If Ridership Is Up, Why Service Cuts?

My friend Nick was wondering, if ridership is way up, why are some places cutting routes and service. Wouldn't the increased ridership pay for it? In theory I guess it should but there are a number of factors that are specific to the economy and transit funding which need to be addressed.

Part of the problem is that most transit agencies are primarily funded through sales taxes. The problem with this is that when the economy is down and people need to take transit more, transit suffers more because revenue comes down due to that already existing gloomy market. Also, ridership only pays a fairly small amount for most transit system's budget. An article in the Boulder Daily Camera covers this quite well:

But, therein lies the terrible Transit Paradox. It turns out the same factors that are driving a spike in demand for transit services are having an unfortunate negative impact on RTD finances.

Fuel costs, roughly 9 percent of the RTD expenditure budget, have risen 47 percent over last year's rates. At the same time, sales and use tax income, which accounts for approximately 66 percent of RTD operations revenue, is coming in at about 5 percent below projections. The cumulative impact of these two economic factors, alone, is expected to be a hit of about $23 million to RTD's total operations budget.

Adding insult to injury, the fares transit riders pay only cover a portion of the cost of each bus or train trip. Thus, the unprecedented 9 percent increase in transit ridership that RTD is welcoming into the system is actually creating a substantial additional financial burden.

What needs to happen is a better way to fund projects and operations than the sales tax. While it seems the most common form of funding for transit, it often creates these problems with the shrink swell of funds and service. Tri-Met funds transit through a payroll tax. I'm not sure if that is much better but its something different. And then there are development fees for capital expansion and perhaps carbon taxes for operations. Another idea thats used is parcel taxes on estimated value. Anyone have ideas on this?

So also there was an article in the Rocky Mountain News that tests the water for another increase, the idea of just 4 years after Fastrax was passed, having to go after more money to pay for the program. This is somewhat of a problem from an advocates standpoint. It gives opponents a lot of fodder, even though none of them really complains when freeway projects go over, which they almost always do. See Katy Freeway in Houston and I-485 in Charlotte.

Even though the Denver Projects (T-Rex, SW Corridor) have been on time and on budget, its hard to predict the amazing increases in materials that have happened since the initial project budget was created in 2004. It's also hard to predict what the costs are going to be in the future when the lines hadn't even been engineered yet. I think that is kind of the problem with engineering projects. There is generally a standard and other projects, but all projects have different challenges and difficulties. While I think cost/benefit analysis is good, people getting super upset if a big project doesn't meet its exact budget is a little bit out of order. But unless its a project like the big dig which was a ridiculous overrun, people see the benefit in freeway projects, but chide transit projects...why? Most of the time they have no alternative plan, they just don't like transit for some reason.