Fasten your seat belts; it’s going to be a bumpy financial ride.
On Jan. 25, in a back conference room in the San Luis Obispo County Government Center, some of the county’s top financial experts listened as Regional Transit Authority Executive Director Ed King pleaded his case: The agency, whose buses connect SLO to Santa Maria, needs a county bailout.
Speaking before economic brainiacs like Auditor-Controller Gere Sibbach, Treasurer Frank Freitas, and Deputy County Administrator Dan Buckshi, King stressed that RTA is caught in a fiscal pickle.
RTA’s problem can be traced to a multi-million-dollar sprucing up of its new digs at 179 Cross Street in San Luis Obispo. Back in March 2008, RTA took out a private loan of about $4.7 million to outfit the building and add such improvements as more parking areas, equipment for fixing buses, and security improvements. Those costs came in under budget, but RTA still owed its lender, Santa Lucia Bank, a hefty $3.6 million to upgrade a building it rents.
That was when things were good—or at least didn’t totally suck, as has become the case with pervasive state cuts to transportation and an economic climate that’s spooked banks into keeping genuine capital on their books. Santa Lucia, it turned out, decided to buffer its own finances by mandating more RTA capital at the ready. In recent weeks, King told the advisory committee, the bank has required RTA to keep $847,000 on hand in collateral, also putting up its fleet of buses, Runabout, and Dial-a-Ride vehicles.
But, simply put, RTA can’t guarantee it will always have $847,000 on its books.
The sole provider of buses between SLO County communities and Santa Maria, RTA operates on a budget of about $7 million. It raised base bus rate fares 25 cents this past August—following a 25-cent increase in 2008—bringing the average bus ticket to $1.50. Additionally, cash from state and federal grants on which RTA greatly depends (fares take care of less than 20 percent of RTA’s costs) are becoming less dependable.
Without help, King warned committee members, RTA is looking at cutting services. But King also tempered his forewarnings with cautious optimism.
“I think by the end of this fiscal year we’ll be in pretty decent shape,” he said.
He later told the Sun: “We are optimistic that the county will agree to the line of credit. If they do not, staff will develop alternative solutions to ensure appropriate cash flow to meet our financial obligations.”
One of the solutions on the list would be eliminating weekend services, according to an RTA employee.
To keep everything peachy with Santa Lucia, RTA would need about $300,000 in county cash ready to go. Members of the committee came up with a loose proposal they thought might work, allowing the county to give RTA short-term loans of about $25,000 apiece with a modest 4 percent interest rate.
“I don’t think that’s why we’re doing this—to make money,” Auditor-Controller Sibbach said. “We’re trying to keep this agency going.”
However, loaning county money to keep RTA from gutting services is fairly unprecedented. The county is required to keep lines of credit for local schools and small service districts that don’t hold their own treasuries, Deputy County Administrator Buckshi explained. However, setting aside a line of capital for a struggling agency isn’t something the county has really done before, nor is it something officials want to make a habit.
To move forward, RTA will have to gain approval from its board of directors in early March and then take the request promptly to the SLO County Board of Supervisors. At the debt committee meeting, Buckshi and others made clear that they’ll emphasize to county supervisors that RTA’s request is a one-time deal. In other words, other cash-strapped agencies need not apply just because the RTA got some help.
News Briefs is compiled by Sun staffers from staff reporting and local and national media. Information should be sent to the Sun via fax, e-mail, or mail.
This article appears in Feb 17-24, 2011.