Every month, Louisville residents take more than 400,000 trips on TARC buses. That’s how they get to work, doctor’s appointments, and many other places.
But starting next January, many of those buses will come less often — disrupting travel and leading TARC to lay off dozens of drivers.
Metro Council members say they felt “blindsided” by news of the cuts, echoing comments made by the head of the bus driver’s union.
Council Member Scott Reed, a Republican representing District 16, said at a committee meeting with TARC leadership Tuesday night he was “stunned” when he received a letter from TARC’s union recently asking for $14 million in stop-gap funding.
“I just can’t imagine how we could be blindsided like this,” he said. “I read that letter the other day and I was incredulous. I couldn’t believe it.”
But TARC’s financial crisis has been a long time coming, and it’s been communicated publicly in budget documents and the agency’s long-term plans. It’s the result of an antiquated funding model, inaction by leadership and decreasing ridership.
The ‘fiscal cliff’
TARC released what it called a “long range plan for the future of public transit” last year. In the document, dubbed TARC Tomorrow, the agency was clear about its financial situation: TARC had been using federal COVID-19 pandemic relief to cover large chunks of its operating budget. That money would soon be gone.
“The agency now faces a ‘fiscal cliff,’ risking a significant budget shortfall that would require drastic cuts in operating expenses unless an equivalent funding source is secured,” the agency wrote.
It wasn’t the first warning.
In 2022, TARC and its employee union agreed to explore proposing a tax increase to buoy revenue. And in its 2019 budget, TARC leaders noted “inadequate operating revenue” threatened its ability to “maintain existing service let alone build a network that provides the service Louisville deserves and needs.”
TARC’s Board of Directors billed the service cuts and potential layoffs announced Monday as a way to buy more time to figure out alternative funding sources.
Currently, the majority of TARC’s funding comes from the occupational tax, which is 2.2% on the paychecks of Louisville workers. TARC gets a small slice of that, with the rest split between Louisville Metro and Jefferson County Public Schools.
The occupational tax rate levied by TARC, 0.2%, is the same as it was when TARC was created in 1974. Frustrated agency leaders see that as the organization’s biggest impediment to growth.
Last year, some Metro Council members threatened not to approve a budget for TARC over frustration with proposed cuts to underperforming routes in the suburbs. Carrie Butler, TARC’s executive director at the time, said in a statement the council was misdiagnosing the problem.
“The real problem is a funding model that hasn’t been updated since 1974 and therefore can’t keep up with rising expenses,” Butler said. “Simple math dictates that when expenses rise faster than revenue something has to give.”
Increasing Louisville’s occupational tax rate would require support from residents and Metro Council.
Under state law, agency leaders or Metro Council members could propose raising the occupational tax rate to boost TARC’s revenue, or levying a new sales or property tax. Then voters would have a chance to weigh in through a ballot referendum. Voters rejected a proposed tax increase to expand public libraries by a 2-1 margin in 2007.
Metro Council also has the power to divert more occupational tax revenues to TARC. But that would decrease funding for Louisville Metro and potentially lead to cuts to other city services.
Some council members say TARC’s problems extend beyond lack of revenue.
District 11 Council Member Kevin Kramer, who heads the Republican Caucus, noted at Tuesday’s meeting that even though the tax rate hasn’t increased, the money TARC has collected from occupational taxes has outpaced inflation over the last 50 years. Kramer said ridership has also fallen in that time, meaning TARC is spending more per rider.
“This really isn’t a question of, ‘How do we find enough money to pay for this?’” Kramer said. “This is a question of, ‘How do we completely restructure what we’re doing, because our ridership doesn’t match the expense and the expense is nowhere close to the revenue.’”
Emptier buses, new strategies
TARC buses carried more than 16 million riders in 2012, according to the National Transit Database.
Then, ridership declined each year leading into 2020, when the COVID-19 pandemic upended public transit across the country.
Cities haven’t fully recovered, with national ridership at about 80% of pre-pandemic levels. But Louisville is even worse off: TARC had just over 6 million riders between July ‘22 and June ‘23, down from 10 million in 2019.
In response, the agency has cut underperforming routes in the last several years. It’s also testing new services in less-covered areas, like with a recent pilot program for a ride-hailing service in New Albany and Jeffersontown.
Ted Smith, chair of TARC’s board of directors, said the agency’s leadership is questioning the viability of a transit model centered around Louisville’s downtown, which has struggled to regain office workers since 2020.
