Transforming Public Transportation Institutional and Business Models (2012)

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15 c h a p t e r 3 Several major societal forces are spurring public transpor- tation agencies of all kinds to reevaluate basic assumptions about who their customers are, how they deliver service, where they get funding, and what organizational and governance structures work best. Transit agencies today show diversity in their mode(s) of service, size, governance models, funding, and other important characteristics. It is within this context that the current research seeks transferable lessons. 3.1 External Forces for Change Organizations rarely embrace fundamental change without first facing significant and specific external driving factors— factors that may be negative or positive. Many of the drivers for change outlined in the New Paradigms research (Cam- bridge Systematics, 1999; Stanley et al., 2003) a decade ago continue to be relevant today, but some emerging forces are also important such as the following: • Funding and finance; • New technology; • Demographics and society; • Sustainability, energy, and environmental concerns; • Travel, land use, and development patterns; and • Infrastructure condition. 3.1.1 Funding and Finance Funding shortfalls and uncertainty about whether, or how, they can be bridged, are undeniably important driv- ers of change within the transit industry. Without reform of traditional transit funding practices, the long-term prospects appear dim for ensuring that transit funding in the United States is sufficient to maintain or expand service in the mid to long-term. The American Public Transportation Associa- tion (APTA) states that annual operating and capital spend- ing on transit from all sources grew by more than 67 percent between 1988 and 2008, from $33.1 billion to $55.4 billion (APTA, April 2010). Several recent national-level studies have documented, however, that despite growth in transit spend- ing, current investment in transit falls well below the amount needed to meet long-term investment needs for public trans- portation. Most of the national research on funding has focused on long-term capital needs, although in many juris- dictions funding for operations is also critical. While specific estimates of the capital funding needs vary, relevant studies consistently depict a large and widening invest- ment gap between nationwide transit-related needs and cur- rent funding levels. In 2009’s Paying Our Way study, mandated under SAFETEA-LU, the National Surface Transportation Infrastructure Financing Commission (NSTIFC) concluded that the nation will need an average of $21 billion per year in capital spending between 2008 and 2035 to maintain the cur- rent condition of the nation’s transit infrastructure, while only $11 billion per year in capital spending is available to meet these needs (NSTIFC, 2009). The 2008 State and National Pub- lic Transportation Needs Analysis concludes that total operating and capital spending on transit of $47.1 billion in 2006 was approximately “one-third to one-fifth of the projected annual investment required to maintain public transportation system physical conditions and service performance at current levels” (Cambridge Systematics, September 2008). 3.1.2 New Technology Technology has the potential to be both a driver and facili- tator of change. As new technology continues to evolve across all aspects of society, expectations increase for transit agen- cies to participate in this evolution. Work done by the Federal Transit Administration (FTA), TCRP, APTA, and others sug- gests that a range of emerging state-of-the-art technologies has the potential to transform the efficiency, effectiveness, reliability, safety, and security of transit in coming decades, if the transit industry is able to integrate them into standard business practices (Hemily, 2004; U.S.DOT-FTA, 2007). Drivers of Change Faced by the Transit Industry

16 livability, smart growth, and sustainability, transit has become increasingly accepted over the past 15 years as an important contributor to the overall livability and quality of life in the many communities where it provides improved access and mobility to workers, reduces congestion, and improves air quality. Transit is also usually considered a vital part of effec- tive “smart growth” planning (Duany et al., 2009). Transit also is perceived as having a role in efforts to address climate change and improve energy efficiency. Tran- sit is viewed as a potential strategy to reduce energy use and contribute to reductions in greenhouse gas (GHG) emissions. If new business and institutional models were used to cre- ate new mobility services and were combined with changes in land use, much larger energy and GHG benefits might be achieved (Center for Neighborhood Technology, 2010). 