April 26--CHAPEL HILL -- The Town Council has given transit officials the OK to look further into a proposal to sell advertising on the outside of Chapel Hill Transit buses.
Council members acknowledged Monday during a business meeting that the town is facing tough times next fiscal year and must look for alternative sources of revenue to avoid a tax increase or drastic transit service reductions.
"If we have to cut funding, there are some really needy people who would lose services," Councilman Ed Harrison warned.
In a memo to Town Manager Roger Stancil, Transit Director Stephen Spade said limited sales of exterior ads could generate about $200,000 a year, but could net the town as much as $450,000 once a fully operational program has been established.
The town considered exterior advertising on buses in 1998, 2001 and 2005 but decided against using them for various reasons, including concern that the ads would be aesthetically unpleasing.
Former Mayor Rosemary Waldorf simply declared that the ads are "ugly" and even voted against exploring the idea during council discussions in 2001.
But in 2001 the town wasn't faced with a $4.6 million budget gap in a weak economy that is still struggling to rebound from one of the worst recessions in recent history.
"The economic situation of the last few years, and more so this year, makes it worth our due diligence to reopen this conversation," said Councilman Jim Ward, who chairs the Transit Partners Committee.
The committee comprises the representatives from agencies that fund the town's transit services, including the town, Carrboro and UNC.
The system's budget for fiscal year 2010-11 totals about $17.4 million, of which about $3.3 million comes from town coffers. UNC contracts bring in about $6 million, state assistance about $3.3 million, federal assistance about $2.2 million and the Carrboro contract about $1 million.
The transit system initiated fare-free services in 2001, eliminating all fare box revenue and pass sale revenue previously collected. By doing so, the system gave up about $1.7 million in revenue in exchange for increasing ridership on the bus system.
In an interview Tuesday, Spade said a portion of the revenue given up was money UNC prepaid for its employees to ride the bus.
There have been discussions about returning to a pay transit system, but such talks have ended with everyone agreeing that returning to a pay system wouldn't be economically sound. As ridership on the bus system goes up, it receives correspondingly increased state and federal subsidies. Fare-free buses have generated more ridership and, thus, more subsidy money than was coming in through pay-to-ride services.
"It was a good decision to make that move [to a fare-free system], but it doesn't appear to be a good move going back," Spade said.
The renewed talks about bus advertising are growing out of discussions among the partners as they look for ways to diversify revenues to help pay for transit services without raising property taxes or dipping into the transit system's saving account.
Spade said even without adding services, the transit budget grows by 6 percent each year. In good times, he said the funding agencies have sometimes been able to cover the increase.
The next step in the process involves transit officials developing a business plan showing how it would market and sell ads. Spade said he will bring the business model back to council by mid-June.
If the council decides to create a transit advertising program, staffers are recommending that it include the sale of exterior placard signs and a limited number of "wrapped buses" in which a bus is completely covered by an ad.
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