Partnerships Between Transit Agencies and Transportation Network Companies (TNCs) (2019)

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4 C H A P T E R 1 Background Transit agencies have long relied on private sector partners to assist in delivering services, looking to contractors for fixed-route and paratransit operations, and sometimes relying on taxi and/or human services transportation providers to increase the cost efficiency of ADA paratransit. Historically, both public and private operators offer mobility services to the general public and specialized populations. However, a multitude of new private mobility service providers has emerged in the last decade, as shown in Figure 1-1. These services leverage advances in mobile technology and digital plat- forms to connect customers with mobility options. A large class of these new providers is TNCs, which are the specific focus of this research effort.2 TNCs established a market for a new kind of on-demand mobility and grew market share quickly. With growing popularity, particularly among younger, more affluent, and more edu- cated individuals, coupled with aggressive expansion across the country, more than half of U.S. adults report they have heard of TNCs3 and 21% of adults in major cities personally use them.4 The impacts of TNCs on personal travel choice, vehicle miles traveled (VMT), transit ridership, and other outcomes are of great interest and importance to academic and industry audiences. As such, there are a number of recent studies and initiatives covering these topics, including: • FTA’s Mobility on Demand (MOD) Sandbox Program (2016):5 In 2016, FTA announced $8 million of funding for MOD public transportation projects. This funding is part of a larger research effort to support transit agencies as they integrate new mobility modes into their net- works. The 11 funded pilot programs will be evaluated on standardized performance metrics. • Between Public and Private Mobility: Examining the Rise of Technology-Enabled Transportation Services (2015): This special report was commissioned by the TRB Executive Committee to gather industry experts’ input on recommendations for policy development, regulation, trans- portation planning, and infrastructure investment as it relates to technology-enabled transpor- tation services, including TNCs. • TCRP Research Report 188: Shared Mobility and the Transformation of Public Transit (2016): Pre- pared for APTA, this report examines the relationship of technology-enabled shared mobility (including TNCs) to public transportation. It draws on interviews with transportation officials, a survey of shared mobility users, and analysis of transit and TNC capacity and demand. • Schaller Consulting, “Unsustainable? The Growth of App-Based Ride Services and Traffic, Travel and the Future of NYC” (2017): This independently produced report leverages New York City’s uniquely available data on taxi and TNC trip mileage and trips. It concludes that TNCs have added to VMT in New York City; that most growth occurred in northern Manhattan Introduction

Introduction 5 Service Type Stop Configuration Service Configuration Ride Request Format Fare Collection Access Requirements Private Market Services On-demand exclusive services (unshared taxis or TNCs) One-to-one Demand-responsive On-demand Online/app Cash Credit Technology restrictions On-demand pooled services (shared taxis or TNCs) Many-to-many Demand responsive Zone route On-demand Online/app Cash Credit Technology restrictions Prearranged route- or zone-based services (microtransit) Few-to-few Few-to-one Fixed-route Zone route Prearranged Ticket Online/app Technology restrictions Flexible route-based services (jitneys, dollar vans) Many-to-one Few-to-one One-to-one Fixed-route Route deviation Request stop Street hail No arrangement Cash Ticket General public Sponsored Services Employer-based commuter services One-to-one Fixed-route Request stop No arrangement Free/subsidized Online/app Ticket Employee only Property-based services Few-to-one One-to-one Fixed-route Request stop No arrangement Prearranged Free/subsidized Online/app Ticket Affiliated only Figure 1-1. Taxonomy of mobility service providers, based on TCRP Research Report 196, Table 1. and the outer boroughs; and that growth in Manhattan was concentrated in the morning and afternoon peaks and in evenings and weekends. • UC-Davis Research Report 17-07, “Disruptive Transportation: The Adoption, Utilization, and Impacts of Ride-Hailing in the United States” (2017): This study uses a survey of a repre- sentative sample of residents of seven major U.S. cities to understand the adoption, utilization, and impacts of TNCs. It finds that 49 to 61% of TNC trips would have otherwise been taken by transit, walking, or biking, or not taken at all, and states that TNCs are likely contributors to a network-wide increase in VMT. • TCRP Research Report 195: Broadening Understanding of Interplay Among Public Transit, Shared Mobility, and Personal Automobiles (2018): This report uses data acquired in partner- ship from a TNC in addition to information gathered through a shared mobility and tran- sit user survey and four surveys conducted by transit agencies in Atlanta, the San Francisco Bay Area, New Jersey, and Washington, D.C. It might help answer the question of whether to enter into partnerships with TNCs. • TCRP Research Report 196: Private Transit: Existing Services and Emerging Directions (2018): By studying the spectrum of private transit services and offering case studies, this report informs public and private stakeholders of the ways these services address transportation needs in a variety of operating environments. It includes several case studies of microtransit partnerships. • TCRP Legal Research Digest 53: Legal Considerations in Relationships Between Transit Agencies and Ridesourcing Service Providers (2018): This comprehensive review of regulatory responses to TNCs finds that there exists a “patchwork” of rules and regulations across jurisdictions,