3.1.5 Travel, Land Use, and Development Patterns The most salient trend in American travel behavior over the last four decades of the twentieth century has been an increased reliance on the private automobile for travel, with correspond- ing declines in transit ridership (Pucher and Renne, 2003). Evidence reported in APTA’s 2010 Public Transportation Fact Book suggests, however, that transit ridership has rebounded throughout the first decade of the twenty-first century to its highest level since 1956, reaching an estimated 10.5 billion trips in 2008 (APTA, April 2010). A number of societal changes that have occurred over the past decade and are expected to con- tinue in the future have contributed to this growth in demand for public transportation including the following: • Revival of cities. After decades of out-migration, the last decade has shown the first signs of inward migration and growth of city cores and inner suburbs (Hemily, 2004). • Growth in single-person households. Household com- position is changing, with the greatest growth occurring in households of childless couples, non-family households, and single-person households. Generation X and aging boomers choosing different lifestyles are creating a greater demand for urban living and urban housing (Hemily, 2004). • Growth of population and jobs in the suburbs. Despite the revival of cities, suburban growth continues. The growth of both population and job concentration in the suburbs will lead to an increase in the demand for suburb-to-suburb travel by commuters (Cambridge Systematics, 1999). • Congestion. Transit can achieve substantial market pen- etration in congested corridors where it is given an advan- tage through separated right-of-way or significant transit priority. Commuter markets in corridors where transit is itself the victim of congestion, however, are likely to be volatile (Hemily, 2004). • Decrease in work trips as proportion of total travel. According to the 2001 National Household Travel Survey, Despite the acknowledged transformative potential of new technology, transit agencies often lag behind the commercial sector in adopting new technologies. In its 2006 Advanced Public Transportation Systems: State-of-the-Art Update, FTA reports several obstacles to faster deployment of new tech- nology, including inadequate cooperation among different departments, agencies, and jurisdictions; limited resources; and gaps in education and training in the integration, use, and maintenance of technologies (U.S.DOT-FTA, 2006). 3.1.3 Demographics and Society For many transit agencies, rapid changes in regional demo- graphics create an environment in which fundamental change must occur in order to remain relevant within the region’s transportation system. Some of these changes are region- specific. TCRP Report 53 (Cambridge Systematics, 1999) cites the importance of changing demographics as a force for change in transit agencies, as does APTA’s Trends Affecting Public Transit’s Effectiveness (Hemily, 2004). The more recent Long Range Strategic Issues Facing the Transportation Indus- try study draws similar conclusions for the transportation industry as a whole (ICF International, 2008). In particular, these reports identify population growth, an aging and more diverse population, and changing lifestyles as important forces for change that will redefine markets for transit: • Population growth—According to the U.S. Census Bureau, the population of the United States is projected to be 439 mil- lion by 2050, an increase of 46 percent from 2007. • Aging population—According to the Long Range Strategic Issues Facing the Transportation Industry study, more than 20 percent of the population of the United States will be 65 years or older by 2050, compared to 13 percent in 2008 (ICF International, 2008). • Immigration—Immigrants and their U.S.-born descen- dants are expected to provide most of the U.S. population gains in the decades ahead. Hemily observes that minori- ties and low-income households account for 63 percent of the nation’s transit riders and concludes that immigrants to the United States are one of the most promising market segments for transit (Hemily, 2004). As a consequence of these demographic changes, tran- sit agencies will find it necessary to tailor services to differ- ent customer segments with increasingly differing needs and expectations. 3.1.4 Sustainability, Energy, and Environmental Concerns Societal concerns about sustainability, energy, and environ- mental issues, particularly in relation to climate change, sug- gest a promising role for public transportation in the nation’s transportation system over the coming decades. With regard to

17 structures. Five of the most common governance structures are identified in “Regional Organizational Models for Public Transportation” (Booz Allen Hamilton, 2011): 1. State agencies include agencies owned and operated by a state, such as the Maryland Transit Administration. 2. General purpose authorities occur where state law per- mits the establishment of a transit agency outside of local government. General purpose authorities are usu- ally established by state-enabling legislation initiated by local actions and support. Examples include Ohio’s transit authorities and Florida’s transit districts. 3. Special purpose authorities are transit agencies created as a result of a specific act of the state legislature, such as the Bay Area Rapid Transit system, or the Utah Transit Authority (UTA). 4. Municipal agencies are transit agencies operated by exist- ing local governments, such as Charlotte Area Transit, King County Metro, or the San Francisco Municipal Tran- sit Agency. 5. Joint exercise of powers or joint powers authorities are spe- cial local arrangements, such as the Virginia Railway Express and the Trinity Railway Express in Dallas-Fort Worth. 3.2.2 Financial Support Mechanisms Agency sources of funds and the potential for funding establish the parameters within which change will happen. As described in TCRP Report 97 (Cambridge Systematics et al., 2009), funding for transit generally comes from farebox rev- enues and a combination of federal, state, and local govern- ment subsidies (see Table 3.2). In general, federal subsidies are applied to support capital needs, and state and local sub- sidies complement farebox and ancillary system revenue to support operations and contribute to capital investment. work travel constitutes fewer than 15 percent of all person trips and is decreasing. • Trip “chaining.” A growing share of commuting house- holds now have two or more workers, which has created greater pressure on time and a subsequent increase in linking work trips with trips to daycare, food shopping, or other errands. As a strategy to reduce total travel time, trip chaining has become common (Hemily, 2004). 