City of Lawrence

Public Transit

TO:	Dave Corliss, City Manager
FROM:	Cliff Galante, Public Transit Administrator
CC:	Diane Stoddard, Assistant City Manager Cynthia Boecker, Assistant City Manager
DATE:	June 4, 2008
RE:	Proposed Transit Sales Tax Rate Analysis

Attached for your review is a spreadsheet analysis recently prepared by staff regarding proposed sales tax rates to support public transportation service in Lawrence. For comparison purposes, varying sales taxes rates of .15%, .20% and .25% were analyzed to evaluate the impacts.

The analysis factors projected revenues received from the four primary sources of funding for the next 10 years that includes: Federal Transit Administration, Kansas Department of Transportation, fares and bus passes collected from transit patrons, and proposed local sales tax. In addition, the analysis evaluates projected expenditures needed to support transit system operating and capital needs based upon historical costs and current pricing. Many assumptions are made regarding projected revenue and expenditures over the next ten years that have been clearly outlined.

Staff believes that rising fuel costs will be the most difficult expenditure to project in the long-term. Since this time a year ago, the price of diesel fuel per gallon has increased by an astonishing 79%. The pace at which the price of fuel is increasing is unprecedented and making it very difficult to predict what the cost of fuel will be in the future.

Another challenge to be addressed is how to budget accordingly for transit system capital and infrastructure needs. As with any service, there are both operating and capital needs. To ensure that the service is well positioned for success in the short and long-term will require funding that adequately addresses both these needs.

The status quo service operates at 67,018 revenue hours of service annually based on existing demand for service. The amount of revenue provided will largely reflect the amount of service hours that can be placed in service. It is important to note that the attached financial analysis does not include capital needs (fixed- route busses and other infrastructure needs.). Sales tax rates funding service below current service levels could possibly work if service is reduced, revenues from other sources are higher than projected or expenditures are lower than projected.