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HomeMy WebLinkAboutPresentation: Transit Opt Out ~ MEETING DATE: AGENDA #: PREPARED BY: Hi!. CITY COUNCIL AGENDA REPORT AGENDA ITEM: PRESENTATION: PRIOR LAKE PUBLIC TRANSPORTATION (Mark Ryan) PRESENTATION: The City Council has directed that the staff research and recommend the most cost-effective means to provide public transit services in Prior Lake. Accordingly, I have asked Mark Ryan, with the firm of URS, BRW, Inc., to prepare a report on this subject which will provide the Council with the information it needs to determine if the City could effectively withdraw from the MVT A and still provide cost-effective transit services to the community. Mr. Ryan has considerable experience in public transit. He worked a number of years for the Regional Transit Board administering contracts with opt-out transit systems. He has also worked for various bus companies operating transit systems. Mr. Ryan is an authority on public transit and continues to have effective working relationships with providers and Metropolitan Council representatives who are responsible for public transit system administration. Mr. Ryan's report seeks to answer the following fundamental question: Can Prior Lake initiate its own transit system effective January 1, 2002 which provides the same level of transit to the community as presently received at a cost equal to or less than the funding annually required by the MVTA? Mr. Ryan's report is attached for your information. In a nutshell, using very conservative assumptions, Mr. Ryan concludes that Prior Lake could provide services identical to the MVTA at a lesser cost than we presently pay. He further recommends a work plan for implementing the service beginning 2002. The Council should review Mr. Ryan's written and oral reports and request clarification as desired. As a separate agenda item, the Council has received a resolution withdrawing from the MVTA effective December 31, 2001 which is recommended for adoption. 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 1:\COUNCIL\AGNRPTS\2001\TRANSIT.DOCAN EQUAL OPPORTUNITY EMPLOYER r T 1 ~ lLlII. BRW, Inc. MEMORANDUM To: Frank Boyles From: Mark Ryan Date: January 3,2001 Subject: Prior Lake Transit Service We have researched your question on the feasibility ofthe City of Prior Lake directly administering the transit services currently provided through the Minnesota Valley Transit Authority, (MVTA). Specifically, we evaluated whether or not the City of Prior Lake can provide the same level and. quality of transit services as is being provided under the current arrangement with MVTA. Our findings are based on discussions with representatives from the Metropolitan Council, potential transit providers and City staff. We also reviewed information provided by MVT A on its Prior Lake transit operations. In summary, we have concluded that there are sufficient funds available to the City to at least duplicate the service it currently receives through MVTA. In addition to a fiscal analysis, we also considered the practical aspects of the City assuming responsibility for directly overseeing the service. It appears that while the City will face some additional risks by dissolving its partnership with MVT A and directly overseeing transit service for residents of Prior Lake, the risks are not considered too great to overcome. Examples of these risks are: . Inadequate time or staff expertise to oversee and administer both the implementation and continued operations of the new service. . The inability to find a provider with accessible equipment to provide Route 35R service. Thresher Square 700 Third Street South Minneapolis. MN 55415 612.370.0700 Tel lfTl T .. j...., 612.370.1378 Fax If the City were to dissolve its partnership with MVT A and directly oversee transit service for residents of Prior Lake, the following actions will need to be taken between now and January 1, 2002. . Under the terms ofthe joint powers agreement with MVT A, the City of Prior Lake must provide a written notice of its intent to withdraw from MVTA no later than January 10th. . Once the City commits to providing transit service directly, an individual(s) needs to be given the responsibility for initiating the service on January 1, 2002. Representative duties may include: ./ Working with MVTA to assure a seamless transition. ./ Developing a management and service plan for 2002. ./ Selecting a provider(s) to operate the service. ./ Preparing applications for capital grants from the Metropolitan Council. ./ Coordinating with other regional services. After the service begins, the City will be responsible for overseeing all aspects of the service including, customer relations, operations, administration, marketing, etc. Below and on the following pages I have outlined in greater detail our findings. Overview of Current Service MVT A provides three types of service to residents of Prior Lake as follows: . Commuter Express Service that Operates Monday - Friday. This is known as the 35R route and