Privatization in mass transit

Privatization in mass transit

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Privatization in mass transit description of privatization efforts and identification of issues
Portion of title:
Description of privatization efforts and identification of issues
University of South Florida -- Center for Urban Transportation Research
Place of Publication:
Tampa, Fla
Center for Urban Transportation Research
Publication Date:


Subjects / Keywords:
Municipal services -- Contracting out -- United States ( lcsh )
Municipal services -- Contracting out -- Florida ( lcsh )
Privatization -- United States ( lcsh )
Privatization -- Florida ( lcsh )
Local transit -- United States ( lcsh )
Local transit -- Florida ( lcsh )


General Note:
"February 1993. May 1993 revised."
Statement of Responsibility:
prepared for Florida Department of Transportation by Center for Urban Transportation Research, College of Engineering, University of South Florida.

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Source Institution:
University of South Florida Library
Holding Location:
University of South Florida
Rights Management:
All applicable rights reserved by the source institution and holding location.
Resource Identifier:
31244004 ( OCLC )
C01-00234 ( USFLDC DOI )
c1.234 ( USFLDC Handle )

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Privatization in mass transit.
n Technical memorandum #2 :
b description of privatization efforts and identification of issues /
c prepared for Florida Department of Transportation by Center for Urban Transportation Research, College of Engineering, University of South Florida.
3 246
Description of privatization efforts and identification of issues
Tampa, Fla. :
Center for Urban Transportation Research,
"February 1993. May 1993 revised."
Municipal services
x Contracting out
z United States.
Municipal services
Contracting out
United States.
Local transit
United States.
Local transit
2 710
University of South Florida.
Center for Urban Transportation Research.
t Center for Urban Transportation Research Publications [USF].
4 856


PRIVATIZATION IN MASS TRANSIT Technical Memorandum #2: Description of Privatization Efforts and Identification or Issues Prepared ron Florida Department or Transportation By: CeoiU for Urbao Transportation llesean:h Collele of Engl.aeeriog Ualvenlty of Soutll Florida


FOREWORD Under contract with the Florida Department of Transportation (FDOT), the Center for Urban Transportation Research (CUTR) is conducting a comprehensive study of transit privatization and its applications to Florida's transit indusoy. This memorandum (Technical Memorandum #2) was prepared to review the extent and performance of transit service contracting, privatization legis lation, non-Florida and Florida privatization initiatives, and major privatization issues for Florida. Emphasis is placed on the review of privatization activities in Florida; however, review of privatization initiatives across the counoy provides valuable information to be compared with and/or applied to the transit indusoy in Florida. The following CUTR staff assisted in the research and preparation of this technical memorandum. CUTR Director: Gary L. Brosch Project Director: Steven E. Polzin, P.E., Ph.D., Deputy Director for Policy Analysis Project Manager: William L. Ball, Research Associate Staff Support: Eric Hill, Research Associate Stacey Bricka, Research Associate Patricia Henderson, Research Associate Perry Maull, Senior Research Associate Patricia Thrner, Project Assistant Tony Rodriguez, Graduate Research Assistant .. u


TABLE O F CONTENTS I. INTRODUCTION .. ................... . . . ..... ........... 1 II. EXTENT AND PERFORMANCE OF PURCHASED TRANSPORTATION .................................. ..... 3 Validity of Data . ................... .......... ............. 3 Extent of Purchased Transponation ......... ................ . . 5 Performance of Purchased Motorbus Service . . . . . . . . . . . 18 Data Comparability .............. . ....... ... ........ .... . 25 ill. PRIVATIZATIO N LEGISLATION ...... ...... ... ..... ....... 27 Overview . . . . . . . . . . . . . . . . . . . . . . . . 27 Discussion of Transponation Privatization Legislation ......... .... 27 Federal Privatization Legislation .......... ......... ......... 29 State Privatization Legislation ...................... .......... 32 Summary of ProviSions . ....... ............................. 38 IV. NON-FLORIDA TRANSIT SYSTEM PRIVATIZATION OOI1A 11VES . . . . 0 0 0 4 5 Contracting Operations ..... ....................... ......... 45 Regional Transponation District, Denver ................ ... .... 46 New Jersey Transit Corporation, New Jersey .. ... .............. 55 Greate r Qeveland Regional Transit Authority, Qeve land . ..... ... 62 PACE, Chicago . . . . . . . . . . . . . . . . . . . . . 67 S n o homish County, Washington ............................. 73 Contracting Maintenance ..................... ................ 76 Niagara Frontie r Transponation Authority, Buffalo ....... ...... .. 76 Join t Development . . . . . . . . . . . . . . . . . . . . . 79 Washington M etropolitan Area Transit Authority, Washington D.C. .. 79 Cross Border Uasing . . . . . . . . . . . . . . . . . . . . 85 B a y Area Rap i d Transit, San Francisco ................. ...... 85 V FLORID A TRANSIT SYSTEM PRIVATIZATION OOTIATIVES .... 87 Florida Inventory of Contracte d Services . . . . . . . . . . . . 87 Florida Case Stu.dies ........................ ........ ........ 92 Metro-Dade T rans i t Age ncy, PEP Project ..................... 92 M etro-Dade T ransi t Agency, Express Bus Service . .... .... .... 97 Manatee County Transit, Fixed-R oute and Demand-Response . . . 100 lll


Palm Beach County Transit, Demand Response ................ Space Coast Area Transit, Contracted Fleet Maintenance ...... ... Summary of Interviews ...... ............ .................. Demand Response Service ......... ....................... Fixed-Route Service ..................................... Problems and Constraints in the Contracting of Operations ........ Maintenance ............. ....... ..................... Ad . IIIlrustrauon ......................................... Interview Conclusions ................................... 102 !05 108 108 110 111 113 114 115 VI. IDENTIF!CA TION OF PRIVATIZATION ISSUES . . . . . . . 117 BIBUOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . 127 APPENDIX A Inventory of Con tracted Transit Services by System . . . . 143 iv


UST OF TABLES Table 1 Annual PUrchased Fixed-Route Revenue Miles Florida . . . . . . . . . . . . . . . 8 Table 2 Annual Purchased Demand-Response Reven u e Miles Florida . . . . . . . . . . . . . . . 8 Table 3 Annual Purchased Fixed-Route & Demand-Response Revenue Miles Florida . . . . . . . . . . . . . . . 8 Table 4 Annual Purchased Fixed-Route Passenger Trips Florida . . . . . . . . . . . . . . . 9 Tab le 5 Annual Purchased Demand-Response Passenger Trips Florida .... .......................... 9 Table 6 Annual Purchased Fixed-Route & Demand-Response Passenger Trips Florida ......... ... ................ 9 Table 7 Annual Purchased Fixed-Route Operating Expense Florida . . . . . . . . . . . . . 10 Table 8 Annual Purchase d Demand-Response Operating Expense Florida . . . . . . . . . . . . . 10 Table 9 Annual Purchased Fixed-Route & Demand-Response Operating Expense -Florida . . . . . . . . . . . . . . 10 Table 10 Number and Percent of Systems Purchasing Motorbus Service in the United States . . . . . . . . . 11 Table 11 Annual Purchased Motorbus Revenue Miles U.S. . . . . . . . . . . . . . . . . 13 Table 12 Annual Purchased Demand-Response Revenue Miles U.S ........ .......................... 14 Table 13 Annual Purchased Commuter Rail Revenue Miles .. U.S ...... . . ........................ 14 Table 14 Annual Purchased Motorbus Passenger Trips U.S. .............................. 15 v


Table 15 Table 16 Ta ble 17 Table 1 8 Table 19 Table 20 Table 21 Tab l e 22 Table 23 Table 24 Table 25 Table 26 Table 27 Table 28 Table 29 LIST OF TABLES (contin ned) Annual Purchased Demand Response Passenger T rips -U.S. . . . . . . . . . . . . . . . . 15 Annual Purchased Commuter Rail Passenger T rips U S . ....... ....... ....... . ....... 16 Annual Purchased Motorbus Operating Expense -U.S .......... ................... 16 Annual Purchased Demand Response Operating Expense -U.S. . . . . . . . . . . . . . . . 1 7 Annual Purchased Commuter Rail Operating Expense -U.S. . . . . . . . . . . . . . . . 17 Florida Statewide Motorbus (MB) Performance indicators and MeasUres, 1990 . . . . . . . . . . . . . . . . . 20 U.S. Motorbus (MB) Performance indicators and Measures, 1990 ....... . .......... . .... ....... 22 Transit System Performance Measure Comparisons . . . . . 25 Summary of Provisions in State-Level Legislative Initiatives ............. .................. 42-44 Contractor Prices, Fare Revenues, Hours of Service, and Cost Per Hour Comparison of Privatized Service .... ..... . 47 incremental Cost Comparison of Directly Operated versus Contracted Transit Services . . . . . . . . . . . 49 Fully-Allocated Cost Comparison of RTD Directly-Operated versus Contracted Transit Services . . . . . . . . . . . 50 Sources of Savings Resulting From Privatization at RTD ...... 51 Routes Contracted Out by New Jersey Transit . . . . . . . 58 Operating Statistics for Flats Flyer, 1989 .. .............. 64 VI


LIS T OF TABLES (continued) Table 30 Summary of Annual Cost Comparison Between NFT Metro and Private Bids . . . . . . . . . . . . . 77 Table 31 Summary of Transit Systems' Cross Border Leasing Transactions . . . . . . . . . . . . . . . . 86 Table 32 Con tracted Operations Activities, Florida StateWide Total . . 90 Table 33 Contracted Maintenance Activities, Florida Statewide Total . . 90 Table 34 Contracted Administration Activities, Florida Statewide Total . 91 Table 35 Contracted Operations Activities, MDTA . . . . . . . . 144 Table 36 Contracted Maintenance Activities, MDTA . . . . . . . 144 Table 37 Contracted Administration Activities, MDTA . . . . . . 145 Table 38 Con tracted Operations Activities, Bcr . . . . . . . . . 146 Table 39 Contracted Maintenance Activities, Bcr . . . . . . . . 146 Table 40 Contracted Administration Activities, BCT . . . . . . . . 147 Table 41 Contracted Operations Activities, ITA ................... 148 Table 42 Contracted Maintenance Activities, ITA . . . . . . . . . 148 Table 43 Contracted Administration Activities, ITA . . . . . . . . 149 Table 44 Contracted Operations Activities, HART . . . . . . . . 150 T able 45 Coatracted Maintenance Activities,'HART . . . . . . 150 Tabl e 46 Contracted Administration Activities, HAR T . . . . . . 1 51 Table 47 Contracted Operations Activities, PST A . . . . . . . . . 152 Table 48 Contracted Maintenance Activities, PSTA . . . . . . . . 152 Table 49 Contracted Administration Activities, PSTA . . . . 153 .. Vll


LIST OF TABLES (continued) Table 50 Contracted Operations Activities, LYNX . . . . . . . . 154 Table 51 Contracted Maintenance Activities, LYNX . . . . . . . . 154 Table 52 Contracted Administration Activities, LYNX . . . . . . . 155 Table 53 Contracted Operations Activities, CoTran . . . . . . . . 156 Table 54 Contracted Maintenance Activities, CoTran . . . . . . . 156 Table 55 Contracted Administration Activities, CoTran . . . . . . 157 Tab le 56 Contracted Operations Activities, Taltran . . . . . . . . 158 Table 57 Contracted Maintenance Activities, Taltran . . . . . . . 158 T bl 58 C ctedAd A ... Tal 159 a e ontra _m,mstranon CIIVlttes, tran . . . . . .... Table 59 Contracted Operations Activities, RTS . . . . . . . . . 160 Table 60 Contracted Maintenance Activities, RTS . . . . . . . . 160 Table 61 Contracted Administration Activities, RTS ................ 161 Table 62 Contracted Operations Activities, VoTran . . . . . . . . 162 Table 63 Contracted Maintenance Activities, VoTran . . . . . . . 162 Table 64 Contracted Administration Activities, VoTran . . . . . . 163 Table 65 Contracted Operations Activities, ECTS . . . . . . . . . 164 Table 66 Contracted Maintenance Activities ; ECTS . . . . . . . 164 Table 67 Contracted Administration Activities, ECTS . . . . . 165 Table 68 Contracted Operations Activities, LeeTran . . . . . . . . 166 Table 69 Contracted Maintenance Activities, LeeTran . . . . . . . 166 Table 70 Contracted Administration Activities, LeeTran . . . . . . 167 Vlll


UST OF TABLES (continued) Table 71 Contracted Operations Activities, SCAT ....... ........... 168 Table 72 Contracted Maintenance Activities, SCAT . . . . . . . . 168 Table 73 Contracted Administration Activities, SCAT . . . . . . . 169 Table 7 4 Contracted Operations Activities, Citrus Connection ......... 170 Table 75 Contracted Maintenance Activities, Citrus Connection ....... 170 Table 76 Contracted A dministration Activities, Citrus Connection . . . 171 Tab le 77 Contracted Operations Activities, MCAT .......... ....... 172 Table 78 Contracted Maintenance Activities, MCAT . . . . . . . 172 Table 79 Contracted Administration Activities, MCAT ........ ..... 173 Table 80 Contracted Operations Activities, SPCT .................. 174 Table 81 Contracted Maintenance Activities, SPCT . . . . . . . . 174 Table 82 Contracted Administration Activities, SPCT . . . . . . . 175 . Table 83 Contr acted Operations Activities, TCRA . . . . . . . . 176 Table 84 Contracted Maintenance Activities, TCRA .......... ...... 176 Table 85 Contracted Administration Activities, TCRA .............. 177 ix


Figure 1 Figure 2 Figure 3 Figure 4 Figure 5 Figure 6 Figure 7 LIST OF FIGURES Florida Statewide Motorbus Expense Performance ........... 19 United States Aggregate Motorbus Expense Performance . . . 21 Operating Expense Per Revenue Mile, Motorbus Scatter Diagram . . . . . . . . . . . . . . . . . . 24 Operating Expense Per Revenue Hour, Motorbus Scatter Diagram ......................... ......... .. '2-4 Comparison of Bodily Injury Accidents Per 100,000 Passengers Between Private Contractors and RTD . . . . . . . . . . 52 Comparison of Property Damage Accidents Per 100,000 Vehicle Miles Between Private Contractors and RTD . . . . 52 Ave rage Transit Coach Service Scheduled Hour Costs . . . . 70 X


l INTRODUcnON Privatization became an important issue in the transit ilidustry during the past decade and became a public policy issue lu general as early as 1971.1 of goods and services and various other public/private partnerships is becomlug a common occurrence throughout tbe United States and, even more so, lu other developed countries throughout the world. The issue of privatization in the mass transit industry is one that has evolved considerably over time, particularly since 1985 when the Office of Private Sector Initiatives was established at the Urban Mass Transit Administration (UMTA), now known as the Federal Transit Administration (FT A). The purpose of this office is to encourage privatization efforts in t he transit industry. The inte n t of this privatization study is to discuss the status and potential of mass transit privatizatio n in Florida. This study produced two technical memoran da and will result in additional wor k to be jointly determin e d by FOOT and CUTR. Technical MemorandUm # 1 (separately bound} is designed to provide an overview of privatization in the transit industry and includes the foUowing sections: Privatization Detined Government Role in Transit Privatization The Transit Privatization Debate Inventory of Transit Privatization Activities The Contracting Decision Summary /Conclusions Technical Memorandum #2 (this document) reviews the extent and performance of purchased transp ortation in the United States and Florida. Privatization legislation, as it r elates to mass transit, is reviewed at the federal and state levels of government. Numerous transit system privatization initiatives are reviewed for non Florida and Florida transit systems. This review provides a better understanding of national trends and activities by which to compare privatization experiences in Florida. An inventory of privatization activities currently or recently implement ed at Florida's transit systems is provided, along with a summary of telepbone interviews of Florida transit officials. The final section 'E.s. S11114S, fuygtj1111jm The Kq to B

identifies major privatization issues resulti.Dg from the information and data collection effort conducted for this memorand um. Issues that relate specifically t o Florida are b.ighligbted. Following the preparation of the first two technical memoranda, an issue paper will be prepared wb.ich will includ e a list of p r oposed activities that CUTR could carry out to assist FOOT in addressing many of the major issues identified in this memor andum. Comments and reactions of FOOT to this issue paper will determine the future direction and subsequent task structure for the privatiza tion srudy. 2


II. EXTENT AND PERFORMANCE OF PURCHASED TRANSPORTATION The purpose of this section is t o review the extent and performance o f purchased transportation in Florida and the United States. Using Section 1 5 information reported by transit systems from across the country, the extent of purchased transporta tion services is measured as a percent of total service provided. Total service and purchased service are measured with three primary indicators: revenue miles of service, passenger trips, and operating expense. Following a sumrnary discussion of the extent of p ur chased transpo rtation, the performance of purchased motorbus service is compared with the performance of directly-operated transit service. Performance is considered by evaluating various ratios calculated from indicators taken directly from Section 15 information. VALIDITY OF DATA Although Section 15 information is the best standardized source of information for transit financial and operating. characteristics, caution is urged in interpreting the data for evaluation purposes. Despite the fact that data have become more reliable over time, there still remain problems with the quality of data for some transit systems. However, if reviewed carefully, the data can be extremely useful for developing a sense of the p erformance for a trans it system. In addition, as data from transit systems are combined, the margin for error is reduced Performance ratios are calculated for Florida's transit systems and for the United States as a whole as reported in the FT A annual Section 15 summary reports (1984-1990) and in actual Florida transit system Section 15 reports. It is important to recognize that the aspects of performance presented in this section are only a few of the many aspects that should be reviewed in the process of conducting a transit performance evaluation. Numerous other performance areas, such as quality, safety, and reliability of service, cannot be reviewed due to the limited data available for purchased transportation services. The PTA data requirements for private providers are not nearly as stringent as those required for public transit systems. As a result, indicators such as the number of accidents and roadcalls are usually not reported, making it difficult to assess the performance of purchased transportation providers in these areas. Numerous issues and cautions are emphasized prior to the presentation of the extent and performance of purchased transportation services. These are provided below and, in many cases, are reiterated throughout the section as the data are presented. 3


The nationwide summary stanSncs provided by these r eports include purchased transponation services, signified with a "P" following the mode abbr eviation, e.g., MBP refers to motorbus purchased. Contracted services referred to in this manner includ e only contractS for less than 50 vehicles. When contractS are for greater than 50 vehicles, the contractor is required to file a separate Section 15 report. FTA Section 15 summary statistics do not include these larger contract providers in their calculations of purchased transponation services.1 As a resnlt, dl.reet ly -operated transit senic:es are overstated and purchased transit seniees are UDderstated Although greater than 50 ve hicle contractS are not designated as purchased service, they are designated as p rivate carriers in a diffe rent manner ( a po following the Section 15 Identification Code).' In addition to includillg greater than 50 vehi cle contractS, lhe private carrier designation includes private franchise systems that do not participate in the competitive contracting process but are subsidized directly. The data do not distinguish whether the contract is competitively bid or whether it is a private franchise. Although private franchises are considered a form of privatization, theory suggests that a private monopoly is no better (perhaps worse) than a public monopoly since, in either case, competition is not preseDL The number of private fral:>cbises has d i minished over the past several decades ; however they still play a significant role in the provision of motorbus services in the northeasL Purchased transportation includes transit service contractS with private carriers and other public agencies. Although it would be preferable to exclude contractS with public agencies to measure the true extent of "privatization, this information is not distinguished in aggregate statistics provided by FT A. ContractS with other public agen cies are particularly common in the provision of demand-response servi ces but are not common in the provision of motorbus services and d o not exist at all in the provision of commuter rail services. Numerous inconsistenc:ies are apparent in the allocation and reporting of operating expenses between directly-operated services and purchased services. Operating expenses were reviewed carefully for each transit system and judgment was used to determine the most appropriate allocation of expenses. Fedoal TnzMi "Dallz Tablu for tJu 1990 Staictl 15 R.epctl Ye411" Df

