High fuel costs and employee pay raises are putting pressure on the city to raise bus fares for the first time in six years.

The city is considering a series of fare hikes for the popular TheBus transit system, starting with a 25 cent, or 12.5 percent, adult fare hike to $2.25 this year.

If approved by the City Council, that increase is likely to be followed by more fare hikes. The plan to increase fees is driven in part by city budget deficits and rising costs at TheBus.

The heavily subsidized public transit system lost $151 million in the 12 months that ended June 30 2008, according to a recently released audit. That's up nearly $12.5 million from the prior year's losses.

The mounting loses are attributed mainly to increases in the cost of fuel. However, in the future TheBus also will be grappling with higher wages. Last summer O'ahu bus drivers, mechanics and other support staff approved a contract giving them a 21 percent pay raise over the next five years.

The city is spending $127 million to subsidize TheBus this year.

"That subsidy will increase without the proposed fare increases," said Honolulu Mayor Mufi Hannemann, who proposed the fare hike last week. "Even if we didn't have this budget shortfall, we'd have to take a look at increasing TheBus fares."

The city is required to recover 27 percent to 33 percent of bus operating costs from passenger fares. That so-called farebox recovery ratio would drop below 27 percent next year without the fare hike, Hannemann said.

Several City Council members also said that a fare hike may be needed.

"I think we're pretty close" to needing to raise bus fares, said council member Gary Okino, who chairs the council's Transportation and Planning Committee. "Definitely, I almost guarantee you that will be part of the discussion. We'll try to (avoid it), but obviously we've got to find money somewhere."

Council member Duke Bainum agreed that a bus fare hike may be needed.

"We're bumping right up. We're close to it," he said. However, "If we can avoid rising the bus fares for another year I'm certainly advocating that."

A 25-cent hike in bus fares could cost bus riders about $5 million a year, but wouldn't be enough to close the $50 million gap in the city's 2010 budget. Even with a fare hike the city's TheBus subsidy is only expected to drop by about $2 million, to $125 million in fiscal 2010.

The last time the city increased bus fares was 2003, when the maximum cash fare was raised from $1.50 to $2. Under a budget plan released by Hannemann last week, that fare would rise to $2.25 and the cost of a monthly pass would increase from $40 to $50. Senior and youth fares would not increase.

Hannemann did not disclose how much more fares could rise in the future.

FARES IN OTHER CITIES

Fares for TheBus would remain in line with other cities even if the proposed fare increase was approved, Hannemann said. Mainland bus fares vary from $1.50 to $3.25 in Pittsburgh, $2 to $2.50 in Seattle, $1.75 to $2.25 in Minneapolis and $2 in Denver, according to city officials.

Still, any hike in fares could drive away some riders.

Since 1980, TheBus has experienced little net passenger growth, despite a 19.3 percent increase in Honolulu's population. In 2007, TheBus had 72.6 million passengers. That's slightly more than the 71.6 million passengers it carried in 1980.

Roger Morton, president and general manager of O'ahu Transit Services Inc., operator of TheBus, said the agency will finish this fiscal year within its budget. That's mainly because of a sharp drop in fuel prices, which peaked in August at $4.61 a gallon. Today, TheBus is paying about $2 a gallon for fuel.

"We were worried about it of course," Morton said. "There are certain uncontrollable expenses and fuel is certainly uncontrollable."

The proposed fare hikes follow service improvements, including additional country express routes, new buses, new transit centers in Wai'anae, Mililani and Kalihi, and a circulator bus service in Mililani.

"Even with increases (TheBus) is still a good deal," Hannemann said. "It's not like we've been standing pat on our bus service and operations. We believe we've improved it dramatically."