Transforming Public Transportation Institutional and Business Models (2012)

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1 Transforming Public Transportation Institutional and Business Models This study describes and explains how transit agencies are making transformative changes in institutional and business models that equip them to handle forces that threaten the long- run efficiency, effectiveness, reliability, safety, and security of the nation’s public transpor- tation systems. The research approach and conclusions of this study are based on 14 case studies of public transportation organizations that have implemented fundamental change. The case studies help explain what changes agencies are making, why they are making these changes, and how they are doing it. The study highlights transferable lessons that can help guide agencies that are undertaking or considering similar efforts. While the reasons for change and approaches to it vary widely, the 14 case studies highlighted in this research exemplify the significant potential for change that exists within the public transportation industry. In many of the regions examined, the change that happened was so fundamental as to transform the reach and role of multiple transportation organizations, including transit operators and regional planning agencies. Defining Fundamental Change The study emphasizes the experiences of agencies that have gone beyond incremental changes in standard or traditional business practices toward large-scale adoption of what might be viewed as “emerging” practices. The consequences of change as highlighted in the research have been perceived as positive, and the lessons learned from the case studies have a degree of transferability. The research identifies the following categories of “transformative” change: • Mission shift—A shift in the defined mission of the organization, led by internal or exter- nal stakeholders, which might involve a shift in types of services, geographic coverage, or market emphasis. • Funding—Responses to changes in funding, including new and broader sources of rev- enues; threats or uncertainty surrounding existing funding sources; or increased account- ability related to existing or new funding sources. • Governance—Changes in the role or structure of the governing body. • Measuring goal achievement—An increased emphasis on goals and measures, with spe- cific activities such as the integration of customer quality measures with operational and budget measures or the integration of measures of community goals (e.g., sustainability and livability) with customer, operational, and budget measures. • Resource management—Innovation in the generation of resources and revenues and their use, including the application of performance measures in policy, budget, and operat- ing decisions; innovation in capital and infrastructure management; and enhanced private sector participation. S U M M A R Y

2• Retooled workforce and organization—Innovation in human capital management, including a renewed focus on recruitment and retention, training, and succession plan- ning; the addition of new capabilities, skills, and capacity; and revised or realigned roles and responsibilities. • Collaboration and integration—Enhanced public and private collaboration across modes, jurisdictions, and programs, including the integration of assets, facilities, equip- ment, and financial and human resources, as well as of operational, managerial, and decision-making roles. • Technology applications—Adoption of state-of-the-art information technologies, including the implementation of real-time data and customer service applications, changes in information access and use policies, and the application of enhanced asset management. Drivers of Change Organizations rarely embrace fundamental change without first facing significant and specific external driving factors—factors that may be negative or positive. In an individual agency, the relevance of particular external drivers for change will vary depending on the agency’s mission, organization, governance, sources of funding, location, and size, among other factors. Common drivers of change include the following: • Funding and finance—In the face of funding shortfalls and uncertainty about if, or how, they can be bridged, funding and finance are undeniably important drivers of change. Without reform of traditional transit funding practices, the long-term prospects are dim for ensuring that transit funding in the United States is sufficient to maintain or expand service. • New technology—As new technology continues to evolve across all aspects of society, expectations increase for transit agencies to participate in this evolution. A range of emerg- ing state-of-the-art technologies have the potential to transform the efficiency, effective- ness, reliability, safety, and security of transit in coming decades, if the transit industry is able to integrate them into standard business practices. • Demographics and society—Rapid changes in regional demographics often create an environment in which transit agencies must embrace fundamental change to remain rel- evant within their region’s transportation system. Population growth, an aging and more diverse population, and changing lifestyles are important forces for change that will rede- fine markets for transit. • Sustainability, energy, and environmental concerns—Perceptions about issues related to sustainability, energy, and climate change all suggest a promising role for public trans- portation in the nation’s transportation system over the coming decades. Greater transit deployment is viewed as a potential strategy to reduce energy use and contribute to reduc- tions in greenhouse gas emissions. • Travel, land use, and development patterns—A number of societal changes have occurred over the past decade that have implications for the level of and type of demand for tran- sit services, including the revival of cities, the growth in single-person households, the growth of jobs in the suburbs, increased congestion, a decrease in the proportion of work trips, and an increase in trip “chaining” (the practice of combining multiple trips into a single coordinated trip). • Infrastructure condition—A significant proportion of the nation’s transit assets are in need of capital reinvestment, an issue that is continuing to challenge public transporta- tion agencies in an era of limited resources.

