September 21, 2016 Updated: September 22, 2016 3:42pm

Building on what they consider the success of a redesigned bus system, Metro transit officials on Thursday approved a $1 billion 2017 fiscal year budget that expects flat or decreasing sales tax revenues, while assuming ridership will increase.

The annual budget, mostly for routine operations, passed muster with the Metropolitan Transit Authority board, following a final public hearing Wednesday.

The 2017 budget is $72 million less than the 2016, though Metro’s operations will cost nearly $10 million more. With the end of light rail construction for the foreseeable future, the transit agency’s capital budget declined by $82 million. There are new park and ride lots and bus shelter improvements planned for the upcoming year.

One reason for the decline is Metro officials are predicting flat sales tax collections, which also affect the money available for Metro’s general mobility program. The program is based on cities receiving a quarter of Metro’s sales tax collections. Forecasts show Metro returning to higher sales tax collections in 2019.

Even with the anticipated decline, board members worried it was not conservative enough.

“I think we need to constantly evaluate,” said Cindy Siegel, chairwoman of the board’s finance committee. She asked Metro staff to “have a backup plan” in case the declines are greater than predicted.

Paul Magaziner, a frequent transit agency critic, feared Metro was being too rosy even with its prediction of slight declines.

“Metro doesn’t exist in a vacuum, the city of Houston is in trouble,” Magaziner said, citing both the city’s economic prospects and city government’s need to attack its own financial woes related to pension debt.

Though officials expect sales taxes to stagnate, the budget reflects an expected increase in fare revenue. In addition to factoring in vanpool revenue – Metro currently outsources vanpool coordination, but is expected to bring the service back into its fiscal fold – the amount collected from rider fares budget writers used is a 3 percent annual increase. Officials said the figure was reasonable, based on expected growth from Metro’s revised bus system, which began 13 months ago.

Early indicators of fare revenue under the new system, however, contradict the expectation. Since October, when fiscal 2016 began, through August, Metro’s fare revenues are $4.4 million, or 6.9 percent, below estimates. Compared to October 2014 to August 2015, the agency has collected $1.6 million less from riders.

A number of factors, however, muddle the comparison. Metro changed its policy on transfers, allowing for a three-hour trip in any direction, costing the agency $2.7 million.

“It is clearly affecting fare revenue, but it is good for the public,” board member Jim Robinson said.

Metro also tested the use of paper transfers for cash-paying customers, and attributed some fare losses to bad weather during April, May and June that kept workers at home. A free week of rides to kick off the new bus system also led to decline in August 2015, which made August 2016 fare revenues higher by comparison.

Officials, meanwhile, remain supportive of the new bus system, which they laud from improving access to jobs and residences. Weekend service especially has increased since the new bus system was launched Aug. 16, 2015.

In the first 10 months of the fiscal year, October to August, boardings on Metro – every single time someone boards a train or bus – are up 5.3 percent compared to the same period in fiscal 2015. The largest gain, 24.5 percent, has been on Metro’s light rail system as the bus network focused on making core connections to the rail from major routes.

The increase in the first year of the new bus system, however, trails the estimate officials gave when they approved the new bus system. In 2015, officials based the changes on a 20 percent increase in boardings after two years.

“We’re not there yet,” Siegel said, noting her concerns about ridership.

Magaziner, who opposed the changes when they were proposed, said the “new bus network has failed,” noting what he suspects are thousands of lost riders as a result of system changes.

A number of factors can affect ridership, including the overall local economy and ease of use for the transit system. A major factor, officials agree, is Houston’s lackluster system of sidewalks, and the sorry state of some bus stops. Both of those are a high priority, Metro officials said, but complicated.

“We cannot be everything to all people,” Siegel said. “We are not going to solve all the issues about accessibility overnight, or the bus shelters overnight.”

Declining park and ride use is also affecting ridership, officials said. The commuter bus system is affected by the region’s overall economy, and job contraction in the oil and gas industry can significantly reduce commuter bus use.

August park and ride use improved, according to Metro’s ridership numbers, but for the fiscal year commuter bus trips are down 1.6 percent compared to 2015.

There are signs of hope for commuter bus use in the region, however. The Woodlands Express, which operates from Montgomery County and is not operated by Metro, had its highest ridership in August since October 2014.

Chris LaRue, transit program manager for The Woodlands Township, attributed the increase, anecdotally, to increased interest in travel to the Texas Medical Center and surrounding spots.

“I get a lot of calls from (medical school) students and college students,” LaRue said. “I get a lot of calls about the Texas Medical Center.”

With parking such a premium in the medical complex, many employers incentivize transit use by subsidizing bus trips, LaRue said.

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