In some instances, joint expenses were not allocated t o modes for a given transit system. In the calculation of nationwide mQtorbus performance measures non-allocated joint expenses were excluded from calculations. As a result, total motorbus operating expense may be understated for some transit systems. In conducting the nationwide performance comparisons of directly-operated motorbus and purchased motorbus services, effortS were made to include the total operating expense for the provision of purchased motorbus services, including the actual contract cost as well as administration, support, and monitoring costs. This was easily accomplished for transit systems that provided only purchased motorbus service since all operating expense could be attributed to this one type of service; however, transit systems providing both directly-operated motorbus and purchased motorbus services presented a problem. The additional non-contract costs could not be emacted from the data, resulting in an underestimation of the operating expense for purchased motorbus service for some transit systems. EXTENT OF PURCHASED TRANSPORTATION The data used to measure the extent of purchased transportation services for the United States were taken directly from summary Section 15 reportS produced by FTA As indicated previously in the list of cautions, transit services are overstated and purchased transit services are nnderstated in the FTA reports Purchased transit services are understated because greater than SO vehicle contracts are reported in a different manner. A consistent trend of purchased transit services can still be observed in contracts for fewer than SO vehicles and is provided below. Greater than 50 vehicle contracts do not distort the Florida data since these data were taken directly from each transit system's actual Section 15 report rather than from the FT A summary report. In addition, there are no contracts with public agencies or with private franchises for the operation of motorbus service; however, contracts do exist between transit systems and other public agencies for the provision of purchased demand-response transportation services. These :contracts are included in the data for Florida purchased demand response service. In the following section on performance of purchased motorbus service, 1990 Section 15 motorbus data have been adjusted by CUTR to eliminate the understatement of purchased services. The adjustment process involved reviewing the data and expanding purchased 5


motorbus services to include those systems designated as private carriers. As mentioned previously, it is important to recognize that some public agency contracts and some private franchises are still included in the data for purchased inotorbus service. These data may distort the results to some extent since they do not necessarily exhibit the characteristics of a competitively contracted service; however the extent of public agency contracts and private franchises is not believed to be significant for motorbus and, therefore, should not significantly skew the data for this mode. The trend in total motorbus purchased services, including greater than 50 vehicle contracts, cannot be determined since only one year of data has been adjusted These adjusted numbers are believed to be a more accurate representation of the extent of total purchased motorbus services. FT A is in the process of correcting this problem in future annual summary reports. Florida Revenue miles, passenger trips, and operating expense are presented from 1984 to 1990 for Florida fixed-route transit services, demand-response services, and the combined total. Fixed route transit services include motorbus, rapid rail, automated guideway (peoplemover), and commuter rail. Revenue Miles -In Florida, total fixed route revenue miles increased from nearly 57 million in 1984 to over 72 million in 1990, an increase of 28 percent. Total demand-response revenue miles increased from over 3 million in 1984 to over 11 million in 1990, an increase of 254 percent. The resulting combined total of fixed-route and demand-response revenue miles increased from nearly 60 million in 1984 to nearly 84 million in 1990, an increase of 40 percent The percent of purchased fixed-route revenue miles increased from zero percent in 1984 to approxUn.ately six percent in 1990, while the percent of purchased demand-response revenue miles increased from 40 percent in 1984 to 73 percent in 1990. As a result, the combined total of purchased fixed-route and demand-response revenue miles increased from just two percent in 1984 to approximately 15 percent in 1990. Tables 1 through 3 provide the absolute number of revenue miles and the percent purchased for fixed-route, demand response, and the combined total. 'Ibid., p. 1-5. 6


Passenger Trips Total fixed-route passenger trips increased from nearly 127 million in 1984 to over 149 million in 1990, an increase of 18 percent. Total demand-response passenger trips increased from nearly 0.9 million in 1984 to over 2 million in 1990, an increase of 147 percent. The resulting combined total of fixed-route and demand-response passenger trips increased from over 127 million in 1984 to over !51 million in 1990, an increase of 19 percent. The percent of purchased fixed-route passenger trips increased from 0 percent in 1984 10 approxilllately 4 percent in 1990, while the percent of purchased demand-response passenger trips increased from 24 percent in 1984 to 62 percent in 1990. As a result, the combined total of p urchased fixed-route and demand-response passenger trips increased from less than 1 percent in 1984 to approxilllately 5 percent in 1990. Tables 4 through 6 provide the absolute number of passenger trips and the percent purchased for fixed-route, demand response, and the combined total. Operating Expense Total fixed-route operating increased from over $174 million in 1984 to nearly $300 million in 1990, an increase of 71 percent. Total demand-response operating expense increased from nearly $6 million in 1984 to nearly $22 million in 1990, an increase of 269 percent. The resulting combined total of fixed-route and demand response operating expense increased from over $180 million in 1984 to over $320 million in 1990, an increase of 78 percent The percent of purchased fixed-route operating expense increased from 0 percent in 1984 to approxilllately 7 percent in 1990, while the percent of purchased demand-response operating expense increased from 40 percent in 1984 to 69 percent in 1990. As a result, the combined total of purchased fixed-route and demand-response operating expense increased from 1 percent in 1984 to 11 percent in 1990. Tables 7 through 9 provide absolute operating expense and the percent purchased for fixed-route, demand-response, and the combined total. 7


TABLE I Amusal Pnrcbased Fixed-Route Revate ' A ' 1984 56,704,940 0 0% 1985 60,598,160 141,200 <1% 1986 61.291.120 68,800 <1% 1987 63,320,480 186,740 <1% 1988 65,760,040 989,950 2% 1989 68,864,580 3,278,760 5% 1990 72,564,581 4,377,9fX> 6% TABLE1 Aanual Purclwed Demaad Respoase Reveaae Mll ... Florida 1984 1985 34% 1986 4,420,700 39% 1987 54% 1988 6,677$} 58% 1989 68% 1990 11,265,168 8,248,233 73% TABLE3 Aanaal l'1udl.ucd Flftd.Jtoafe & DemancJ.Respoase Remlae Miles Florida 1984 59,887,040 1,263,600 2% 1985 1.176,600 2% 1986 65,711,820 1,797,100 3% 1987 67,342$) 2,354,240 3% 1988 n.m:no 4,843,260 7% 1989 76,846,930 8,719,360 11% 1990 83,829,749 12,626,139 15% 8


Year 1984 1985 1986 1987 1988 1989 1990 1984 1985 1986 1987 1988 1989 1990 . TABLE 4 Anllual Purchased F'ludRoute Pas8eager Trips Florida . total Ftud-Roaee ,,, ... 1'llrdlaoe4 126,657,410 0 0% 132,592,020 17,800 <1% 134,268,920 52,400 <1% 129,172,360 249,470 <1% 126,754,540 658,550 <1% 140,798,400 4,351,790 3% 149,Zn,3u 6,162,529 4% TABLE 5 Anual Pnrcllased Demaad Respon$0 l'as$0Q801' Trips Florida 1,249,000 800,210 TABLE6 26% 30% 38% 53% 62% Anlloal Purchased Flxed R oote & DemandltospoDSe PasseDgV Trips f1orida Year 1984 1985 1986 1987 1988 1989 1990 135,414,120 142,316,430 151,393,194 9 .. . : . : <1% <1% <1% <1% <1% 4% 5%


TABLE7 Amlaal Parc:hased Fb:ed R oul< Operai!Dg Esponse Florida >A % l'an:bMed: 1984 $174,41S,440 so 0% 1985 $2()6,256,240 $78,390 <1% 1 986 $224,790,050 $ 172,570 <1% 1987 $236,220,230 $707,01'1) <1% 1988 $245,153,470 $1,732,510 <1% 1989 S270,663,121l $12,585,500 5% 1990 $298,689,066 $20,606,084 7% TABLES AoDaal PDrdwed DtiiWld-Rapoase OperaliDg El

Uo.ited States Of tbe 384 public transit systems aod private franchise transit systems reporting Section 15 data in the United States for fiscal year 1990, 119 transit systems purchased some motorbus service. The percent of transit systems contracting for some motorbus service i s approximately 30 percent for the following groups: under 25 vehicles, 25-49 vehicles, 50-99 vehicles, 100-249 vehicles, 1000 or more vehicles. This percent is higher for two of lhe larger vehicle groups, i.e., 250-499 vehicle s (39 percent), 500-999 vehicles (92 percent). These vebicle groups were chosen since lhis is bow tbe data are broken down in the FI'A summ ai)' reports. Tab le 10 summarizes the number and percent of systems pu.tcbasing some moto rbus service. This information was gathered for motorbus only; however, the extent of purchas ed services is provided for demand-response and commuter rail in subsequent tables in tbis section. TABLE tO Nttmber aad Puceot or s,.ttms l'llrcha.slns Motorbus S.nto:e In the UD.lte

for demand-response and commuter rail. Also note tbat tbe absolute numbers for tbe two sets of 1990 numbers are not exactly tbe same, wb.ich is primarily a result of roundina 0 differences in CUTR calculations versus Fr A summary repon calculations. R even ue Miles -Total motorbus revenue miles increased from 1.42 billion in 1984 to 1.53 billion in 1990, an increase of 8 percent. Total demand-respons e revenue miles increased from over 78 million in 1984 to over 171 million in 1990, an increase of 118 percent. Commuter rail revenue miles increased from over 155 million in 1984 to over 193 million in 1990, an increase of 24 percent. The percent of purchased motorbus revenue miles remained stable at 3 to 4 percent from 1984 to 1990. Following tbe adjustment made by CUTR, tbe percent of purchased motorbus revenue miles increased to 11 percent in 1990. The percent of purchased demand-response revenue miles acrually decreased from 68 percent in 1984 to 62 percent in 1990. In addition, tbe percent of purchased commuter rail revenue miles decreased from 9 percent in 1984 to 4 percent in 1990. The decline in purchased commuter rail service can be attributed to tbe transition of some commuter rail systems from private franchises to direcrly-operated service in 1986, e.g., New Jersey Transit and San Francisco-CaltraoS. Tables 11 througb 13 provide tbe absolute number of revenue miles and tbe percent purchased for motorbus, demand-response, and commuter rail. Passenger Trips -Total motorbus passenger trips decreased from 5.8 billion in 1984 to 4.9 billion in 1990, a decrease of 16 percent; however, a sligbt increase is observed from 1989 to 1990. Total demand-response passenger trips increased from nearly 22 million in 1984 to 40 million in 1990, an increase of 85 percent. Commuter rail passenger trips increased from nearly 267 million in 1984 to 328 million in 1990, an increase of 23 percent. The perce n t of purchased motorbus passenger trips also remained stable at approximately 1 to 2 percent from 1984 to 1990. Following tbe adjustment made by CUTR, tbe percent of purc hased motorbus passenger trips increased to 6 percent in 1990. The percent of purchased demand-response passenger trips remained nearly constant, declining slightly from 66 percent in 1984 to 65 percent in 1990. The percent of purchased commuter rail passenger trips decreased from 8 percent in 1984 to approximately 3 percent in 1990. T ables 14 througb 16 provide tbe absolute number of passenger trips and tbe percent purchased for motorbus, demand-response, and commuter rail. 12


Operating ExpenseTotal motorbus operating expense increased from $53 billion in 1984 to $7.8 billion in 1990, an increase of 46 percent. Total demand-response operating expense increased from nearly $127 million in 1984 to over $385'million in 1990, an increase of 204 percent. Commuter rail operating expense increased from over $566 million in 1984 to nearly S2.2 billion in 1990, an increase of 281 percent. The percent of purchased motorbus operating expense increased from 3 percent in 1984 to 5 percent in 1990. Following the adjustment made by CUTR, the percent of purchased motorbus operating expense increased to eight percent in 1990. The percent of purchased demand-response operating expense increased fro m 49 percent in 1984 to 59 percent in 1990. In addition, the percent of purchased commuter rail operating expense increased slightly from 11 percent in 1984 to 12 percent in 1990. Tables 17 through 19 provide absolute operating expense and the percent contracted for motorbus, demand-response, and commuter rail. TABLEll ADDual l'ardwecl Motorilus line MUes -u.s. j .. .. ,. _.,,. = .. ;rw.., ...,..Jti'"K "' ,__ ; .. =: :PuiC!lUt ae.a; i ... :---kl-1-.-.... 1984 1,419,735,.500 39,77S,OCIJ 3% 1985 t,463,734,400 52,683,300 4% 1986 1,476,113,.500 43,81.2,400 3% 1987 1,484,333,800 39,431,300 3% 1988 1,486,976,0CIJ 41.739,.500 3% 1989 1,.500,9$), 700 50,139,600 3% 1990 1,534,.500,0CIJ 64,600,0CIJ 4% 1.990' 1,520,272,0CIJ 166ST.l,OCIJ 11% 13


TABLE U Allaaol Purchaled Domaad-Respollle ...... Mila u.s . Y.r : . ,_ Jlep e Mllel Pvcl>aed Rioame. Mu... .. l'vc:t.ucol. 1984 18,450,100 S3,0SS,300 68% 1985 90 ,465,000 62,317,300 69% 1 986 104,839,000 72,716,400 69% 1987 113,100,000 75,648,600 67% 1988 131,087,300 91,831,400 70% 1989 154,652,000 99,540,300 64% 1990 171,200,000 106,400,000 62% TABLE 13 AmuraJ l'llrcllaMd eo-ow Rail Rymoe Miles U.S. ,., y.,. . ;:'fn .Jd. .:. I -o( --<;; .. $,.tnd' . .... SF 'PMMr:tJI&c ... 1984 155,544,300 14.486,1Q) 9% 1985 167,012.,300 10,&S3,600 7% 1986 170,133,200 8,671,700 S% 1987 169,900,700 6,97l,SOO 4% 1988 172,560,100 8,241, 000 S% 1989 190,224,100 7,684,000 4% 1990 193,100,000 7,000,000 4% 1 4


TABLE 14 Anlloal Pun:lwtd Motorbus hseugo: r Trfpo U.S. 1985 5)438,700,000 74,300,000 1% 1986 59,300.000 1% 1987 4,794,300,000 48,000,000 1% 1!188 4,m,600,ooo 46,800,000 < 1% 1989 4,838,500,000 53,800,000 l% 1990 4,887,000,000 7 4 ,000,000 4,886,576,000 211,389,000 6% TABLE 15 AAnual Pun:huecl DomdRespo-............ Trtpo us. 1984 21,600,000 14,300,000 66% 1985 66% 1986 27,300,000 68% 1987 67% 1!188 33,600,000 69% 1989 65% 1990 65% 15


TABLEl6 Auul Commuter Rail Posse...,. Trips -US Y ear ' : ,. pr.'lrt:ps; ... PDrc:l&attd P*'" TrtP, . ... : > ,, l'vdlaoed 1984 266,700,000 22,300,000 8% 1985 Z7S,300,000 14,500,000 S% 1986 305,800,000 14,300,000 S% 1987 311,000,000 9,200,000 3% 1988 308,200,000 10,100,000 4% 1989 3 29 ,600,000 10,400,000 3% 1990 328,000,000 9,CXX),000 3% TABLE 17 Auul Purdwed M otorblu ()puatlna Expetue -US y.;,.. -' o,..:... r,q;.;;;; : .. ...... . j 11:,; ' PwdM'iJ.-: 1.984 S5,335,100,000 sm,m.soo 3% 1985 S6,017,200,000 $156,447,200 3% 1986 S6,366,000,000 S1S9,150,000 3% 1987 $6,606,400, 000 $'218,011,200 3% 1988 S6,948,100,000 SZ70,975,900 4 % 1989 S7 ,278,600,000 S30S,701,200 4 % 1990 S7,788,600,000 $354,000,000 S% 1 990' S7,485,576,000 SS90,922,000 8% 16


TABLE 18 Almual Purchased Demand-Response Operating Expe!>$e US. y ealf '' "-. : . hn:ha.Sed' . . : ... 1984 $126, 700,1XXl $61,576,200 4 9% 1985 Sl54,401l,IXXl $77,354,400 50% 1986 $176,200,000 $94,267,000 54% 1987 $206,700,000 $115,958,700 56% 1988 $247,000,000 $147,459,000 60% 1989 $290,700,000 $161,047,800 55% 1990 $385,500,000 $226,000,000 59% TABLE19 Aluloal Purchased Commuler Rall Opera11D3 U.S $60,038,400 1985 $731,700,000 $121,462,200 1986 7% 1987 S70,9!Ml,100 4% 1988 $1,717,700,000 10% 1989 $171,380,000 9% 1990 12% 17


PERFORMANCE OF PURCHASED MOTORBUS SERVICE The performance of purchased motorbus services and directly-operated motorbus services is reviewed and compared in this section for Florida's transit systems and for the United States as a whole. Various indicators were taken from Section 15 summary reports and ratios were calculated to assess relative performance and to compare the efficiency of purchased motorbus services versus directly-operated motorbus services. Service efficiency is determined by ratios such as operating expense per revenue mile and operating expense per revenue hour. This analysis was limited to motorbuses due to the significant level of effort required to compile nationwide data and adjust the aggregated purchased data to include greater than SO vehicle contracts. As a result, demand-response and other modes are not included in the performance evaluation comparisons. Florida Section 15 data were broken down between directly-operated moto,bus service (MB) and purchased motorbus service (MBP) in order to compare their performance. In addition, the combined total for directly-operated and purchased motorbus service is also provided. Tbe percent of purchased motorbus service is provided for the performance indicators. The data clearly indicate that purchased motorbus service is more cost-efficient than directly-operated motorbus service in Florida. Operating expense per revenue mile is $3.58 for MB and $2.47 for MBP. Likewise, operating expense per revenue hour is $47 21 for MB and $32.92 for MBP. Figure 1 illustrates these comparisons. Vehicle utilization differs significantly from directly-operated to contracted motorbus service. The number of vehicle miles per peak vehicle is 52,800 for MB and only 32,530 for MBP, indicating that vehicles used by contractors are not utilized to the extent of directly-operated vehicles. Average speed (revenue miles divided by revenue hours) is virtually the same for MB and MBP. Table 20 provides performance indicators and measures for Florida's motorbus transit services. 18


FIGURE 1 Florida Stattwlde Motorbas Elpout PtrfOI'IIWI<:e &pcnoe Per l!cftnuc Mile $4.00 I . $}.00 $2.00 I l I -$1.00 $0.00 MB ... I I I. MBP 19 $SO $40 $}0 $20 $10 $0 MB MBP


TABLE%0 Florida StoiOW!de Mocorbll! (MB) PufOMII&Dct IDdlc:aton and Measortt, 1990 MB MBP MB + MBP MRD, Ptrf.,.,;,;;., IDdkaloc'l ' ;: .,. .... > "" Vellicles ill Max. Service 1,289 132 1,421 9.29% Vehicle Miles (000) 4,294 5.93% Vehicl e Hours (000) 4;J73 290 5,263 S.Sl% Miles (000) 62,044 3,299 U

Overall Performance in the United Stetes Figure 2 indicates that operating expense per revenue mile and operating expense per revenue hour are lower for purchased motorbus services (MBP) than for directly-operated motorbus services (lvm). Operating cost per revenue mile is $5.06 for MB and $3.55 for MBP, while operating expense per revenue hour is $62.56 for MB and $57.18 for MBP. The aggregated data clearly indicate that cost savings are being achieved in the transit iJldustry through the use of privatization. Vehicle utilization is similar for directly-operated and purchased motorbus service as the number of r evenue miles per peak vehicle is 35,733 for MB and 33,462 for MBP. Ridership indicators and measures are not included in the performance evaluation. Although ridership should always be monitored, in most cases it is not used to mea5ure the performance of purchased services siJlce the characteristics are usually such that relative patronage is below that of directly-operated service. New service where ridership bas not been fully developed and is Jess lucrative, and existing service where ridership is low are often the rypes of services that are purchased. The contractor usually has little or no control over ridership in these situations. Table 21 summarizes overall nationwide performance of motorbus service provided by these transit systems. $6.00 $,,00 $4.00 $3.00 $2.00 $1.00 $0.00 MB FIGUREZ UDIItd States AQxtpte Motorblu E:rpeu>e Puf01'1118Dce MBP MB MBP 2 1


