Ypsilanti and the Ann Arbor Transit Authority have nine months to figure out what to do about a shortage of funds for sustaining current levels of transportation in the city.

At its Tuesday meeting, the Ypsilanti City Council approved a nine-month contract with the AATA that will end at the June 30, 2012 conclusion to Ypsilanti’s fiscal year.

Next fiscal year, the transportation millage Ypsilanti has in place to fund bus service is projected to fall approximately $60,000 short of the AATA’s cost of service.

But Chris White, manager of service development for the AATA, said the agency wants to avoid service cuts, though how to do that is “a question we don’t have an answer for yet.” That solution isn’t needed until fiscal year 2013, he said.

He explained that AATA officials met with City Manager Ed Koryzno last week and learned that the transportation millage is projected to generate less than the AATA assumed.

“The situation is worse than we understood it at that time,” he said.

“We want to preserve service in Ypsilanti,” he later added. “We’re committed to working with you to do that.”

The AATA is trying to develop a countywide transit master plan that would be funded by a countywide millage.

Officials have been hopeful some kind of countywide plan will materialize. That would help Ypsilanti, which White said already has heavy ridership and demand for expanded service.

No one is certain where the countywide plan’s development will be at the end of the city’s or AATA’s budget year.

“Hopefully by that time there will be more of a resolution on the grand scheme of things,” Council Member Pete Murdock said.

The AATA is raising its rates as part of a four-year plan to spread costs among all its contracting jurisdictions. Many expenses were previously shouldered by Ann Arbor taxpayers.

Ypsilanti has been hit harder this year because American Recovery and Reinvestment Act Funds that subsidized its service over the last two years dried up.

Ypsilanti voters approved a charter amendment in November 2010 that levies 0.9879 mills, or $292,000 in fiscal year 2012. But the AATA is charging $321,000 for full service in federal fiscal year 2012.

Next year, the millage is only expected to generate $272,000.

The city will pay around $262,000 for service this fiscal year, which will leave approximately $30,000 to put towards the next year.

But the bottom line shows a projected shortfall of $20,000 next year.

The service agreement rate is based on a cost per hour of bus service in Ypsilanti. That cost went up from $81.29 per hour in fiscal year 2008 to $112.43 in fiscal year 2012. The true cost of providing service during that time fluctuated between $99.30 and $112.43.

Those figures don’t include the increase in the frequency buses on the busy route four from downtown Ann Arbor.

Council Member Mike Bodary questioned why the AATA is spending significant money promoting and developing its transit master plan while raising rates on a cash-strapped city that provides its system with a significant number of riders.

In April 2010, the agency entered into a $399,805 contract with international consultants Steer Davies Gleave to help develop the plan and authorized CEO Michael Ford to spend $350,000 over three years to market the plan.

White said $1.2 million in planning and promotion for the transit master plan has come out of the AATA’s fund balance.

“We look at what is being spent for your consulting, studies, promotional costs, everything else and that's more than $1 million,” Bodary said. “We look at those outlays … and we think 'They’re not in very bad shape, unlike us.'”

“The way our board put it is it’s an investment,” White responded.