SEPTA is proposing to raise its fares by 21.5 percent across the board on New Year’s Day and plans severe service cuts next July, a combination described by the transit agency’s budget director as the potential start of ” managing the decline of the system.

A legal opinion regarding the proposed fare hike was released Tuesday morning, triggering a mandatory public hearing, which SEPTA has scheduled for Dec. 13 at the Convention Center.

“We’ve been talking about this for two years now,” Erik Johanson, SEPTA’s director of budgets and innovation, said in an interview. “We warned that this day was coming, and we fear that we are (now) here.”

Like other public transportation systems in the country, SEPTA faces an annual structural deficit — $240 million, in its case — as federal pandemic transit aid phases out.. Earlier this year, state Senate Republicans blocked Gov. Josh Shapiro’s proposal to inject $283 million in new state aid for public transit by increasing its share of sales tax revenue. This would have brought in about $161 million for SEPTA.

Instead, lawmakers approved a one-time payment to the state’s trust fund for transit systems, of which SEPTA received $46 million.

Tuesday’s announcement comes amid tense contract negotiations between SEPTA and its largest bargaining unit, Transportation Workers Union, Local 234, which represents the city’s bus, subway and streetcar operators and other front-line workers.

» LEARN MORE: What you need to know about a possible SEPTA strike

SEPTA maintains that it cannot afford a generous wage increase because of its budget crisis. Members have been working without a contract since November 8, after TWU leaders postponed a strike to continue negotiations.

Both parties have indicated that progress has been made on non-economic issues raised by Local 234. In recent years, SEPTA has also stated that it cannot afford raises, but that it had accepted them when the talks failed.

» LEARN MORE: SEPTA and its largest union failed to agree on a new contract but will continue to discuss

The authority’s board could vote on higher rates at its monthly meeting Dec. 19; if approved, they would take effect in early 2025. Passengers would pay a 21.5% increase on top of an interim average fare increase of 7.5% scheduled to take effect December 1.

SEPTA last raised fares in 2017, and officials say the consumer price index for the cost of goods and services has increased 29% since then.

It expects the rate changes to generate $23 million for the rest of this fiscal year and $45 million annually starting in 2026.

“Service unusable on weekends”

Possible overall service reductions of 20% are not imminent. They would be implemented during the next fiscal year, which begins July 1 and ends June 30, 2026.

The cuts would save about $92 million in the first year and that amount could increase in future fiscal years as SEPTA begins to consider reductions in system infrastructure, such as closing depots. bus.

But SEPTA plans $40 $50 million to $50 million in lost revenue each year due to loss of endorsements after budget cuts take hold. The net revenue would still help close a budget deficit that now stands at about $153 million after cost-cutting measures, increases in Regional Rail parking fees and other measures. The agency also used the $46 million and part of its Service Stabilization Working Capital Fund to avoid significant rate reductions and increases so far.

Jody Holton, SEPTA’s chief of planning and strategy, said the cuts would include eliminating routes, shortening routes and reducing the frequency of buses, streetcars, subway and regional rail service.

“It will be very crowded in all of our (travel) modes, and we would have virtually unusable service on weekends, both on regional rail and public transit,” Holton said.

Risk of “death spiral”

Taken together, Holton and Johanson say SEPTA, the nation’s sixth-largest transit system, risks a “death spiral,” a self-reinforcing process when transit systems raise fares and cut costs. service, driving away customers and necessitating further rate hikes and cuts. About 790,000 people use the SEPTA system each weekday.

They said the proposals are not policy statements, but actions that must be taken quickly because the agency cannot count on help from Harrisburg.

The service reductions would be considered as part of SEPTA’s regular budget process early next year.

Delaying the cuts until July 1 leaves little opportunity for the state Legislature and governor to negotiate a measure increasing aid for transit systems as part of drafting the expected state budget on June 30.