San Francisco transportation officials are looking at revamping its fare system as they begin to discuss the upcoming two-year budget.

The discussion Tuesday at a special workshop meeting of the Municipal Transportation Agency Board of Directors led to talks of possibly increasing cash fares and leaving Clipper fares alone and giving a smaller discount on fares to seniors, youth and disabled riders as possible new revenue sources.

The Municipal Transportation Agency’s preliminary operating budget for the 2016-2017 and 2017-2018 fiscal years will top $1 billion, but will carry deficits of $13.3 million in 2017 and $14.3 million in 2018, said SFMTA Director of Transportation Ed Reiskin:

“Our expenditures grow faster than our revenues, which leaves us with modest but real shortfalls that we will need to address.”

Some of those expenditures included in the baseline preliminary budget are higher pension costs,the hiring of more Muni operators during the last year and other commitments and contracts such as a 3.25 percent wage increase for operators previously negotiated in 2014.

On the revenue side, the transit agency included its automatic fare indexing, which includes increases of fares, fines and fees based on the Bay Area Labor Consumer Price Index. A Muni-only Fast Pass would jump from $70 to $73 in the 2016-2017 fiscal year and then to $75 the following year.

The transit agency will also have funds from the 2014 voter-approved Proposition B, which increases funding for Muni based on population growth. Those funds though will only be used for capital improvements, said Reiskin.

Cash v. Clipper

Reiskin said that the transit agency has about 50 percent of riders still paying cash on Muni as opposed to using Clipper:

“One way other transit agencies in this region, in the country and the world have facilitated the shift by providing a monetary incentive.”

He also suggested to use some of the transit agency reserve funds for some capital projects that have difficulty in finding funding for. The board’s policy is to have a reserve fund of a minimum of 10 percent of the annual operating budget.

For the upcoming budget, it would require the transit agency to have $100 million in reserves. Reiskin said the reserve fund is above 20 percent of the annual budget.

The transit agency dipped into its reserve funds during the last recession. SFMTA board Director Malcolm Heinickie said that was an exception because it kept Muni going.

Heinickie said he would like to keep the reserve funds above 10 percent of the annual budget in case of another economic downturn. He said he would consider using the funds if there was a one-time expense that would save money over time or increase efficiency, and keep reserve funds above 15 percent of the annual budget:

“That’s really got to be the criteria. It’s not something we want. It’s something that really is a valuable investment of our money.”

Heinickie also supported the idea of raising cash fares as a possible new revenue source:

“I think not only will it raise money, but it will serve an overall benefit of getting off cash fares, which have all sorts of problems. I’ll just name one. They slow the bus down. It’s just that simple.”

No figure was discussed on how much cash fares could possibly increase.

On the topic of increasing senior/disabled and youth fares, Reiskin said since the transit agency has now a low- and moderate income program for free Muni, and that board members should look into scaling back the fare discount closer to 50 percent, which is the federal mandate for senior fares. The discount from the SFMTA is closer to 66 percent.

The SFMTA board will get two more updates on the budget in February and March and will host two town hall meetings on March 9 and 23. The board will have two opportunities in April to adopt the budget.

Once adopted, the budget will go before the Board of Supervisors for approval in May. The new fiscal year begins on July 1.