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How does Golden Gate Transit survive?

The short answer

The bridge is highly profitable. And, it supports the financially weak bus & ferry services.

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Summary

Golden Gate Transit has three operating divisions:

1. The bridge
2. Bus service
3. Ferry service

The bus & ferry services’ ridership is currently only 42% of the pre-pandemic level (- 58% decline). These services' revenues (contract & fares) cover less than 20% of their expenses.

Meanwhile, the bridge traffic is 82% of the pre-pandemic level (-18% decline). The bridge is highly profitable. Its toll revenues are twice its operating expenses.

The bus & ferry services funding is provided by:

a) Less than 20% self-funding (contracts and fares)
b) Bridge operations about 45%
c) Government about 35%

Overall, the Golden Gate Transit funds nearly 65% of its operations through contracts, fares, and tolls. This percentage of self-funding is far higher than for the 10 largest public transport systems in the US (range 20% to 45%).

The bus & ferry services, even at their lower post-pandemic levels, reduce vehicle traffic by close to - 7%. This is a material reduction with substantial environmental and commute benefits. This is because a small change in traffic volume can have a multiplier effect on commute time (queuing theory).

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Content

Within this essay, I will analyze several topics and trends including:

1. Perspective on public transit
2. GGT public utilization
3. GGT tolls and fares inflation
4. GGT financial trends

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Perspective on public transit

See below a table of the 10 largest US public transit systems and the % of their operations funded by fares and tolls (gathered using the Perplexity AI).

Among the top 10 largest public transit systems funding from tolls and fares range from 20% to 45%. San Francisco Muni comes in near the bottom at 25%.

Keep in mind that public transit is not a business. It is a public service that relies extensively on Government funding at various levels ranging from local to State and Federal.

GGT public utilization

The graph below discloses the ridership for the bus and ferry services and the southbound traffic for the GG Bridge on an indexed basis (2019 = 100). The data is based on GGT fiscal year ending June 30 (instead of the calendar year ending December 31).

Fiscal 2019 (red dashed line) was the last year not affected by the COVID pandemic. The GG Bridge traffic has remained far less affected by the pandemic than the bus and ferry services.

The bus ridership has been on a long-term decline that started way before the pandemic. From 2015 to 2019, the bus ridership already declined by - 14%. From 2019 to 2021, it dropped by another - 79% when it experienced the full impact of the pandemic. It has since partly rebounded. However, in fiscal 2023 its ridership is still - 58% below fiscal 2019 level.

The ferry ridership just about shut down in fiscal 2021, as its ridership declined by - 96% vs fiscal 2019. It has partly rebounded to the same level as the bus ridership. In fiscal 2023, their respective ridership stands at 42% vs fiscal 2019 (- 58% decline).

The bridge traffic was far less impacted by the pandemic. It bottomed out in fiscal 2021 at 67% of the fiscal 2019 level (- 33% decline); and in fiscal 2023 it bounced back to 81.6% of the fiscal 2019 level (- 18.4% decline).

The facet graph below shows the same data on a disaggregated basis so one can observe the trends separately.

By fiscal 2023, the impact of the pandemic appears well-seasoned. We may have reached a new normal whereby the bus and ferry ridership will remain permanently lower than before the pandemic.

Bus & Ferry passengers as a % of Bridge Traffic

The data two main points are:

1. The first one is that the bus & ferry services have been much more affected by the pandemic than the bridge traffic. If they had been affected at the same level, the graph would have shown much straighter lines with bus passengers (green line) holding up at around 8% of bridge traffic; and ferry's figure holding up at around 6%. On a combined level, their passenger count decreased from 15.3% of traffic in fiscal 2015 down to 7.5% in fiscal 2023. This figure had bottomed out to only 2.8% in fiscal 2021.
2. The second point is that even at its new normal post-pandemic level, the bus & ferry services provide material environmental and commute benefits. Removing about - 7% of vehicles from the regular traffic is material. Commute times are extremely sensitive to traffic volume. A small change in traffic volume can have a multiplier effect on commute time (queuing theory). So, the passengers, representing 7.5% of the traffic, who take the bus & ferry service are most beneficial; even if this figure never fully bounces back to 15%.

