Question

The Charleston Metropolitan Transit System (CMTS) is facing an extreme financial crisis. Although federal subsidies make up some of the deficits not covered by fares, it is also necessary to cover some of the costs through local tax collections. For the past four years, these costs have been met through local sales and property taxes. Assume that your firm, Derrick Cheatham, and John, has been asked to serve as a consultant on future financing of CMTS’s operating deficit. In that capacity, please answer the following questions.

a. What criteria would you recommend for judging alternative taxing mechanism for meeting CMTS deficits?

b. Using the criteria you have established in part (a) evaluate the current form of tax collections.

Answer 1

Some of the recomendations to improve CMTS's  financial crisis":

1. Fare Price:

Increase in Fare price will give extra revenue

2. Cost Structure Analysis

CMTS has to analysis its current expenditure cycle and has to identify all those non value added activites that exist.

3. Alternate Revenue Source

If it not possible to increase the fare price or decease the cost that have to find alternate ways to generate some revenue. Firm is already using this model. It is already meeting its expenses by local sales and property tax . Firm can tie up with advertisement agency to display commercial advertisements. This very common use technique to generate extra revenue.

4. Timings: CMTS has to identify the pick hours and loom hours. During pick hours it can operate more Buses, thus will reduce the operating cost.

5. Routes Indentification

Some routes give more revenues as compared to others. CMTS have to indentify those commercial viable routes and should focus generating more revenues from those routes by providing more services.Like Pre Booking, which gives extra revenue in the name of booking charges.