TABLE 21 U.S. Mocorbo.s (MB) i'ufonDADce laciJcators a.od 1990 MB MBP MB + MBP MBP/(MB+M.Bl') .... -... ,.. VeiUdC6 Opented iD Max. Semce 37, 884 4,978 42,862 11. 60% Reveoue Miles (000) 1,353,699 166,573 1,520,272 10.96% Reveoue How-s (000) 109,481 10,334 119,815 8.62% Operating Expense (000) $6,849,654 $590,922 $7,485,.576 7 .89% ' ., ' y : t>" .. .... ''( 't ,.,. .... . _, ... "':'-" .. ,. Oper.IIU>g ExpcDSe Per Revenue Mile $5.06 $3.55 $4.92 a/a Oper.IIU>g E>:peDSe Per Reveoue Hour $62.56 $57.18 $62.47 o/a Reveoue Mllco Per Peat Vehicle 35,733 35,469 .. ,. Transit System Size PerformaJlCe Numerous efforts were made to determine whether the size of a transit system was an imponant variable in explaining transit system performance. These efforts ranged from the calculatio n of expense performance measures for various vehicle groups (based on number of motorbus vehicles operated in maximum s ervice) to nmning regressions where the number of vehicles was desigrtated as th e explanatory (independent) variable and the expense ratios were designated as de pendent variables. Extreme caution is urged when reviewing the data broken down into vehicle group ca t egories. Several data prob l ems and inconsistencies were observed when compiling the information, resulting in a hesita tio n to presen t pure results, particularly for the regression analyses. This is not SUiprising. as some variance in system performance was expected for a number of reaons. Fint, many fact ors influence the performance of a transit system in addition to the size, including the skills and experience of management and staff, local policy d e cisions with respea to land usc, parking. service levels, etc., the characteristics of the o pera tin g environment in general, e.g dens ity, co ngestion, transit dependency, etc. Second, accounting methods and definitions used for the reporting of Section 15 indicators may vary from system to system, resulting in some inconsistencies in the data. Third, many purchased services tend to be those that are more expensive to operate. As a result, this may give the 22


impression that the cost of purchased services is the same or more expensive than direclly operated services when actually it may be the result of the type of services provided. Removal of outliers from the data was considered but not used due to the uncertainty associated with the identification of cutoff points for the outliers. As a result, no conclusions were made regarding the performance of transit systems based on the size of the motorbus fleet; however, the raw data are presented as scatter diagrams in Figure 3 with tbe number of motorbus vehicles operated in s ervice on the horizontal axis and the expense ratios on the vertical axis. The scatter diagrams give the reader an opporrunity to review the data without necessarily drawing unfounded conclusions. The data do provide a general sense of comparative performance between directly-operated motorbus and purchased motorbus service. 23


nGUR ()pondaa EJ:pmse Per Rnmu Mile, Motori>t>s Scoaer Diagram $12 $ 1 0 Purclwed Motarbut xx : x i "'c !x X !" $0 o -400 aoo 1,200 z,ooo 2 ;400 z,soo :J,zoo Number ofVcbiclea nGUR4 ()poniiDI Elpaue Ptr Rnaaue Hoar, M--Scolfrr Dlap'am $120 X $100 )( Purclwed l4ooorl>oo 1 : ,x )(" .. . r.; X X $0 0 400 100 1 ,200 1,600 2,001 2,-400 2,180 .),200 24


DATA COMPARAB1Ll1Y Table 22 compares SU!llmary Section 15 data collected for Florida and the United States to data reported for specific studies of purchased transit service efforts in Miami and Denver. Of the four performance measures calculated for Florida and the United States, only ope r ating expense per revenue hour was calculated in the Miami and Denver studies. Florida's cost per revenue mile and revenue hour are below the United States ior MB and MBP; however, both Florida and the United States data indica te that purchased motorbus service is less expensive than directly-operated motorbus service. These costs appear to be reasonable w h en compared to the system-specific fully-allocated costs reponed in Miami and Denver. Vehicle utilization is significantly different in Florida than in the United States as a whole. The number of revenue miles per peak vehicle for Florida's directly-operated motorbus service is 48,133, which is significantly greater than the Florida purchased motorbus service of 24,992. The United States directly-operated motorbus service is 35,733, while the United States purchased motorbus service is similar at 33,462. The average speed is similar for directly-operated motorbus service in Florida (13.17 mph) and the United States (12.38 mph); however, a significant difference is observed for purchased motorbus service, with Florida MBP operating at 1334 mph and United States MBP operating at 16.12 mph. TABLEll Transit System Perfoi'IIW>ce Measllft Comparisoa.s OpuadDg Opera ling RemlueMUes Elpecse Ptr Expeo!e Ptr Ptr Peak Veblcle Average Speed Transit Systems ........ MOe Rnal0< Hoa.r MB MBP MB MBP MB MBP MB MBP Florida $3.58 $2.47 $47.21 $32.92 48,133 24,992 13.17 13.34 Uoited StaleS $4.93 .$3.71 $60.98 $59.76 35,733 33,462 12.38 16.12 Miami PEP Projea n/a a/a S7Q.OO $29.60 a/a n/a of a n/a Denver n/a n/a S7Q.OO $43.50 of a n/a n/a of a r 25




10. PRIVATIZATION LEGISLATION OVERVIEW Many states have passed legislation to guide their privatization efforts. The contents of legislative initiatives are key factors in encouraging or discouraging the implementation of these efforts. The purpose of this section is to review legislative initiatives for key provisions that impact efforts to privatize. 1bis section is confined solely to initiatives that were implemented by legislative action. Non-legislative initiatives, such as the Federal Transportation Administration's Private Participation Program, were discussed in Technical Memorandum No. 1 and are not included in this section. Privatization provisions in the lntermodal Surface Transportation Efficiency Act of 1991 and the Executive Order on Infrastructure Privatization of 1992 are summarized and discussed. At the state general enabling legislation for several states is presented, as is privatization legislation for corrections and franchises, which may offer some applications for transportation privatization legislation. Those provisions with possible applicability to the use of privatization in transit will be highlighted. DISCUSSION OF TRANSPORTATION PRIVATIZATION LEGISLATION The purpose of privatization legislation varies, from creating an environment in which privatization can potentially be implemented to more aggressive mandating of privatization. The boundaries of that environment are outlined in the initiative's provisions, as are the requirements. The objectives of privatization legislation are to: ensure that public policy objectives are achieved and that the public interest is protected; ensure consideration of partnership options in transport agency planning; ensure consideration of all costs and subsidies in comparing government and private development options; improve the decisionmaking process so that it can adapt to the special needs of public-private partnerships; 27


empower a single govermnent age ncy with t he authority to direct, support, and protect the partnership project 8 These objectives can be fulfilled by specific legislative provisions that are des i gned to encourage private sector involvement. These provisions cover a range of tasks, including: identifying or creating the designated govermnent agency for public-private negotiations; empowering the agency to solicit proposals, select/permit projects, and negotiate the tenos of the public-private agreements; describing the general content of the public-private agreements, including time limits on the duration of the agreements; establishing how or whether the govermnent will charge the private partner for project services that it provides; establishing insurance requirements and tort liability limits, if any; establishing general reporting/auditing requirements for the projects, if any; establishing oonditions/recourse for government and private partner default.9 Some legislation, however, may oontain provisions that hinder the ability of the private sector to participate. Examples of these provisions include: requiring a seoond formal legislative approval after the initial enabling legislation; requiring the posting of excessive bonds; requiring excessive private insurance; requiring private infrastructure developers to use govermnent subcontracting and procurement methods.'0 The intent of this section is to review selected initiatives to determine the extent to which they contain specific provisions that would be useful should Florida decide to pursue privatization legislation in mass transit. For this reason, those provisions related to 'Pri<< and UP/ilk$ G101JP, r.q.slaliw for Publkl'rivate Pfllfflenhips in A Guide (WIUhingi

authority, implementation, funding, and liability will be highlighted. To the extent that other noteworthy initiatives are present, also be examined. In the sections that follow, federaland state-level legislative initiatives are discussed, and the extent to which they contain the above provisions are noted. The initiatives reviewed are not limited to those related to mass tramit, but include those in other areas such as corrections and general franchises that potentially may have applications to mass transit. FEDERAL PRIVATIZATION LEGISLATION This section contains a description of privati2ation legislation at the federal l evel. Specifically, the Executive Order on Infrastructure Privatization and the Intermodal Surface Tramportation Efficiency Act of 1991 are summarized, and key provisions impacting privatization effortS are noted. The Executive Order on Infrastructure Privatization The Executive Order on Infrastructure Privatization (the Order) was issued on April 30, 1992, by President Bush. Its purpose was to ensure that the nation realizes "the most beneficial economic use of its resources." The underlying principles of the order include the following: Economic growth requires adequate and well-maintained infrastructure. To facilitate this growth, state and local governments should have greater freedom to privatize infrastructure assets. The foundation of the economy and economic growth is private enterprise and competitively-driven improvements. Federal funding of infrastructure should not hinder the private sector in its endeavors. State and local governments are in the best position to assess and respond to local needs and should have the ability to d6 so with respect to federally-financed infrastructure assets. User fees are generally more efficient than general taxes as a means to support infrastructure assets.11 11E:acutiw Order, Euc;utiye Orrter on ln[ra.rtmawt PrivalJziJJjon" (Coblmlnu, OH: Office of the Press Swei/Jly, April 30, 1992), p. 2. 29


Accordingly, the Order outlines a number of provisions related to the implementation of privatization initiatives. The provisions address actions .that potentially could be taken by the head of each executive department and agency, including: assisting local privatization initiatives; removing federal regulatory impediments; increasing state and local governments' proceeds; protecting the public interestY It is anticipated that, by issuing this order, state and local governments will have greater financial flexibility "to sell or lease infrastructure assets obtained with federal assistance."'13 1bis order will also present "private firms with near term opportunities to profit by rebuilding and expanding America's infrastructure."14 lntennodal Surface Transponatlon EMciency Act or 1991 The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) was signed by President Bush on December 18, 1991. The privatization provisions in the Act pertaining to transportation are summarized below. Section lOU Section 1012 of ISTEA concerns toll facilities including roads, bridges, and tunnels. Provisions within this section permit federal assistance for privately-owned projects, provided there is a contract between the public authority (having jurisdiction over the highway, bridge, or approach) and the private entity for the design, finance, construction, and operation of the facility. Under this section, the state is entitled to loan all or part of the federal share (which may not exceed 50 percent of the project cost) to the agency constructing the toll facility. The loan repayment OlUSt begin within five years from the opening date of the facility, and the term may not exceed 30 years. 12E:uculiw Orrkr, "E:uaJriw 01116 on l'riwztizalion-Fllcl Shut" (Columbw, OH: Ojfict of the P1= StcrtiiUy, April 34 1992), p. 2 "Ibid.. p. J. "McDmnoa, WUJ

Section 1060 -Section 1060 is a mandate for the establishment of a private sector involvement program that would, through the disbursement of at least three annual grants, encourage states to privatize their e ngineering and design services on federal-aided highway projectS when cost effective. F ive million doiJIUs per year is available for appropriations under this section. Section 3019-Section 3019 of ISTEA is a mandate for the funding of special rurnkey system projectS. A rurnkey system project is defined as a project in which a recipient contracts with a private s ect or entity to have a transit system built and operated for a period of time specified in the contract. The transit system is expected to meet certain performance standards. A t least two special projectS are to be approved as part of the initial demonstration phase. The demonstration phase is necessary 'to aid. in the development of regulations pertaining to turnkey system projectS. Section 3040 -Section 3040 is a mandate to establish a Charter Services Demonstration Program in up to four states. This program would allow transit operators to provide charter services for government, civic, charitable, and other community activities that cannot be served more effectively or efficiently by another means of transportation. Section 13(c), Urban Mass 'l)'ansportation (UMT) Act of 1964, as amended through 1988 Section 13(c) of the UMT Act of 1964 mandates that "it sball be a condition of any assistance ... of this Act that fair and equitable arrangements are made, ... to protect the interests of employees affected by such assistance.' The terms and conditions as to how this mandate is complied with must be included in the transit service contract. This includes provisions for: rights, privileges, and benefits under existing collective bargaining agree ments; continuation of collective bargaining rights; protection of individual employees against-worsening of their positions with respect to employment; assurances of employment to employees of acquired mass transportation systems and priority reemployment of employees terminated or laid off; and paid training or retraining programs. In most cases, Section 13(c) is the most important factor in the consideration of transit privatization. Transit systems that have not contracted or have contracted very little usually 31


indicate that the requirements of Section 13(c) prevented or discouraged them from implementing privatization initiatives. Several methods have been used to implement privatization in mass transit while still complying with Section 13(c). STATE PRIVATIZATION LEGISLATION This section contains a description of general enabling legislation for several states. In general, the initiatives for each state contain similar provisions. The similarities and differences are noted at the conclusion of this section. Florida Legislative Initiatives Florida bas several legislative initiatives relating to privatization. These include the privatization of correctional institutions, transportation, and treatment for alcoholism, and legislation defining allowable franchise, lease, and finance anangements. In addition, a Privatization Study Commission was created to meet in fiscal year 1987. Each of these initiatives is discussed below. A summary discussion of the provisions is provided at the conclusion of this section. Corrections Florida Statute .105 is enabling legislation for the privatization of the management and operations of correctional institutions. The Florida Department of Corrections is identified as the agency for public-private negotiations and implementation. This initiative empowers the Department to contract with private entities for the operation and maintenance of correctional facilities. The contract term is determined by the panies involved, but must be contingent upon annual appropriations. This statute requires specific legislative approval and appropriation in order for a contract to be binding. The legislation mandates certification of private correctional officers and annual audits to be performed by the Auditor General in conjunction with the auditors of the private entity The private entity is held "liable in tort with respect to the care and custody of inmates under its supervision and for any breach of contract with the department" At the time of this report, notbiDg in Florida bad been implemented as a result of this legislative initiative. General Franchise Florida Statute (Annotated) .14-180 .18 authorizes privatization of the construction or operation of municipal public works The municipality is identified as the designated government agency for public-private negotiations and implementation and is empowered to grant franchises. The contract terms are not specified but must be 32


"deemed expedient and for the best interest of'' the municipality and may not exceed 30 years. The legislation mandates that the private entity be liable for all damages, to the same extent as other private corporations chartered in the stat e of Florida. However, unlike other private corporations in Florida, the rates or charges "shall be fixed by the city council," not the private entity. Leases & Financing Florida Statute 159.28 is a general provision authorizing local governmental agencies to acquire property b y lease and to enter into contracts to facilitate financing. 1bis section also establishes government-assisted financing of bond issues for water, sewerage, or solid waste pro jects It requires that projects built and financed by local governments under the provisions of this chapter be sold or leased to the private sector for operation and maintenance. Tax exemption for bonds can be issued under these provisions. Transportation The purpose of Florida Statute .40, also known as the Florida Transportation Corporation Act, is to promote and develop transportation facilities and systems by new and alternative means. It identifies the Florida Department of Transp ortation (FDO'l) as the desigilated government agency for public-private negotiations and implementation. FDOT is authorized to have non-profit corporations act on its behalf; howe ver FDOT must approve the articles of incorporation and the members appointed t o the boards of directors of those corporations. The content of the p ub lic-private agreements must include provisions for accountability and default. In addition, the fiscal year of the private entity must be from July 1 to June 30 of the following year. The specific purposes and geographic area in which the private entity is auth orized to act for the Department must be clearly stated in the contract. Privatization Study Commission In the 1986 session of the Florida Legislature, as documented in Florida Statute Chapter 216, 2, a Privatization Study Commission was created for a fixed life of one year. The purpose of this commission was to document and examine current privatization efforts and issues. The scope of the study was to include the identification and analysis of the following: privatization efforts and issues in Florida and other states; fiscal and legal implications of privatization; 33 ...


the appropriate relationship between state and local government and roles of public officers in privatization efforts; services and facilities with !Ugh potential for privatization; applicability of privatiza tion to authorities special districtS, and regional agencies; political and managerial problems related to privatization and their correspondin g solutions; and the means to accommodate personnel displaced as a result of privatization efforts. The rommission was also expected to generate conclusions and recommenda tions, including the parameters within which privatization policy should be established. The Commission was to report to the Advisory Council on Intergovernmental Relations within tbe Legislature. Non -Florida State Legislative Initiat ives The 1990 edition of the Privatization Council's Compendium of Privatization Laws and privatization literature in general were reviewed in order to determine which legislative initi atives should be included in this Technical Memorandum. Emphasis was placed on locating those initiatives relating specifically to transiL The selected initiatives do not necessarily reflect all legislative initiatives passed in the United States; however, the search is believed to be nearly complete for those initiatives relating to transportation and general enablin g privatization legislation. The process resulted in the identification of legislative initiatives in the following states; Alaska Indiana North Carolina California Massachusetts Rhode Island Colorado Minnesota Utah Georgia Missouri Wisconsin A brief discussion of each state's initiative folloWs. For the most part, the initiatives are defined as general enablillg legislation, as opposed to legislation for a specific industry, such as wastewater tre&tmenL Where available, transportation-specific legislation is reviewed. Ahuka -Alaska Statute .35.060 bas been defined as franchise legislation. The designated government agency fo r public-private negotiations and implementation is the municipality. Specifically, the legislation grants a municipality the authority to award franchises to a o r corporation not otherwise certified by the Alaska Public Utilities 34


Commission. The initiative defines the term limit for a non-competitive franchise grant as five years; however, a longer grant may )?e approved by a majority of voters in a referendw:n_ Califomla -California Government Streets and Highways Code 143 bas been defined as transportation or toll road legislation. Specifically( the legislation empowers the California Department of Transponation (Caltrans) to enter into agreements with the private sector for four public transportation demonstration projects (turnkey arrangements). The agreements are for the construction and lease of the projects. The lease bas a maximum length of 35 years, at which time project ownership reverts back to the state. Caltrans is authorized to provide services (preliminary planning, environmental certification, and preliminary design of the demonstration projects} as part of the agreement, provided they are reimbursed. In addition, any agreements for maintenance or police services must also provide for full reimbursement-Colorado Colorado Statute {}-11-101 has been defined as general enabling l egislation. This initiative empowers each organized county within the state" to enter into contracts necessary to exercise its powers. The duration of the agreements is detertnined by the parties involved. Colorado Statute -9-1195, enacted in 1988, is a privatization initiative formulated to require competition in providing bus service within the regional transponation district. Specifically, i t requires the privatization of at least 20 percent of the bus service, as measured by the number of vehicle hours of bus service. The Regional Transportation District (RTD) is identified as the designated government agency for public-private negotiation and implementation. It is empowered to implement a system that would achieve this mandated level of privatization. This implementation system cannot result in the displacement of existing RID employees, and the contract must be awarded to the technically qualified. provider whose proposal offers the lowest costThe legislation requires that the contract agreements include the following specifications: reasonable passenger colllfort and safety characteristics of equipment used; access for persons with disabilities; reasonable training and safety records to be required of drivers; reasonable insurance; reasonable standards for reliability and on-time performance; 35


reasonable penalties for inadequate performance; and a contract term limit of up to three years, with op?ons for an extension of up to five years. The private provider is entitled to determine and retain passenger fares. The fares collected are exempt from sales tax but the providers themselves are not exempt from property, sales, income, excise, or other taxes. Coordinated service between the provider and the district is man dated. Georgia Article 9, 2 of the Georgia Constitution contains a general enabling provision. Specifically, it empowers local governments to provide polic e and fire protection, garbage and solid waste collection and disposal, and public transportation, among other services. By interpretation, this provision allows local governments to contract with private companies for such services.15 Indiana Indiana Code -17-4-2 has been defined as a general enabling act. It contains a provision that empowers local governments to enter into an agreement with a private entity to perform any service in the public interest Massachusetts Massachusetts Statute Chapter 40, 4 was passed in 1985 as a general enabling act. This act empowers a municipality to contract for a variety of services, including garbage disposal, health services, transporting school children, and construction of water treatment facilities. Contract terms and limits are specified according to each individual service listed. Minnesota Minnesota Statutes A, 469, and 471A are privatization acts. Section 471A is a comprehensive privatization law authorizing the privatization of capital intense public services. Specifically, as empowered in 469, municipalities and redevelopment agencies may enter into privatization agreements for econo mic redevelopment (or the prevention for such redevelopment) as deemed necessary. Prior to entering into an agreement, the approval by the Commissioner of the Department of Energy and Economics must be obtained. Acceptable projects are outlined in this portion of the legislation. "PoslmiiJk, BIDnksrein ci Lund, 1M Corzuwdium of SUI Prjyqljrgljot! L..M (Boston: 1M l'riwzlizDlion Council, In.:, 1988), p. 6. 36


