Maintaining Transit Effectiveness Under Major Financial Constraints (2014)

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SUMMARY MAINTAINING TRANSIT EFFECTIVENESS UNDER MAJOR FINANCIAL CONSTRAINTS Transit agencies in the United States have frequently dealt with insuffi cient resources, but the “great recession” of 2007 to 2009 clearly presented the most diffi cult fi nancial chal- lenges most transit agencies have ever seen. The collapse of the real estate market and the decline in sales tax revenue substantially reduced the revenues typically available to support transit systems. Service was reduced in many communities, and transit agencies struggled to maintain their effectiveness. Essentially, this means that they needed to bal- ance their budgets with reduced funds and maintain quality service in their communities while costs for such items as fuel and health care increased substantially, as did the demand for their service. Transit agencies have responded by becoming more effi cient in a great variety of ways. While gains from effi ciencies are rarely suffi cient themselves to balance transit agency budgets under such severe fi nancial strain, each dollar saved or generated from new sources of revenue helps to maintain service in a community and demonstrates that the agency is doing everything possible without raising fares or increasing taxes. This synthesis exam- ines the many ways transit agencies have reduced their costs and generated new revenues to help provide as many dollars as possible to maintain or increase service and thereby maintain their effectiveness. The sampling plan to obtain information for this report was based on a survey that was issued to 46 transit agencies. Forty transit agencies completed the survey, representing an 87% response rate. This synthesis includes an extensive literature review that, together with the survey responses, provides information refl ecting the experiences at more than 100 transit agencies in the United States. Four case examples offer more focused reviews of the efforts individual transit agencies have made to retain or expand their effectiveness in the communities they serve. The most important fi ndings of the synthesis follow. Advances in technology, usu- ally purchased with capital dollars, have enabled transit agencies to conduct much better analyses than they could have done 10 years ago, allowing much more data-based deci- sion making throughout the organization. Transit agencies are using superior analytics and technologies such as automatic passenger counters to pinpoint where and when riders use transit, allowing them to almost surgically modify service in ways that either save money with minimal impact on riders or allow the agency to invest the savings into service where it is most productive. Transit managers and their boards are also exercising greater disci- pline through the adoption of service guidelines or standards, resulting in their providing service in areas of higher demand while fi nding other, less expensive ways to serve areas that support the transit system through taxes but have a low demand for the service. This right-sizing of service is also refl ected in the types and sizes of vehicles that are purchased, which are increasingly operating on more effi cient alternative fuels. Optimization software

2 helps transit planners and schedulers develop more effi cient runs and routes. Paratransit expenses are being managed more effi ciently through • Travel training to encourage the use of less expensive fi xed-route service • Better management of “no-shows” • The incorporation of local taxi services to help handle peak demand • Cooperative partnerships with nonprofi t agencies • The utilization of more fuel-effi cient vehicles • Firm but fair determinations of eligibility for service. Contracting for lower-cost fi xed-route service is becoming more common and, in some areas, has helped communities retain service that would otherwise have been eliminated or drastically reduced. Commonsense low-cost solutions such as the reduction of idling and consolidating the number of bus stops to enhance bus speeds have saved money and improved the reliability and quality of service. An increasing number of transit agencies are participating in the American Bus Benchmarking Group to examine their performance in relation to peers, leading to further improvements in productivity and quality. Tremendous advances in offi ce computer systems have resulted in reduced costs and better management of assets. Social media are increasingly being used to transmit real-time information to passengers. This is particularly timely as more people (especially younger people) are coming to rely on applications on cell phones to access information about transit service status. It also provides transit agencies the opportunity to reduce costs associated with printed materials. Capital funds have been used strategically to reduce operating expenses through the pur- chase of more fuel-effi cient vehicles and utility-effi cient buildings and equipment. Improve- ments of this nature not only save transit agencies a considerable amount of money but also reduce their carbon footprint. Health care costs are being better managed through a variety of techniques, including self-insurance strategies coupled with wellness programs and safety campaigns, the pro- curement of greater expertise to help control costs associated with workers’ compensation and the Family and Medical Leave Act (FMLA), transitional work programs for employees unable to perform their regular duties because of injury, and the institution of high-deduct- ible insurance plans to replace premium-based plans. Transit agencies have downsized management and reorganized to become “fl atter” and leaner. Most employees, including those represented by collective bargaining units, have seen minimal, if any, increases in pay at the same time that they have been asked to con- tribute more to health benefi ts. In some cases, pay increases are tied to overall agency per- formance judged through key performance indicators. Work rules, particularly in transit operations, that many see as antiquated have been eliminated or changed while guaranteed overtime has been reduced through negotiations with transit unions. Some pension sys- tems have been changed from defi ned benefi t plans to defi ned contribution plans for new employees. Some functions have been outsourced, while others have been brought in-house, depending on which option is more cost-effective. Transit vehicle maintenance programs have found new ways to reduce inventory and its associated costs. More use of electrifi cation of key accessories on buses has increased fuel mileage by as much as 15%. Better analytical capabilities of maintenance issues have been implemented through software and an investment in budget analysts that can track perfor- mance and work with managers to develop solutions.

