transit sustainability project commission workshop april 28, 2011

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Transit Sustainability Project Commission Workshop April 28, 2011

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Page 1: Transit Sustainability Project Commission Workshop April 28, 2011

Transit Sustainability Project

Commission WorkshopApril 28, 2011

Page 2: Transit Sustainability Project Commission Workshop April 28, 2011

2

Today’s Agenda – Transit Sustainability Project

a. Introduction

b. Financial Data Summary

c. Draft Financial Principles

d. Look Ahead to Service Delivery and Institutional Issues

Page 3: Transit Sustainability Project Commission Workshop April 28, 2011

3

Introduction

3

Steve HemingerExecutive Director

Page 4: Transit Sustainability Project Commission Workshop April 28, 2011

4

Financial: Short and Long Term Problem

$17.2 b

$8 b

$0

$10

$20

Total 25-Year

Operating Deficit

Total 25-Year

Capital Deficit

Projected Deficits Transportation 2035

Page 5: Transit Sustainability Project Commission Workshop April 28, 2011

5

Why now?

Severe budget shortfalls in the immediate term.

Service cuts are degrading the transit system.

Long term viability of the existing system is at risk, let alone the ability of the region to provide service expansion.

Need to provide a system that more people will use – customer-focused, not agency-centric.

A robust transit system is fundamental to the mode shift needed for the Sustainable Communities Strategy per SB 375.

The region has a significant opportunity to alter course as budget situation improves.

Page 6: Transit Sustainability Project Commission Workshop April 28, 2011

6

Project Approach

Financial Service Institutional

Technical Analysis

18-month project schedule

Commission established Select Committee to inform the project

Technical Analysis supported by advisory committees

Project Steering Committee – transit general managers, labor, advocacy community, business community

Staff Technical Advisory Committees – financial and service planning staff from transit agencies and CMA representatives

Public outreach as technical analysis advances

Page 7: Transit Sustainability Project Commission Workshop April 28, 2011

7

FinancialData Summary

7

Alix Bockelman, DirectorProgramming and Allocations

Page 8: Transit Sustainability Project Commission Workshop April 28, 2011

8

Bay Area Large Operators: Percent Change in Cost and Performance Indicators (1997 – 2008)

Source: National Transit Database, “Big 7” only. Excludes ferry, cable car and paratransit.

Page 9: Transit Sustainability Project Commission Workshop April 28, 2011

9

Major Modes: Aggregate Percent Change in Cost & Performance Indicators (1997-2008, adjusted for inflation)

27%34%

40%

79%

38%

4%

63%

74%

-8%

43%

55%

40%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

All Bus Heavy Rail Commuter Rail Light Rail

Operating Costs Revenue Vehicle Hours Unlinked Passenger Trips

Source: National Transit Database, “Big 7” only. Excludes ferry, cable car and paratransit.

SFMTA, AC Transit,VTA, SamTrans,

GGBHTDSFMTA, VTABART Caltrain

Page 10: Transit Sustainability Project Commission Workshop April 28, 2011

10

2008 Operating Costs – “Big 7” Operators Nearly $2 billion

Source: National Transit Database, “Big 7” only. Includes ferry, cable car and paratransit.

Wages and fringe benefits account for over 75% of O&M costs.

Page 11: Transit Sustainability Project Commission Workshop April 28, 2011

11

Operator Base Wage Consistent with Peer Agencies

Source: "ACCRA Cost of Living Index, 2009 Annual Average Data," prepared by the Council for Community and Economic Research, as cited by Dash &

Associates. Dash & Associates, Agency data* As of July 1, 2010** As of June 2009

Hou

rly W

age

Top Hourly Wage Rates Adjusted to Bay Area Cost of Living

Page 12: Transit Sustainability Project Commission Workshop April 28, 2011

12

Operator Wages – Summary Findings

Region’s base operator wage rates are higher than many peers, but when adjusted for the cost of living, appear reasonable

Increases in the base wage rates were higher than inflation, but lower than the overall regional wage index

Total wage costs grew faster than inflation:

Also affected by work rules, which are distinct from base wage rate

Staffing levels, which affect total wage costs

Recommendation: no further analysis of operator base wage rate, and more analysis of work rules and staffing levels

Page 13: Transit Sustainability Project Commission Workshop April 28, 2011

13

Review of Fringe Benefit Cost Trends

13

The “Big 7’s” total fringe costs have increased from $355 million in 1997 to $601 million from 1997 to 2008. Increase of 69% after adjusting for inflation.