The designated agency may issue revenue bonds in anticipation of project revenues. Unfinished sale or rental projects financed under these terms are exempt, upon application, from property taXes until the building is occupied. An additional taX incentive is the provision in A, which defines the private vendors iJivolved in privatization projects as political subdivisions. Missouri Missouri Statute .220 is defined as a general enabling act. This act empowers municipalities t o enter into contracts with private entities for the construction or operatio n of any public facility or for a common service. North Carolina North Carolina General Statute 153A-449 was passed in 1985 as a general enabling act. This act is a short general provision empowering a county to contract with the private sector to "carry out any public purpose t hat the county is authorized by law to engage in." Cities are empowered for the same purpose in North Carolina General Statute 160A-20.1, also enacted in 1985. Rhode Island Rhode Island General Laws 45-2-4 is defined as a general e nabling act. Cities and towns are empowered to make all contracts necessary for the conduct of business. These contracts may include lease and lease purchase agreements. Utah Utah Code -10<1, or the Utah Privatization Act, was passed in 1986 as a general privatization .law. This detailed statute empowers local governments to enter into agreements with the private sector for the provision of services. These contracts may lie for construction, operation, maintenance, and ownership of privatization projects, which include s drinking water, and wastewater projects. The local governments can regulate or establish the rates paid by users and are empowered to issue bonds to finance the cost of the privatization project on behalf of the private sector. 1n addition, the legislation contains a provision that limits future, direct competition. The contract must also include "hours of operation, character and kinds of services, and other rules necessary for the safety of operating personneL Wisconsin -Wisconsin Statute .061 is defined as a general enabling act. This ac t empowers local governments to grant franchises or service contracts for the operation of a system of water works or for the provision of lights, heat, or power. The contracts are limited to 30 years or, if prioe adjustments are to occur at least every five years, an indeterminate period. In either case, the local government retains jurisdiction over the .. rates. 37


Pending Legislative Initiatives New Jersey -If passed, House Assembly Bill 1175 would require New Jersey Transit Corporation to issue req uests for proposals for at least 25 percent of the regular bus routes operated by the corporation within one year of the effective date of the act. Within two years, the corporation would be required to issue requests for proposals for at least 50 percent of the regular bus route service operated by the corporation. At the time of this report, the bill was suspended for discussion of some additional amendments. Pennsylvania -The "Public Transportation Consumer Protection Act" was introduced in the Pennsylvania Legislarure in 1990. If passed, the act would require the Southeastern Pennsylvania Transportation Authority (SEPTA) in the Philadelphia region and the Port Authority of Allegheny County (PAT) in the Pittsburgh area to issue requests for proposals for at least 10 percent of their routes within a six-month time period. The percent of service would be based on the annual vehicle miles for the most recent fiscal year and existing contracted service would not qualify toward meeting the designated 10 percent. This bill was approved by the Senate Transportation Committee but has never emerged from Appropriations. At the time of this report, the furore of the bill was still uncertain. This review of legislative provisions has provided a cross-sectional view of privatization legislation throughout the United States. However, legislation is amended annually, and every attempt has been made to locate the most current legislation. For a more complete look at privatization legislation, consult the Privatization Council's Compendium of Privatization Laws16 or a local law library. SUMMARY OF PROVISIONS The provisions contained in legislative initiatives play an important role in ultimately determining the extent of subsequent privatization efforts. Initiatives that are too vague may never result in the implementation of privatization efforts CoiiVersely, there is a danger in having legislation that is too detailed, as specific provisions may discourage private sector participation. 1bis section summarizes the provisions outlined in the above legis lative initiatives and notes similarities. For ease of discussion, the provisions are distributed among four categories: "!bilL 38


initiatives and notes similarities. For ease of discussion, the provisions are distributed among four categories: Authority Implementation Funding Liability These categories are summarized in Table 23 on pages 42-44 following a brief discussion. Authority A provision granting a specific agency the authority to enter into privatization agreements is an integral part of a legislative initiative. Such empowerment is necessary for the success of the project. The designation of a single agency for negotiation and implementation of p u blic-private parmerships can possibly circumvent interagency or intergovernmental disputes.17 In addition, by empowering the agency to enter into agreements, bureaucratic barriers to implementation are reduced. For most of the state-level initiatives examined above, the municipality or local government is empowered. However, California's initiative is directed at its Department of Transportation, and in Florida, the transportation privatization legislation designated FDOT as the agency for public-private negotiations and implementation. The participation of the Minnesota Department of Economics and Energy is mandated as well. In Colorado, the designated agency is the Regional Transportation District. ImplementationImplementation provisions are those that work to prevent problems which may ariSe in the contract or implementation phases, in order to ensure a successful project. These provisions might include allowing the private sector to specify contract terms, delaying biUs for service until after the construction phase of the project, and allowing for the exemption of local property taxes until project debt is retired. In Colorado's legislation, the fares collected by the private provider are exempt from sales tax. However, this does not exempt the providers themselves from property, sales, income, excise, or other taxes. Minnesota has a similar provision, exempting sale or rental projects from property tax until the building is oo:upied. In addition, those private entities participating in a privatization project in Minnesota are defined as political subdivisions for tax purposes. "Ibid., p 20. 39


California's legislation contains a provision that allows Caltrans to provide services such as preliminary planning and environmental cer:tification, provided they are reimbursed for these services. Utah's Privatization Act contains a provision that limits future, direct competition Some contract terms specify a term limit for the contract. This can range from at least one year (Colorado) to a maximum of35 years (California). Not all legislative initiatives specify term limits, thus leaving tbe decision to the negotiating parties Legislation in Florida and Minnesota requires a second approval before a contract can be implemented. In Florida, the Corrections legislation requires specific legislative approval and appropriations in order for a contract to be binding. In Minnesota, the commissioner of the Department of Energy and Economics must approve contracts. By requiring a second approval after the initial enabling legislation, the private project is unneoessarily put at risk for the "dollars in planning, design, and permitting already expended "18 Financing -Some legislative initiatives contain provisions that establish how government assisted financing may be made available. In particular, Minnesota and Utah have provisions that allow the designated agency to issue revenue bonds in anticipation of project revenues. In addition, a description of the allocation of federal and state funds to the project could be included. Colorado's legislation requires the inclusion of available federal funds, wbether through reimbursement or vehicle leasing, as part of the request for proposal. The ability of the private sector to collect revenues and charge market-based rates is also an important consideration. Colorado's initiative mandates the inclusion o f a provision that the provider retain from SO to 100 percent of the fares, remitting the balance to the RID. However, in Utah, the initiative mandates that the local governments regulate or establish rates paid by users. In Florida, general franchise legislation mandates that the city council, not the private entity, establish rates or charges. Liability liability is also an important consideration. A provision that establishes reasonable insurance requirements and tort liability limits is beneficial, since excessive insurance requiiements may not be available at a reasonable cost.19 Colorado's initiative mandates that coutracts contain a provision requiring reasonable liability insurance. In the Florida Corrections legislation, the private entity is held liable for the care and custody of "Ibid., p. 17. "Ibid. 40


the prisoners under itS care. Not many legislative initiatives address liability, since the specifics are generally addressed in the individual priv a tization contra cts ."' S ummary This section summarized federaland state-level legislative privatiza tion initiativ es in an effort to pr esent provisions tha t bave been passed or are unde r considerati on. The role that privatization will play in the future will depend largely upon economi c and fiscal conditions in tbe l ocal governmental age ncies and in the political eavironment of the nation. Privatization l egislative initiatives tend to be general enabling in nature. That is, tbe provisions included in the legislation give public agencies the power to privatize, subject to tbe req uirements of the legislation; however, recent effo rts in public transportation partnership legis lation have moved in th e direction of mandating the p urchase of a portion of t ransit service. A mandate has already been implemented in Denver and mandates are still under consideration within the legislatures of New Jersey and PelliiS)'lvania. "Amoic"" Road and 11uiJdc$ As.rocUuion, Publk/PriW!I( fll!'l1!mlliw in Thpta>qrW!Ipn: The S1111(11[1heM (WAihing!On. D.C.: Amtria1n Road and T11111SpCt141ion 11uiJdc: AJwcialiort, 1991), pp. 2-7. 41


Table :13 s ..... ., o r Prorislooos ID State-Level '4!olaUv c lalliollv es SOot Lcplioa lmpkDoal n...po.w;oo &.qlolita privltlut!OA or 20 percuu lU..On.tblc (l'rM

StAle Lcp.Q1iM Authori'Y Implcmental ioo Liablli1)' Florida (OOCK.) P.S. 11180.14 .18 M\IAlcip&.tiay O::lecrtd. not spetiflt4 by IIW$t Private cmity (Ocnc.ral FtucbiK l.cplation) be: docmcd CJfpc.di.cru aCMI for tiC4l hck11ialol1c. for aJl int<:f'Cit ol mvni9.28 l..oc&l Bond iuue& rot (LoMe ....... ......, LOoo) 43


,. :a :S nl "' f il ; h L! ]H.J H! c "' ..... .,[ e-g p g t."' .. g !Jit '!J : j-9 0 Ht "Ll a .a_ e a :1 i -lint "' d I o I .8 ;; < c X s 0 j g g i j l i J c .:s .:s 2 1 -;J d J 1 :u :sl a-e ;;;e .j"e :Si! .ss -l =iJ tJ g o z-z-oi-! I I 'i "' 3:


IV. NONFLORIDA TRANSIT SYSTEM PRIVATIZATION INl'l'lATIVES This section provides case studies of uansit privatization activities occurring throughout the United States. Several rypes of privatization activities are reviewed, including (Ontracting transit operations, contracting fleet maintenance, joint and cross border leasing. CONTRACI1NG OPERATIONS lbis section summarize s the privatization efforts of several non-Florida transit systems in the contracting of operations. It discusses the processes and guidelines that are used by selected transit systems to contract operations and describes the exten t of success or failure that transit systems have experienced in the process of implementing privatization initiatives. Ftve systems were selected for case studies regarding the contracting of transit operations, including Denver Regional Transportation District, New Jersey Transit Authority, Greater Cleveland Regional Transit Authority, Chicago Pace, and the Snohomish County Public Transportation Benefit Area Corporation. Each of these transit systems bas been identified as being an active participant in the privatization of transit services. Ideally, case studi es of privatization in small, medium, and large transit systems would be preferred to determine the extent of success and failure according to system size. Unfortunately, little or no data are available for initiative s implemented in small and medium-sized transit systems. As a result, the non-Florida case studies presented in this section summarize initiatives undertaken by large transit systems. 45


Regional Transpor1arion District Denver Description of Transit System Denver Regional Transit District (RTD) is a public trans portation system that operates over 750 buses, providing fixed-route service in the greater Denver area. RTD provides paratransit service as the service sponsor and contracts with private systems to operate the service. RTD manag es its own staff of approx:imately 2,000 employees. Description of Initiative In mid-1988, RTD was mandated by the state legis lature to implement an initiative that would contract out at least 20 percent of its existing transit services to private operatofl. To ulfill requirements of the legislative mandate, guidelines were established by RTD to solicit proposals from potential contractors, to select the contractors, to provide pre-revenue service assistance to selected contractors, and to provide oversight during contractor start-up and revenue servic e. As a result of this policy, RTD currently contracts for service in five groups. Each group represents approximately five percent of RTD's fixed-route service and is comprised of smalle r packages, with each p ackage representing route groupings. 1bis approach was developed to give small contractors the opportunity to submit proposals for smaller contracts. Contracts are established for three-year initial terms with two one-year options and are awarded to quali.6ed contractors who propose the lowest cost below RID's fully allocated cost for service. In 1990, RID contracted 20.5 percent of its service. The same level of purchased service was maintained in 1991, the seco nd year of its mandated privatization program. In 1992, additional service was con tracted bringing the total to 23 percent. 1bree contractor1 were selected to provide transit services, including Mayflower Contract Services, Inc. Laidlaw Transit, and American Transit Corporation. Table 24 sUIIl.IJlal'izes the projected cost for 'the initial five-year period of RID's privatization program. The table also includes contractor prices, fare revenues, annual hours of service, and cost per hour comparisons of privatized service. The five-year projections indicate contractor cost to be $4350 per revenue hour, while RID's fully allocated cost is $70.00 per revenue hour. 46


>-You ......... (S MUlloa) S6S. 9 TABLE 24 Contractor Prices, Fare R.eveoues. Hours of Senic:e, BDd Co!! Per Hour Comparlsoo ol Prlvadzed Sen1ce S.Yoar Coctractor E( (S C... (S ANt ... Tot.ol To.m 20.69Co $43S Kill r.u. AIJo

To date, KPMG Peat Marwick has cond u cted two performance audits of RTD's privatizatio n program. The first audit was conducted in 1990 to evaluate the first year of the initiative. The evaluation period for this year was actually less than ten months of actual rev en ue service. A second audit was cond u cted for a full twelve-month period from July 1, 1990, t br ough June 30, 1991. The r esults of the second performance audi t are s u mmarized below. This audit is preferred over the first since it covers a full year of service and provides the most information reflecting actual im pacts of the private participation program. A description of the cost analysis used in t h e performance audit is presented, along with an analysis of the contractors' costs and profitability. This is followed by a summary of the issues presented in t h e performan c e audit for the period ending in 1991. More attention is given to the cost analysis aspect oi the performance audit sin c e it no rmall y serves as the best i ndicator of the poten t ial benefits o f privatization. To compare RID's cost to operate a rou t e and the cost of a private system to operate the same route, two types of cost analyses were used: incremental cost analysis and fully all ocated cost analysis. For short-term cost evaluation, an incremental cost analysis is used. This cost analysis identifies near-term effects of alternative management decisions, each res ul ting in alternative revenue and cost flows.21 It also provides a lower boundary of projected financial impacts due to privatization. For long-term cost evaluation, a fully all ocated cost analysis is used. This cost analysis implicitly assumes that all costs are directly related to the level of service provided; therefore all costs, including overhead, are allocated to estimate the full cost of direct operation of service. Long-term, fully-allocated cost analyses provide an upper boundary of projected financial impacts due to privatization. RTD developed an incremental cost allocation model to address labor productivity and unit costs associated with the different types of service operated. This model distinguishes labor productivity and other unit cost factors for the various services operated by RTD and can he applied at the route level. Various administrative and overhead expenses are excluded from the incremental cost analysis. These exclusions are functions that RTD is specifically mandated to perform, such as general administration, legal counsel, materials management, and marketing. among others. RTD would continue to perform these functions after contracting service. "KPMG Pe

The incremental cost analysis compares the cost of RTD directly-operated service with the actual cost of the contracted service.22. Cost savings are realized if the incremental cost is above that of the private c o ntractOr bid cost. Table 25 summarizes the results of the incremental cost analysis for RTD directly-operated service and contracted service for fiscal year 1991. The table includes the cost for RTD to operate the service directly rather than to contract, the positive and negative impacts achieved by RTD from contracting the service, the savings (costs) of contracting, and the cost of contracting as a percentage of RTD's total cost. The savings resulting from privatization were estimated at $2.5 million, or 1 2.5 percent of RTD's estimated in-bouse cost. TABLE25 Coot Comparisoa or Diroctly.Operated vtnus Contractod 'IftDsl t Senlces Adu&l"coots locrt.....,tal Cost J llly 90-Jome 91 RTD's Estimated loaemental Cost (io millions) $20.0 PO$itive lmpacu' (io millions) $16.7 NegatiV<: lmpacu' (io millions) $14.2 : (Cosu) (iD. millioo.) .. ,..,.:: . ,'As Z.S(.: t ..... . % of COOl of RTD Dire

TABLE u; FuUy Allocate

local radial service. Contractor safety performance, as measured by property damage accidents per 100,000 vehicle miles, !s better than RTD for l ocal non radial service and express service; however, contractor performance is below RTD for local radial service. TABLE 27 SourctO or Cool Savlop Resultlna From Prhatl.zatloa at RTD our.... a.. .... RTD .., ( .... ) -,_, ,.etT-s Total lml Folly-Conf'tador .. Laa .... Oponoloc ()pontiaC+ Allocated Cost CoM s lmlC... c... Capllal c ... llUia-' our..._. Ope"tor Wagos & Fringe$ S8.3 34.8 S3..S J8.691o 34.4% Mainleaaoec Wage& & Friotga $2.2 SI.O Sl.l ss.m ll.6% 12.l'l!"o Pamfi""truj PuelfOuU;ide Svt $3.1 S2.1 Sl.l 34.391o 11.991. 10.6% Ocber Coct $0.9 SO.l $0.8 8Z.6'1Co 8.491. Othu Ooentina O.u $3.0 S2.S <"una Coots $20.0 SII.O $9.0 <5.091. 100.091. 89.191. To>W Cap;to! C... su $3.0 Sl.l %7.091o I 10.9> TOtal Oper.ciac & C.pita.J c... $24.0 $14.0 SlO.t 42.091. I 100.0% 'Represents the percent of difference in total operating cost $9 million. 'Represents the percent of difference in total operating aDd capital cost= $10.1 million. So wee: KPMG Peat Marwicl<, 'Denver RTD Privatization Performance Audit Update: July 1990 to June 1991; p. Ua. 51


Figure 5 Comparioou or Bodll7 iliJary Acdd

(2) Quality or Service Quality of service for contractors, as by on-time performance, was reported as similar to that of RTD's; however, contractor maintenance reliab ility performance for local service, as by roadcalls due to mechanical failure and the need to replace a bus for mechanical reasons was 45 percent wor se than RID's. The audit disclosed that contractors' mechanic staffing l evels are generally lower than similar privately-operated transit systems. (3) Operator Wages and Tumover-An analysis of RTD and contractor bus operator wages and turnover was included in the performance audit to address the major sou.rces of cost savings identified in the cost analyses. The report indicated that 86 percent of RTD's operators were at the top of the allowable wage rate for bus operators. Contractor employees were not as high on the wage scale, particularly since they bad been employed for a shorter period of time.24 The audit revealed that the average wage rates paid to an RTD part-time operator was 8 to 34 percent higher than that paid by a contractor, while the average full-time wage was SO to 87 percent higher than that paid by a contractor. The wage dilierential may have contributed to some employee turnover, but turnover was not a significant problem, particularly in light of the s ignificant cost savings. Conclusions Over the five-year period, RTD's Privatization Participation Program is projected to save the agency more than $29 million (25 percent) on a fully-allocated cost basis and nearly $16 million (15 percent) on an incremental cost basis. The 1991 KPMG Peat Marwick performance audit indicates that, in terms of safety and quality, the contractors performed similar to RID. Management at RID bas realized that privatization advantages can be achieved without relinquishing safety and service quality standards. Since RID is currently in the third year of its contracted service agreements, it may be too early to determine the degree of success or of its privatization initiative ; however, the results from the performance audits clearly indicate that RTD's contracted services program bas provided financial benefits to the agency an_d maintained a quality of service that i s acceptable. In spit e of its sucoess, RTD is still faced with concerns about its privatization program. These concerns were first identified in the 1990 performance audit, which disclosed several weaknesses in the incentive/penalty system used by RID. The dollar amount of the "Ibid., p. 30. 53


incentives and penalties, namely r e tamed fare revenues and liquidated damages, were too small to be of significant value to the coQtractors. A;ny incentive for the COQtractor to provide quality service is based on fare revenues received. There are two aspects of fare r even ue that coutractors are limited in their ability to control: fare structure and ridership. The fare strucrure is set by RTD without any influence by the contractors. Also, the contractors cannot COQtrol regional economic conditions or route-specific changes. Both of these aspectS have a profound effect on the amount of fare revenue received by the contractors. Finally, liquidated damages were imposed by RTD based on observations from a variety of sources. RTD currently does not employ any additional staff personnel to assure that assessments are based on uniform and consistent infon:n.ation. Under SB 164, RTD was required to have performance audits only after the first and second years of contracted service (fiscal years 1990 and 1991). RTD has budgeted for a third year performance audit as well. Because of its success with contracted services, RTD bas achieved one of its long-term objectives of expanding service in the Denver area. Under the legislation, RTD was required to contract for existing services. Therefore, to increase its market area, RTD contracted more of its current service, which allowed the agency to utilize existing resources to develop new route service. In light of the short-term success, the agency expects to continue this practice beyond the current contractual arrangeme nts. 54


