possible increases in Amtrak's liability insurance premiums, board members said.

Amtrak also pressed Metrolink to increase its umbrella operating insurance coverage by 50% to $300 million per incident, some rail agency officials said. The added cost of increased coverage has not yet been determined. But Metrolink outlays for liability insurance more than doubled last year to $10.8 million, partly because the rail service has suffered a major accident about every two years since 1999.

Though more costly than hoped, the new operating contract will give Metrolink more enhanced provisions to ensure safety among train crews, officials said. Connex engineers will be given priority in hiring by Amtrak, but they will be carefully screened under a rigorous new process, Millhouse said. Also, in addition to Amtrak testing and oversight, Metrolink inspectors will have authority for the first time to board locomotives at any time and conduct spot inspections of Amtrak crews.

"I feel these employees will be some of the most scrutinized, if not the most scrutinized, in the country," Millhouse said.

Officials expect other safety improvements, such as video surveillance of engineers, high-tech train control systems and safer passenger cars, to reduce the chances of major accidents and help curb future insurance costs. And an economic recovery and return of ridership growth is likely to stabilize the agency's finances over the next few years, Katz said.

The current fare increase proposal of between 3% and 6% is a response to immediate financial problems, officials say.

But Millhouse, for one, said the agency should resist a fare hike now by pursuing savings through more competitive contracting. In some instances, only a single vendor is bidding on large contracts, he said, a sign the agency may not be getting the best deals possible.

"We really need to squeeze and take a look at what we're spending money on," he said. "If we're bidding out multimillion-dollar contracts, we . . . better be getting multiple bidders competing for this business.

"If you've got a $5-million contract and can save 10%, it doesn't take a lot" of those sorts of savings to generate the money needed to balance the budget, he said.

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rich.connell@latimes.com

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