“Big 7” operators;Source: National Transit Database

$0

$100

$200

$300

$400

$500

$600

$700

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Mill

ions

, 200

8$

Page 14: Transit Sustainability Project Commission Workshop April 28, 2011

14

Peer Analysis of Funded Pension Liability (as of June 2008)

Sources: Agency CAFRs[1, 2] Data as of June 30, 2008, from Pew Center on the States report entitled “Trillion Dollar Gap,” dated February 2010. [3] Based on S&P 500 Indices

14

0%

20%

40%

60%

80%

100%

120%

SFMTA

Samtra

ns

City o

f San

Jos

e

BART

Gold

en G

ate

Mar

in Coun

ty

Santa

Cla

ra C

ount

y

State

of C

alifo

rnia

[1]

Alam

eda

Count

y

Avera

ge o

f U.S

. Sta

te G

over

nmen

ts [2

]

Privat

e Indus

try [3

]VTA

City o

f Oakla

nd

San M

ateo

County

AC Tra

nsit%

Fu

nd

ed

Pe

nsi

on

Lia

bili

ty The region’s pension plans are mostly funded; however, unfunded costs in the region total $482 million.

Page 15: Transit Sustainability Project Commission Workshop April 28, 2011

15

Fringe Benefits – Summary Findings

Fringe benefits are a major cost driver both over the short and long term

Both health care costs and pension obligations are areas of concern, requiring increasing percentages of agencies’ operating budgets over time

Pension funding appears to be in relatively good shape; however, unfunded liability of nearly $500 million remains (as of June 2008)

Lower projected investment returns would increase unfunded pension liabilities

Issue is not unique to transit agencies

15

Page 16: Transit Sustainability Project Commission Workshop April 28, 2011

16

Work Rules Analysis

Current rules are the result of a long history of collective bargaining agreements and agency specific practices

Rules impact how transit service is delivered and the cost of delivering service

Scenarios tested provide possible areas of consideration and do not represent agency policy directive

16

Work Rule Category Proposed Test

Interlining/Layovers Target 15% layovers

Guarantee/Overtime Weekly guarantee/overtime (40 hours)

Report Times 10 minute sign on and 5 minute sign off

Meal Times 30 min. unpaid meal breaks as allowed in Wage Order 9

Split Shifts Spread premium from 11th hour; Max 2 hour split break; No pyramiding

Part Time Maximum 7.5 hours per day and up to 20% of full time roster assignments

Extraboard/Absenteeism 1-5% reduction in Extraboard staff

Holidays One less holiday on full service day

Service Contracting Contract operation of one division or service group

Page 17: Transit Sustainability Project Commission Workshop April 28, 2011

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Annual Work Rule Cost Saving Estimates

17

Interlining/Layovers , $8M (19%)

Meal Breaks$3M (7%)

40 Hour Guarantee/Overtime ,

$10M (23%)

Report Times , $0.5M (2%)

Split Shifts$6M (14%)

Part-time $7M (16%)

Extraboard/ Absenteeism $1.5M (5%)

Holidays$1M (2%)

BART Various Cost Savings

$5M (12%)

Total Estimated Annual Savings: $38M – $46M

Figures in chart based on mid-range estimates

Savings result from:• Reduced overtime• Reduced time paid when not working• No reductions in service or base wage rate

Page 18: Transit Sustainability Project Commission Workshop April 28, 2011

18

Work Rule Cost Analysis – Summary Findings

Areas of potential savings vary significantly among agencies

Key work rule changes can potentially save significant operating costs by removing unproductive time

Some improvements are possible under existing contracts

Actual implementation of specific work rule changes is under the purview of transit agencies and labor representatives during the collective bargaining process

18

Page 19: Transit Sustainability Project Commission Workshop April 28, 2011

19

Business Model – Contracting

Many examples of service contracting throughout California and the nation

Some are legacy (e.g. SamTrans)

Others are more recent transitions intended to lower overall operating costs

Mix of 100% or partial service contracting

Savings result from both:

More efficient work rules and practices

Lower hourly rates and benefits

Service quality considerations raised as a potential issue

19

Page 20: Transit Sustainability Project Commission Workshop April 28, 2011

20

- Directly Operated - Contracted

Contracted portions of Golden Gate,and VTA services not included.

Source: National Transit Database

20

$185 $166 $156 $154

$107 $100 $92$99$111

$171

$0$20$40$60$80

$100$120$140$160$180$200

GoldenGate

Sam Transdirectly

operated75% ofservice

SFMTA AC Transit VTA SamTranscontracted

25% ofservice

Santa Rosa CCCTA FAST LAVTA

All agencies use union drivers.