3 Themes of Successful Change On the basis of the case studies, this study identifies several shared themes related to suc- cessful change found across a selection of public transportation agencies that have made fundamental changes in business and institutional models. These themes are the following: • Collaboration and partnership are essential to successful change. The case study research suggests that motivation for change often comes from outside the organization, or as part of a collaborative partnership. Challenges during the change process often require more support and resources than are available within an agency. Given the long- term nature of change strategies, it appears vital that an agency establish partnerships with organizations that have continuity, particularly in cases where the transit agency gov- ernance changes with political cycles. In a number of cases, when an agency faced criticism, external partners defended the agency and thereby allowed change to continue. • Successful change requires a clear vision. In almost all of the cases explored, the transit agency, the regional planning organization, the business community, elected officials, or other stakeholders first defined a vision or desired outcome that subsequently helped guide the direction of fundamental change and helped stakeholders stay focused through the inevitable challenges faced along the way. In most of the cases examined, a vision was developed in partnership with other organizations and outside stakeholders. In some cases, the vision for change was developed by outside organizations with expectations that the transit agency change to fully meet an expected role. • Stable and supportive leadership is necessary to support change. Any change effort will require the support of leadership within the organization, but some of the most effective change efforts are headed by leaders that have served their agencies for an extended period of time. These leaders built the support of their governing board, employees, and other key stakeholders as they engaged in the change process. Among the agencies explored in the case studies, a number engaged in a period of fundamental change under leadership that had been in place for more than a decade. • An effective governance structure is required for fundamental change. In six of the case studies explored, a change in governance was at the center of the movement toward fun- damental change. In five of these six cases, the make-up of the governing body changed, and in the sixth, the governing body remained fundamentally the same but the governing body explicitly changed its role. The common thread through these cases was that the existing governing body required some modification to support a changing role for the transit agency, often with the effect of providing agency staff with more authority. • Change requires sufficient internal and external agency resources. In several of the case studies, the path to change required modifications in organizational structure to reinforce a desired outcome, while in others change required outside expertise, hiring new staff, or considering new approaches to procurement. While the needs for new resources varied widely, in all cases the agencies identified specific resources that were needed to make the change happen. • Targeted workforce development supports change. In a number of the case studies, the agency focused attention and resources on the development of its workforce. In some cases, this attention included engagement of employees in the process of change, while in others the agency invested in workforce development with direct training related to the change. • Change may require realignment of agency authority with other regional agencies. Sev- eral of the change efforts among the case studies involved a shift of responsibility and/or authority across agencies, often with an enhanced emphasis on multimodal transpor- tation planning, project delivery, and finance. In many cases, more effective transit

4programs emerged from closer coordination with highway programs and regional plan- ning organizations. • Understanding the risk of failing to change supports success. In a number of the case studies, the agency and other stakeholders understood the risk of failing to change and were motivated by those potential consequences. The reality of any effort to embrace fun- damental change is that an agency will face opposition to the proposed changes. Under- standing the risk of failing to change can provide balance against the natural resistance to change. As outlined in Table S-1, these common themes of successful change are found within the 14 case studies conducted as part of this research effort. While the underlying characteristics of these organizations vary and the consequences of these changes are remarkably different, many of the strategies and elements of change are notably consistent. Table S-1 provides a brief summary of the change explored in each case study and the consequences of change. Full descriptions of each case study are available in the appendix to this report. Actions Recommended to Promote Change The experiences of the agencies studied highlight a number of