New Jersey Transit Corporation, New Jersey Description of Transit System With a staff of approximately 8,400 employees, New Jersey Transit (Nflj provides fixed-route bus, commuter rail, and light rail services throughout the state. NIT bus services consist of 156 fixed routes, with operating responsibility assigned to a subsidiary, New Jersey Bus Operations (NIT Bus), which operates a total of 2,624 buses NIT also provides paratransit service in the state as the service sponsor, but the service is operated by the various city, local, and municipal governments. Description of Initiative While acting as the primary transit provider in the state, the New Jersey Department of Transportation (NJDOl) previously provided operating subsidies to eight private systems. By 1979, the number of private systems receiving operating subsidies grew to 21 and total operating assistance to these systems reached $53 million. The operating assistance was further supplemented by federal capital assistance for vehicle leases. However, during this period, transit ridership in the state declined by 41 percent and the quality of service deteriorated.25 Because the state did not have the stanitory authority to restructUre inefficient routes or to make internal management improvements in the private bus companies, the legislature created the publicly-owned New Jersey Transit Corporation (NJT) to acquire and operate endangered bus properties.26 The legislation designated the corporation as a conduit through which state and federal subsidies would flow to private companies and mandated NIT to provide a public transportation system that would be efficient, coordinated, safe, responsive, have public participation, and, "to the maximum extent feasible," include private sector participation. Unlike other private participation programs, NITs privatization efforts have focused on improving an already-existing relationship with the private systems operating in the state and on implementing a legislative mandate. As a result of the 1984 UMT A edict for the of private systems in the planning and delivery of traDSit services, NIT developed one of the most comprehensive private participation practices in the country. Several programs were established to involve private systems in the planning and operation of transit services, including a Bus Allocation "'James A Dunn. Jr. 11114 WiUiGm Fe/ir, "l'riwziUing LocGI Stnliul As A Ftdoal Policy GO

PrograJll, a Private Carrier Capital Improvement PrograJll, Operatillg Subsidies, a Private Carrier Advisory Committee, and a Contracting Out Po\icy. These programs are described below. (1) Bus Allocation Program NJT leases buses to privat e c arriers. During the perio d from 1979 to 1991, NIT allocated approximately 1,065 buses to private systems, valued at over S146 million. This program has enabled private systems to realize significant savings in capital expenses. (2) Private Carrier Capitalllllprovement Program (PCCIP) This program provides private systems with capital equipment (other than vehicles) such as fareboxes, r adios, computers, software, wheelchair lifts, and service vehicles. NIT has leased over Sl9 million worth of equipment t o privat e systems since 1984. (3) Operating Subsidies NIT provides operatillg assistance to private systems in the form of reimbursements valued at $6.1 million annually. These programs enable private systems to provide reduced fares to transit-dependent persons without a loss of revenue by underwriting elderly, disabled, and student reduced fares. Additionally, $5 . 2 million is budgeted annually to private systems operating in suburban counties. (4) Private Carrier Advisory Committee (PCAC) This committee was establislled to maintain an on-going and open dialogue with private systems and to explore opportunities to maximize private carrier participation in the provision of regular route service. The oommittee also serves as a forum at which the private operators can meet regularly with NJT staff, receive notification of any proposed new or restructured service, and be apprised of applications for federal grants and equipment allocations.77 The committee is complemented by a NIT Board of Directors' Sub.Committee, which allows private systems the opportunity to voice their oonoerns an d recommendations to the entir e board. P rivate carrier involvement is ensure d through these forums. (5) Contracting Out Policy -In Aprill986, NITs Board of Directors adopted the New Jersey Transit Contracting Out Policy, which provides for the identification of "New Ieney T11211Sit, "An CMnoiew of Rt/atioru &tween NJ TNnril and Private Canim' (Newall<: Ntw ltr.sey /991), p. 2 56


certain routes for the purpose of seeking competitive proposals. Following the adoption of this policy, NIT s et a goal to identify approximately five percent of its existing routes that would be subjected to the" bidding process within 12 month s and to review opportunit ie s for contracting out new and restructured service in the future NIT Bus Operations was also permitted to bid on these routes NITs contracting out program utilizes a route review process to determine where opportunities exist to increase private carrier involvement. As!y current NIT service or prospective service is considered for external bid when it meets the following criteria: The decision to contract out route service by NIT must substantially improve the financial position of the transit system. The contracting of service must achieve, at a minimum, a substantial reduction in cost for the service in question over a five year period.>! NIT calculates costs using an incremental cost model and not, as Ff A proposes, a fully-allocated cost model NIT believes that to include fixed cost (e.g ., quality control, top management salaries, and schedulers) could distort the actual benefit obtained through contracting and result in the worsening of NITs financial position. The motivation for contracting service is to fulfill the legislative mandate to provide a transportation system that is efficient and coordinated. Private sys tems must accept, and NIT has an obligation to enforce, procedures that promote the best use of state resources. Table 28 summarizes the number of routes that were contracted out by NIT in 1987. During that year, NIT contracted out 38 of 156 routes. The total cost of these contracts was $37.45 million. The 1986-87 period was the only time that NIT went through an elaborate bidding process to contract out a significant number of r outes.29 In subsequent years, NIT reviewed its service and fOUIId few routes suitable for contracting out "Ibid., p. 28. "'Dunn IZIId FeJD; p. 15. 57


TABLEZS Routes Coo traded OUt B)' N.,. Jenq l'nlult : Wt."G;.oap -. . ; . . .... . } ; i ol b.t.eo COUDIUs. Stnecl ... . , .. Bergen Cou.o.ty Local Bel! 10 Camden Area Local Camd e,_ Burlillgt oo, Glo ucester 6 Uui011 Local Uaion. Somenet 4 Passaic Local Pas.saie, Bergen s Garde n State ArU Cente r Monmouth I Meadowlands PatkRido Bergen 1 Southern Passaic Local Passaic, Bergea, &sex 6 Morris Local M orris. Esse, Passaic 4 AirliAk &sex 1 TOTAL CONTRACTED ROUI'ES 38 TOTAL NJT ROUI'ES 1S6 'll> OF ROUTES CONTRACTED 24% In addition to NITs Private Participation Programs, the system has instituted a fare policy and scheduling f ormat to further improve coordination of services between its directly opera t ed and contracted routes. Fares and fare zones are set by NIT for private systems. Schedule formats for both NIT and private systems have been standardized, with connecting services shown on the schedules. Review o f Issues leading to Initiative By legislative mandate, NIT is responsible for overseeing a rational and coordinated system of routes. NITs contracting policy was developed within the following parameters: the need for a unified/coordinated transit system; the need to define and implement temtorial integrity; the need to avoid destructive competition; the need to exercise resource control. These guidelines w e r e developed within the limits of NITs legisl a tive a uthority and are perceive d as part of the agency's goal to maintain private carrier participation in the provision of transit service. The guidelines are summarized below. 58


(1) The need for a unified/coordinated transit systemNJT considers this to be an imponant principle when deciding to contract services. The system requires public transportation systems to work cooperatively in promoting efficiency, coordination, responsiveness and cost-effectiveness. lbis is best achieved through the rational, orderly design of complementary services. (2) The need to avoid destructive competition Destructive competition against a public system occurs when a new service violates territorial integrity and results in deterioration of the public carrier's financial condition.30 In a truly competitive market, a consumer receives the lowest market price and the best possible product Since businesses must maintain a competitive edge within the marketplace, better management ensues. However, this is not the case in the transit industry, which receives most of its funding from the state and federal governments. Because the legislation mandates a coordinated system of routes, it is necessary to develop a rational/ coordinated system without destructive competition in order to ensure that tax dollars are utilized effectively. In fact, destructive competition in the state's public transit system could result in an inefficient use of state resources, an uncoordinated system of routes, skimming of profitable routes, and a reduction in economic and operational efficiencies. (3) The need to define and implement territorial integrity -The concept of territorial integrity is promoted by NIT to enable the agency to develop a system that is coordinated and efficient. NIT defines its territory as: all existing New Jersey Transit routes; any new route that connects a combination of routes currently operated by NIT but that does not infringe upon the territory of another carrier; any new route where NIT initiates service without infringing upon the territ orial integrity of another carrier and which can be integrated into the existing NIT bus system; any local road or highway which can be used to increase the efficiency of an existing route 's service, speed, or farebox recovery; "'Ibid.. p 22. 59


the routes of all private bus operators who receive state operating assistance or are under contract to provide service on behalf of NJT.31 These guidelines enable NJT and the private bus systems to work in a partnership to provide public transportation services that are efficient and complementary. This also creates needed flexibility for the system to make minor route adjustments to improve the performance. ( 4) The need to exercise resource control This concept is also used to ensure that state resources are allocated in an efficient and coordinated fashion. It gives NJT the ability to recall all state-supplied assistance should a private carrier act destructively against another carrier. If service provided by NIT is found to be destructively competing, even NIT can be required to discontinue service tbat is found to be destructive Methodology Used to Evaluate Initiative An evaluation of the savings or impactS resulting from NITs privatization programs bas not been conducted. The agency bas not established any standards or measurements to assess the long-term cost or actual benefits of these programs; however, staff at NIT indicate that the annual route review portion of the Contracting Out Policy has not only served as a determination of where contracting opportunities eldst, but also symbolizes the effectiveness of privatization on the agency's transit operations. Perceptions or Parties Involved NJT staff considers its privatization program to be one of the most comprehensive attempts at meeting the ITA privatization initiative in the country. Notwithstanding the absence of any formalized assessment process to determine the actual benefits of these programs to NIT and its riders, the agency anticipates that it will continue to provide opportunities for private systems to take part in the provision of transit services in the state. Conclusions In general, the programs established by NJT have allowed the system to meet its mandate to provide transit services that are efficient, coordinated, and safe and that include private systems in the process "to the maximum extent feasible." While much of the success of this program reflectS efforts by NJDOT prior to the creation of NIT, the system has continued to support these activities to ensure that a competitive environment exists for "New Ieney Tnwit, 'CaniTGCiing Out Policy' (Neworlc: New Ieney Tnwit, 1986), p 21. 60


private systems. This is further supported by the contracting out policy, which has complemented the agency's privatization initi atives. A review of Table 28 on page 58 indicates that 38 routes were put out for bid. No private bids were awar ded on 10 of the routes, all of which continue to be operated by NIT Bus Operations. As a result, only 28 routes are operated by private businesses. Eleven of these rou tes were operated by priva tely-subsidized systems prior to the mandate. Thus, only 17 routes were actually transferred from NIT to the private sector through the contracting out process. Unde r this program, private systems are r estricted from using leased buses to compete against each other. However, this program has a loophole in its restrictions. A private carrier may use a vehicle obtained through this program to operate routes where there is no other operator and may use a privately-financed vehicle to directly compete against NIT or another private carrier. It was observed that, while the allocation of capital resources has benefitted private systems, more accountability must be placed on the contracted systems to facilitate NITs strategic: objectives. The private carrier capital assistance programs do not have reciprocal responsibilities to ensure the quality and integrity of services in an overall public transportation system. :n Under NITs contracting out policy, contract awards for route service are given to the private system that submits the lowest bid under NITs incremental cost estimates to provide the service; however, when costs are calculated for providing private systems with operating assistance, subsidized fares, capital improvements, and vehicles, it is conceivable that this cost may exceed NITs actual cost to operate the service directly. NIT also experiences a reduction in revenues equal to that which is retained by the private systems. NIT is also responsible for the cost of maintaining displaced employees, who are protected by Section 13(c) of the UMT Act. "Ibid., P J4, 61


Greater Cleveland Regional Transit Authority, Cleveland Descript.ion of Transit System The Greater Cleveland Regional Transit Authority (GCRTA) began operation in 1975 following the consolidation of Cleveland Transit System (CTS), Shaker Rapid Transit, and s everal small transit companies. The initial format ion of tbe GCRTA began in 1973 when tbe Northeast Ohio Areawide Coordinating Agency (NOACA) commissioned tbe "Five County Transit Study," which created a framework for t he expansion and development of the area's transportation system.33 In 1974, voters approved a one percent sales and use tax to provide a dedicated source of operating income for transit purposes. CTS was officially transferred to GCRTA on September 5, 1975. A month later, GCRTA contracted with five suburban transit agencies and implemented a standard fare structure. Today, GCRTA is the largest public transportation agency in Ohio and is ranked among the 12 largest agencies in the nation.34 GCRTA operates 799 buses and 108 rail cars in the Greater Cleveland region. The service area includes 515 square miles, 67 municipalities, and 1.6 million people.35 Additionally, GCRTA's Community Responsive Transit (CRT) Program operates 68 paratransit vehicles to provide demand-response transportation services for senior citizens and persons with disabilities. Description of Initiative Although not as extensive, GCRTA's efforts to contract out some services have been similar to those of other transit systems in their attempt to comply with FTA's privatization directive. Generally, GCRTA's privatization initiativ es have been limited to new and/or experimental fixed-route services and the suburban segments of its paratransit, demand-response services. In addition, services where smaller transit vehicles are more efficient have been targeted for privatization efforts. For example, in 1988, GCRTA initiated the Flats Flyer Van Service, a five-month seasonal trans it service under a: three-year contract with the Yellow Cab Company. The service provided transportation between downtown office buildings and the Flats entertainment district (located o n the Cuyahoga River) during weekday lunch hours a.Iid weekend evenings. Also, as part of a demonstration project started in July 1990, GCRTA contracted with Special Busing, Inc. to "O,.Illtr Cleveland &gioniiJ Tnwil AWht>rily, "Trtutsil 2010 Long Plan" (Cleveland: Orratu Cleveland REgicMI Tnwil AU!hority, 1992), p. 36. 62


provide a one-route loop circulator service around the University Circle area serving Case Western Reserve University, and medical and cultural .institutions. Dubbed 'The Circle," this second attempt by GCRTA to privatize a new service originated as a two-year contract using four vehicles. Review or Issues Leading to Initiative In the Greater Oeveland area, NOACA is the metropolitan planning organization (MPO) responsible for coordinating transportation plans covering Cuyahoga, Lake, Geauga, Medina, and Lorain Counties. In response to FTA's policy to encourage private sector involvement in the planning and provision of public transit services, representatives from various transit entities worked together to develop a local policy that takes a regional approach to private sector participation. The privatization policy provides for private sector involvement in the planning process, the establishment of criteria for evaluating services for possible competitive tender, periodic examination of services, and a dispute resolution process.36 The majority of GCRTA's service changes involve modifications to routes, service frequencies, and service spans. Methodology Used co Eval11ate lDitiatlve According to GCRTA's service policy, an operating farebox ratio of 25 percent is required to continue a service. This policy also governs contracted services and, subsequently, serves as the only measurement to determine the success or failure of a privatization effort. Both the Flats Flyer and The Circle failed to attain the minimum required farebox ratio, which resulted in the modification of one service and the discontinuation of another. Table 29 contains the 1989 overall statistics for the operation of the Flats Flyer over the five-month period Ridership levels declined from the first year of operation by 29 percent, while an average of 4.4 passengers per vehicle hour utilized the service. Although the overall service reflects poor performance in 1989 (16.6 percent cost recovery), its performance on Fridays and Saturdays almost realized the 25 percent minimum cost recovery. Poor weekday performance on the route led GCRTA officials to recommend a weekend-only operation and to shorten the sea5on duration from six to five months?' OIJio Art4widt CoonliMtfng Agmcy, "Devt/.opmml of A LocDl Polky for 1/u {hnpetilivt Conwaing of Trrznspottation Serviul ill Ohio (Ckl>e/4nd: Ohio Artawi Coordinaling A&""cy, Novombu, 1990). "Greland RegioMl T1111Uit AJithori1y, inlc'-of!ic M'lduud Yorlc 1<> Rost.Mary CovingJon m:ommmdJJiion for /990 Fl

Although overall performance was not what GCRTA officials had hoped for, the Flats Flye r was considered more successful than The Circle. T-UlLE 29 Operating Statistics for Flats Flyer, 1989 Total PasseD8ers 14,780 Lunchtime Passengers 3,798 E'ltning Pa.ssellgers 10,982 Total Service Hours 3,330 Lunchtime Service Hours 954 Evening Service Hours 2,376 Total Passengers/Vehicle Hour 4 4 Lunchtime Passengers/Vehicle Hour 3.98 Evening Passengers/Vehicle Hours 4 .62 Total CAst $56,610 Total Revenue $ 9,453 Farebox Recovery Ratio 16.6% Average ReveuuefPasseoger $.64 Tc>tal Cc>st Per Ride $3.83 Sc>uree: Greater Cleveland Regic>nal Transit Authority inter-<>ffice o:orrespoodenee from Bill Olszanicl:y to Michael York regarding Flats Flyer 1989 performance, March 13, 1990. The Circle was discontinued after just one year of operation. A strong marketing effort, along with an expansion of service to four vehicles operating in two directions with ISminute beadways and a reduced fare of $.50 failed to significantly increase ridership. The overall operating revenue to operating expense ratio was between 5 and 6 percent, which fell s ignificantly short of the minimum acceptable level of 25 percent. One explanation for lower ridership levels was that existing fixed routes operating across the same area could not be restructured, which led to some duplication of services. Additionally, University Circle, Inc. (UCI) operated a parking shuttle service that provided circulation throughout the same area. While not duplicative of The Circle, the service was free and, subsequently, riders anticipated The Circle was free. The UCI service, subsidized by parking fees, created an image problem for The Circle and confusion among riders. 64


Perceptions o f Parties Involved The success of GCRTA's privatization effons has been viewed as "mi.xed." Overall, GCRTA bas bad positive experiences with private operators; however, the services have failed. The Flats Flyer enjoyed initial success, but its pop ul arity waned over time after the novelty of the service wore off. Because it was a seasonal service, ridership levels fluctuated with the weather (warm weather brought more people into the area) and the day (Friday and Sarurday). GCRTA bad to constantly modil'y the service in order to increase route productivity. While GCRTA mana gement is not against privatization, several factors such as procurement and labor union issues complicate furure privatization initiatives. The competitive tender of all projects offered to private providers/operators is governed by federal and state procurement rules, contained in UMT A Circular C4220.1A and Section 306 of the Ohio Revised Code, respectively. Procurement issues arising between the complainant and the transit authority must be resolved under these rules and regulations .38 In Ohio, GCRTA has been on the losing end of litigation concerning the appropriate method for competitively procuring transit services under the Ohio Revised Code. GCRTA would prefer to use a Request For Proposal (RFP) mechanism to foster and award creativity by perspective bidders. However, Ohio courts have interpreted existing statutes to limit GCRTA and other transit systems to use the more rigid Invitation For Bid (IFB) mechanism. Currently, legislation bas been introduced to modify the statute in Ohio to accommodate increased flexibility in procuring transit services. The region's heavily organized and strong labor union provides some opposition to future privatization initiatives. Public transit employees who fear layoffs due to privatization understandably are not supportive of private operators providing transit services. Evidence lends support that private firms can hire transit vehicle drivers at lower wage rates.39 One eJ(planation is related to size rather than private ownership. Generally, private firms are smaller than publicly-owned transit authorities, which appears to be a crucial fearure leading to lower wages. Another constraint is Section 13( c) of the Federal Transit Act which provides job protection for public transit employees in the event of layoffs due to 0/Uo CoordiMting A&"mcy, "Development of a Local Policy for 1M Competitive of Tfd1UJ'O'f4tibn Services in Nonhast 0/Uo" (Clevelalld: Nonhast 0/Uo .Amzwisu of Public 111111 l'1rlvidm of Mass Transit" in Urllqn TiwyjL ed. Otarlt.s A. l..llYt (Sqn Frrw:isco: Ballinger Publishing Co., 1985), p. 243. 65


privatization. Part -time operators are often times employed, thus allowing private firms to resist effortS at unionizing workers and to avoid paying !=<>Stly fringe benefits associated with full-time employees. One GCRTA representative indicated that in the future the agency is no t looking to expand services. While this may limit the potential for future privatization efforts involving service expansions, it may also encourage the privatization of some existing services as OCR TA looks for ways t o increase efficiency. Conclusions The Greater Cleveland Regional Transit Authority has historically privatized its suburban paratransit services; however experience with fixedroute privatization has been somewhat limited. Of the two experimental, fixed-r oute privatized services GCRTA has attempted, only o n e was mildly successful. This limited success was achieved only after officials modified the service several times. The other attempted fixed-route privatization effort failed after one year because of poor ridership and a low farebox recovery. Additionally, poor market analysis and route planning caused overestimation of demand and some duplication of services, while the lack of coordination between the transit authority and local officials may have contributed to its short life. Cleveland's political climate is sensitive to privatization issues as they relate to employme nt levels and the standard of living. The strong influence of the labor union ensures that future privatization initiatives would likely be met with some resistance. On the other haild, the Ohio Bus Association, a trade association for private providers, continues to promote increased awareness of what private companies can do for public agencies in terms of providing services. Despite the lack of success of earlier privatization attempts, GCRTA remains committed to involving the private sector in the delivery of transit services. In early 1993, GCRTA will complete an analysis of its fixed-route system to evaluate potential opportunities for privatized services. 66