Fixed Route Bus Cost and Service Delivery Comparison

Cost per vehicle service hour FY09Fixed route bus only

Page 21: Transit Sustainability Project Commission Workshop April 28, 2011

21

$171

$143

$128$122

$118

$98 $96

$111

$68

$81$88

$58 $57 $60

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

SamTrans DenverRTD

LAMetro

MetroHouston

OCTA RiversideRTA

San DiegoMTS

Directly Operated Cost per Hour Contracted Cost per Hour26% 48%33%6%120%7%47%

21

Service Contracting Examples

Source: 2009 NTD

Percent Contracted:

1OCTA moving to 30% outsourcing

Page 22: Transit Sustainability Project Commission Workshop April 28, 2011

2222

Annual Savings from Partial Service Contracting

Total Estimated Annual Savings: ~$30M – $40M

System Scenario TestedPercent

Contracted

AC Transit TransBay express and school services 14%

BARTwould require complete contracting (all-or-nothing); was excluded from analysis

0%

Golden Gate two smaller divisions 30%

SamTransalready contracts 28%; Tested increase of one percent to currently allowed limit

29%

SFMTA smallest bus division 13%

VTA smallest bus division 24%

TOTAL 19%

Page 23: Transit Sustainability Project Commission Workshop April 28, 2011

23

Section 13(c) Considerations

Section 13(c) requirements may impact potential cost savings

Each transit agency has its own 13(c) agreements with different requirements and conditions

Section 13(c) provides certain protections to existing transit employees who are affected by federally-funded projects

A high-level review of 13(c) is being undertaken as part of the TSP to assess the potential impact of Section 13(c) requirements on any proposed recommendations

A review of each transit agency’s Section 13(c) provisions could be undertaken based on the results of the initial analysis and proposed recommendations coming out of the TSP

23

Page 24: Transit Sustainability Project Commission Workshop April 28, 2011

24

Source: National Transit Database 2008

Note: Data includes all modes except Vanpools, Paratransit, SFMTA Cable Car, and Ferry.Bay Area Large Operators: BART, SFMTA, SCVTA, GGBHTD, AC Transit, and SamTrans

Administrative Cost Comparison ($ adjusted to SF-Oakland 2008 CPI)

Operator Admin Cost ($ in thousands)

RVH (in

thousands)

Unlinked Passenger Trips

(in thousands)

Admin Cost per RVH

Admin Cost per Trip

Admin Cost as a % of Total Operating

Cost

Bay Area Large Operators

$326,676 9,322 459,510 $35.0 0.71 19.9%

CTA, Chicago $117,676 7,730 526,336 $15.2 0.22 9.4%

LACMTA, Los Angeles

$185,442 7,823 474,228 $23.7 0.39 16.0%

King County, Seattle

$78,529 3,096 118,692 $25.4 0.66 16.5%

MBTA, Boston $90,118 3,171 368,954 $28.4 0.24 9.7%

MTA, New York $614,524 15,362 3,330,949 $40.0 0.18 11.7%

SEPTA, Philadelphia $138,843 4,652 339,168 $29.8 0.41 15.1%

WMATA, DC $321,539 4,134 423,524 $77.8 0.76 15.8%

MARTA, Atlanta $76,686 2,356 150,503 $32.5 0.51 19.9%

Group Avg $34.1 0.42 14.3%

Staffing Levels: Administrative Cost Relative to Peers

24

Page 25: Transit Sustainability Project Commission Workshop April 28, 2011

25

Staffing Levels – Summary Findings

Findings

Bay Area operators dedicate a higher percentage of operating budgets to administrative costs than peers

Bay Area administrative cost per service unit is mixed compared to peers

Based on 2008 NTD data; many agencies have since experienced layoffs and hiring freezes, so a more careful look is needed

Recommended next steps for staffing levels

Analyze further as part of institutional analysis:

Collect more detailed and current data from all agencies

Refine peer analysis framework

25

Page 26: Transit Sustainability Project Commission Workshop April 28, 2011

26

Cost Containment Strategies Summary

Potential annual regional savings if cost containment strategies applied regionally: approximately $235 million

Represents approximately 10 to 12% of annual operating costs

26

Cost Category Potential Regional Savings

Fringe Benefits $65 million

Work Rules and Business Model $80 million

Administrative Staff Costs $90 million*

Total $235 million

*More detailed analysis currently underway; estimated savings will be updatedas information is available.