3.1.6 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 transportation agencies in an era of limited resources. FTA’s National State of Good Repair Assessment, released in June 2010, found that 29 percent of all bus and rail assets are in either “poor” or “marginal” condition (U.S.DOT- FTA, June 2010a). Authors of the study estimate that the cost of bringing the nation’s rail and bus transit systems into a state of good repair is $77.7 billion in 2009 dollars. The challenge is multifaceted, with limitations in the techni- cal capacity of agencies to assess, maintain, and manage aging assets. Based on review of numerous agencies’ asset manage- ment practices, FTA issued a report in 2010 that highlights weaknesses in transit asset management practices (U.S.DOT- FTA, June 2010b). Few agencies have completed development of capital asset inventories intended to support long-term capital needs analysis. Only 6 of the 23 agencies included in FTA’s study have committed to conducting comprehensive asset condition assessments on an ongoing basis. Approaches to prioritizing capital investments also vary widely. 3.2 Effect of External Drivers on a Diverse Transit Industry In individual agencies, the relevance of particular exter- nal drivers for change will vary depending on the agency’s mission, organization, governance, source of revenue, loca- tion, and size. Public transportation organizations range in size from the massive New York Metropolitan Transporta- tion Authority, with an annual capital and operating budget of more than $12 billion, to thousands of small paratransit providers in rural communities throughout the country. The APTA 2010 Public Transportation Fact Book (APTA, April 2010) estimates that 7,700 public transportation systems operate in the United States, with about 5,300 of these orga- nizations dedicated to providing paratransit service for the elderly and disabled (see Table 3.1). 3.2.1 Governance Structures Transit agency governance has an influence over an agency’s ability to undertake fundamental change. Public transpor- tation agencies operate under a wide range of governance Mode Number of Systems Aerial Tramway 2 Automated Guideway Transit 7 Bus 1,100 Cable Car 1 Commuter Rail 23 Ferryboat 32 Heavy Rail 15 Inclined Plane 4 Light Rail 33 Monorail 2 Paratransita 7,200 Trolleybus 5 Vanpool 83 Totalb 7,700 a Partransit providers include an estimated 5,300 serving the elderly and persons with disabilities. b The total number of systems does not equal the sum of all modes listed because it includes a number of agencies that operate more than one mode of transit. Source: APTA, April 2010. Table 3.1. Number of public transportation systems by mode—2008.

18 In urbanized areas with more than 200,000 people, federal funding flows directly to “designated recipients,” but funds for transit in rural and small urban areas are administered by state departments of transportation (DOTs), which usually coordinate the distribution of funds with small urban transit agencies and rural transit providers. Source Total Dollars (Millions) Percent of Total Local (including agency levies) $19,547 35% State 11,941 22% Federal 9,628 17% Fares/Other Agency Generated 14,304 26% Total $55,420 100% Source: APTA, April 2010 Table 3.2. Public transportation funding sources (capital and operating)—2008 3.3 Drivers of Change Among Agencies Studied Among the potential drivers of change, those identified as most significant among the agencies studied are wide reach- ing, as summarized in Table 3.3. The most common drivers of change relate to funding and finance; sustainability, energy, and environmental concerns; travel, land use, and develop- ment patterns; and demographics and society. Technology and infrastructure condition are less notable as drivers of change among the agencies studied despite the attention given to these topics in recent years within the industry. It is within the context of these drivers that the agencies studied in this research undertook often impressive efforts to promote change within their organizations, often with the effect of shaping the overall significance of transit within their respective regions. Fu nd in g an d Fi na nc e N ew T ec hn ol og y D em og ra ph ic s a nd So ci et y Su st ai na bi lit y, En er gy , a nd En vi ro nm en ta l C on ce rn s Tr av el , L an d U se , a n d D ev el op m en t Pa tte rn s In fr as tr uc tu re C on di tio n Advance Transit (NH/VT) Capital Area Transportation Authority (Lansing, MI) Champaign-Urbana Mass Transit District (Champaign-Urbana, IL) Charlotte Area Transit System (Charlotte, NC) Chittenden County Transportation Authority (Burlington, VT) Metropolitan Transit System (San Diego, CA) Metropolitan Transportation Authority (New York, NY) Metro Transit (Minneapolis/St. Paul, MN) Regional Transportation District (Denver, CO) San Francisco Municipal Transportation Agency (San Francisco, CA) Southeastern Pennsylvania Transportation Authority (Philadelphia, PA) TransLink (Vancouver, BC) Utah Transit Authority (Salt Lake City, UT) Washington (Statewide) Total 11 4 7 10 12 4 Table 3.3. Drivers of change.