NJ Transit Says Proposed Fare Hike is Last Resort

Jim Redeker InterviewNJBIZ: What brought NJ Transit to seek a 9.6 percent fare hike?

Redeker: The background for this proposal is our Fiscal Year 2008 operating budget. We estimate that we will be facing a $60 million shortfall between our revenues and expenses for the year beginning July 1. And that [$60 million] is after we believe that we’ve done a completely thorough analysis of all of the options to reduce costs. We’ve taken initiatives to do that, looked at where we can identify new, nonfare commercial revenues—things that obviously don’t affect the rider but aid us in our budget.

NJBIZ:Would you expand on that?

Redeker: Sure. Our budget is, round terms, $1.5 billion a year. That’s what it takes to run trains, buses and light rail. If you think about that and inflation, which most people relate to as 3 percent, a 3 percent increase on that budget base means, at a minimum, we see $45 million a year just because of inflation. That’s the net increase just from 3 percent inflation. In addition to that, we’ve got other things that happen in the budget. We’ve got about a $17 million number that relates to new and expanded services. We’ve expanded light rail service; we’ve added significant amounts of rail service and bus service throughout the year. That new service costs us, net, $17 million. And there are some extraordinary things that a lot of [businesses] are facing: costs for our benefits packages, costs for insurance, fuel costs and so forth—things that are above inflation. That’s another $6 million. So, if you add the $45 million plus the $17 million plus the $6 million, we’re talking about a $60 million dollar budget gap.

There are really a couple of places that we get resources from to pay for our operating expenses. One is the fare. The second is we get money from the state budget and that’s at $300.7 million this year. We did get an increase last year of $22 million. Frankly, that’s in the context of a very tight state budget.

Then we looked at expenses and said, “What can we do to really reduce expenses as much as possible?” We’ve taken about $20 million of what could have been expense growth out of the budget by doing things like reducing or freezing positions, working on our pension and benefit costs, reducing consultant and advertising fees and costs. That means that net-net—when you take all of that together—we’re still looking at a $60 million gap. The only place left is the fare.

NJBIZ: OK, so let’s talk about it.

Redeker: To raise $60 million, we need to increase the average fare by 9.6 percent. What it really means is that we’re doing that to get to $60 million. We actually have to do that in June rather than July to raise that amount.

NJBIZ:Why is that?

Redeker: If we wanted to raise it in 12 months instead of 13, we’d have to raise it above 9.6 percent. So what we do is carry forward some of the money from this year into next and do it in June rather than July. That helps make the increase a little bit less for everybody.

NJBIZ: When was the last time you raised the fare?

Redeker: In 2005, and at that time we raised it by 11.5 percent.

NJBIZ: What is your stance on the New Jersey Association of Railroad Passengers’ contention that if the proposed increase were approved, it would be the highest fare among commuter railroads in the country?

Redeker: The analysis that they did, we believe, was wrong in a few areas. First, they used only monthly rail fares to Penn Station New York, which represents only one of 10 passenger trips taken on our system every day. It’s not representative of what New Jersey Transit riders actually pay. New Jersey Transit operates significant services to Hoboken, to Newark and within the state of New Jersey that [NJARP] is not talking about.

The second point is they used basically two fare examples that ignore the other distances. If you look at other places than those two, you get different answers. The third point gets to the 90 percent, where they ignore most of our riders; [that’s] where both our current and our proposed fares are lower than other systems.

I would also note 30 percent of all the fares that NJARP used are wrong. They’re absolutely the wrong numbers. We don’t know where they got them. In the future, we would like to work with them to make sure all the numbers are right.

NJBIZ: Have you contacted them?

Redeker: We have spoken with them. We said the analysis they did is like comparing a single menu item in a restaurant and declaring the restaurant the most expensive. The important part is to look [at this] comprehensively.

n May, Jim Redeker will mark his 30th anniversary with NJ Transit, where he currently serves as assistant executive director for policy, technology and customer service. Redeker and his staff developed the proposal to raise fares 9.6 percent, which would take effect June 1, if approved by the agency’s board. The New Jersey Association of Railroad Passengers, which conducted an analysis, says NJ Transit would have the highest fares among commuter railroads if the increase goes through (see NJBIZ, March 5, 2007.) Redeker, who says the group’s report is inaccurate, spoke with NJBIZ Deputy Editor Cheryl Sarfaty about how the agency’s budget and goals led to the decision to seek a fare increase.

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