Pace, Chicago Description or Transit System -The Chicago Regional Transponation Authority (RTA) was established in 1973 to coordinate the many transit entiti es in the Chicago metropolitan area and to expand the transit funding base. During the early 1980s, the authority began to expe rience some financial problems, resulting in rapidly increasing debt to vendors, a large fare increase, and a local controversy about level of taxes versus level of service. In an attempt to reduce RTA expenditur es, provide more responsive direction to the multitude of transit services, and decentralize operations, the legisl ature split the authority into three se rvice divisions: Chicago Transit Authority (CfA), Commuter Rail Division (METRA), and the Suburban Bus Division (Pace) Pace serves as the public transponation agency that operat es fixed-route and paratransit service in the suburban areas of Chicago. Originally, Pace's services were managed by a private transit manage ment company. Pace now manages its own staff, as board members believed it would be more cost-effective. P ace's services consist of 234 bus routes and 60 paratransit services, with ope r ating responsibility assigned to Pace-owned service providers, other publicly-owned service providers under contract, and privately-owned service providers under co ntra ct. 40 Pace owns a total of 866 vehicles. Description o r Initiative Pace bas been very active in uti lizin g private systems for fixed route and paratransit services. Since the 1970s, private contra ctors have played an integral part in the delivery of services Pace was one of the first transit agencies in the region to use private operators on such a large scale. The desire to expedit e service delivery served as the initial basis for Pace 's efforts to use contracted service providers. In addition, the Chicago Area Transponation Study (CATS) supponed the FfA privatization program in the Chicago metropolitan area. CATS organiud private operators in its jurisdiction to form the Private Providers Committee, which meets monthly to discuss issues related to private participation in providing transit service I ssues r e garding upcomin g activities and contracts of public agencies are also discussed. In addition, CATS publishes a quarterly newsletter for the local private transit industry. T. lar:4b,

Approximately 450 private transit companies, primarily taxi and limousine services, have provided services in Chicago .41 These private own over 6,000 vehicles and transpon over 45 million passengers every year Several owners of these private established the Metropolitan Transportation Associatiou (MTA). With the assistance of tbe lviPO, t he MTA attempts to unify the effons of individual systems and lobbies for greater privatization of transit services. The MTA represents approximately 30 private taxi, livery (airport shuttle) paratransit, school bus, and charter bus operators in the Chicago area. Prior t o the 1984 reorganization of RTA, paratransit services to the suburban communities were subsidized by the a u thority. The authority bad limited control over the operation of these services. When Pace became the suburban transit sponsor, service agreements were established with suburban communities and other local units of government to administer paratransit services. Pace bas maintained this program structure and continues to act as a service sponsor for a variety of service providers, including private systems operating suburban paratransit service. Pace solicits bids from private operators for fixed-route service in three categories: privately-owned vehicles of any type (mostly school buses); Pace owned vehicles, operated and maintained by the private vendors; commuter buses, owned and operated by the private These applications have proven to be cost-effective. For example, Pace bas observed that school buses are very effective at providing feeder services to rail stations. Review of Issues Leading to Initiative Pace utilizes three separate criteria to determine when contracting of transit service is needed or cost-effective. Bach is discussed below. (1) New Non-Demonstration Service Improvements Competitive bids are used to purchase new service or to make service improvements The intent is to make service more efficient and cost-effective. Pace determines the additional cost of service improvements using a fully-allocated cost model. Should the results of the "fbid. "Rkt CenJer. Staor /n'o'()/vonQ!t in Urban TI'Q/Upor!l1fion: Case Studi.ts" (Howton: Rke Center, Dtwnbu 1986), p. 7 68


cost model reveal that contracting for new service or to make service improvements is cost effective, then bid specific;ations for the service are prepared and bids are solicited from potential service providers. All public and non-profit transit systems involved in this process are required to use a fully-allocated cost estimate. Bids received from private systems are based on actual cost to operate service. Pace management recommends to the Pace Board that service be assigned to the higbest-scoring provider deemed responsible and responsive based on the bid evaluation procedure. Occasionally, fixed price bids are used depending on the type of service. (2) Demonstration Projects and Non-Significant Service Improvements Pace may choose to contract with a private operator for the purpose of implementing a demonstration project. This option protects Pace against some of the uncertainties associated with demonstration projects (e.g., possible premature termination of the service potential modification of service design, or operator default). This risk reduction subsequently reduces project costs. (3) Farebox Recovery Any transit service that satisfies the Pace productivity guidelines but does not meet the farebox recovery ratio requirements as specified by Pace may be contracted out. Services that are operated by publicly-owned systems falling into this category may be treated as demonstration projects or as new non demonstration service proposals, depending on service characteristics. Methodology Used to Evaluate Initiative A study of the savings that privatization has enabled or will enable Pace to achieve has not been conducted. Pace management, however, bas done an analysis comparing the costs of service operation by Pace with those incurred by contracting with private systems for fixed-route service and paratransit service. The findings from each comparison are presented below. In comparing the costs of fixed-route service ope.ration by Pace and other publicly-owned systems with those of private systems, it was determined that Pace's costs, as well as those of the other public systems, are competitive with private systems. This determination was based on the comparison made between the average cost of purting one publicly-owned transit coach in revenue operation for one hour and the average bid price from private systems for purting one privately-owned transit coach in revenue operation for one hour. 69


Hours in revenue operation were calculated as scheduled in published timetables.43 As shown in Figure 7, average private transit system costs exceed nearly all public transit system . costs. FIGURE7 Average Tnu>sit Coacb Sen1ce Scheduled Hour Costs W Bid 1ol S Nf N SW Aur WU Elg HP Nil MP Btd =Private Stct()f Bid.& for TIURt Co.cb Setvic:c. Where Cootreaon Provided 'Tbeit Own Velllck$ WPace West DiviPoa JoJ=-Joliec M.T.D. S=Pac:c South DivisioD NTN=NORTP..AN NPace North Diviiioa SWPaceSouthwcst Divisioa. AorCtyoiA.wor& WUWilb\1$ ElgCity ol !&Ua HP Otyot fligbW)d Put N"dVliJ&&e of N"lk:s of Melro&e Parlt Source: Janab Brazda, Reynolds, and Capacdo, Thln.sil StiYiu Sponsor Ccsr.s: A Publicjl'rivale Case Slllliy, p. 6. As indicated in t h e above figure, the average cost per revenu e hour for the Pace West Division to operate fixed-route service exceeds the average private contract cost by $0.67 (1 percent). Private contract costs exceed the costs for the remaining public systems included in the comparison. Service operated by the City of Highland Park, which represents the lowest average cost per revenue hour, is $22.40, or 51 percent below the private bids. This type of analysis enabled Pace management to make other observations about its fixed route purchased service operation. First, the belief that private systems have a cost advantage over public systems is based on the assumption that competitive pressures force 4/ames T. lllnJlb, et aL, 'Tiri1Uil Sponsor Cosls: A PublkjF'rivtlu Cau Study" p. S. 70


bids down to the market l evel. As n oted earlier, numerous private operators exist in the Chicago ar ea. Pace may accept b ids from any of these systems, but occasionally only a few operators respond to any given request for service. Beeaus e of this, th e number of bids to pr ovide s ervice may be insufficient to create a market environment w here t h e cost advantages of competition can be achieved. Other factors that p l ay a rol e in attracting bids include the size of bid, length of contract, and othe r s. Seco n d, unless routes in close proximity are operated by a single service provider excessive deadheading may re s ult, increas in g the cos t of servic e p r ovision .44 In this instance, private sector economies of scale may not be qchieved. Third, many of the private systems in the Pace region are school b u s operators Providing service for Pace, in many instances, is an oppornmity for the con tractor to suppleme n t t h e in come of i ts school bus operation. As a result, these private systems are abl e to s u b mi t the best bid prices only if the Pace service can be integrated with an existing s chool contract. Finally in most cases Pace contracts with private systems for services that have been recently implemented. Given that these routes have had less "fine tuning" than other routes, some additional costs may be incurred in providing the service that might otherwise be experienced .s A similar comparison of paratransit service was attempted, but it failed to identify distinguishable cost differences between the two typeS of service providers. This analysis was limited in its attempt because the data did not reflect fully allocated costs of providing the service and, due to the variety of paratransit services that were provided a direct comparison of private and public systems was not feasible Pace manageme n t did c o nduct a sub j ective analysis of the data and concluded that in certain situations the private provis ion of publicly funded paratransit services may have a cost advantage over public provis i on. Perceptions of Parties Involved Pace management reported that, while problems inherent with contracting servioes exist, the agency considers the program to be effective in providing quality transit service to the suburban communities of Chicago. One of the problems Pace has difficulty resolving is the shortage of qualified contractors capable of providing proper vehicle maintenance, qualified vehicle operators, and dispatch facilities throughout the Pac e operating area. Most of the cost benefits of this privatization program have resulted from contracting with established school and charter bus operators. Pace has not realized the Mfbid., P 10. "Ibid., p. 12 71


same cost-effectiveness when contracting with small firms who do not have the extensive public transit experience. Finally, Pace views contract administration to be vital to the continued success of this program. Contracts need to be monitored closely by the agency to ensure that all contracted systems are in compliance with contract requirements (e.g., level and hours of service, vehicle maintenance, and vehicle type). Incentives and penalties for meeting standards and violating requirements should be updated periodically to serve as an effective and equitable enforcement policy. Conclusions Pace serves as the public transportation agency that operates and provides funds for fixed-route and paratransit service in the suburban areas of Chicago. In its role as a transit agency, Pace has structured a policy enabling the agency to contract some of its transit operations to publicly-owned and privately-owned transit systems. Pace's efforts to contract transit services to suburban communities have been further supported by the privatization initiatives of the Chicago Area Transit Study (CATS) and by the abundance of private transit operators in the Pace area. According to Pace officials, the overall experience of contracting services has benefitted the agency and the communities that are served; however, mixed results have been reported regarding cost impacts. One report found that depending on the route, location, deadhead, number of riders, etc., the average cost for Pace to operate transit services was competitive with the average cost for private operators. In some cases, such as school bnses on feeder routes, it was found to be more cost effective to use private operators, while in other cases, Pace-operated transit services were more cost effective. Although the agency continues to have problems that need to be resolved (e.g., contractors providing qualified vehicle maintenance), Pace expects to continue effortS to use private operators when feasible for the provision of some transit services in Chicago. Pace management maintains that good contract administration, particularly in the area of contract compliance, is essential to realizing any additional benefits from contracting out. 72


Snohomish County, Wasbington46 Description of Transit System-The Snohomish County Public Transportation Benefit Area Corporation (more commonly known as Community Transit) provides local, rural, elderly/handicapped, and commuter services (e.g. express and park-and-ride) in Snohomish County, a suburb of Seattle, Washington. Community Transit operates 26local fixed routes and 17 express routes to downtown Seattle. The agency owns 72 commuter coaches, 75 local buses, and 22 paratransit vehicles. Description of Initiative From 1977 to 1986, Community Transit contracted with Seattle Metro to provide commuter service. In 1986, Community Trans it contracted approximately 70 percent of its commuter s ervices, from Snohomish County to downtown Seattle, to the ATE Management and Services Company. ATE is responsible for vehicle operation and maintenance services. This includes the provision of drivers, storage of buses, and a third party contract for support services. Vehicle maintenance is performed through a sub contract that ATE has with the General Motors Corporation (GM). Responsibility for planning, scheduling, and marketing for the contracted transit service is maintained by Community Transit. Review or Issues Leading to Initiative Unlilce other transit systems that developed private participation programs to appease the FTA directive, Community Trqnsit improved its existing contracting program in order to achieve other corporate objectives. First, this contract enables Community Transit to increase its visibility in Snohomish County and Seattle. All vehicles used by ATE carry the Community Transit logo and paint scberne, which gives the corporation an identity independent of Seattle Metro Second, the contract specifies marginal cost adjustments for changes in service levels. This gives Community Transit more flexibility in adjusting service levels and schedules. Third, the contract gives Community Transit more authority to control and monitor service through performance standards and financial penalties for non-compliance. Vehicle inspections and on-board surveys are also permitted under the terms of the contract. Finally, the contract requires that ATE use new suburban buses to operate service and specifies several vehicle amenities, such as high-backed reclining seats, individual reading lights, overhead storage racks, and air conditioning. Joinl CtllleT [ UrlJan Mobility Rt.stmth, "CcnlnM::ttd Comnw1u Servil:t and Mainlt111t, PrivDlt Sector Briefs (Houston: Ric< Cmtu, !UM 6, 1986), Section 4 p. 6-3. 73


Methodology Used to Evaluate Initiative -Community Transit is currently conducting an audit to determine the absolute cost a dvantages of contractin g with ATE for commuter service. The r esults of this audit were not available' for inclusion in this case srudy. However, the contract between Community Transit and ATE specifies that operating cost per reven u e h our will serve as a standar d to measure performance In th e first year of the contract, the operating cost will not exceed S59.22 per revenue-hour, rising at an average rate of 9 percent in subsequent years. Also, Community Transit considers the cost difference between the contract with ATE and the contract cost for Seattle Metro to provide commuter services as a measure of the cost effectiveness of the ATE contract The contract with ATE is for a fixed tow price averaging S2.95 million annually over live years. This service would cost approximately $4.0 million annually if contra cted from Seattle Metro. Perceptions o f P arties Involved Repres e ntatives of Community T r ansit that are involved with the administration of tbe contract with ATE describe this con tr a c t as one of the most successful privatization effortS in the coun try Through its contract with ATE, the corporation has reduced its cost of providing commuter service without compromising the quality of service. In fact, it is believed that the vehic le amenities specified in the contract (i.e., high-backed reclining seats, individual reading lights, overhead storage racks, and air conditioning) are perceived as improvements in the quality of service. Community Transit representatives have also considered the contractors' response to correcting deficiencies, personal interaction between the corporation and the contractor, and high customer satisfaction as conttibuting to the ove r all s uccess of this pro gram. Management at Community T r ansit foresees the potential for additional contracting as part of its strategy to meet the requirements of the Americans with Disabilities Act (ADA) by 1997. ConclusionsCommunity Transit provides local, rural, elderly /handi capped, and commuter services in Snohomish County, a suburb of Seattle, Washington. In 1986, Community Transit contracted with ATE Manageme n t and Services company to provide commuter servi ces to downtown Seattle. Previous commuter services were provided by Seattle Metro tbrough a service contract with Community Transit. Unlike other transit systems that developed p rivate participation programs to appease the FTA directiv e Community Transit improved on its existing contracting program in order to achieve other corporate objectives. These objectives included: increased visibility of the transit system in Snohomish County; ability to make adjustments to the levels of service and schedule requirements; a uth ority to control and mo ni tor service; use o f new transit vehicles. 7 4


Management at Community Transit considers its privatization initiative to be one of the most successful efforts in the country. Through its contract with ATE, the corporation bas reduced its cost of providing commuter service without compromising the quality of service. Community Transit is currently conducting an audit to evaluate the ATE commuter service against the performance standards that are specified in the contract. Nol\l. ithstanding the res ults of this audit, management at Community Transit considers the contract with ATE to be cost beneficial to the corporation. Community Transit is considering the possibility of using other private systems to assist in meeting the ADA guidelines. 75


CONTRACI'ING MATh"TENANCE Niagara Frontier Transportation Authority, Butralo Most transit systems contract for numerous maintenance activities. The following is a review of a 1990 study that was performed at Niagara Frontier Transportation Authority (NFTA) in Buffalo, New York, to determine the potential cost benefits of contracting maintenance services for its bus operations, NFT Metro. Although the scope of the NFT study covered the support and operation functions at NFTA, this case study reviews only the contracting of maintenance services. Description of Transit System NFT Metro operates 335 vehicles on 48 fixed routes, including school bus service. The authority provides transit services for Erie and Niagara Counties, New York. Currently, NFT Metro maintenance functions are performed at four different garages: Cold Spring, Broadway, Frontier, and Niagara Falls. Description of Initiative The 1990 transit operations study included an examination of the cost savings that could potentially be achieved from the contracting of maintenance services. The primary purpose of the study was to identify functions that, if privatized, would allow the authority to be in compliance with the FTA directive regarding private sector participation. Specifically, this study would enable NFT Metro to establish procedural and evaluation criteria to meet the federal program objectives. The focus of the maintenance analysis portion of the study was to determine facility requirements for a planned maintenance facility intended to replace the Cold Spring Garage. Review or Issues Leading to Initiative The contention was that contracting some or all of the maintenance functions at the Cold Spring Garage would result in cost savings and reduced space requirements for the new replacement facility.47 Cost estimates for NFTA to perform various functions at the Cold Springs facility were compared with private sector bids to perform the same functions. In additi011 to operational cost savings, capital cost savings could be ruliud if the contracting resulted in reduced space requirements for the new replacem ent facility.48 "'Niagara Fronlio AJulwrily, "Transit Colltracrillg StMt:es Study Phtlse a F'ma/ Reporr" (Buffail>: N'uzgatG Fronlio Tft111Sp

Methodology Used to Evaluate Initiative NFf Metro cost estimates were based on a fully allocated cost for each function included in the comparison. Private secto r costs were base d on bid estimates for performing the same functions. Cost estimates were subjected to 30. year life cycle cost calculations to determine if it would be more cost-effective to perform the particular functions in-house or by contract. Of the 55 functions that wer e used in the comparison, only eight of the functions were computed as having life-cycle costs that would favor private contracting. Table 30 shows the comparisons of these eight functions for which b ids were sought. Although the cost comparisons appear to offer some cost savings for the authority, the report concluded that the accumulated difference of $18,516 in annual savings would be negated by the estimated $47,960 for contract administration. TABLE30 Summary of AD.aual Cost Comparls011 NFr Metro 811d Prmlte Bids COMPONENT NiTA METitO ANNUAL COST CONTRACIOR BID Fuel Pump, Rebuild $1,825 SS79 Rod Set GV.92, Rebuild S21..688 $17,218 Engin e Rod Set, Rebuild $16,742 $13,646 Air Dryer, Rebuild $1,900 rns Air Starter, Rebuild $3,387 $3,387 Slack Adiu.ters (Rear) Rebuild $5, 669 $1,496 Slack Adjusters (Front), R e build $5,669 $1,496 Booster Pump, Rebuild $1,374 $1,181 TOTAL ANNUAL COST $58,254 $39,738 Source: N'&agara FrOD!icr Transportatioo Authorily, Tnznsit Conlnlcting Sll1Vices SIJidy, p. 40. Conclusion NFT Metro's 1990 transit operation study offered the agency the opportunity to examine the potential for cost savings through contracting with the private sector. The study reviewed the impacts that privatization could have on all aspects of the agency's operations, including the contracting of maintenance services at the Cold Spring Garage. The ultimate objective was to determine the appropriate size for a replacement maintenance facility. 77


