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High gas prices not yet a factor in city budget

Friday, March 21, 2008 by Austin Monitor

When you look at those two cars sitting in your driveway, it is easy to become concerned days about how you are going to pay for the oil and gasoline it takes to run them. Now, imagine having thousands of vehicles to keep on the road, and you get a sense of how hard record fuel prices are hitting cities and counties around the state.


While record high prices for crude oil and natural gas are a boost to the overall Texas economy, the subsequent cost of gasoline and diesel fuel is hitting cities, counties, and state agencies where it hurts.


The Associated Press reported this week that American consumers used 1 percent less fuel during the past eight weeks than they did during the same period last year—which has not happened in the past 11 years. Gas usage normally goes up about 1.5 percent per year as the population grows.


The numbers are staggering: Crude oil, $110 a barrel. Regular unleaded gasoline: $3.25 a gallon. Natural gas: $10.00 per MMbtu.  Diesel fuel: $3.85 per gallon.  Price increases in gasoline and diesel are affecting almost every sector of the economy, from food prices to airline tickets.


Officials at the City of Austin say that they have not been forced to take any drastic actions to deal with higher fuel prices.


“City departments are charged a fixed price per gallon for the entire budget year,” said Jennifer Walls with the City Budget Office. “The fixed price anticipated rising fuel prices this year.  In addition, the city purchases fuel in bulk, which helps save costs.”


She said that, so far, no city departments have had to cut their budget in order to keep gas in the tank.


Walls, who keeps tabs on the city’s fleet of vehicles, said Austin currently has 3,626 vehicles, 116 of which are hybrids. Many of its vehicles are run compressed natural gas or other alternative fuels. 


But with no end in sight to a the rise in fuel prices and a potential recession on the horizon, city officials will have to plan carefully during the next budget cycle in order to keep its vehicles on the road.


Elna Christopher with the Texas Association of Counties said government agencies around the state are faced with a double-edged sword. She said most counties’ fiscal years begin in October, so budgets are fixed for the year. In addition to that, most fuel contracts have a cost-pass-though clause, meaning counties have fixed budgets to pay for increasing fuel costs.


“Some of our members have been able to cut back a small amount on the use of vehicles, but not very much,” she said. “Counties maintain and patrol thousands of miles of roads, and have no choice but to put the vehicles on the road and find the money to pay for them.”


Christopher said counties with large populations might actually be better off than some rural counties. Areas with a larger tax base have more money to shift around than do smaller, rural counties. However, the rural counties may have as many or more miles of roadway.


Perhaps the hardest-hit agency is the Texas Department of Transportation, which is responsible for building and maintaining some 80,000 miles of roadways.


TxDOT’s Chris Lippincott said his agency is hit twice by high fuel prices.


“First of all, we have thousands of vehicles used in patrolling, building and repairing roads across Texas,” he said. “That fleet has been hit hard by higher fuel costs. On the other hand, TxDOT is funded by the gas tax, which is about 20 cents per gallon and has not changed since the early 1990s. As gas prices rise, people begin cutting back on the amount of gasoline they use. That also hits us in the pocketbook.”


Lippincott said TxDOT management ordered a 10 percent, across the board budget cut last year in order to accommodate higher costs and lower revenues. He adds, however, that the agency’s use of alternative vehicles and fuels has dampened the effect of higher gas prices.


“We have begun converting many of the vehicles in our car pools to hybrids whenever possible,” he said. “I drove a truck last week that ran on E-85 (ethanol). And the agency plans to find more creative ways to save on energy costs.”


Capital Metro has recently begun a campaign to lure riders out of their cars and on the buses. The “Dump the Pump, Ride the Bus” promotion points out to riders how much money they can save by leaving their car at home. At last count, ridership was trending upward.


The American Public Transportation Association recently announced that Americans took some 10.3 billion trips on mass transit in 2007, the largest number since the late 1950s. Light-rail ridership, like all transit, began to fall after the interstate highway system was built. After reaching a low of 103 million riders in 1977, light-rail ridership began to climb again. In 2007, it was 431 million.


Economists are predicting a continued rise in fuel prices over the next few months, with some predicting that gasoline could hit $4 a gallon by Labor Day.

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