Houston Strategies

This week we have another excellent analytical guest post from Oscar Slotboom.

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The past 14 months have been very eventful for Metro. In February 2024 the nine-member Metro board welcomed six new members including new Chairwoman Elizabeth Brock, who has operational experience in the private sector. The new leadership appears to be committed to improving Metro's operational and financial performance.

In June Metro suspended work on the University Corridor Bus Rapid Transit (BRT) due to its cost increase to $2.2 billion. This was a very favorable development, both from the financial perspective and for preventing the collateral damage of removing traffic lanes on Richmond and Wheeler. In September Metro paused plans for the Inner Katy BRT to study converting it to HOV lanes. In February Metro unveiled its new MetroNow initiative, which seeks to improve ridership by focusing on safety, cleanliness and reliability.

This is all good news for the management and future of Metro, although the efficacy and cost-effectiveness of MetroNow remains to be seen. Metro's 2024 financial statement shows that Metro continues to make steady progress in improving its financial and ridership performance. (2023 analysis for reference)

Highlights of the 2024 Financial Statement

2024 ridership was 75.9 million boardings, up 10.6% from 2023. Ridership remains 15.7% below the pre-Covid 2019 ridership of 90 million, and 26.2% below the 2006 ridership peak of 102.8 million.

The subsidy per boarding was $12.37, down from $13.93 in 2023 ($14.27 inflation-adjusted). The subsidy is now only $1.73 higher than the 2019 pre-Covid inflation-adjusted value of $10.64.

Total operating expense was $988.4 million, down from $1000.6 million in 2023, which is down 3.6% on an inflation-adjusted basis.

Local infrastructure assistance was $249.9 million in 2024, 24.2% of $1033.6 million sales tax revenue. This brings the assistance close to the traditional target value of 25% of sales tax. Infrastructure assistance was 18.8% of sales tax revenue in 2023.

Fare revenue increased 7.4% from $46.4 million to $49.8 million. But since boardings increased faster, the average fare collected per boarding was $0.656 in 2024 compared to $0.660 in 2023, which is a 2.87% drop on an inflation-adjusted basis. Adjusting past fares for inflation, the average 2024 fare of $0.656 is the lowest value in the past 25 years and almost surely the lowest in Metro's history.

In 2024 Metro's employee count had the biggest increase in the past 25 years, jumping by 635 employees, from 3992 in 2023 to 4267. It's unclear if this employee increase can be attributed to the MetroNow initiative, since the headcount was for fiscal year 2024 which ended in September and MetroNow was announced in February 2025. This increase would sound an alarm if it is due to expansion of headquarters bureaucracy, but is less of a concern if it is to replace contractors or reduce overtime. It's interesting to note that in the past 25 years, Metro achieved its peak ridership in 2006, the same year it had the lowest employee count, 3356. (see chart below)

Outlook

Metro's finances and ridership are going in the desired direction, with its new board focused on better operational performance and ridership continuing to recover from Covid. The suspension of the costly University BRT and Inner Katy BRT will help future financial performance. A realistic and achievable goal is to reduce the boarding subsidy from its current value of $12.37 to a value at or below the pre-Covid inflation-adjusted value of $10.64. Of course $10.64 is still a very high subsidy, 117% above the 2001 inflation-adjusted value of $4.90. With continued financial discipline and increasing ridership, progress can continue to be made to reduce the high taxpayer subsidy.

Charts

The blue line shows the ongoing ridership recovery from the 2020 Covid collapse, and the red line shows the decrease in operating expense in 2024. These two trends resulted in reduced boarding subsidy.

This chart shows progress in reducing the boarding subsidy from its 2021 inflation-adjusted value of $19.51 to $12.37 in 2024. Reducing the subsidy to the pre-Covid value of $10.64 is within reach.

This chart shows monthly Metro ridership since Covid, including the first five months of fiscal year 2025. Bus ridership is within 5% of pre-Covid values. Metro reached a post-Covid high in October 2024, 10% below the pre-Covid one-year average. This chart suggests that fiscal year 2025 ridership will be around 12% below the pre-Covid value, compared to 15.7% below pre-Covid ridership in 2024.

This chart shows principal Metro budget items. Changes in 2024 were incremental compared to 2023, with a noticable uptick in infrastructure assistance.

This chart shows fare revenue. Fare revenue increased in 2024 to $49.4 million, but the average fare per boarding dropped to $0.656, the lowest in the 25 year period of the plot and almost surely the lowest in Metro history on an inflation-adjusted basis.

Due to lower cost per boarding, the average fare as a percent of operating cost per boarding showed a slight uptick, from 4.52% in 2023 to 5.04% in 2024.

Metro's marketing expense was $16.1 million in 2024, down from $18.1 million ($18.6 million inflation-adjusted) in 2023.

Metro's employee count had a huge jump in 2024, increasing by 635 employees. This would normally raise an alarm, since those employees are an annual cost that's probably around $50 to 60 million. But if the new employees reduce costly overtime or contractors, or result in increased ridership, it may not be financially detrimental. Metro achieved its peak ridership in 2006 with its lowest headcount in the 25 year period, 3356 employees.