Seve ral o f Cold Spring Garage's maintenan ce functions appeared to offer cost savings when NFr Metro 's fully-allocated costs to perform tbese functions were compared with private bids t o perform the same functions. According to the contracting study prepared by NFT, these savings were offset by costs associated with contract In the final analysis, no cost benefits were recognized in contracting for maintenance functions at the Cold Spring Garage. As a result, NFT Meuo could not r educe the size of the replacement maintenjUlce facilit:y.49 An example of a successful mainten ance contract is provide d in the Florida case studi es within the next major section. "lbld., p. JS. 78


JOlNT DEVELOPMENT Washington Metropolitan Area Transit Authority (WMATA), Washington D.C. Description of Transit System -In fiscal year 1990, WMATA operated 1,410 motorbuses (Metrobus) and 478 rapid rail vehicles (Metrorail) in the District of Columbia, nonhero Virginia, and southern Maryland .so The bus system carried 1 75 502,340 passengers and the rapid rail system carried 182,005,851 passengers in this fiscal year. Upon completion, Metrorail is planned to cover 101 miles with 86 stations. It functions as both a commuter rail and a downtown circulator into and within the District of Columbia. The system extends from Vienna, Virginia, to New Carrollton, Maryland, and from Huntington, Virginia, to Shady Grove, Maryland. When the system is completed, the number of trips are expected to double. As a result of current system operations, an estimated 31,000 fewer cars enter the downtown central business district. Description or Initiative"Joint development refers to the planning and implementation of an income producing real estate development which is adjacent to or physically related to an existing or proposed public transportation facility."51 Examples of a joint development project may include an office building constructed in the air rights of a rail station or the construction of a retail mall with direct access to a transit stationfterminal.52 WMATA has placed a major emphasis on joint development efforts as a means of increasing ridership, stimulating economic development, and recapturing some of the costs of building the system. To encourage transit-land use synthesis, WMATA bas prepared station area development plans to facilitate growth and increase Metrorail ridership. Planners have developed intermediate plans for 20 stations and long-range plans for 80 stations. Implementation of the intermediate plans will create some 25,000 new jobs, generate S20 million in tax revenue, and provide $12 million in annual revenue to WMATA The transit authority has several major joint development projects completed or under "U.S. DtpwtnW "DtaG Tablu FO' The 1990 St

construction. Examples include Gallery P lace North, 1101 Connecticut Avenue, Rossyln Center, and Bethesda. S'l .-'\5 an example, the Gallery Place North joint development site is located in the physical center of downtown and the visual center of Chinatown. The site is two blocks east of the Washington Convention Center and the Martin Luther King Jr. Library. South of the project site is the National Portrait Gallery, the National Museum of American Art, and the PelliiSylvania Avenue development area which includes housing, offices, and specialty retail stores. The building program for the Gallery Place North site is a mixed-use development including a 426,000 square foot hotel, 197,800 square feet for retail space, and 219,200 sq uare feet for offices. A smaller residential building to the east of the commercial building has 165,000 square feet for condominiums and 10,000 square feet for retail space. Only 632 parking spaces will be built for the entire development. The land area for the Gallery Place North development is 113,923 square feet. Review of Issues Leading to Initiative Concern over rising cost estimates for the completion of the Metrorail system forced WMA TA to evaluate the cost-effectiveness and land-use benefits of the Metrorail system. In 1982, nearly $970 million in private development was under construction in areas adjacent to Metrorail substations. Five billion dollars in additional construction is projected when the full system is completed. This will provide working space for 260,000 employees and residential space for 40,000 people.54 WMA TA believes that the use of joint development is one mechanism for helping to defray the significant costs to complete the system. Discussion of Joint Development Prospectur5 WMATA released the joint development prospectus in August 1982, Qlling for the integration of transit facilities with mixed-u se developments. The objective of the joint development program is to promote a policy that yields increased ridership, provides revenue to WMA T A, enhances the tax base, allows greater accessibility to Metro facilities, and in the implementation of D.C. planning objectives. The major sections of the prospectus include: "E. Davis, I. li>'oMoo, IWl R. Holma, 'TtrlliSit-Unk

(1) Parcel Description A legal description of the parcels to be developed. (2) Development Potential Explains the transit assets available to the site, what WMATA hopes to accomplish from the project, and any planning and design criteria that will apply to the development. (3) Property Interest Ofl'ered Define s t he lease and purchase rights available to the developer. ( 4) Proposal Requirements Provides the specifics on what the development group should include in its joint development offer to WMATA, including: A. Joint Development Plan: Plans, specifications, project implementation schedule, number of residential dwelling units, number of rooms, and floor area of hotel space, floor area of office space, vehicular trips generated, and Metrorail ridership generated from the development. B. Minority Business Enterprise Plan : illustrates the amount of minority participation expected by the developer for the design, construction, and operation of the project. C. Statement of Qualifications: Demonstrates the developer's history on similar projects. D. Financial Terms : Specifics on the lease arrangement including development period rent, minimum guaranteed rent and additional rent as a specific percentage of gross income. E. Additional Tenos and Conditions: Bid bond for the proposal, execution of lease agreements, as well as any other financial terms not specified. ( 5) Selection Procedure Gives WMA T A the right to analyze each proposal and select that which is most advantageous to WMATA (6) Selecdoa Crtteria Sets forth the methodology that WMATA will undertake t o make their selection: Among the items to evaluate are: compliance with requirements, adequate financial return to WMATA, development criteria compllalioe, development of\and/air rights, acceptability of MBE plan, probability of reaching income projections, capability of developers, and the completeness/clarity of the proposal for ease of analysis. 81


Methodology Used to Evaluate lnitiative56 The methodology of determining if a piece of real estate bas joint development potential is quite extensive, and careful analysis of the site and the local market help to ensure a successful end proouct. The process from concept to operation normally takes several years. For the concept phase, the transit agency identifies joint development sites along its transit route network. Once a site has been identified, preliminary information on land costs and local market conditions must be gathered. Presently, development rights can be acquired for the furure use of the site. The development phase allows the transit agency to refine the development concept of specific sites. The process consists of maximizing the site's potential and neutralizing the obstacles in order to attract the right developer into the project. At this time, the transit agency can request proposals from interested developers, and an evaluation can be conducted to determine which proposal will best serve the needs of the transit agency. Upon award of development rights for a joint development sight, the role of the transit agency in the final design and financing phase varies depending upon the particular needs of the project. Scenarios could range from merely monitoring contractor performance to compleJt coordination if the transit station and the joint development site are being built at the same time. The transit agency should participate in the financing aspects of the project if the development entity is unable to secure financing or if the transit agency has committed resources as part of the financial arrangements. Unless there is a co-construction requirement, the role of the transit agency in tbe construction phase of the project is supervisory. The transit agency should retain the option to stop construction if the planning and design requirements are violated. Periodic review ofQcontractor performance should be undertaken to verify compliance with administrative and contractual guidelines. Unless there are unique cooperation arrangements of the joint development project with the local transit agency, the operation phase involves the developer transitioning from construction of the project to property management of the completed development. An ongoing relationship between the developer and the transit agency will assist the transit "'Ibid., pp. 74-103. 82


agency in detennining how effective its joint development efforts have been in terms of generating revenues and ride r ship. Perceptions o r Parties lnvolved57 -Significant lessons were learned from the imple m e n tation of the successful Gallery Place North joint development. The lessons include: (1) Organizers and investors must recognize that, in many instances certain preconditions must exist before a project can be deve l oped Many preconditions have a basis in the local political environment, such as a heavy weighting on MBE panicipation criteria. (2) Project organizers must recognize that a great amount of time and money must be invested to plan and organize participation in the process Since the money must come from somewhere, it is only fair that upfront "sweat equity" and expenses be fairly compensated. (3) The ownership structure of an agreement is very important A corporate structure is workable from a decisionmaking viewpoint only if most of the partners are experienced in real estate development transactions and financing. Otherwise, a limited partnership structure (no management responsibility or liability for decisions of which they lack the experience or resources to address) is more advantageous to those that can bring money to a project and linle else Operational decisions are the responsibility of the general partner, who in turn answers to the investors (4) It is important that the development entity have sufficient risk capital to cover the expenses of a development proposal. If successful in obtaining the development rights, the development entity must also have sufficient funds for all deposits and additional document preparation needed for applying for the construction loan and pennaneut financing. (5) Sufficient time must be given to prepare a development proposal for a joint development site. In the case of Gallery P lace Nonh, WMATA gave three months for the preparation of the proposal; however, six to nine months lead time "Ibid., pp. 23-25. 83


for the preparation of the development proposal would be more reasonable. Development entities must be. given sufficient time to plan, organize, and develop a competitive proposal. (6) The financial plan and the legal partnership agreement are the most important documents of the development proposal. The use of accountants and attorneys specializing in real estate investments is essential to show the clarity of the proposal and the stability of the development entity. (7) All transit-related real estate development projects require extensive planning, attention to detail, and coordination among public and private sector participants. An essential element to this organizational effort is leadership. Because of the diversity of functions and roles within the process, this leadership is most effective when shared between project organizers. ConclusionsSSIt appears that WMATA is a model system to showcase joint development; however, the abundance of joint development project sites is incidental rather than designed. Route selection was a factor of costs and right-of-way needs. The joint development sites are in strong markets and have favorable land ownership patterns. Although this has been the case, WMATA has been successful in implementing land-use changes and stimulating economic development in both D.C. and its surrounding areas. Several changes have occurred in the metropolitan Washington area concerning land-use policies which coincide with the opening of the Metrorail line. Node development rather than circumferential development around Metrorail stations was encouraged. Mixed-use developments have occurred in areas that would have bad lower density single-uses such as industrial and office parks. These mixed-use joint developments encourage transit ridership and reduce congestion. Another major impact directly attributable to Metrorail is that the focus of downtown development has shifted to an area adjacent to Farragut Square, where two Metrorail stations and former deteriorated commercial districts are now the sites of Metrorail growth centers, as in the case of Gallery Place North. "DIMs, s,.,., t1lld Holmes, 'Trrzn.rilLinked DeveJopmOil: A C..Se Study of .Ali4n14's MARTA System, p 13. 84


CROSS BORDER LEASING Bay Area Rapid Transit, San Franciseo Cross border leasing is an innovative financing mechanism that takes advantage of foreign tax laws. In this type of arrangement, a transit agency purchases assets, such as rail cars or buses and then resells these assets to a foreign entity. The foreign entity then l eas e s the assets back to the transit agency. The foreign entity receive s tax and depreciation benefits and shares this benefit with the transit agency in the form of a negotiated reduction in lease payments.59 The technique evolved from a similar technique known as "safe harbor leasing," under which public transit vehicles or other assets are purchased by a private U.S. entity for the tax shelter benefits and then leased back to the transit system. Since safe harbor leasing was abolished by the 1986 Tax Reform Act, many large transit systems have turned to cross border leasing to continue use of this innovative financing mechanism. Since the adoption of the 1990 Ff A policy supporting the use of cross border leasing, several transit systems have capitalized on this mechanism to secure additional revenue for capital and operating expenses. In addition to this achievemen .t, cross border leasing transactions have served as a venue for developing public/private relationships in the transit industry. Several transit systems have reported success in using this revenue enhancement method, including Bay Area Rapid Transit (BART) in San Francisco. BART was successful in negotiating a cross border lease with a Swedish company just prior to the adoption of the FI'A policy in 1990. Under the terms of the agreement, BART purchased 30 railcars as part of a $245-million, !SO-railcar order from Sofeval, a French company. The railcars were sold to ABB Credit AD in Sweden. ABB Credit AD enjoys the tax shelter benefits of owning and depreciating the railcars and leases the railcars to BART. BART also negotiated to share a portion of these benefits. Unlike the typical cross border transaction, no federal money was in this cross border lease. BARTs share of the funding was obtained from the issuance of bonds supported by a local sales tax. As a result of this transaction, BART was able to secure $3 million in additional revenue. Several other transit systems have entered into cross border leases since the adoption of the ITA policy, some of which are summarized in Table 31 on the following page. The data "US. Dtpmrmml a[T1r111Sp0114tiot 'Publk in the Uniled SliltU: Ptr{Of1ti4TIU and Condition" (Wasltington, D.C: Ftdorzl Trrznsil Administ1rztion IUM 1992), p. 32. 85


include the transit agency, type of asset, origin of assets, source of financing (country}, equi p ment cost, and do llar benefit to the transit system. The magnitude o f these transact i ons ranges from $28 million in Boston to $21& million in New York. The benefit to the transit agency is typically three t o six percent o f the total transaction. TABLE 31 Summary or Transit Systems Cross Border Leasloa Transactions AGENCY ASSETS ORIGIN OF SOURCE OF EQUIPMENT BENEFIT ASSETS FINANCING COST MBTA Passenger Cars Germany Germany $28 mil. $1 mil. Boston MBTA Boston Passenger Cars Germany Germany $28.5 mil. Sl tnil MTA Light Rail cats Japan Japan S216 mil. $11.9 mil. New York BART San Passenger Cars France Sweden $30 mil. $1.8 mil. F rancisco !ACTCLos Light Rail Cars Japan Japan $28.5 mil. Sl mU. Angele$ NIT Locomotives Sweden S66 mil $4mil New Jersey MTDB Light Rail Cars Germany Germany $53 mil. $3.5 mil. San Diego BART San P assenger Cars France France $1.50 mil S6 mil. Francisco METRO Dual Mode Italy Japan $43 mil $1.6 mil Seattle Buses TOTAL n/a a/a a/a S643 miL $31.8 mil Source: PPTN, eross Border Leasing in the Transit I ndustry; 1991. 86


V. FLORIDA TRANSIT SYSTEM PRIVATIZATION INITIATIVES This section begins with a summary of elristing and recent privatization activities of transit systems in Florida. Specifically, an inventory of privatization activities was compiled as a result of data collection and interviews with transit officials. This is followed by a presentation of selected case studies of privatization initiatives in Florida. Near l y all involvement by Florida transit systems in privatization is in the contracting of operations, maintenance, and administration. Finally, this section concludes with a summary discussion of the status of, potential for, and perceptions of privatization in Florida's transit industry based on interviews of key transit officials in Florida. FLORI.DA INVENTORY OF CONTRACI'ED SERVICES An inventory of contracted services within Florida's transit systems was compiled to illustrate the extent of this type of privatization in Florida. The contracted services are presented in three major functional areas: operations, maintenance, and administration. Each functional area is broken down into major categories and then into major activities as previously compiled in Technical Memorandum #1. Minor revisions and additions were made to the activities presented to account for activities and areas that were deemed appropriate as a result of the interviews. Tables 32 through 34 provide a summary of the number of transit systems contracting by category and activity. All17 major transit systems in Florida were included in the statewide inventory. Inventories for each transit system are provided in Appendix A. A list of the transit systems included in the inventory is provided below. Metro-Dade Transit Agency (MOTA) Broward Transit Division (BCf) Jacksonville Transportation Authority (JTA) Hillsborough Area Regional Transit (HART) Pinellas SnJXXl8St Transit Authority (PST A) Tri County Transit (Lynx) Palm Beach County Transportation Authority (CoTran) Tallabassee Transit Authority (Taltran) Regional Transit System (RTS) East Volusia Transit Authority (VoTran) Escambia County Transit System (ECI'S) 87


Lee County Transit Authority (LeeTran) Sarasota County Area Transit (SCAT) Lakeland Area Mass Transit District (Citrus Connection) Manatee County Transit (MCA T) Space Coast Area Transit (SCAT) Tri-County Commuter Rail Authority (TCRA) Contracted Operations Activities Inventory Demand-response is clearly the primary contracted operations category in Florida, as 13 of 17 systems contract to provide the service Thirteen systems contract the actual provision of the demand-response service, while nine transit systems contract for scheduling and eleven contract for dispatching. Contracting fixed-route bus service is not common in Florida, with only seven transit systems currently or recently contracting for the provision of some type of fixed-route motorbus service. Four systems have contracted for regular service (MDT A, MCAT, LeeTran, and PSTA in process), rwo systems have contracted for the provision of feeder bus service to Tri Rail (BCT and CoTran), and one system has contracted for express bus service (MDTA). Three systems contract or are in the process of contracting for the provision of vanpools (Space Coast Area Transit, PST A, and LYNX), and one system contracts for the provision of commuter rail service (Tri-County Commuter Rail Authority). Table 32 summarizes the contracted operations activities for the state of Florida. Contracted Maintenance Activities Inventory Fifteen of the seventeen major Florida transit systems contract for some vehicle maintenance, with the majority of contracted activities relating to major repairs/overhauls and body /paint work. However, several systems contract for vehicle cleaning, routine maintenance, and the lease of .bus tires. The most frequently contracted non-vehicle maintenance is for buildings, facilities, and grounds (lawn maintenance and landscaping). Numerous systems also indicated contracting for the maintenance of office equipment and radios. 88


Table 33 summarizes the contracted maintenance activities for the state of Florida . Contracted Administration Activities Inventory Various activities within the planning category are frequently contracted, with a majoriry of the contr a cting related to tbe preparation of transit development plans and miscellaneous planning for facilities. However, other contracted activities include special studies route evaluations, and service planning. Marketing is also a major area of contracting, with 14 systems indicating that they contract for some form of advertising A few systems use private sector assistance for marketing analyses. Very little contracting occurs within the human resources category. However, a few systems contract for specific categories of employee training and recruiting and the provision of some employee benefil. Two systems contract for assistance in labor relations and employee evaluations. The only major contracting activity within finance/accounting is for auditing. All transit systems are required to contract for auditing from an independent private sector entity. Three systems indicate contracting for the responsibility of payroll. Other areas indicated by one system include assistance in the preparation of Section 15 reports and financial planning. In the "Other" category, the two major contracting categories include legal services and transit management services. Two systems indicated contracting for security as well. Table 34 summarizes the contracted administration activities for the state of Florida. 89

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TABLE3% Cootracteuter Rail 1 Provision of SeMce 1 TABLE33 C on tracted Malotena o ce ActlvfU.. Flaricla Sllltewlde T otal CATEGORY NAME #of ACTIVI1\' #of SY>temS Systems Vehicle Cleaning 4 Body/PaiD! Work 9 Veblde 15 Repairs/Overhauls 14 Routine Mai.11lell3.Dce 3 s .. Tttes 6 Office Equipmen t 8 Radios 6 14 Buildinp 11 GrOIIII
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TAJILE34 Coa1111dod Admilllstntloa Adkitles, Floricla Statewide Tomt C ATEGORY NAME #of ACTIVJn' #of System.t SysteDll Section I.S Report 1 Transit Development 10 Ma.nagemell! Audit 2 Special Studies 4 15 Route Ewluatioa 4 Market Analysis 3 Plaaoiog facilities 7 Planning Service 5 Marketing 5 Marll.etln& 14 Cam 1 Adve .. 14 Labor Relaliona 2 EmpiO)'CC T . 3 Huma.a 8 Employee Beoefits 3 Reauiting 4 EmpiO)'CC Ewluation 2 Sectioa 15 Report 1 Budget 0 FiaaDCial Plaaaiug 1 17 Monthly Accounting 0 Audits 17 Payroll 3 Graa.t Administration 0 Computer Proeesoiog 2 Procuremelll 0 Oilier 13 t Semces 12 Sec:wity 4 Maugemelll SeMces s 91

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FLORIDA CASE STUDIES Several case studies were prepared as examples of privatization initiatives that have been implemented by transit systeOlS io Florida. The case studies in operations include the Metro-Dade Transit Private Enterprise Participation (PEP) demonstration project and express bus service, Manatee County Transit (contracted one fixed-route and some limited demand-response) and Palm Beach County Transit (demand-response contract). In addition, Space Coast Area Transit is also included as a case study of its role in fleet maintenance co n tracting. Metro-Dade Transit Agency, PEP Proje.:t60 Metro-Dade Transit Agency (MDTA) conducted a Private Enterprise Participation (PEP) demonstration project beginning in November 1988. The intent of the demonstration project was to compare service costs and quality of directly-operated services and contracted services with similar characteristics. This demonstration project is one of seven sponsored by the Federal Transit Administration (FI'A) across the United States. A case study of the MDT A demonstration is provided below. Description of Transit System MDTA is a multi-modal transit system operating in Dade County, Florida. Modal alternatives include bus, rail, peoplemover, and demand-response transit services. MDTA has actively contracted demand response and express bus services to the private sector, but has not been involved in the contracting of normal fixed-route services until the advent of the PEP project sponsored by FI' A. In fiscal year 1991, MDTA bus ridership was 56,279,726; rapid rail ridership was 13,906,539; peoplemover ridership was 3,229,032; and demand-response ridership was 858,565. Description of Initiative The intent of the demonstration project was to set up a controlled study to directly compare the performance of publicly-operated and privately-operated routes with similar characteristics. Five paired routes were selected to be included in the project, with MDTA operating five fixed routes and the private contractor operating five similar fixed routes. All ten routes were operated with similar vehicles and the same vehicle spare ratio. The private contractor and MDTA each had 40 vehicles available for service ,.Priu W..urllowt, 'Priwlle EnJcptiu PIIJtidptzdon (PEP) l'logJom EvGI11atiOR. Si>: MOIIIh (Miami: Price W..urllowt, Allgrut 2, 1989); IZ1Id !'ria W..urllowt, 'Priwlt.e &terprlse P1111iclpatWn (PEP) l'rof/am Evaluation. Second Si% MOIIIh Rqlott' (M'wmi: !'ria W..urllowt, Marr:JJ IS. 1990). 92

