Transit’s new ‘Better Bus’ plan already looks over budget

You’re reading Charlotte in Motion, a biweekly newsletter that examines how the Charlotte region is dealing with bumper-to-bumper traffic, rising housing costs, crowded schools and other challenges that come with the ultimate Charlotte story of growth. Charlotte in Motion is produced in partnership between The Charlotte Ledger and WFAE.

by Steve Harrison/WFAE

The Charlotte Area Transit System pledged a 50% increase in bus service. It also promised 18 new “microtransit” zones where people could travel door-to-door with on-demand rides, like using Uber. The city and CATS also said the new money would pay for new benches and shelters at 2,000 bus stops across Mecklenburg County.

But six months after Mecklenburg voters approved the tax, it’s doubtful there will be enough dedicated bus money to fully fund what’s called “Better Bus,” according to a WFAE analysis.

To fulfill bus campaign pledges, the new Metropolitan Public Transportation Authority may have to spend some of the money set aside for rail transit. That would make it harder to fulfill different campaign promises to build billions of dollars of new light rail, streetcar and commuter rail.

And it could lead to a repeat of the 1998 and 2007 transit plans, which failed to deliver on projects like the Red Line commuter train because CATS overpromised revenues and underestimated costs.

WFAE interviewed CATS interim chief executive Brent Cagle for 45 minutes about the budget and Better Bus program. He said he believes the new transit authority can fulfill its promises, though he did not dispute WFAE’s analysis that expenses could soon exceed revenues. 

“Costs are brutal, no doubt about it,” Cagle said. “This is a huge program for Better Bus and the rail program. And it’s going to take not just this year, but it will take every year to have discipline to watch [our costs].”

He said he believes the transit system’s commitment to modernizing its bus fleet and train cars over the past three years will pay off in lower expenses going forward. And he said there are other ways to raise new revenues apart from the sales tax, such as reducing fare evasion and getting more existing passengers to pay for bus and train tickets.

There are also advertising possibilities, he said.

“Speculative revenues are not a great way to balance your budget,” he said. “But we have started to look at it on the rail side, but maybe on the bus side as well. What are additional revenues that CATS hasn’t pursued in the past that maybe we need to pursue in the future?”

Starting in July, the general sales tax in Mecklenburg County will increase from 7.25% to 8.25%. The extra penny will generate roughly $340M in the upcoming fiscal year, with 40% sent to the city of Charlotte and Mecklenburg towns for roads. The rest of the money — 60% — will go to the new MPTA, which takes over transit in early 2027.

One-third of that new transit money must be spent on the bus system, according to state law. The rest is earmarked for trains, though the MPTA could spend that money on buses, too. (The authority is required to build the Red Line before any other train.) 

Out of that $340M, a total of $66M is projected to be set aside for buses in the first year of the new sales tax that starts in July.

Here is the plan:

During the campaign, the city made two promises about bus service. 

The first was that it would increase total service by 50%. The city also said it would ensure that buses on the 15 busiest routes would arrive every 15 minutes, and no route would have wait times longer than 30 minutes. There would also be more frequent express bus service for commuters.

Increasing bus service hours by 50% alone would likely cost at least $60M annually because it costs CATS about $200 an hour to operate a bus. But CATS said it will only be spending $48M to achieve all its goals of more frequent service when the program is fully complete in 2031. Let’s accept that lower estimate.

Total cost in 2027 dollars for all of Better Bus: $48M a year

The second-most expensive part of “Better Bus” is creating 18 new microtransit zones across the county. CATS launched a microtransit pilot program in north Mecklenburg 14 months ago. The annual cost was $2.3M.

Because the new zones will all be smaller than the north Mecklenburg zone, Cagle said he expects the cost of each zone to be $1M or less. Two new zones will open late in the upcoming fiscal year, at $2M total for part of the fiscal year.

Total annual cost in 2027 dollars for 18 new zones: $15M-$18M

The budget calls for CATS and the MPTA to improve 2,000 bus stops with new shelters and benches across Mecklenburg County. It’s a key part of a campaign pledge to ensure bus passengers travel with “dignity.”

CATS plans to improve 100 stops in the upcoming year.

While the bus stop improvement program will not continue indefinitely, it appears as if it will be an ongoing annual expense for at least 10 years, and probably more. (There will be some ongoing maintenance, too.)

The five-year capital budget for the bus stops is $40M, and CATS has budgeted $4.6M in operating costs for the upcoming year to install them.