critical actions for transit agencies and/or their stakeholders who wish to promote fundamental changes in business and institutional models: 1. Define a vision. A “vision” should serve to guide fundamental change. Support and acknowledgement of that vision should exist among board members, agency staff, key regional organizations, other stakeholders, and the general public. Should a clear vision not exist, establishing the most effective platform for developing such a vision is a critical step in the change process. Agencies should consider several key questions at this step: • Is there a clear vision or desired outcome upon which to focus the change process? If not, who are the key organizations or leaders who should serve as partners in a visioning process? • If a defined vision does exist, are key stakeholders aware of and supportive of that vision (e.g., unionized agency staff, non-union staff, senior management, governing body, agency funders, local elected officials, state elected officials)? If key stakeholders are not supportive, does the lack of support among specific stakeholders undermine the potential for change? 2. Assess the strength and role of external partnerships. Partners and external advocates are crucial to success. These partners may serve to defend the agency, run campaigns for transit funding, or provide critical support as inevitable challenges emerge. In some cases, the transit organization may need to cede leadership to a partner with broader scope to accomplish the change. Agencies should consider several key questions in assessing the strength of partnerships: • Who are your current partners and advocates? • Which partners could help you achieve desired change? • What actions are your partners taking to support desired change within the organization? • What additional activities could be helpful? 3. Identify and address barriers to change. It is vital to conduct a thorough assessment of potential barriers that will limit the agency’s ability to achieve its vision for change. Areas of consideration include the following: • External institutional constraints, including legislative constraints, funding limitations or requirements, and agency authority;

5 Transit Agency Change Evaluated for Case Study Consequences of Change Advance Transit (NH/VT) Shift in service to target choice riders in collaboration with regional institutions and other area partners. These new partners needed the new service to meet changes in institutional locations and resulting travel patterns. The agency now plays a key role in regional mobility and serves the needs of major regional institutions. Service now attracts more choice riders (54 percent) compared to 10 years ago (25 percent) and is the second largest in New Hampshire as measured by ridership. Capital Area Transportation Authority (CATA) (Lansing, MI) Shift from operational mission guided by experience and intuition to one based on collaboration, integration, and partnering using data-based planning and management. An enhanced partnership with Michigan State University (MSU) encouraged the change to a more analytical approach. Decisions are now based on a more analytic framework with a shift from an annual to a long-term planning horizon. As a result, the agency has increased ridership and sustained strong public support as measured by approval for property tax millage renewals or increases. Champaign- Urbana Mass Transit District (C-U MTD) (Champaign- Urbana, IL) Agency fully embraced technology with a supporting change in the organizational structure. C-U MTD has completely transformed its communication approach with real- time information delivered through multiple means. Resulted in improved customer satisfaction, an improved perception of reliability, continued community support, and high levels of customer satisfaction. The transition to using one data set for stop times and locations also has improved the accuracy and efficiency of scheduling. Charlotte Area Transit System (CATS) (Charlotte, NC) Agency changed from a bus operator serving the city with relatively static service to a regional multimodal service provider. Shift involved governance changes and an increase in internal staff capacity with business involvement and collaboration to push for change. Between 1998 and 2010, CATS increased service by more than 75 percent, expanded its service area, opened its first light rail line, expanded commuter bus service, and more than doubled ridership. Local land use decisions are now coordinated with transit investments. Chittenden County Transportation Authority (CCTA) (Burlington, VT) Agency changed its role from serving a single jurisdiction to serving multiple counties. Most expansion occurred through the takeover of other systems, which was required to protect existing services that were in crisis. The agency improved service and increased efficiencies through the merger of several operating agencies. By taking responsibility for an expanded service area, the agency transitioned from providing service in a single county to serving a five-county region with a wide variation in service type. Metropolitan Transit System (MTS) (San Diego, CA) Change involved integration of transit