6 Partnerships Between Transit Agencies and Transportation Network Companies (TNCs) and that partnerships have developed both contractually and non-contractually. The digest’s intended audience is transit agency legal staff, but planning staff will find it a useful resource on topics of procurement, contractual provisions, compliance with federal legislation, litiga- tion associated with TNCs, and risk management issues. • Schaller Consulting, “The New Automobility: Uber, Lyft, and the Future of American Cities” (2018): Relying on recently published research and new data from the National Household Travel Survey, this report finds that TNCs compete mainly with transit, walking, and biking; that shared TNC rides have not offset the VMT impacts of exclusive ride TNC trips; and that TNCs can be a valuable extension of public transit. • SUMC Shared Mobility Toolkit (2016): Prepared by the Shared-Use Mobility Center (SUMC), this resource includes three interactive tools to “help cities and public sector leaders better realize the benefits of shared mobility.” The Shared Mobility Policy Database includes hundreds of shared mobility policies, studies, and strategic plans from around the country. The Mapping and Opportunity Analysis Tool identifies where mobility services are lacking and which modes might support mobility in those areas. The Benefits Calculator models greenhouse gas, VMT, and other benefits tied to shared mobility growth. This set of research provides the transit industry with the primary considerations transit agen- cies must have in mind when deciding whether or not to establish a partnership with one or more TNCs. While the existing body of literature includes policy recommendations, no one study has yet to identify specific, practical guidance for transit agencies that have decided to pursue partnerships. This report fills that gap. Motivations for Partnerships Between Transit Agencies and TNCs Our research reveals several motivations for partnerships between transit agencies and TNCs. These motivations include increasing cost effectiveness, demonstrating innovation, avoiding major capital investments such as park-and-rides, and increasing mobility for existing and/or new transit customers. TNCs are motivated to collaborate with transit agencies for several reasons as well. These part- nerships increase the visibility of TNCs to potential new customers, demonstrate shared values and good-faith efforts to solve local mobility challenges, reveal the constraints and needs faced by transit agencies, and address shared challenges such as pick-up/drop-off queueing. To date, these motivations have resulted in partnership models that vary according to the target customer and the purpose of the resulting program (e.g., suburban mobility, first mile/ last mile access, late night transportation, or alternative paratransit option). While partnerships between transit agencies and private mobility providers are not new, partnerships with TNCs present new opportunities and challenges as the partners navigate toward mutually beneficial program models. Opportunities • In some cases, transit agencies and TNCs can support each other’s growth. TNCs benefit from policies and infrastructure designs that support or encourage first mile/last mile access. Likewise, insofar as TNCs have the potential to shift some trips out of personal autos and into shared trips linked to transit hubs, transit agencies have the potential to capitalize on down- stream effects of mode shift away from drive-alone. • Unlike most transit agencies, TNCs collect data on the specific origins and destinations of individual customers, enabling a keen understanding of localized mobility patterns. As man- agers of mobility, transit agencies are mutually interested in this information, which could be used to refine transit networks. Further, the data orientation of TNCs has the potential to

Introduction 7 demonstrate specific cost savings, mobility improvements, or other outcomes of interest to transit agencies. • TNCs offer several features not found among other private mobility service providers. These include the ability to request and pay for a ride exclusively through a smartphone; the ability to see the location of the vehicle on its way to pick up a customer; the ability to review and rate both customers and drivers through an app; and the ability to set prices dynamically based on-demand. These features might help transit agencies achieve goals beyond the provision of trips, such as improvements to customer satisfaction. • TNCs are customer-service oriented. TNCs have the ability to revoke drivers’ ability to participate in the platform based on customer reviews. TNCs also have the ability to revoke customer privileges based on the reviews of their driver-partners. • TNC fleets are independent of transit agency–owned vehicles. TNC drivers typically use their own personal vehicles for service, rather than a company-owned, maintained, and/or insured fleet vehicle. This provides an opportunity to right-size vehicles for context and need, offering potential cost savings and other benefits. • TNCs are data-oriented. Transit agencies are interested in partnerships for specific, outcome- driven motivations. TNCs’ data can improve transit agencies’ understanding of progress toward specific goals, such as cost savings, increased access to transit, or increased customer satisfaction. Challenges • Some transit agencies considering partnering with a TNCs have expressed uncertainty about the interpretation of and adherence to existing federal requirements (e.g., Title VI of the Civil Rights Act, the ADA, and National Transit Database (NTD) reporting). Since the earliest partnerships were started, FTA has made significant progress in clarifying what is required. Some outstanding questions on partnership requirements were addressed in FTA guid- ance, which reminded transit agencies of their obligation to ensure equity and access when developing partnerships to improve mobility at lower cost. The letter included clarifying language indicating that the use of federal funds triggers Title VI and re-confirmed that the ADA applies to partnerships regardless of the source of funds. Still, though most transit agencies use local funding sources and structure partnerships to make accessible vehicles, cash pay, and phoned-in requests available, there is limited data to gauge how well people with disabilities and other protected classes are being served in these pilots. • Though operational information is available, TNCs seek protection of their data. Historically, coming to agreement on which data points are needed and what can be shared has been a common challenge within prospective transit agency–TNC partnerships. • For its driver-partners, TNCs review driving records and criminal backgrounds through state DMVs and third parties. Unlike other commercial drivers, TNCs’ drivers do not undergo fingerprinting, physical exams, or drug testing, and generally do not receive any specialized sensitivity training (except in a few cases in which the TNC partners with a local non-profit or has structured its business model to target these customers). Unless multiple options are made available to customers (e.g., two TNCs or a TNC and a taxi), recipients of federal fund- ing must require drug and alcohol testing of drivers.6 TNCs’ less comprehensive background check process poses a liability concern to some transit agencies considering partnerships, sometimes large enough for the transit agency to delay or forego an agreement. • TNCs’ original business model was business-to-consumer, not business-to-government. Unlike private operators hired to provide fixed-route public transit or ADA paratransit services, TNCs have attracted a large customer base on their own, outside of partnerships with transit agencies. As such, their businesses are not structured for government contracting. Thus, a partnership with a transit agency that often has varying regulations can pose a hurdle to reaching basic agreement terms.