3 Transit agency revenues have been increased by more aggressive sales of advertising opportunities to companies looking to promote their products or services. Ad space is now sold not only on bus exteriors and bus shelters but in almost every venue controlled by transit agencies that might be viewed by a pair of eyes or heard by a pair of ears, including on transit agency websites. Digital advertising is becoming more common, whether on kiosk panels, the sides of buses, or billboards on property owned by transit agencies. The sale of nam- ing rights to major transit stations or routes has generated millions of dollars. More transit agencies, particularly in urban areas, are relaxing their restrictions on advertising alcohol, resulting in increased revenues. Audio advertising is now featured inside buses at a growing number of transit agencies. Transit stations serve not only as areas to advertise but as places that can provide convenient services—such as video rentals and virtual grocery shopping— that result in rental income to the transit agency and convenience for passengers. Companies or organizations interested in improving access to their locations are open to sharing the costs of providing transit services, enabling transit systems to expand the service they offer. Transit agencies have developed cooperative relationships with uni- versities, school districts, hospitals, downtown businesses, military bases, social service agencies, local governments, sporting venues, apartment complexes, and casinos, among others. These agreements not only provide additional revenue to the transit agency but also improve the relevance of the agency in its communities, which can lead to additional public support in the future. This synthesis reports on hundreds of actions implemented by transit agencies to increase their cost-effectiveness and describes how the agencies have engaged their com- munities during challenging fi scal circumstances. These actions have been generated from all functional areas of transit systems, making the report useful to virtually any transit employee or board member. While the actions described helped transit agencies deal with the funding crisis brought on by the great recession, communities should continue to real- ize the benefi ts of these actions well into the future.

5 passengers per hour or mile at the lowest cost. On the other hand, effectiveness is often intended to mean whether the transit system is contributing to a community’s goals, such as economic development, environmental sustainability, decreasing traffi c congestion, and the provision of equitable mobility opportunities. For the purposes of this synthesis, “transit effectiveness” will refer to actions taken by transit agencies that allow them to provide the most and best service possible while work- ing with budget resources that have been stressed owing to dwindling revenues and rising costs. In this case, effi ciency and effectiveness are not mutually exclusive. Much of the report will cover what could be referred to as “cost-effec- tiveness.” Quite simply, without intelligent management of resources to maximize revenues and reduce costs for greater effi ciencies, transit agencies cannot be effective in terms of accomplishing their service mission and the broad goals of their communities. PURPOSE OF REPORT AND INTENDED AUDIENCE This report examines the various actions transit agencies have taken to maintain their overall effectiveness as a pub- lic service and as an employer when budgets get very tight. Perhaps the one advantage of stressed budgets may be that they can stimulate more creativity and greater questioning of long-practiced procedures that might need revision. In the case of transit, a tight budget also requires improvement in an agency’s ability to communicate its circumstances and seek reasoned input from its patrons who rely on the service to access jobs, education, medical treatment, shopping, and all other life-supporting services. Transit agencies have the additional challenge of needing to lead these efforts in an environment in which many new practices must be nego- tiated with a workforce composed primarily of organized labor in a political environment. As one transit manager noted, “If there was a lot of money, anybody could manage this agency.” This report is intended to collect as many examples as possible of ways that transit agencies across the United States have reduced their costs with the least (or no) painful reductions in ser- vice or loss of ridership, while also identifying various steps these agencies have taken to increase their revenues from CHAPTER ONE INTRODUCTION PROJECT BACKGROUND AND DEFINITION OF “TRANSIT EFFECTIVENESS” Transit agencies in the United States usually struggle to deliver the most effective service possible with limited resources. Most transit agencies have never had the luxury of abundant funding. However, the recent great recession substantially reduced revenues from formerly reliable sources such as prop- erty taxes and sales taxes. The decrease in property values and overall sales tax revenue, combined with rising costs of fuel and health care for their employees, resulted in most transit agencies increasing passenger fares and reducing total hours of service. The challenge became even greater as demand for transit services increased owing to higher unemployment and rising gas prices, causing more people to utilize transit in place of their private vehicles. This set of circumstances has compelled transit agencies to look more broadly at strategies to increase their effi ciency and effectiveness. More than ever, it is vital that transit agencies adopt techniques and policies that enable them to deliver the most effi cient service in the most cost-effective way. This synthesis identifi es approaches and actions that agencies around the country have undertaken to make their service more effi cient, fi nancially sustainable, and responsive to the needs in their community. Managers of transit agencies could benefi t from understanding what has worked and what pitfalls should be avoided. This synthesis report was designed to review activities associated with the following items: • Nonservice cost effi ciencies • Labor contract provisions and costs • Service productivity • Service design and effectiveness analysis • Technology improvements • Operating effects of capital investment • Outsourcing • Alternative revenue sources • Identifi cation of transit agencies that have implemented any of the above-mentioned measures, the motivation for doing so, and any processes used • The types of analysis transit agencies are engaged in • Documentation of any impacts of the initiatives. Transit effi ciency usually deals with per unit costs of service delivery and can be defi ned as achieving the most