provides two trips in the morning and two trips in the evening between Prior Lake and downtown Minneapolis. . Vanpool Service. Four vanpools have been organized by MVT A. Two of the vanpools operate between Prior Lake and the Shakopee Court House with the other two vanpools operating between Prior Lake and Northwest Airlines at MSP Airport. . Seasonal Dial-a-Ride Service. From June 12 to September 1, dial-a-ride service is available to all residents of Prior Lake on Mondays - Fridays between the hours of8:00 AM and 6:00 PM. Funding Sources Under the terms ofthe joint powers agreement, the City is obligated to pay MVT A the total amount of its transit tax levy. For the past two years and again in 2001, this amount is $379,950. The actual value of the service received from MVT A is less than what Prior Lake pays in. MVT A has developed a process for assessing each of its member cities for the cost of the services received. MVTA's total assessment from the Year 2000 budget for the City of Prior Lake is $353,654 with year 2001 expenses estimated at $ 369,000. It should be noted that the actual costs for MVTA to operate the Prior Lake service is estimated to be even lower than the assessed amount. January 3. 2001 2 I I .. In reviewing funding available to Prior Lake for transit service, both operating and capital funding sources were considered. Funding/or Operating Costs Transit Tax Levy The City of Prior Lake has the authority to set and collect a tax on property for transit service. The maximum amount of transit tax that can be collected in the City of Prior Lake is $463,739. This maximum amount is set by State statute. As noted earlier, the City has set its annual transit tax levy at $379,950, which is 82% of the maximum legal amount. Ifthe City were to dissolve its partnership with MVT A, the proceeds from the transit tax levy would no longer be forwarded to MVT A and would be available to the City to fund its own transit system. The transit tax levy is the single largest source of funding available to the City for operating costs. Revenue Generated from Service In addition to the transit tax, another source of revenue is funds generated from the operation ofthe bus services. These funds come primarily in the form of fares paid by passengers who use the service. A much smaller amount of funding may be generated through advertising on buses and/or at bus stops and earned interest. MVT A has provided conflicting information on the revenues generated by Prior Lake service. Based on the lowest dol/ar amount provided by MVT A, approximately $35,000 per year is generated through passenger fares. If the City were to continue to set the transit tax levy at its present level of$379,950 and $35,000 in passenger fares are generated annually, then approximately $415,000 would be available to the City each year to pay for operating costs. Funding for Capital Costs Regional Capital Funds for Transit The Metropolitan Council has a program in place to fund the capital needs of public transit providers throughout the region. Eligible expenses include offices, bus shelters & buses. Applications are accepted in AprillMay of each and are priority ranked by the Metropolitan Council. Funds are available to the successful applicants beginning in January of the following year. Funding for this program is from a regional "capital" property tax levy that is set and collected by the Metropolitan Council. The amount of available funding is set by the State Legislature through its establishment of a bonding limit for the Metropolitan Council. The bonds are issued by the Metropolitan Council and then repaid with the proceeds of the "capital" tax levy. January 3.2001 3 rrn ,I, [I 11'. Approximately $130,000 per year is generated in the "capital" tax levy for the City of Prior Lake. Private Vehicle Capital In addition to the capital grant program, the Metropolitan Council also has a "Private Vehicle Capital" program in place. This program is also open to all public transit providers in the region and is designed to pay for ongoing capital costs such as vehicle lease payments and/or the capital portion of a provider's expenses. To be considered for this program, transit providers must submit a management and operations plan to the Metropolitan Council in October. As with the capital grant program, applications are prioritized and funds are made available beginning in January of the following year. If the City of Prior Lake were to dissolve its partnership with MVT A, the City would be eligible to participate in both ofthese Metropolitan Council programs. While there are no guarantees the City will be awarded any funds under these programs, our initial discussions with the Metropolitan Council indicate that there is a high probability of receiving funds under one or both of these programs. Estimated Prior Lake System Revenues In summary, there will be a minimum of approximately $415,000 available annually for the City of Prior Lake to operate its own transit system as outlined below: Transit Tax Levy