“Our ability to go east-west, with limited exception, is not strong. And we have a lot of growth in our community into the suburbs,” he said. “Our downtown-centric bus system is not working for that at all.”
Chris Glasser, president of the group Streets for People, which advocates for transportation improvements, said he thinks TARC needs to pick: either expand coverage or increase route frequency. TARC championed both ideas in its long-range plan last year.
He said further route cuts feel inevitable alongside next year’s service reductions, which he thinks will fuel a cycle of less ridership and revenue.
“I think a lot of U.S. transit agencies are facing this, like, downward death spiral. And in many ways, TARC is no different,” Glasser said.
Years to act
Since longtime leader Barry Barker retired from TARC in 2018, the agency has shifted through executive directors.
Ferdinand Risco, Baker’s replacement, resigned in 2020 amid sexual misconduct allegations. Carrie Butler took over, before stepping down at the end of last year.
Now Ozzy Gibson is filling in as TARC’s interim leader.
Smith said he’s discussed the search for a permanent head with Mayor Craig Greenberg, who’s responsible for the appointment.
“It is very clear that he really needs to see for himself somebody who's going to come and bring some energy into this,” Smith said, rather than someone in the “excuse-making business.”
But across executive directors, board members and mayors, the agency has failed to steady itself.
Steve Miller, who chairs the TARC board’s finance committee, discussed the state of the agency with members of Metro Council’s government oversight committee on Tuesday evening.
He said TARC has been responding to its deficits by plugging capital funds — meant for uses like infrastructure upgrades — into its operating budget over the past 20 years.
And he noted TARC will have used about $140 million of federal COVID-19 relief funds over the course of five years. That money has covered about a third of the agency’s annual operating expenses.
“Without those funds…the people who were on the board or managing TARC would have been here before you three or four years ago with the message that I'm delivering today,” Miller said.
For years, TARC has said that the taxes it collects from Jefferson County workers aren’t sufficient to cover its costs. That’s including as early as 2009, and as recent as last year’s annual report.
But the agency has yet to put out a serious proposal on tax reform, which would require Metro Council’s approval and a vote by residents.
Board chair Smith said he doesn’t believe advocating for a voter referendum on raising taxes is the board’s responsibility.
“We're there to provide guidance and oversight to the agency….I think in other communities, you’ve seen the agency itself find a path to build a base,” he said.
Metro Council President Markus Winkler, a District 17 Democrat, said the agency’s leaders need to take initiative.
“Part of running an organization is making sure that you have long-term strategic planning,” he said. “And I would say that it is the board's responsibility, if there is a fundamental structural issue, that that's what they should be tackling."
'A new TARC’
TARC is facing a $30 million funding deficit by mid-2026.
Agency leaders said at the meeting Tuesday that the significant cuts approved by the board will only stave off the financial crisis for a few additional years.
Without more cuts, or a new source of revenue, TARC’s reserves are expected to drop below $20 million by fiscal year 2028. Its savings would run out by fiscal year 2030, according to TARC’s own projections.
Part of the transit agency's stated approach is to pursue additional revenue “from local, state and federal sources,” but TARC officials admit the prospects of that aren’t promising.
Federal grants in the past typically couldn’t be used to cover operating costs. And the Kentucky General Assembly has already set the state’s budget for the next two years.
Metro Council members, meanwhile, seem skeptical of diverting city funding to TARC. They may also oppose a tax increase referendum without a concrete plan for what the bus system will look like and how the agency will achieve financial sustainability.
Without knowing TARC’s long-term strategy, it feels like city leaders would just be “throwing good money after bad,” Winkler said. He said they also run the risk of enabling TARC to continue delaying needed structural changes.
“My perspective is, unless there is some sort of definitive action towards a long-term plan, that doesn't just put a Band-Aid on it for six months or nine months, I'd have a real hard time supporting it,” Winkler said.
TARC has federal funding for a complete network redesign process. It’s planning to launch the TARC 2025 initiative this summer, along with community meetings.
Miller, who chairs the finance committee of TARC’s Board of Directors, told the council the goal is to have a plan for overhauling the bus network.
“We must have a new TARC,” Miller said. “Exactly what that new TARC is and how big I don't know enough yet. But within about a year, we're going to have that information.”
That long-term plan isn’t expected to be finalized until next February.
