7 Tips for Making, Saving Money for Your Transit Agency

Posted on October 31, 2017 by Paul Comfort - Also by this author

Right-sizing bus routes is one of the ways agencies can cut costs. Photos courtesy Paul Comfort
Right-sizing bus routes is one of the ways agencies can cut costs. Photos courtesy Paul Comfort
I’ve spent my whole career in transportation and government, and one thing I know is that we never have enough money to do all we want. So, I’ve gathered ideas that have worked for me to gain money for my agencies and also some approaches that have been perfected by others. I also look at ways to save money knowing that as Benjamin Franklin said, “A penny saved is a penny earned”.  

MAKING MONEY
If there’s one thing I’ve learned in thirty years about getting increased funding from your board, it’s that winners get investment. People want to invest in winners because they have already shown a propensity to get results with what they have.  
When I arrived as CEO at the MTA in Baltimore, the Governor had just made a decision to cancel the proposed light rail project for downtown Baltimore called the Red Line. When I evaluated our six operating modes of bus, light rail, metro subway, commuter bus, commuter train (MARC) and paratransit (Mobility), it became clear that the bus service had the most passengers but the worst service. 

“Nothing breeds success like success” – Gary Player

After quick fixes in mobility and replacing 30,000 linear feet of track in our light rail and metro divisions, we developed a plan to improve bus service based on previously gathered data and over 200 public meetings with plenty of input from our bus drivers and pitched it to the Governor and legislature. Based on our plan and successes that we trumpeted, we were able to secure $135,000,000 in new investment and over 100 new positions for our agency from the Democratic-controlled legislature and the Republican Governor to fulfil the promise of improved and connected bus service.  

Gleaning lessons from this and other similar experiences I can tell you that the number one way to increase your funding is to:

1.    Build Momentum
-    Identify your pain points – address them.
-    Establish a service improvement plan and execute.  
-    Publicize your success and build momentum with small wins.
-    Tell your own story – use social and traditional media.
-    Remember, people only invest in winners.

While many city transit agencies charge their school system for providing public transit to schools, some CEO’s have taken it to the next level. Bill Carpenter, CEO of the Rochester-Genesee Regional Transit Service in upstate New York now has over 70 contracts with businesses and educational institutions that have extended his transit service to their operations, while charging them the fully allocated cost of doing so. When a nursing home asked him to extend a bus route to their facility at certain times of the day, he did so but only at those times and with them paying the full cost of extending that public route. You can evaluate doing this for your agency to by adding:

2.    Service Contracts  
-    Charge for new routes/stops/service – per trip or fully allocated for extra service necessary.
-    Businesses want an extra stop added to end-of-route or a new route – figure total allocated cost – fuel, driver, vehicle, depreciation etc… and charge that amount by hour or by mile.

Most transit agencies have tapped their local market for traditional ads on their buses and bus shelters but now new technology is opening the market for more revenue options. Your current ad agency should be able to discuss options for:

3.    New Digital Ads
-     Beyond standard bus and shelter ads look for new digital revenue. Get your ad agency to sell ads on ticket vending machines screens, put small TV screens on buses and sell geo-coded ads as they pass stores and restaurants or on your agency’s smart phone app.
-    Ask your ad agency to purchase new hardware and keep all ad revenue to pay for it. (i.e. – new downtown digital screens at major stops with real-time arrival info and ads.)

SAVING MONEY
Too often the answer that “we’ve always done it this way” ends up costing you dearly. One way cities across America are now improving service and saving money is by:

4.    Right-Sizing Bus Routes
-    Analyze ridership by stop and route. Establish benchmarks. Reduce those that don’t meet standards. (e.g. Baltimore eliminated any stops with under 10 passengers per day or within 400 feet of another stop.)
-    For businesses (i.e. Fed Ex or Amazon) – ramp up or ramp down service based on shift times. Don’t need to go to end of line every time. Put it in your schedule and keep it open to the public.

5.    Improve Procurement Procedures
-    Evaluate requirements that can slow a procurement down or vastly increase the cost of the procurement thus leaving less money available for other improvements to services. These include:  

  • high-performance bonds or letters of credit
  • one-sided legal terms such as uncapped liability or strict order of precedence and
  • high liquidated damages

One way to evaluate these options is to hold an Industry Day before you issue an RFP. Ask industry reps to give you best practices and identify areas of risk aversion on your part that may end up causing them to raise their prices too much. Make a business decision on how much risk you can absorb while keeping an eye on the bottom line.

A good example of this is how the transit contracting officers got smart in the 1990s about how to handle fuel cost. When I first got into the transit business development arena in the mid- 1990s many transit agencies asked contractors to include fuel prices in their overall per hour charge. Of course no one knew what gas was going to cost 3-5 years out so companies included buffer in their bids which increased the cost to the transit agency, sometimes unnecessarily. Then in the early twenty first century, agencies started providing fuel themselves for the contractors (often gleaning the additional benefits of state gas tax exemptions) or asking contractors to provide fuel cost as a “pass through” to the agency. This eliminated unnecessary risk for the contractors thus keeping the overall cost for the agencies lower.  Applying this same principle of reducing risk to the contractors in other areas of procurement can have the same result.

The total per-passenger cost to provide ADA paratransit service is now topping $45 per trip, well over 10 times the cost to provide an individual fixed-route bus trip. On average, paratransit makes up about 1-2% of system total ridership, but at least 8-9% of operating cost, according to a TCRB report.

These increases are unsustainable for most transit agencies so they are going to need to:

6.    Better Manage Paratransit Cost
-    Purchase sedans instead of all wheelchair lift-equipped vans (cheaper, quicker to purchase, less fuel, easier to maintain, customers like them).
-    Use a trip broker approach – taxi, sedan service (i.e. Lyft).
-    Lowering or eliminating the fare for ADA-certified passengers to use fixed-route bus/rail service (a much lower-cost option).
-    Increasing travel training for regular ADA users so they can adopt fixed-route transit usage for their primary mode of mobility.

Finally, most transit agencies outsource some of their regular service such as paratransit or fixed-route bus in order to save money and utilize the expertise of private sector companies who specialize in this area. However, there are many other options to reduce cost to your agency by:

7.    Outsourcing
-    Paratransit service
-    Revenue handling
-    ADA certification
-    Travel training
-    P3 approach toward major capital expansions (i.e. Purple Line)

These seven steps and the practical application points afterwards can assist you in making your transit operation more efficient and thus able to provide more service to the tens of thousands of passengers who rely on your system daily for mobility.

Paul Comfort is VP, business development with Trapeze Group.
© Copyright by Paul Comfort, 2017

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