LEGISLATIVE ANALYST MEMORANDUM

To: Members of the Board of Supervisors

From: Andrew Murray, Office of the Legislative Analyst

Date: June 1, 2005

Re: Employee Suggestion - Suspend Issuance of MUNI Passes to Employees and Their Family Members (OLA#: 038-05H)

Employee Suggestion

As part of the 2005 Board of Supervisors Employee Suggestion Program, a City employee suggested that MUNI stop providing free transportation passes to employees’ spouses and dependents.

Executive Summary

MUNI currently provides free passes to the spouses and dependents of employees in four classifications: Transit Supervisor, Transit Manager I, Transit Manager II, and Transit Operator. As not all spouses and dependents that receive these passes use them, or would purchase them at full price if not received for free, it is difficult to determine MUNI’s foregone fare revenue due to this practice. For the sake of discussion, the Office of the Legislative Analyst (OLA) estimates roughly that MUNI foregoes approximately $129,000 annually in revenues as a result of this practice. Although this practice likely benefits MUNI through improved employee relations, it is not clear how this benefit compares to the cost of providing it.

The labor agreement with the union representing the Transit Supervisor, Transit Manager I, and Transit Manager II classifications (Transit Workers Union Local 250A) is currently open for negotiation, and the agreement with the union representing the Transit Operators (Transit Workers Union Local 200) will be open for re-negotiation in 2008. The OLA recommends that the Board of Supervisors direct the City’s labor negotiating team and MUNI to consider the value of providing this benefit relative to its cost.

All MUNI employees are entitled to ride the system for free. For the sake of discussion, the OLA estimates roughly that this benefit results in foregone fare revenues of approximately $200,000 per year. The OLA recommends that the Board of Supervisors direct MUNI to consider the value of providing this benefit relative to its costs.

Analysis

Number of Passes Issued to Spouses and Dependents, and Face Value of Benefit

The Annual Salary Ordinance (ASO) for FY 2004-2005 indicates that there are 2,366 FTE in the four classifications listed above. Unfortunately MUNI was unable to provide information on the total number of spouses and dependents of these employees, who receive free passes. Therefore, it is not possible to estimate the face value of this benefit.

Estimated Fare Revenue Foregone

MUNI foregoes between $0 and the face value of the benefit in fare revenue per year as a result of this practice. Not all of the spouses and dependents that receive free passes use them or would be likely to purchase passes if they no longer received them for free. To estimate the fare revenue that MUNI foregoes by providing free passes, it seems reasonable to assume that San Francisco resident spouses and dependents would be those most likely to pay for MUNI services. Table 1, below, displays the number of San Francisco resident spouses and dependents that receive free passes.

The 2005 City Survey, conducted by the Controller, asked San Franciscans how often they rode MUNI. The responses are contained in Table 2, below.

Data on San Francisco residence of spouses and dependents receiving free passes and typical MUNI ridership by San Franciscans are combined in Table 3, which illustrates that an estimated $128,665 per year in fare revenue is foregone as a result of providing the free pass benefit to the spouses and dependents of MUNI employees that are San Francisco residents, presumably those most likely to pay for MUNI service in the absence of free passes. Although rough, this estimate is useful for illustrative purposes.

Eliminating Passes for All MUNI Employees

The discussion above addresses the face value and the estimated fares foregone by providing free passes to spouses and dependents of MUNI employees. Subsequent to the employee suggestion that passes be eliminated for spouses and dependents, a conversation began regarding savings if the free ridership benefit that applies to all MUNI employees were eliminated. Using the same assumptions and methodology applied above, it is possible to estimate the face value of the benefit and the fare revenue foregone. Per the ASO, there are 4,331 total MUNI employees. The face value of free ridership is $2,338,740 per year (4,331 employees * $45 per month * 12 months). Approximately 1,050 of these employees reside in San Francisco. Assuming that only San Francisco resident MUNI employees would ride MUNI in the absence of free passes, and that they would exhibit ridership patterns consistent with the findings of the City Survey, the estimated fare revenue foregone is approximately $200,000 per year, as calculated in Table 4 below.

Recommendation

The labor agreement with the Transit Supervisor, Transit Manager I, and Transit Manager II classifications is currently open for negotiation, and the agreement with the Transit Operators will be open for re-negotiation in 2008. The OLA recommends that the Board of Supervisors direct the City’s labor negotiating team and MUNI to consider the value of providing free passes to spouses and dependents of workers in these classifications relative to its cost.

All MUNI employees are entitled to ride the system for free. The OLA estimates that this benefit results in foregone fare revenue of between $0 and $2,338,740 per year, and recommends that the Board of Supervisors direct MUNI to consider the value of providing this benefit relative to its costs.