Fuel for Thought
April 6, 2009 2:00 PM
A few weeks ago I asked city staff to go out for fuel bids for 2010. I didn't expect to decide to lock in, but I wanted to see where the market was at. As it turned out we got surprisingly strong bids, so I made a decision to lock in. The result is that the city will save about $2.6 million on fuel in 2010 as compared to what we're spending in 2009.
About $1.8 million of that savings will go to the Metro bus system, and so some have asked how that impacts the need for the fare increase that went into effect this week.
Of course, locking in on lower fuel prices next year is good on two fronts. It will allow us to plan better because our fuel budget won't be a wild card. And it will also make it more likely that I can make good on my determination not to raise fares or cut service next year.
But the good news on the fuel contract doesn't lessen the need for the fare increase now. For one thing, the new fuel contract doesn't kick in until next year, so it doesn't help with 2009 prices, which were locked in at a higher level. If we were to roll back the fare increase, we'd still be looking at a budget deficit in Metro of about $700,000.
For another thing, the higher fares were needed to start to make up ground that was lost during the nine years when cash fares weren't increased. General inflation since 2000 has run at about 30% - roughly the increase from $1.50 to $2.00. And our fuel costs during that period went up 230%!
Finally, while it's too early to know exactly how the 2010 fuel savings will be applied, we know a few things. First, we have to share as much as 20% of those savings with entities that contract for our service like the UW, the City of Middleton and the Town of Madison. Then, there will be general inflation in salaries, benefits and supplies and services at Metro. Altogether, these things will eat up pretty much all of the $1.8 million right there.
So, locking into fuel prices for 2010 looks like it was the right thing to do. Combined with the fare increases, this will contribute strongly to the long-term stability of Metro, but it won't change the need for the recent fare increase.