CO: RTD to consider service reductions, job cuts in face of $215 million deficit

Financial realities hit hard at the Regional Transportation District’s headquarters Tuesday afternoon as managers told elected directors they must correct a $215 million deficit by 2027 in an agency budget that has been out of balance for years.

That means bus and train services could be reduced or potentially eliminated for metro Denver residents across RTD’s 2,345-square-mile service area that spans eight counties. The extent of service cuts wasn’t immediately clear.

RTD’s directors bristled with frustration, demanding an explanation — and initially refused to enter into a closed executive session, where they received legal advice about possible job cuts.

RTD general manager and chief executive Debra Johnson declined to comment on possible service reductions.

“That would be premature,” she said.

The prospect of transit reductions hit at a difficult time for RTD as ridership lags and state lawmakers, who created the agency in 1969 to develop, run and maintain a mass transportation system, draft legislation to overhaul the agency’s governance by replacing some of the 15 elected directors with appointees.

Lawmakers for years have been demanding more from RTD as a key part of state efforts to reconfigure Front Range cities by concentrating housing at bus and train hubs — “transit-oriented development” touted as a solution to vehicle air pollution that worsens climate warming, traffic congestion and housing affordability.

RTD chief financial officer Kelly Mackey laid out the overspending in recent years, exceeding $200 million a year, after hearing from credit ratings agencies.

“These are very severe deficits. It is a viability issue,” Mackey said, referring to the ability of the agency to keep operating.

Ratings agency officials have told RTD they must balance the budget by 2027 “to avoid a downgrading,” she said. S&P Global currently rates RTD at AA+ with a stable outlook. However, ratings officials wrote that “we could lower the rating if sales tax revenue performance were to materially weaken or if expenses were to remain elevated.”

Johnson has begun exploring a reorganization of agency operations to improve efficiency.

As recently as January, RTD communications staffers were announcing that “credit agencies affirm RTD financial strength with stable outlooks.”

Public transit agencies rely on good credit ratings to lower costs when financing projects, such as replacing buses, fixing tracks and expanding routes, according to the American Public Transportation Association, a Washington, D.C.-based industry group. Financial stability can attract investors and help transit agencies secure loans with lower interest rates, saving taxpayer money.

For several months, RTD officials — who recently approved a record $1.5 billion budget — have known that the revenues the agency receives from sales taxes and fares haven’t been sufficient to cover growing expenses. But the orders to immediately explore cuts, while trying to preserve “core services” wherever possible, piqued fury.

“Why are we just hearing this now? Why wasn’t there a discussion three years ago? … What efforts were taken to increase revenue and correct for that structural deficit over the last five years?” Director Chris Nicholson asked Johnson.

She said she proposed several years ago that directors consider a 1% state property tax increase as a step that other agencies have taken to sustain public transit.

“Why didn’t the agency put through a plan to close the deficit in that time?” Nicholson asked.

“There were various options that were discussed,” Johnson said.

RTD officials a couple of years ago pronounced the agency financially healthy in a report to state lawmakers.

How did the RTD get into this mess? “There’s no single cause,” Mackey told directors, explaining that spending for several years has exceeded revenue.

Director Lynn Guissinger, who has served on the RTD board since January 2019, offered directors her analysis that, after the pandemic, “we really were trying to bring back ridership.” That led to spending on programs that proved popular, such as Access-on-Demand for riders with disabilities, reduced-fare programs during high-pollution summer months to promote transit as a cleaner alternative to driving, and free fares for people under 20 to increase ridership.

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