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GGT tolls and fares inflation

The main point of the graph below is that all the average tolls and fares have risen faster than the local San Francisco MSA inflation rate.

Source: GGT, BLS

Showing the trends separately on the facet graph below.

Source: GGT, BLS

The graphs above raise the following considerations:

How sustainable are such trends of raising tolls and fares faster than the local San Francisco inflation rate?

If the Bay Area wants to support public transit, the mentioned fares and toll increases should slow down and converge toward the San Francisco inflation rate.

However, if fares & tolls are to be raised at a slower rate, additional funds will be needed; where will they come from?

As we speak, the Government at all levels is running unsustainable fiscal deficits.

This brings us to our next topic, the GGT finances.

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GGT Financial trends

GGT's finances consist of two major components.

The first one is the bridge. It is located at a prime location connecting one of the most affluent suburban US counties to San Francisco. The latter is part of the world's leading hi-tech megalopolis. The bridge toll gates are a financial powerhouse supporting the whole GGT system.

The second component consists of the bus & ferry services. They both cover only a small fraction of their operating costs with fares. They need substantial financial support from the bridge and the Government.

Bridge Operations

As mentioned, the bridge operations have very strong financials. Typically, the bridge toll revenues are twice the bridge operating expenses. The resulting operating profit margin of 50% rivals the ones of major hi-tech companies.

If it was not for the bridge supporting the bus & ferry services, the bridge tolls could be half as much, and the bridge operations would break even just fine.

Bus Operations

In 9 of the past 15 fiscal years, the GGT bus service generated more revenues from its contract with the Marin County Transit District (Marin Transit) than from running its own GGT bus service. The GGT bus service operates buses for Marin Transit under the mentioned contract.

As shown in the table and graph below, the GGT bus service % that is self-funded through passengers' fares and the Marin Transit contract has declined from 32.9% in fiscal 2009 to 17.8% in fiscal 2023. It bottomed out in fiscal 2020 at 12.6%.

Ferry operations

The financial performance of the GGT ferry operation is similar to the bus one. The % self-funded from passenger fares peaked at 50.6% in fiscal 2016. This figure was 44.4% in fiscal 2019 before the pandemic. It bottomed out at 2.1% in fiscal 2021, and it partially rebounded to 18.5% in fiscal 2023.

Combination of bus & ferry operations

The table and graph below show how the bus & ferry operations are funded.

The main points from the above data are:

1. The bus & ferry operations level of self-funding through contracts and fares is declining. It was 33.4% in fiscal 2009. It bottomed out at 11.0% in fiscal 2021; and, it partially rebounded to 18.0% in fiscal 2023. Given current trends, it appears unlikely that the level of self-funding will reach over 30% for a very long time.
2. The bridge is the obvious financial powerhouse of this trio (bridge/bus/ferry). And, its operating profits represent the major source of funding for the GGT bus & ferry services. Indeed, over the past 15 years, the bridge has provided more financial support to the bus & ferry services than the Government. This trend is likely to continue. The bridge's operating profits routinely provide 40% to 50% of the funding of the bus & ferry services.
3. The Government (at all levels combined) funds the remaining gap. In fiscal 2023, the Government funded 35.4% of the bus & ferry operations.

When recalling the industry perspective at the beginning of this essay, it raises several considerations:

1. On a stand-alone basis, the bus and ferry services would be under pressure to improve productivity and cut services and costs (more than they have) where such services may be less viable in our new normal post-pandemic world.
2. The bridge is an outstanding financial performer. The bridge provides massive financial support to the other two services.
3. Overall, the GGT appears to be a pretty formidable operation (thanks to the bridge). Its level of self-funding reaching 65% in fiscal 2023 is far higher than for the 10 largest local transit systems in the US (ranging from 20% to 45%).

THE END

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