As we do each year, Metra began the 2017 budget process by looking for ways to reduce costs and maximize efficiencies that can have a positive impact on our bottom line. This year, we found $5.3 million in cuts to the current operating budget, bringing the total efficiencies achieved by Metra in the past seven years to $24.8 million.
In 2017, we also plan to benefit from previously negotiated diesel fuel prices locked in in 2016, with a projected savings of $9 million. Other factors impacting the operating budget are the projected $11.6 million increase in employee health care costs in 2017, combined with an average 3 percent increase in employee wages. In 2017, we also expect a $4.7 million increase in training and mechanical costs, a $2.6 million increase in PTC operating costs, a $2.8 million increase in materials and services costs and a $1.2 million increase for the Safety and Police Departments. These changes will increase operating costs in 2017 by $21.4 million to $781.2 million – an increase of 2.8 percent over 2016.
Fares only cover about half of the operating budget, with the rest primarily coming from the RTA sales tax collected in the six-county region (partially matched by state). The $21.4 million in operating cost increases will be offset by an additional $21.8 million Metra is expected to receive from the RTA sales tax in 2017.
Last year, we said that without a new state bond program, we may need to raise fares even higher than we had projected to fund our capital budget. By finding budget efficiencies and carefully prioritizing our capital needs, we are proposing a 5.8 percent increase in fare revenue for 2017 – with 100 percent going toward capital improvements.
In all, we expect to invest $279.5 million in 2017 on capital projects, up from $251.1 million in 2016. Our 2017 Preliminary Capital Budget includes $90.4 million for rolling stock to continue our program to rehabilitate 18 locomotives and 43 railcars annually and a portion of funding to purchase 21 new railcars.
Other major capital investments include: $23 million to continue the multi-year effort to replace aging Union Pacific North Line bridges over 22 streets on the north side of Chicago; $20 million to expand the 49th Street rehabilitation facility and increase by 30 percent the number of railcars Metra can rehab each year; and $30.5 million to continue to install PTC. This is the minimum capital investment. This is the minimum capital investment we need for our system to function reliably.
Even with the increased fare revenue, we’re still far short of our capital needs. In fact, over the next 10 years, we need to spend nearly $1.2 billion annually on capital projects: $550 million annually to maintain our existing system and $600 million annually to return to a state of good repair. That’s $11.7 billion over the next decade. In each of the next four years, we project that we will have less than $300 million annually available to spend on capital projects – about $900 million less than we need to spend each year.
We have consistently said that if we can find ways to avoid higher fares, we will do it. However, we have no other option at this time unless we cut capital spending, reduce service or find even more new sources of revenue. Despite the impact a fare increase will have on our customers, we have a responsibility to provide a safe and well-run system today and for the next generation.
Executive Director/CEO DON ORSENO and the BOARD OF DIRECTORS