8 Partnerships Between Transit Agencies and Transportation Network Companies (TNCs) Research Objective As described in the original call for proposals, “Research is needed on existing and potential collaborations and partnerships between public transportation and TNCs to increase under- standing and support effective decision-making in this emerging area.”7 As such, the objective of this research is to produce practical guidance for decision-makers to enhance understand- ing and to facilitate informed decisions on where, when, and how partnerships between transit agencies and TNCs should be considered and pursued. This report, based on a review of 20 past, current, and in-development partnerships between transit agencies and TNCs, covers the following points: Chapter 4: Case Studies • Motivations for entering into partnerships • Regulatory considerations examined as part of the partnership design, including identifica- tion of barriers, risks, and legal restrictions at the federal, state, and local levels that make agreements between transit agencies and TNCs challenging • Methods for marketing pilot programs to customers • Methods and metrics to measure outcomes or indicate success of partnerships • Funding mechanisms and budgets used to establish partnerships Chapter 5: Findings • Data and information requirements of transit agencies and TNCs • The range of benefits and outcomes that transit agencies, communities, and customers have pursued through partnerships • The challenges faced by transit agencies as technology-enabled services are implemented and expanded Chapter 6: Partnership Playbook • Options for structuring partnerships • Strategies for mitigating barriers, risks, and legal restrictions, implemented and under consid- eration, that may ease the development of partnerships • Mechanisms for accountability for TNCs, whose ability to be responsive to public transporta- tion agencies may be affected by market forces Chapter 7: Suggestions for Further Research • Suggestions for further research, such as imaginative future scenarios, beyond current experience Key Terms This report adopts shared mobility definitions as used by the FTA. Definitions not covered by the FTA are acknowledged in the endnotes. Key terms used in this report include: • Microtransit: “IT-enabled private multi-passenger transportation services [ . . . ] that serve passengers using dynamically generated routes, and may expect passengers to make their way to and from common pick-up or drop-off points. Vehicles can range from large SUVs to vans to shuttle buses. Because they provide transit-like service but on a smaller, more flexible scale, these new services have been referred to as microtransit.”8 • MOD: An integrated and connected multimodal network of safe, affordable, and reliable transportation options that are available and accessible to all travelers. Also used to refer to

Introduction 9 the MOD Sandbox Program, which “provides a venue through which integrated MOD concepts and solutions—supported through local partnerships—are demonstrated in real-world settings.” • NTD: “A reporting system that collects public transportation financial and operating information.” • Paratransit: “Comparable transit service required by the ADA for individuals with disabilities who are unable to use fixed-route transportation systems. [49 CFR 37.3]” • Shared-Use Mobility (or Shared Mobility): “Transportation services that are shared among customers, including transit agencies; taxis and limos; bike sharing; car sharing (round-trip, one-way, and personal vehicle sharing); ridesharing (car-pooling, van-pooling); ridesourc- ing; scooter sharing; shuttle services; neighborhood jitneys; and commercial delivery vehicles providing flexible goods movement.” • Transit (also referred to as public transportation): “Transportation by a conveyance that provides regular and continuing general or special transportation to the public, but does not include school bus, charter, or intercity bus transportation or intercity passenger rail transpor- tation.” This report considers TNC partnerships with transit agencies that report to the NTD. • TNC: “Provides prearranged transportation services for compensation using an online- enabled application or platform (such as smartphone apps) to connect drivers using their personal vehicles with passengers.”9 • WAVs: a vehicle shall be considered to be readily accessible to and usable by individuals with disabilities if it meets the requirements of [§ 37.7(a)] and the standards set forth in Part 38 of this title.” The full list of the FTA’s definitions can be found on its website, https://www.transit.dot.gov/ regulations-and-guidance/shared-mobility-definitions and https://www.transit.dot.gov/ntd/ national-transit-database-ntd-glossary.