The Utah Transit Authority – a primer and a warning

The Utah Transit Authority (UTA) is a government entity tasked by local municipalities and county governments with providing public transit in Utah. It was created when the state Legislature passed the Utah Public Transit District Act in 1969, allowing UTA to be officially formed by Sandy, Salt Lake City and Murray in 1970. Other cities and counties joined UTA in subsequent years, expanding these special transit districts all along the Wasatch Front.

City and county citizens vote to create these transit districts, bringing UTA’s services to their area and raising their sales tax rate to help pay for the services. These rates vary by area, ranging from 0.3 percent in Tooele to 0.6875 percent in Salt Lake County. Two-thirds of UTA’s funding comes from sales taxes; 15 percent comes from federal government grants; and another 15 percent via fares that UTA charges to ride its trains and buses.

While UTA is a government entity, it is not directly overseen by the governor or Legislature. The local governments that cover UTA’s transit districts select 12 members of the governing Board of Trustees. The governor, the speaker of the House, the president of the Senate, and the Utah Transportation Commission also each appoint a board member, bringing the total membership to 16. The Board of Trustees hires the executive officer who conducts daily business affairs. The board meets regularly to provide operational, planning and budget oversight.

UTA’s revenue tops $325 million, but as noted above it is highly dependent upon sales taxes. Only about $50 million, or 15 percent, of its revenue comes from the actual fares we pay when we board a bus or ride a train. Another $49 million comes from the federal government, and $2 million from the ads you see on the sides of buses and trains. Notably, the percentage of UTA’s revenue that comes from the federal government has dropped over the last five years, and fare income is expected to surpass federal grant revenue for the first time in 2014.

UTA’s expenses are $235 million, giving it a $91 million operating income in 2014. It expects to increase this income to $175 million by 2020. It says it will do this by increasing revenues 36 percent in those years while holding expenses to 14 percent growth. These projections sound rosy. However, a 2012 legislative audit found that UTA’s debt has ballooned in recent years and now stands at $2 billion. Repayment, it says, will cut into UTA’s projected profits, making it difficult for the transit organization to fund ongoing operations. And if UTA’s revenue projections prove overly optimistic the problem could be far worse. For its part, UTA is well within its legally defined debt threshold of no more than 3 percent of the fair market value of property within its transit districts. However, its credit rating was recently downgraded to an A+ from AA- because of its increasing debt load.

Because UTA is a public entity with a great majority of its funding coming from taxpayer dollars, executive pay and bonuses are often scrutinized by the public and media. UTA paid $1.7 million in bonuses in 2013 and will pay $1.9 million in 2014. Its general manager makes $300,000 a year in salary and benefits and received an additional $25,000 bonus in 2013. Many community groups and some members of the Legislature have said those salaries and bonuses are excessive when compared with those of other even larger public transit organizations around the country. UTA has publicly stated it uses bonuses like the private sector does – as a means to incentivize and reward high performance. However, it consistently pays out large bonuses even when its goals aren’t met. For instance, one of UTA’s goals for 2013 was to increase ridership 4 percent, but it rose just 3.1 percent, and that only after a strong finish to the year propelled by large events in Salt Lake City like the highly attended Comic Con. Before that, ridership was basically flat year over year.

Which brings up the biggest question UTA has to answer: After spending hundreds of millions of dollars on operations and amassing $2 billion in debt building large capital projects like the TRAX and FrontRunner train systems – which in effect has spent its future taxpayer-funded revenue stream before it’s even been collected – why hasn’t ridership increased in response to all this spending?

Despite years of public service campaigns putting air quality on the minds of commuting Utahns, those Utahns don’t seem to see UTA’s transit services as a viable alternative to driving their own cars, regardless of the air quality impact. Has UTA’s spending been worthwhile? Has it overestimated the usage rate of trains over that of buses?

During the 2014 session UTA asked the Legislature to remove the cap on the sales tax rate that it relies on for the bulk of its funding. UTA leaders clearly share the same fears that the legislative auditors expressed – that UTA might not have enough money to pay back all the debt it has accumulated. This is the danger of public works projects and accompanying public debt. It’s easy to say yes to exciting new projects that promise to solve our problems. It’s not so easy to stomach the resulting debt and tax payments that inevitably follow.

Because of this debt-fueled expansion, UTA and taxpayers (now on the hook for $2 billion of borrowing) are now in a position of hoping sales tax revenue continues to increase and that ridership picks up significantly. If not, then UTA will be looking for other revenue streams (read: tax increases) even as it struggles to provide adequate transit service.

Dig Deeper:

Website: UTA Organization & Governance

Website: Board of Trustees

Website: UTA Budgets

Report: Legislative Auditor General’s Audit

Website: UTA Credit Rating

Article: UTA Salaries

Article: UTA Bonuses

Editorial: Remove UTA Sales Tax Cap