A hearing about Baltimore’s free Charm City Circulator – and possibly charging passengers for it – is scheduled tomorrow before the City Council’s Taxation, Finance and Economic Development Committee.

The contract with the Circulator’s operator, Veolia/Transdev, expires in January, and the Council is evaluating the future of the popular, but financially struggling, service run by the city Department of Transportation.

The Circulator system consists of four downtown-based bus routes running from Harbor East to Hollins Market (Orange Route), from City Hall to the Johns Hopkins East Baltimore campus (Green Route), from Ostend Street in Federal Hill to Penn Station (Purple Route), and from the Inner Harbor to Fort McHenry (Banner Route). The Circulator also runs three water-based shuttle routes, called the Harbor Connector.

Late last year, the city acknowledged the Circulator’s long-rumored but previously undisclosed financial problems – the service was more than $11 million in the red and its future was uncertain.

Council President Bernard C. “Jack” Young called tomorrow’s hearing to determine whether charging a $1 fare or other operational changes would be necessary to sustain the service.

Representatives from the departments of transportation and finance were asked to report on the Circulator’s costs and ridership as well as whether the revenue sources (mostly city parking garage taxes) have proven to be sufficient to keep running the service.

Started in 2010, the Circulator has served 14 million passengers, currently about 4 million per year.

Money Problems

The reasons for the Circulator’s financial problems are myriad.

Its primary source of funding, city garage parking taxes, were sufficient  according to initial projections, but the program had unforeseen expenses (accelerated payments and additional bus purchases, among others). Over the same period, the Circulator’s anticipated advertising revenues fell far below forecasts, amounting to only $28,000 total through FY 2015.

A 65-page report from the Bureau of the Budget and Management Research released in November said the Circulator also suffered from bookkeeping irregularities.

The report said gaps in financial reporting made a basic understanding of expenses hard to discern. “Accurate financial reporting is key to providing a clear picture of the service – and the problems with reporting. . . present a distressing picture.”

Concern about the Circulator’s bookkeeping deepened when Barry Robinson, a division chief who ran the Circulator, was indicted on two counts of bribery and one count of money laundering.

Last month, Robinson pleaded guilty to charges that he tried to sell warehoused bus shelters to fund his retirement. He also took a $20,000 cash bribe to cancel an advertiser’s debt for Circulator advertising.

Report Gives Recommendations

The BBMR report analyzed four possible scenarios for the Circulator’s future, including various combinations of parking tax increases, route reductions/closures, and charging a fare.

It recommends a 2% parking tax increase (from 20% to 22%) and eliminating two buses from the Green Route, and one bus each from the Orange and Purple routes. This would increase headway to about 20 minutes for the Purple Route, 15 for the Orange Route, and 20 for the Green Route. (The current optimal headway is about 10 minutes.)

The four buses pulled from the other routes would serve the expanded Purple Route, the route with the highest ridership and the route most well connected to other modes of transportation. The Purple Route is slated to expand north to 33rd Street (and south to Wells Street in South Baltimore) in 2015.

Additionally, the report  recommended that the Banner Route, which has the lowest ridership and was funded to run only through the Sailabration, be discontinued.

Charging a Fare is Costly

Charging a fare seems like an obvious way to reduce the operating deficit and make the service sustainable. But collecting a fare, at least for the first few years, would require over $3 million in start-up costs and $800,000 or more a year to maintain, according to the BBMR.

Fare collection would also likely increase headway, potentially to the point where the wait time would be comparable to the MTA’s regular city bus service.

What’s more, a fare is predicted to lower ridership. A $1.00 fare per rider is expected to decrease ridership by 46%, increasing the cost of transporting each passenger because the buses aren’t full.

Charging a fare would also make the Circulator ineligible for certain grant funding.

Brand Damage

In February 2012, a group of city consultants released a “Fare Survey Report” that advised the city not to charge a fare for some of the same reasons, but added another: political backlash.

It warned against an “outcry” among business leaders who had supported the initial parking tax increases. (In 2008, the parking tax was raised to 16%, with four percentage points of the total parking tax revenues identified for Circulator. The parking tax was increased to 20% in 2010 to help balance the service’s FY 2011 budget.)

Another reason not to charge a fare, according to the report, was the damage it could cause to the Charm City Circulator brand, whose tagline is “Fast, Friendly, Free.” A rebranding and public relations campaign would become necessary if a fare were imposed, the report stated.