Total cost: $12.5M a year, in 2027 dollars

CATS has budgeted $106M over the next four years to buy the new buses needed for Better Bus. It has also budgeted $150M over five years to replace buses in the existing fleet. That expense will presumably be paid for from existing transit revenues that were in place before the tax was approved.

This annual cost for Better Bus purchases will drop significantly once all the new buses come online, but it will become an ongoing expense again as those new buses need to be replaced, starting in 2035.

A silver lining for the MPTA is that it can pay for those buses with surpluses built up in the first few years of the tax, before the operational expenses are fully realized.

Total cost: $27M a year, from 2027 to 2030

If you set the bus purchases aside, the MPTA will have to spend as much as $76M in present-day operating dollars and recurring expenses to fulfill the expanded bus service, microtransit and bus stop improvements. But remember, present-day revenue is expected to be just $66M.

And there are other financial pressures.

CATS has budgeted $10M each year for additional security in the upcoming year to bolster public confidence after the murder of Iryna Zarutska on the light rail. It has budgeted $12M annually for “organizational resiliency.” That includes hiring new staff for the authority, which won’t be able to rely on city officials for back-office functions like payroll and human resources.

The PAVE Act allows for the city of Charlotte to reduce its direct transit subsidy, which will be a loss of $7M a year.

CATS projects advertising revenue to decline by $3M in the upcoming year. State and federal grants are expected to decline by $5M.

And transit ridership is declining compared to the previous year, and is still far below pre-pandemic levels. That makes an increase in fare revenue unlikely.

All those extra expenses/losses — more than $35M — will affect the transit system as a whole. Better Bus will have to absorb a portion of them.

How can that math work?

The long-term transit plan looks more feasible (on paper, at least) because sales tax revenue grows each year. The current plan calls for the tax to grow at an annual rate of 4%. So if there is $66M for buses in the upcoming year, there would be $68.6M in 2028 and $71.5M in 2029. 

But while tax revenues will increase because of inflation and population growth, costs are also going to go up.

Some of that will be because of inflation and things getting old and breaking. Some is due to unionized bus drivers getting a more lucrative contract, which they did in 2023. (CATS’ bus management company is currently negotiating a new contract for drivers.) 

According to the Federal Transit Administration, CATS reported in fiscal year 2019 that it cost $120 to operate a bus for one hour. In fiscal year 2024, that had risen to just under $200 an hour — a whopping 66% increase in five years.

The most recent CATS budget ignores this history. It calls for a five-year increase of just 8% for all existing transit services, or 1.7% a year.

Cagle said some of those steep post-Covid increases were because of CATS spending heavily on deferred maintenance. He said the transit system’s rail cars and buses are in better condition now. He expects annual costs to return to what he called a more normal growth rate of between 2% and 4%.

But even 2% to 4% is not normal, and it's not what the transit system has budgeted. In the five years before 2019, operating expenses for CATS buses still increased by 25%, an annualized growth rate of close to 5%.

The difference between costs growing by 1.7% a year and 5% a year is significant. It siphons off upwards of $10M a year — money that can’t be used to provide new service.

The first two or three years of transit expansion will be easy, as there is plenty of money to handle a slow ramp-up in service. Cagle said the new transit authority could have to make tough decisions later this decade, however, should expenses outstrip revenues.

If there is a problem, the MPTA could fully fund Better Bus by dipping into the rail portion of transit revenues, Cagle said. But he said that has impacts far into the future, by cutting into money for rail in the 2030s.

“It’s like a balloon — if you push it on one side, it pops out on the other,” he said.

The other option, he said, is not to expand the bus system as much. Perhaps there are routes where ridership will never justify having service every 30 minutes or every 15 minutes, he said.

Greg Asciutto is president of the community group Charlotte East, which has been lobbying CATS and the city to try to extend the planned Silver Line light rail from the planned terminus at Bojangles Coliseum to Sharon Amity. 

He’s concerned about the prospect of using rail money to cover bus expenses. 

“From what I have watched, I do feel there is an overwhelming good faith for the new [MPTA] board to do right and to fulfill promises,” he said. “But what I also think that’s become readily apparent is that politicians made promises that that board did not make. And the funding gaps will be tighter than anticipated. We’re not surprised by the conversations that they are having now.”

Steve Harrison is a reporter with WFAE, Charlotte’s NPR news source. Reach him at [email protected].