Passenger Fares Met Council Capital $$ $ 379,950 $ 35,000 $ Total $ 414,950 It should be noted that total revenue figure of approximately $415,000 figure is a very conservative number and could be higher as described below: . The transit tax levy of $379,950 has remained the same for the last three years. Also, the $379,950 is approximately 82% of the maximum legal amount available to the City of Prior Lake . Passenger fares of $35,000 are the lowest of several figures provided by MVT A and represent less than 10% ofthe total revenues available to fund the service. The Prior Lake transit services may actually generate more passenger fares to help pay for the service. For example, the 2000 budget for MVT A outlines 27% of its operating costs are covered by passenger fares and other route generated revenue. This 27% figure is consistent with industry expectations for passenger fares as a percentage of total operating costs. . The $415,000 figure assumes that the City does not receive any capital funding from the Metropolitan Council, resulting in all capital costs being paid for out of the available transit tax levy and passenger fares. As noted earlier, while there are no guarantees the City will be awarded January 3,2001 4 u " Ir. any funds under the capital grant programs, our initial discussions with the Metropolitan Council indicates that there is a high probability of receiving funds under one or both ofthese programs. Estimated Prior Lake System Expenses The single largest expense that the City would face if it were to dissolve its partnership with MVT A is the cost to hire providers to operate service. Of the three services currently provided by MVT A, the most expensive to operate is the Monday - Friday commuter express service between Prior Lake and downtown Minneapolis - Route 35R. To estimate what it would cost for Prior Lake to contract directly for this service, several sources were used including the following: . MVTA's current contract for the 35R service. . Representative rates from similar services under contract to the Metropolitan Council. . Telephone quotes from area providers. This resulted in a wide range of costs as follows: . MVTA's 2001 management plan indicates a rate of$78.82 for the 35R service that equates to approximately $87,000 annually (1,100 service hours). It should be noted that this rate DOES NOT include capital costs. . The Metropolitan Council has a number of contracts with providers to operate service similar to the 35R route. The range of costs per hour for these similar services tops out at $150 per hour that INCLUDES THE COST OF CAPITAL. Using the 1,100 annual service hours for the 35R service and the top end of existing contracted rates for similar service; the 35R service would cost approximately $165,000 annually to operate. . A final check on estimating rates came from telephone quotes from private charter providers in the area. Several providers were contacted via telephone with a request for a quote on one trip from Prior Lake to Minneapolis with one return trip later in the day. The providers were Schmitty & Sons, Anderson Bus, Richfield Bus, Lee Lines, Voigt, Northfield Co~ch and Minnesota Coaches. Based on the telephone quotes for the single round-trip and four trips per day over 260 days, the annual cost ranged from $197,600 - $355,680 and are show below: -/ $197,600 -/ $202,800 -/ $262,080 -/ $281,320 ./ $286,000 ./ $355,680 All quotes included the cost of capital. One provider quoted a cost of $165,360 annually that EXCLUDES all capital costs to operate the service. To establish a reliable estimate of the cost to operate the 35R service, it seems reasonable to look to the rates the Metropolitan Council is currently paying for similar service, the range of quotes from area charter providers and the current MVT A rate with Schmitty & Sons. As noted earlier, the January 3.2001 5 I i,11 il ]Ii. charter provider rates are based on a quote for one single route trip - it is reasonable to expect that providers would offer a lower rate if they were under contract to operate two round trips per day for one year or more. This is also supported by the actual rates that the Metropolitan Council currently has in place for service similar to 35R. To estimate the total cost for the City to contract for 35R service $250,000 annually, was used and appears to be a very reliable figure, particularly in light ofthe current MVT A contract with Schmitty and Sons and representative rates from the Metropolitan Council. Estimating costs to operate the dial-a-ride service and vanpool service are much easier as there is very good information available from MVT A and providers. The vanpool program is estimated to cost approximately $65,000 annually to operate and is based on information from the vanpool provider (VSPI) and MVTA's reported costs. The cost to operate the dial-a-ride service is estimated at approximately $15,000 annually and is based on 600 hours of service at MVTA's contracted rate with Scott County of$24.03 per hour. One final