6 questions that asked agencies to describe their experi- ence and the various techniques they have employed to maintain effectiveness in their communities. The sur- vey was initially sent to 46 transit agencies; 40 agen- cies responded (87% response rate). • Follow-up phone calls and e-mails with a number of the survey respondents to clarify information they pro- vided in the survey. ORGANIZATION OF THIS REPORT Chapter two summarizes the fi ndings from the literature search that featured the types of articles, papers, and reports listed earlier. Chapter three provides results of the survey developed for this project that documents how 40 tran- sit agencies are improving their effectiveness in providing transit services under tight fi scal constraints. Chapter four provides case examples of four different transit agencies rep- resenting different parts of the United States. Chapter fi ve summarizes the fi ndings, presents conclusions, and offers items for further study. Appendix A is the survey instrument used to gain infor- mation from the 40 participating transit agencies. This sur- vey was available to complete either through a web-based link or in a Microsoft Word document. Appendix B is a list of all the transit agencies that responded to the survey. Appendices C through G provide additional information received in response to questions asked in the survey, partic- ularly from transit agencies that had provided a considerable amount of detail in response to the questions. This synthesis contains information on many hundreds of techniques that transit agencies are using to gain new revenue without raising fares or to reduce their costs without nega- tively affecting their passengers. Given the volume and detail of information in the report and the variety of transit func- tional areas it covers, it is unlikely that every reader will want to read the entire synthesis. However, readers are encouraged to review the table of contents describing chapters two and three to identify subject areas they are particularly interested in (e.g., operations, maintenance, marketing, planning). In both the literature review chapter and the survey responses chapter, the techniques that save transit agencies money are covered fi rst and the techniques agencies have used to earn new revenue are covered last. Each technique to save money or gain revenue is categorized into the separate disciplines normally present in transit agencies. In addition, the agency that submitted the technique is identifi ed, allowing those who wish to contact the agency in order to learn more to do so. sources other than increased fares or traditional property, sales, or other taxes, which are diffi cult to raise during weak economic times. In short, the report will identify how better management at all levels has enabled transit agencies to pro- vide the most service possible under tight fi scal constraints. This synthesis will be of interest to transit managers throughout the country, regardless of their level in their agency and regardless of what aspect of the agency they are engaged in (e.g., operations, planning, administration, mar- keting, purchasing, fi nance, information systems, human resources). The report will also be of interest to transit agency policy boards, transit unions, businesses that supply the industry, and public transportation customers. TECHNICAL APPROACH The approach to this synthesis included the following: • A literature review of papers and reports recorded in the Transport Research International Documentation (TRID) database to retrieve any scholarly articles in professional journals and reports prepared over the past 5 years that have addressed the subject of transit effectiveness, particularly under fi nancial constraints. • A review of articles over the past 5 years included in weekly or monthly transit industry journals such as Mass Transit Magazine, Metro Magazine, and Passenger Transport, as well as TransitTalent, a weekly e-zine that collects news stories focused on transit issues while also advertising open transit positions around the country. These publications proved to be the greatest source of information relevant to this synthe- sis, as they provided recent examples of actions taken by transit agencies to improve their cost-effectiveness. • A review of articles included in http://www.transitnews. net, a paid subscription service that provides links to all transit-related stories appearing in various media throughout the country. Some of the articles chronicled the actions taken by transit agencies to deal with their fi nancial challenges. • Information received by the author from transit agen- cies around the country in response to ongoing inqui- ries he has made to stay abreast of this subject since the publication of his 2003 National Center for Transit Research report Lessons Learned in Transit Effi ciencies, Revenue Generation, and Cost Reductions. • A survey completed by 40 transit agencies of vari- ous sizes representing 17 states from every region of the country that included both closed and open-ended