operations with a shift of all planning and development functions to the regional metropolitan planning organization (MPO). Operations planning and support functions later moved back to the transit agency with long-term planning remaining at the MPO. The transformation of agency roles has allowed the transit agency to focus on operations while the San Diego Association of Governments (SANDAG) manages other decision-making responsibilities. MTS restructured most of its service, increased bus ridership 12 percent, and improved the farebox recovery ratio from 25 percent to 43 percent. SANDAG now leads the region’s emphasis on complex multimodal transportation projects. Metropolitan Transportation Authority (MTA) (New York, NY) Decades after the consolidation of different operating agencies, MTA has centralized a number of duplicative business service functions that were previously delivered independently by each of the operating agencies. Transition to centralized delivery of business services allowed for a significant reduction in staff and, over the long term, will allow the agency to focus on ways to further improve its approach to these activities. Table S-1. Agency case studies. (continued on next page)

6Metro Transit (Minneapolis/St. Paul, MN) Change in the region involved creation of a new body to facilitate regional funding for transit. The change involved a shift in responsibility for funding and decision-making from the state to the region. The creation of the Counties Transit Improvement Board (CTIB) increased the Twin Cities region’s capacity to develop large-scale, federally funded transit projects. Since its creation in 2008, CTIB has authorized about $500 million in grants and has supported securing about $1.5 billion in federal funds. Regional Transportation District (RTD) (Denver, CO) Agency changed its focus from moving vehicles to moving people in a continuing evolution in business model and organization. Change was supported by new strategies in partnering and in resource use to increase the availability and effectiveness of service. The agency did so while reducing the associated public subsidy per trip. Partnering and cost-sharing arrangements adopted to meet its new people-moving mission have allowed RTD to meet its service standards, minimize per-trip subsidies, carry on a major capital expansion program, and sustain a high degree of political and community support. San Francisco Municipal Transportation Agency (SFMTA) (San Francisco, CA) Change involved consolidation of multimodal responsibilities, including roadways, parking, bicycle planning, pedestrian planning, and taxi regulation for the entire city-county transportation network into one agency governed by a single policy board. Efforts to manage limited road space using various modes have begun to take better advantage of the inherent capabilities of each mode in meeting market needs. Combined responsibility has brought greater funding flexibility and offers the prospect of continued improvements in service, access, and mobility. Southeastern Pennsylvania Transportation Authority (SEPTA) (Philadelphia, PA) The agency instituted an enhanced emphasis on customer service with corresponding organizational changes to reinforce the focus. The agency also now focuses on non-users as key stakeholders. Customer service ratings have improved significantly since the new customer service initiative began. There has been a steady change in front-line interactions with customers. TransLink (Vancouver, BC) The agency changed from a transit operator to a regional multimodal organization with land use authority. The shift in role happened as the province moved away from its role as the provider of regional transportation services with a corresponding emphasis on regional delivery. Ridership has more than doubled since 1999, bus service hours have increased by 40 percent, and the agency has constructed two rail lines. The region’s transit mode split increased from 10 percent to 12 percent between 1999 and 2011, customer service ratings reached record levels in 2010, and land use density has increased in transit corridors. Utah Transit Authority (UTA) (Salt Lake City, UT) The agency transitioned from a regional bus operator to one that operates bus, light rail, and commuter rail services. Change happened with active community collaboration to build political support, an effort to build institutional capacity, and a change in the role of the board. A market that was once made up primarily of captive riders is now estimated to be approximately 70 percent choice riders, and annual ridership has increased from 24 million in 1998 to 39 million in 2010. Washington (Statewide) Washington State DOT shifted its role from grants manager responding to funding requests to an active manager of intercity bus with innovative financing approaches. Under the new business model, the state contracts for identified services rather than responding to specific subsidy requests. The change has resulted in a complete statewide intercity bus network with limited public subsidies and now serves as a model for other states. Transit Agency Change Evaluated for Case Study Consequences of Change Table S-1. (Continued).