Page 27: Transit Sustainability Project Commission Workshop April 28, 2011

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Revenue Trends

27

Page 28: Transit Sustainability Project Commission Workshop April 28, 2011

28

"Big 7" Revenue Composition ($ in billions)

Source: MTC Statistical Summaries

28

Fare Revenue

Sales Tax

Property Tax

STA

FederalOther

SF General Fund and Parking

$-

$0.5

$1.0

$1.5

$2.0

$2.5

1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Revenue picture is different forsmaller operators

Page 29: Transit Sustainability Project Commission Workshop April 28, 2011

29

Bay Area "Big 7": Farebox and Sales Tax Revenues(Figures in $ millions)

$-

$100

$200

$300

$400

$500

$600

1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Mill

ion

s

Sales Tax ($1997) Farebox ($1997)

Source: MTC Statistical Summaries

29

Observations:

Sales Tax Revenue unpredictable and lower in real terms than in 1997; decreasing trend likely.

Farebox revenue higher in real terms and more in agency control

Page 30: Transit Sustainability Project Commission Workshop April 28, 2011

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Draft Financial Principles

30

Page 31: Transit Sustainability Project Commission Workshop April 28, 2011

31

Possible Approach

MTC could set performance targets for:

Improved efficiency

Controlled cost growth

Stable operating revenues

Each transit agency/board would decide what specific changes (e.g. work rules, pension programs, administrative costs, etc) to make in order to meet those targets

Page 32: Transit Sustainability Project Commission Workshop April 28, 2011

32

Financial Principles and Targets Framework

Principles

Example Strategies

Targets

32

Page 33: Transit Sustainability Project Commission Workshop April 28, 2011

33

Draft Financial Principles

Draft Principles

#1Improve

Operating Efficiency

#3Stabilize

Operating Revenues

#2Control

Cost Growth

33

Targets

Reduce cost per hour of service by 10% (after adjustingfor service fluctuations)

Potential target of ~10% reduction in operating costs appears reasonable

Page 34: Transit Sustainability Project Commission Workshop April 28, 2011

34

Draft Financial Principles

Draft Principles

#1Improve

Operating Efficiency

#3Stabilize

Operating Revenues

#2Control

Cost Growth

34

Targets

Keep any real increases in operating cost per hour/mile

equal to or less than increases in amount of service provided

Page 35: Transit Sustainability Project Commission Workshop April 28, 2011

35

Draft Financial Principles

Draft Principles

#1Improve

Operating Efficiency

#3Stabilize

Operating Revenues

#2Control

Cost Growth

35

Targets

a) Secure increased and more reliable funding equal to X% of regional operating costsb) Create regional operating reserve of X% annual operating costs as hedge against revenue fluctuations

Page 36: Transit Sustainability Project Commission Workshop April 28, 2011

36

Performance Framework

Incentive-based funding allocations

Reward operators that meet certain performance thresholds with regional discretionary funds:

TDA (~$270 million annually)

STA Population-based (~$30 million annually)

FTA funds (~$350 million annually)

Condition new funds on meeting certain performance standards

Regional gas tax (estimated to generate roughly $300 million annually)

County sales taxes

Other new dedicated fund sources

Figures based on FY2012 Fund Estimate and recent FTA appropriations.

Page 37: Transit Sustainability Project Commission Workshop April 28, 2011

37

Discussion of Draft Principles

How do we make principles and targets meaningful?

Condition funding on meeting targets:

Option A: Any new regional funding source

Option B: Any increase in funding from today’s levels

Option C: Some portion of current funds

MTC role in achieving regional targets

Page 38: Transit Sustainability Project Commission Workshop April 28, 2011

38

Look Ahead to Service Delivery

and Institutional Issues

38

Carolyn ClevengerTSP Project Manager

Page 39: Transit Sustainability Project Commission Workshop April 28, 2011

39

Service Analysis

System-wide:

Evaluate existing performance

Regional Services:

Assessment of transit competitiveness

TransBay, Express, and Feeder Services

Analysis of ADA-paratransit

Sub-regional Service Analysis:

East Bay and Peninsula

Page 40: Transit Sustainability Project Commission Workshop April 28, 2011

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Service Outcomes

System-wide:

Consistent performance metrics to evaluate service performance

Regional Services: Strategic plans for TransBay, Express

and Feeder services

Evaluate where transit is most competitive relative to market demand, land use, etc.

ADA-paratransit delivery options

Sub-regional Service Analysis: Service plans for Inner East Bay and

Peninsula

Strategies to improve service delivery and increase rider convenience of multi-operator services

Page 41: Transit Sustainability Project Commission Workshop April 28, 2011

41

Performance Metric Framework

Evaluate the existing system performance using consistent metrics

Transit services will be differentiated by type of service (e.g. regional all-day services, urban trunk, local network, community bus, etc.)