cost consideration for the City are any direct expenses associated with staffing and/or direct administrative costs such as marketing. Initial discussions with City staff indicate that existing staff will likely take on the responsibility for overseeing the transit system and that the City will experience no new costs. While it is quite likely that this may be how the City decides to move forward, for cost estimating purposes $50,000 per year has been identified for staffing and direct administrative costs. This figure is being used to establish all foreseeable expenses to insure that this financial analysis is as reliable or conservative as possible. In summary the following figures were used as estimated costs for the City to operate the transit system directly: Commuter Express (35R) Dial-a-Ride Van Pool Administration $250,000 $15,000 $65,000 $50,000 $380,000 Total When comparing the anticipated revenues with the estimated costs, it is anticipated that there will be at least $35,000 per year to provide service over and above the current levels. This is a very realistic estimate due to the conservative assumptions that were made for both revenues and expenses and the fact that current MVT A allocated expenses are approximately $354,000 for 2000 and estimated at $370,OOOfor 2001. Operational Considerations In assessing potential barriers or obstacles to the City successfully operating service beginning January 1,2002, two potential concerns were identified and are discussed in greater detail. First, there is a significant amount of time and expertise that will be required for the City to successfully implement and administer the service. The City will need to make certain that there is January 3. 2001 6 n I :t 1r. a qualified individual(s) who has adequate time and the necessary support to implement and administer the transit services. Ifthe city does decide to dissolve its partnership with MVTA, then responsibilities for implementing the service will begin soon after the City's decision and continue through 2002. Staff has indicated that the necessary expertise is available and that the necessary time and support will be forthcoming if the City decides to establish its own transit system. A second concern is the ability to provide wheelchair accessible service on Route 35R. According to the Metropolitan Council staff, it is a legal requirement that the 35R service be wheelchair accessible. Currently the buses that operate the 35R service are wheelchair accessible and are owned by MVT A. One possible way to insure that accessible service continues to be made available on the 35R route is for MVT A to transfer the buses over to the City of Prior Lake effective January 1,2002. While this scenario should be discussed further with MVT A, it does not appear to be very realistic as the buses are currently used for other services and MVT A has a need for this type of equipment. A second, and more likely solution, is for the City of Prior Lake to include a requirement in the provider bid specifications for the 35R buses to be wheelchair accessible. Under similar circumstances, providers in the area have bid on and provided wheelchair accessible equipment to provide public transit services and it is quite likely that providers would be able to do the same for a January, 2002 start date. To further verify the availability of equipment, we spoke with a local representative of a bus manufacturer who has delivered similar vehicles to other transportation providers in the region. We were told that given a January 1,2002 start date, a lead-time of7 - 8 months would be sufficient to deliver new vehicles. A third and equally likely solution is for City to provide accessible buses to the successful bidder. This could be accomplished in cooperation with either ofthe two Metropolitan Council capital grant programs described earlier. Metropolitan Council staff has indicated that they would be willing to assist the City with providing accessible buses for the Route 35R service. Schedule and Milestones Listed below is an overview ofthe milestones and schedule of events that are recommended ifthe City decides to implement and administer its own transit service. The following page contains a schedule that highlights the key milestones for implementing service by January 1,2002. . January 8th - City Council Decision . January 10th - Written Notice to MVTA (not later than the 100h) . February - Determine Transit Staffing & Approach for Vehicle Acquisition . February/March - Transition Discussions with MVT A . March - Establish 2002 Service Plan . March - Develop Bid Specifications for Providers . April - Release RFP for Providers . April - Submit Capital Request to Met Council . July - Select Provider & Enter into Contract January 3, 200/ 7 Ii . lr.- . October- Submit Private Vehicle Capital Request . January - Commence Service I will be present at the January 8th City Council meeting to present these findings and answer questions from members of the City Council. January 3.2001 8 Hl 1 . II..