7 • Internal institutional constraints, including agency governing body, or organizational structure; • Human resources and technical capacity; • Perceptions of the agency’s capabilities held by the public, elected officials, or other key stakeholders; • Financial resources; • Technology-related constraints; and • Process-related limitations. For each of these potential barriers, change agents should identify potential strategies to eliminate the identified barriers (e.g., through legislative changes, reorganization, new partnerships, etc.) or, in cases where eliminating these barriers is not possible, identify strategies to minimize the identified barrier. 4. Identify necessary changes in institutional responsibilities. Desired change may require a shift in responsibilities for operations, planning, or visioning. If limitations in institutional authority or institutional capacity act as impediments to desired change, it is helpful to consider which organizations can take on some of these responsibilities and become a partner in the change movement. Conversely, public perception of too much agency authority might serve as an obstacle to an agency’s effectiveness. In several of the case studies, the transit agency either increased its authority (e.g., authority to generate revenue or regulate land use) or shifted responsibilities to other regional organizations (e.g., shift of transit planning, project delivery, authority to generate revenue). 5. Determine financial or human resources necessary to make the change happen. Agents of change should determine expected resource needs and think broadly about how to obtain needed support, even if these resources come through partnership. While addi- tional resources are often needed to support change strategies, these resources do not necessarily require new funds or people. In a number of the case studies, the agencies shifted funds or people from other places, or generated resources through partnership. Development of necessary human resources through targeted workforce development activities can be an effective approach. 6. Set expectations for a reasonable timeframe for success. A realistic assessment of the timeframe for success will establish a framework within which change agents can identify necessary resources to effect change. As importantly, a realistic assessment of the timeframe will set expectations and support strategies that extend beyond politi- cal or other institutional cycles. Establishing a reasonable timeframe is important for setting expectations among governing bodies, the general public, funders, and other key stakeholders. 7. Assess current governance and whether the governance aligns with desired change. Given the influence of the governing body, understanding the support of the current governing body and whether the governance structure creates any potential barriers is critical. The governing structure may create limitations in geographic expansion, expec- tations regarding the distribution of service, or generate other limitations that should be understood. 8. Understand the risk of failing to change. Failing to change also comes with risk. Under- standing the consequences of failing to change is an important motivator in promoting change. Remembering these consequences can serve to balance the likely opposition to promoting change and help an agency overcome some of the external challenges, particu- larly those that are political and public in nature. The wide variation in transit agency size, role, mission, governance structure, funding part- ners, and operating environment make it difficult to map a precise strategy for making change

8happen. The questions below provide a structured process of self-assessment for those transit agencies beginning the process regardless of an agency’s size, structure, or mission: 1. Is there a clear vision or desired outcome upon which to focus the change process? 2. If a defined vision does exist, are key stakeholders aware of and supportive of the vision (such stakeholders include unionized agency staff, non-union staff, senior management, the governing body, agency funders, and state and local elected officials)? 3. Who are the agency’s current partners and advocates? What actions are the agency’s part- ners taking to support desired change within the organization? What additional activities could be helpful? 4. What external institutional constraints, including legislative constraints, funding limita- tions or requirements exist? What actions can the agency or others take to remove or reduce any of these barriers to change? 5. What internal institutional constraints, including the agency governing body or organi- zational structure, exist (e.g., human and technical capacity, perception of agency capa- bility, financial resources, technology constraints, process limitations)? What actions can the agency or others take to address these limitations that are likely to inhibit change? 6. What additional financial or human resources are needed to undertake the desired change? 7. Does the current governance structure create any limitations in the agency’s ability to undertake change? What actions can the governing body or others undertake to address these limitations?