Performance metrics related to service effectiveness (productivity) and service efficiency (cost effectiveness) will be used to evaluate current system performance by service type

Metrics can be used to evaluate system performance over time, and inform future MTC investment decisions and performance-based allocation policies

Page 42: Transit Sustainability Project Commission Workshop April 28, 2011

42

Identify Partnerships with Local

Jurisdictions

Applications of Transit Competitiveness Index (TCI)

Support Public Outreach & Funding

Proposals

Transit Agency Resource Allocation

Expand competitive markets

Reduce service in uncompetitive markets

Land use density

Parking Price & Supply

Transit priority on local streets

Pedestrian environment

Voters

Transit supporters/advocates

Neighborhoods

Page 43: Transit Sustainability Project Commission Workshop April 28, 2011

4343

TCI Example: VTA Comprehensive Operations Analysis

< 25

25 - 50

50 - 100

100 - 200

> 200

DestinationOrigin Both

Page 44: Transit Sustainability Project Commission Workshop April 28, 2011

444444

44

Core Network

Comprehensive Operations Analysis

BRT Corridors

TCI Example: VTA Comprehensive Operations AnalysisCore Network Routes

Page 45: Transit Sustainability Project Commission Workshop April 28, 2011

45

Sub-Regional Service Analysis – Inner East Bay

Focus on BART and AC Transit

Collaborative effort with transit agency staff actively engaged to analyze transit service in the Inner East Bay

Outcomes:

Comprehensive service and market review of AC Transit and associated BART service

Service planning concepts that:

examine coordination opportunities between AC and BART services

identify gaps and/or duplication in terms of service coverage (by location and/or time of day)

identify resource requirements for service improvements

Page 46: Transit Sustainability Project Commission Workshop April 28, 2011

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VTA and SFMTA recently completed comprehensive evaluations of their respective service areas; SamTrans is currently undertaking a similar effort

TSP effort will focus on:

Trips between service areas

Connections with Caltrain

Implementation of recommendations from previous efforts

Will work with transit agency staff to identify priority areas for analysis

Sub-Regional Service Analysis – Peninsula Caltrain Corridor

Page 47: Transit Sustainability Project Commission Workshop April 28, 2011

47

Service Analysis Discussion

Performance metrics:

Performance-based allocation policies?

What options would you like us to consider?

Regional Analysis:

Should MTC play a more active role in defining and funding regional services (TransBay, Express and Feeder services)?

In addition to the TCI tool, what additional tools/information would be useful to evaluate services?

Sub-regional Analysis:

Are there specific issues in the Inner East Bay or Peninsula you would like us to consider?

Page 48: Transit Sustainability Project Commission Workshop April 28, 2011

48

Institutional Analysis

48

Page 49: Transit Sustainability Project Commission Workshop April 28, 2011

49

Regional Transit Network

Examples:

Transbay

AC, BART, ferries

Peninsula

BART, Caltrain,

SamTrans, VTA

East Bay Suburban

Marin/Sonoma

Multiple Services/Shared Service Areas

Page 50: Transit Sustainability Project Commission Workshop April 28, 2011

50

Bay Area has 28 transit agencies and 228 transit decision makers

11 Service providers governed by local City Councils or County Board of Supervisors

15 Districts/Authorities/Agencies with Appointed Members

2 Districts with elected board of directors

Service and fare policy decisions are understandably agency-centric

Challenge at regional level is to knit together a network that works for passengers

Complex Decision-making Structure

Page 51: Transit Sustainability Project Commission Workshop April 28, 2011

51

Examples of Recent Institutional Challenges

Caltrain financial plan

Financial reliance on three distinct boards Competing needs and priorities

SMART implementation

Multiple jurisdictions System overlays existing inter-county and local bus services Competing needs and priorities

Clipper implementation

Multiple and complex fare structures Inconsistent policies and practices for customers

Page 52: Transit Sustainability Project Commission Workshop April 28, 2011

52

Institutional Analysis Approach

Analyze opportunities and challenges of different institutional models

Functional consolidation or coordination

East Bay Paratransit Consortium LAMTA model

Agency consolidation

Geographic: ACTC and SolTrans examples Modal consolidation: Regional Rail Plan concepts Multi-modal: WMATA model Multi-functional: VTA – combined CMA, sales tax, and transit

agency

Page 53: Transit Sustainability Project Commission Workshop April 28, 2011

53

Institutional Discussion

What information would be helpful for you in evaluating institutional structures?

Are there specific models or questions you would like us to focus on?

How should we effectively engage local transit agency boards and local stakeholders?