Budget Cutback Management You are the budget director of a transit department th

Question

Budget Cutback Management

You are the budget director of a transit department that has a budget of $9 million and serves on average daily 937,500 “transit dependent” riders (people who cannot get anywhere without the transit department busses) and 1,562,500 choice riders (people who choose to ride buses from time to time, but have alternatives to buses). The city wants to cut the department’s budget by 5%; their main reason is that the system can generate their own revenue. They currently generate $1.6 million in fare revenues. The transit system has recently conducted a study in the fare structures which found that any fare increases (or complex fare structures) may decrease the number of choice riders significantly. The city does not charge any fees for ride and park parking lots to boost the ridership (mainly choice riders). The city also does not currently allow any advertisements on busses/stations and vending options on transit stations. What part of the budget would you first examine? Why? After that examination, what would you cut? Why? Create alternatives so the department has choices

Explanation / Answer

Transit Dependent riders will have no choice but to ride the buses even if buses' fare increases. So I would start charging fees for ride and park parking lots which now we are providing free of cost to attract choice riders so here the department can cut costs. Moreover we will also start adveritising on buses/stations and vending option on transit stations to generate advertising revenues which would help compensate for the 5% contraction of budget. Moreover we will increase the bus fares only marginally so that it does not become less attractive because we will be compensating for the contracted budget via advertising revenues.

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