Transit Agencies Build Innovative Revenue Streams

Posted on May 11, 2010 by Claire Atkinson, Senior Editor

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[IMAGE]Revenue.jpg[/IMAGE]Much of the news about transit industry issues these days revolves around budget cuts and resulting fare hikes and service cuts.

While agencies of all sizes are forced to make these difficult decisions, some are countering their fiscal pressures with innovative ways to add revenue beyond selling fares.

In the wake of fare hikes that drew public ire in April, the New Jersey Transit (NJ Transit) board of directors was considering awarding a one-year, $480,000 contract to a financial advisory firm to find ways to bring in additional revenue from the agency's parking structures, possibly through privatization, The Star-Ledger reported. NJ Transit would save on the cost of staffing and maintaining the lots. Another option would be to charge commuters for parking in lots that are currently free or raising rates at paid lots.

According to the board's meeting agenda, "NJ Transit is seeking assistance in structuring efficient and innovative financing arrangements for its parking assets throughout the system."

Case Study: Virginia Regional Transit

Purcellville, Va.-based Virginia Regional Transit (VRT) is a 501(c)(3) non-profit organization with a $5 million annual operating budget with which to provide public transit services to 15 different jurisdictions in the state.

President/CEO Mark McGregor says that the agency is required to raise 32 percent of its budget locally, while the rest comprises federal and state funds. While the local governments from the areas the agency serves help fund services each year, they require a budget that covers 18 months at a time. "When gas went from $2 a gallon to $5 a gallon, we didn't budget for $5 a gallon," McGregor says. The other challenge to budgeting, he says, is the caps on budget increases set by the local governments. "You can't just throw a number out there even if you have good support for it. You're really subject to a political process that says, 'we're not going to let you go more than 3 percent or 5 percent,'" McGregor says. With the agency responsible for raising about $2 million each year, instead of reducing service VRT chooses to bring more money in.

The agency places advertising on its buses through a bus ad company. "The reason we use [a contractor] is I don't have the resources to keep up with it," McGregor says. "Getting the ads on and off the buses, having the correct contacts for the state lottery ads and the big customers — it's very intense."

In addition, VRT offsets the cost of printing its marketing materials and schedules by selling ad spots in those printed materials. "Our belief is that you need to produce high-quality documents, because for the most part, that's the only image of your company that the passenger sees," McGregor says.

Some of the agency's more unique fundraising efforts include an annual golf tournament, bowl-a-thons, an annual fundraising dinner and other community events. The VRT special events coordinator handles the event planning and arrangements, but the 20 hours per week she spends on these activities does not include the unaccounted outreach time other staff members put in, McGregor says. "I'm at a conference right now in Montana and I've actually talked to a couple of vendors about coming to our golf tournament," he says. "Raising revenue has to be 100 percent on our minds 100 percent of the time. Everything that we do, we have to remember the financial side."

VRT also brings in revenue by operating as a contract agent for the state's Department of Motor Vehicles (DMV), processing vehicle registrations for local residents. The arrangement was originally implemented when the DMV made the move to close offices on Wednesdays due to fiscal issues and put out the call to other Department of Transportation branches in the state to help fill the gap.

"We had just built a brand new facility with a front reception area that was set up as a Greyhound ticket office," McGregor recalls. When Greyhound's business in the area declined, VRT converted the reception area for DMV use. As a contract agent, VRT receives a percentage of every transaction processed there. "Not to mention that when it comes time to register and tag all of our own vehicles, it's a real simple process," McGregor says. VRT earns 3 percent of each transaction up to $500,000, then 5 percent of each transaction beyond that. "We currently do better than $1 million a year," McGregor says.

VRT also has a vehicle emissions testing and state inspection station set up in its garage, making the facility a one-stop shop for residents registering vehicles. "We're in a rural area so people have to travel about 20 miles to a DMV office," McGregor says. The agency earns $28 for each emissions test performed at its facility.

VRT also brings in revenue by leasing out office and parking space to Veolia Transportation, which operates the local commuter bus service into Washington, D.C. "They pay rent to us, which is local match," McGregor says.

"All this allows us to do is have some flexibility in our budget," McGregor says. "The counties and towns all know that I won't be coming back and asking for additional resources. They will not have to provide any funding beyond what they've allocated. That's very attractive to them, especially with the private contractor, where every year you're a budget item that can be eliminated with the stroke of a pen. We are one of the few providers in the state that I know of that has adequate local match to fund the federal and state dollars they've budgeted for."

Several of VRT's routes are funded by private sector businesses or organizations that need employees transported from Washington to campuses along what's known as the Dulles Corridor. "The private sector has needs for bus transportation and working with local governments is next to impossible because they're budgeting 18 months out," McGregor says. "One of the things that doesn't allow is for the counties or towns to plan route expansions with the immediate response that business needs."

VRT management staff members make connections with private organizations through membership and participation in such groups as Rotary, Kiwanis, and chambers of commerce. McGregor also attends meetings for the Committee for Dulles, the Dulles Area Transportation Association and Loudon County's economic development commission.

For example, George Washington University and the Howard Hughes Medical Institute established satellite campuses in Loudon County about 20 miles away from Washington. VRT started a route connecting the end of a D.C. Metro line to the campuses with Job Access Reverse Commute (JARC) funds and additional financial support from the university and medical center, but no local or state funds.

"We went to them and said, 'if you will fund this as a reverse commute route and allow us to stop at several other businesses along the way, this will fit within the JARC funding stream and I can get you the service for 50 cents on the dollar. It has to be a public route and it has to run on a schedule, and you have to fund it a year in advance whether your people ride it or not' — and they bought into it," McGregor says.

Despite the success of these routes that are funded without the help of state and local dollars, McGregor says it can't be all about the money. "The focus is the passengers and the service," he says. "If we get too caught up in the money, then the passengers will suffer. We have to remember it's like any other contract or any other deal. It has to work for the passenger, not just the person putting the money up."

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