City officials agreed Tuesday that the city's transit system needs a financial overhaul.

The council directed staff to put out feelers for a consultant to advise the city on ways to increase revenue and/or reduce the escalating costs of running the Mainline's "Little Blue Buses" year-round and the festival trolleys for 10 weeks a year.

"We don't have the information or the knowledge to know strategically how to proceed with our system," Councilman Steven Dicterow said. "But I think we all agreed that we like the system, we want to see it used more and expanded if money is there.

"I just want the system to be as good as it can be, at the lowest cost."

City officials tout Laguna as one of only two city transit systems in South County. The system is subsidized by grants, but still runs in the red, which requires a transfer from the parking fund — about $700,000 in past fiscal years and estimated to increase.

"Note that the transfer from the parking fund will range from $710,000 to $2 million over the [next] 14 years, with an average transfer of $1.176 million and is expected to increase after that," City Manager John Pietig said.

Mayor Pro Tem Elizabeth Pearson opposes the transfer because it precludes parking projects.

About $4.7 million goes into the parking fund annually, and about $800,000 will come out in the next fiscal year to cover the transit system deficit, Mayor Pro Tem Elizabeth Pearson said.

Pietig also cautioned the council that grants could dry up.

"We apply for every grant possible, but we can't count on them," Pietig said.

In light of the financial drain, the council unanimously voted on Tuesday to spend up to $50,000 for a consultant to provide a comprehensive analysis of the transit system, including different types and sizes of transit vehicles.

If hired, the consultant would be asked to review and provide options to modify Mainline bus services to reduce costs; analyze the possibilities for increasing fares, passes and charter fees, identify possible revenue sources, other than fares, for the summer trolley service and make recommendations about interior trolley ads.

The council voted to defer a discussion on raising parking meter and parking lot fees to the Downtown Parking Management Plan.

Councilwoman Toni Iseman said the benefits of getting cars off the city streets should also be analyzed, as well as the beneficiaries of the system.

Trolley ridership has increased dramatically in the past few years, according to a staff report, attributed in no small part to eliminating fares. Ridership on the Mainline has also increased, although not so dramatically.

The total operating costs for city transit services including Mainline, trolleys and paratransit services is estimated at $2.4 million for fiscal year 2012-13. Revenue is estimated to be $1.7 million ; $1.4 million of it from Orange County Transportation Authority.

Operating costs for the Mainline is estimated to cost $1.1 million in fiscal year 2012-13, only about $100,000 less than for the trolleys. The estimates do not include replacement costs.

Paratransit service for the disabled or elderly, provided by OCTA and the nonprofit Sally's Fund, is expected to cost $100,000 next fiscal year.

Staff was directed to report back to the council on the results of the search for a consultant.

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