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on the selected routes. In addition to direct comparison of performance on the five MDTA operated routes and the five privatelyoperated routes, the five MDTA routes were compared to all Metrobus routes and all PEP routes were compared to the baselin e p erform ance. Baseline performance was established based on the operation of these routes by MDT A prior to the implementation of the PEP project. In November 1987, a service contract was put out to bid. Greyhound Lines, Inc. (GU) was the only b idder and a three-year contract was approved by the County Commission on July 19 1988. The demonstration began November 27, 1988. ReYiew of Issues Leading to Initiative FT A encouraged Metro-Dade to apply for a Private Enterprise Participation grant. Faced with rising costs, Metro-Dade began exploring the use of contracting to assist in controlling and/or reducing costs. Metro-Dade applied and was awarded the grant to undertake a competitive services demonstration to compare the performance of privately and publicly-operated transit service. Methodology Used to Evaluate InitiativeThe demonstration project required independent and periodic evaluations of the service being provided by the private contractor. Price Waterhouse was retained to develop an evaluation methodology and to conduct periodic evaluations. Three evaluation reports were scheduled over the life of the three-year contract: a six-month report, a 24-month report, and a final report. Due to problems reported in the six-month report, the subsequent scheduled evaluations were changed to a second six-month report and a final report at the end of two years. The evaluation methodology was conducted in three parts: MOTA PEP routes versus all Metrobus routes This comparison determined whether the performance on the MDTA PEP routes is similar to or different from all Metrobus service in general. The intent of this comparison was to ensure that no s)?H'ial emphasis was placed on the publicly-operated PEP routes since they were being explicitly evaluated in the demonstration project and compared with the privately-operated routes. AU PEP routes versus performiJice The PEP routes operated by MDTA and GU were compared with the performance of the operation on these same routes for the fiscal year prior to implementation of the demonstration project (FY 93

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1988). This determined whether performance improved or worsened with MOTA an d GU operation, as compared to the base14!e fiscal year 1988. MDTA PEP routes versus GLI PEP rou tes This involved a direct comparison of the performance on the paired routes selected for the demonstration project. This comparison established pertormance discrepancie s between public and private operation. The same performance indicators are used in eacb of the comparisons and can be classified into four categories: (1) cost, (2) service quality, (3) service reliability, an d (4) ridership. Eacb of the indicators used to measure these categories was expressed as a ratio to prevent differences in the amount of service and ridership from skewing the comparisons. The use of ratios resulted in each of the indicat ors being viewed on a normalized scale. The indica tors used in each category are provided below. Cost Fully-Allocated Cost Comparisons compared the full cost of MDTA operation ( direct and indirect costs) with the invoice oost o f GU. Avoidable Cost Comparisons (Increm(lota\) compared the direct cost of MDT A operations with the invoice cost of GU. Service Quality Q>m pljnts Pe r Thousand measured the ratio of servi ce complaints submitted to MDT A per thousand passengers. Vehicle Condition evaluated by means of a composite score based on periodic observation of vehicle interior and exterior cleanliness, signage, interior tempennu-e, and exhaust. Miles Roa.dt:alls measured the frequency of mechanical failures that resulted in the interruption of revenue service. 94

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On-time Perfonnance measured the percentage of vehicle departures that were within five minutes of the scheduled departure time. Percent Of Service Canceled measured the percentage of revenue hours t hat were canceled relative to the total revenue hours scheduled. Accidents Per 100.()()() Miles measured the frequency of vehicle accidents. Ridership Bowlines Per Revenue Hour measured ridership trends in terms of ridership per revenue hour of service. Each of the evaluation reports indicated similar findings. The Gil service was significantly less costly than that of MDT A, but was also characterized by lower quality, reduced reliability, and reduced ridership. The performance differences did not change throughout the two years of GU service. Although GU showed some minor improvements during the second six months, GU service declined back to the f4st six month levels by the end of the second year. A summary of the key findinl?.' is provided below: The $30.00 per revenue hour cost of GU service was over 50 percent less than MDTA's fully-allocated cost and approximately 30 percent less than MDTA's avoidable costs. Based on these costs, it is estimated that MOTA enjoyed cost savinl?.' of approximately $2.9 million over the two-year time period. This savings is reduced to $1.3 million after adjusting for additional administrative and maintenance expenses and a reduction in passenger fare revenues resulting from the contracted service. The service quality of MDTA service uniformly better than GU service The service reliability of MDT A service was consistently better than GU service Ridership on GU routes decreased by an average of 17 percent from the level that was achieved when MOTA operated the routes previously, while ridership on MDT A routes was unchanged during the two-year. period. The declines in ridership on GU routes resulted in an estimated $850,000 revenue loss. 95

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Perceptions o r Parties Involved A number of valuable lessons have been learned abou t service contracting as a result of the PEP project . The indicated by MDTA staff in the final evaluation include:41 From the perspective of the contractor: Avoid bidding so low that the quality of service must be jeopardized to maintain project viability. Require th at contractor use it s own buses since they have a vested interest in maintaining them properly. Make sure driver recruitment and training is good Pay drivers commensurate witb job sttess to avoid high turnover . Realize that operating over-the-road service is not compatible experience with operating urban, intra-city service. From the perspective of the transit agency: Ensure proper contract supervisio11. Start contract with small amount of service and increase as contractor gains experience. Make sure performance parameters are well-defined Do not utilize contractors on heavily utilized routes Include liqui dated damage penalties in contract to compensate for poor performance. Realize that patrons are as sensitive to quality of service as the transit system is to the cost of service. Do not allow the contractor to use agency buses Include a performance bond requirement in the contract in the case of contractor default Establish baseline ridershi p and revenue levels Conclusions MDTA conducted a Private Enterprise Participation demonstration project under the sponsorship of FT A. The demonstration project permitted performance comparisons of directly-operated and contracted services with similar characte ristics. Five "MeltfrD
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paired routes were selected, with MDTA operating five routes and a private contractor operating five routes. The private contractor and MDTA each were given 40 similar vehicles to provide service on the r especti ve routes. MDT A achieved significant cost savings by contracting with GLI for the provision of the five fixed routes; however, the cost savings were achi eved at the expense of s ervice quality, reliability, and riders hip. Metro-Dade Transit Agency, Express Bus Service Descriplion of Initiative MDT A contracts with the Mayflower Contracting Service to operate "limited express bus service" in the Kendall Drive corridor of southern Dade County. This service is known as Kendall Area Transit (KAT). Mayflower Contracting Service is responsible for providing the vehicles and drivers that are used to operate this service. The term "limited express bus service" is specific to the MDTA service area and has been described by MOTA officials as a cross between local and express service. Local service is typically characterized by several stops along a transit route, the use of local streets, and a low vehicle operating speed: Express service nonnally has greater distance between stations, serves longer trips, and has higher operating speeds. KATs limited express bus service is between these two extremes, with stops being spaced approxilllately every ten blocks and operating speeds higher than local service Initially, the KAT service was operated only on Kendall Drive, between Southwest I 54th Avenue and Metrorail's Dadeland North Station. Service has since been expanded to include s ervice north to Sunset Drive and south to Killian Drive. KAT operations currently consist of one route and 15 mini-buses. MDT A officials report that average weekday ridership in fiscal year 1991 was approximately 1,100. Review of Issues Lead!Dg to Initiative During the early 1980s, the Florida Department of Transportation (FOOT) conducted the Major Corridor Identification Study to identify traffic oorridors in the state that were experiencing major oongestion problems. One of the conclusions of this study identified privately-operated express bus service as the most practical and cost effective option for relieving traffic oongestion in the state's major traffic corridors. FOOT encouraged various public transit agencies in the state to implementing express bus service in these corridors and advocated using private systems to operate the service. As an incentive, 97

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FDOT made Urban Corridor Funds available to fund 100 percent of the cost to operate this service during a four-year period, staning in 1988. Jransit agencies that decided to implement express service using FDOT funds would be responsible for maintaining the operating funds after the initial four-year period. To receive funding for express bus service projects, transit agencies are responsible for determining where to impleme n t exp ress bus service and for soliciting co mpetitive bids from the private sector. MOTA conducted market research to ascertain the feasibility of operating express bus service in the Kendall Drive corridor, one of the corridors identified in the FDOT study. The market research provided MOTA with supporting evidence to initiate limited express bus service in this corridor. In 1988, a four-year contract was awarded to Red Top Limousine Inc. to operate KAT service. In 1989, this contract was awarded to the Mayflower Contracting Service. Methodology Used to Evaluate Initiative A formal m ethodology for evaluating the KAT service was not established when MOTA began this service, nor did FDOT require any monitoring mechanism in the application for the receipt of Urban Corridor Funds. However, the KAT service is included in an annual report on route perfonnance indicators that MDTA provides to FDOT. Each bqs route in the MOTA system is ranked based on the operating statistics listed below. MOTA officials reported that, since the inclusion of KAT in this reporting process, the scores for this service have been below the system average for eacll of these perfonnance indicators. It is important to note that most of these measures are ridership-based and that these types of measures are not typically used to monitor contractor performance. Passengers per revenue mile Passengers per revenue hour Revenue per revenue hour Revenue per revenue mile Average passengers per trip Operating ratio Pen:eptions of Parties Involved In spite of the below-average contractor perfonnance based on these ridership-based measures, MDTA officials contend that the KAT service has been a successful endeavor for 98

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the agency. They reported that the service bas proven to be an effective method of meeting travel needs and alleviating traffic congestion in the. Kendall Corridor. Officials also indicated that its below average ranking in the MDTA system is directly related to its operating environment-a low density area with a high rate of automobile use. At the same time, the ridership on the service has increased from approximate ly 300 per weekday to approximately 1,100 per weekday in the four years that the service has been operating. As mentioned earlier, MDTA bad initially contracted with Red Top limousine to operate the KAT service. One year later, Red Top limousine defaulted on the service contract with MDT A, citing a low profit margin as the reason for terminating the service. However, MDTA was able to continue to operate the KAT service through a contract with the current operator, Mayflower Contracting Service. As a result of this experience, MDTA maintains a listing of private systems that are abl e to meet the service specifications to operate the KAT service. Also, by establishing this list of private systems MDTA is able to circumvent much of the bidding process since service requests can be sent directly to qualified private systems. Conclusions Since 1988, MDTA has acted as the service sponsor for the KAT service. This service was initially contracted to the Red Top limousine Service, but the contractor defaulted in 1989 and the service was subsequently contracted to the Mayflower Contracting Service. The KAT service was initiated as a result of the FOOT Major Corridor Identification Study, which concluded that contracted express bus service could serve as one of the most cost effective options to relieving congestion in urban corridors. To encourage transit systems to implement this service, FOOT made Urban Corridor Funds available to pay the contracting cost of operating the service. The KAT service is evaluated in the annual report on route performance that is provided to FOOT. MDTA officials maintain that, in spite of its poor performance when compared with other MDTA rou t es, the KAT service bas been a successful endeavor. 99

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Manatee County Transit, Fixed-Route and Demand-Response Service Description of Transit System Manatee County Transit is the public transportation that provides fixedr oute and demand-response services to the urbanized area of Manatee County. The transit system is a division of County Government within the Public Works Departme nt. Nine routes comprise the fixed-route service provided by the transit system in the service area The demand-response service provides a variety of sponsored trips by educational and social service agencies, as well as non-sponsored trips for those eligible as transportation disadvantaged. Description of Initiative -A single contract was put out for bid for the provision of service on one fixed-route as well as fo r demand-response service lbree responses were received, and the contract was awarded to Florida Trails, Inc the low cost bidder based on cost per mile. Review of Issues Leading to Initiative -A management performance audit was conducted by a consultant which resulted in numerous recommendations. One recommendation was that the trans i t system should consider contracting some of its operations in the future. Political interest emerged primarily due to interest in cost savings through the process of contracting. Methodology Used to Evaluate Initiative No formal process was used to evaluate the performance of the contractor. Monitoring methods were not included in the cont r act; however, based on interviews with various transit officials, it was dear that the initiative was unsuccessful. Perceptions of the failure of the contractual arrangement are provided below. Perceptions o( Parties Involved Several issues were identified by individuals familiar with the situation as factors that contributed to the lack of a successful contracting effort, including: ( 1) Many perceive the contract to be poorly written, long. and difficult to interpret and understand. The contract was believed to be too small and did not include provisions for monitoring. resulting in Manatee County Transit being responsible for almost all liability. (2) The contractor used vehicles owned by the transit system. The vehicles were not maintained properly and did not meet safety standards when they were returned. 100

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(3) The contnlctor u:;ed part-time drivers on the fixed route, most of wbom were poo r ly-trained with little experience ( 4) Poor communication existed between the transit system and the contractor from t be start. Drivers used for the demand-respo nse service were qualified but equipment problems resulted in poor quality of demand-response service as well. Conclusions Detailed inform atio n regarding the implementation of this initiati ve was unavailable, primarily becau:;e few transit officials still wor k at the transit system that were there when the initiative was implemented; however, it is still deemed important to recognize that an effort took place that resulted in failure. It is clear that significant problems resulted from the contractual arrangem ent. The failure of the initiative is blamed primaril y on a poorly-written contract that was difficult to understand and bad no requirement for monitoring and evaluation. 101

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Palm Beach County Transit, Demand-Response Service Description or Transit System From the early 1920s, public transponation in Palm Beach County was provided by a private company until it went bankrupt in 1971. As a result of the local union's appeal to t he County Commission, the Palm Beach County Transportation Authority (PBCf) was created August 7, 1971, to provide public transponation for the c ounty. The service was initially implemented to cover four municipalities but was expanded in the mid to late-1970s to cover the entire county, including the urban coast and five municipalities in the Everglades. Currently, PBCT operates motorbus service on 19 fixed ro utes An additional ten routes are provided as feeder services to tlte Tri-County Commuter Rail system. which links West Palm Beach to the Miami Intematiollal Airport. The feeder bus service was originally contracted but is now provided directly by PBCT. The agency owns 73 motorbuses, 60 o f which operate daily to provide service to 29 municipalities thrOUghOUt the county Both system management and employment are provided under contract by Florida Transit Management, Inc., a subs idiary of National City Management. PBCT is also responsible for providing demand-response services to the elderly and handicapped. The focus of this case study is the paratransit service, Spectran Dial-A-Ride, which is contracted to Palm Beach County Paratransit, Inc., a 11on-profit sector of the Yellow cab Company. Spectran Dial A-Ride began operation September 1987 with four lift-equi pped vans that provided approximately 2,000 passe nger trips per year. Today, the service has expanded to 15 vehicles, which includes eight lift-equipped vans that provide some 18,000 elderly and handicapped citizens with door-to-door transportation. Description of Initiative As indicated above, the demand-response service has been contracted since the service began in 1987. PBCT maintains total control over the operatio11. In addition to monitoring the contract, PBCT is responsible for the registration . of clients, the amount of trips required, and the scheduling and dispatching of service. Palm Beach Paratransit, Inc., is responsible for providing the onroad door-to-door service only. The contractor also supplies the vehicles and the drivers for the service operation. Review of Issues Leading to Initiative PBCf management supponed the privatization of the demand response service from its onset because of the uniqueness of the service. Additionally, three other factors played an important role in their decision to contract: cost effectiveness, capital investment, and t imeliness Because wages for non-unionized drivers 102

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are lower, officials realized an immediate cost savings in terms of labor costs. The contract also stipulated that the private provider supply the paratransit vehicles, which reduced initial capital costs required to provide the service. In addition, PBCf believed that contracted services were more flexible and responsive to service expansion because the capital was already in p l ace. An example of this flexibility is that recently the contractor was able to expand service in as little as two weeks. While there were no direct barriers to privatizing the service, several problems became evident after the contract was in place. First, the original number of vehicles ( 4) was not sufficient to cover both the urban and rural service area because the population is so dispersed. Second, scattered population also contributed to longer-than-normal average trip lengths. Finally, poor road conditions and tra.(fic congestion caused further delays in the amount of time required per trip. Methodology Used to Evaluate Initiative -The success of the service is measured by the number of trips provided. With a seven-vehicle fleet, the service provided 37,000 units of service over an eleven-month period last year, a statistic that is considered successful by PBCf managemenL The fleet was expanded in July 1992, and to date no statistics are available on the number of trips the agency now provides. Success of the contracted service is also measured by service expansion. In addition to increasing the fleet size of the operation, the days of service and hours of operation have expanded. Service hours have increased from 7 a.m. to 6 p.m. Monday-Friday to 6 a.m. to 10 p.m. Monday-Saturday, including most holidays. Perceptions of Parties Involved PBCf management believes the privatization initiative to be quite successful and attributes this to total control over the operation. Management believes that there is no effective way to monitor the contract if the entire operation were handled by the contractor. As a result, PBCf h.andles all scheduling and dispatching of services and then passes the information on to the contractor for operation. PBCf management indicated that demand-response service is best provided through a contractual arrangement because of the uniqueness of the service. In addition, there are no objections to contracting this service from labor since they tend to not view it to be part of their responsibility. Cost savings are achieved, most of which is attributed to cheaper labor. 103

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Conclusions -PBCf views contracting as the most efficient method for the delivery o f demand-response services in Palm Beacli County. Cost savings h ave been realized primarily through lower wage rates. PBcr officials strong l y believe that the public agency should always be respoOS!ble for the scheduling and dispatching of demand-response services for ease of contract monitoring and to minimize the probability of contractor fraud. Although PBCf views their privatization effort very positively and plans to continue contracting indefinitely, their main concern in the future is to further reduce the costs of providing the service. They want to make the contract less capital-intensive for the contractor and one way they plan to achie ve this is by procuring some paratransit vehicles of their own. 104

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Space Coast Area Transit, Contracted Fleet Maintenance61 Description of Transit SystemSpace Coast Area Transit is the public transportation system serving Brevard County, Florida. Space Coast directly operates and contractS out demand response transportation services. Commuter transportation needs are met through the use of a comprehensive vanpooling program. The directly-operated demand-response service utilizes a fleet of 25 lift-equipped 30-foot and 40-foot diesel buses. Most of the directly operated service is provided on a subscription basis to clients of human service agencies. All services are open to the general public. Description of Initiative Prior to contracting the maintenance of the bus fleet, Space Coast was expending approximately $500,000 annually for in-bouse maintenance. A request for proposal (RFP) was issued in Sept ember 1987 for the provision of maintenance for this bus fleet. ATE was the only respondent to the RFP, but the bid was still lower than the estimated in-bouse marginal cost of $500,000. The ATE bid came in at an estimated $400,000, resulting in cost savings of $100,000 or 20 percent. This cost savings amounts to over four percent of Space Coast's operating budget of $2.3 million. The contract specifies that Space Coast pay a flat fee of $18,000 per month for the entire bus fleet, plus an additional cost of 6 to 23 cents per mile, depending upon the type, condition, and age of vehicle. Since ATE is paid a flat fee for their maintenance services, the goal is to maintain the vehicles in the best possible condition. ATE profits most by keeping the vehicles in good condition and on the road. As a result, incentives exist to use skilled mechanics, effective preventive maintenance, and high quality parts. A number of benefits were realized as a result of the maintenance contract, including: maintenance cost savings; higher wages for mechanics; discounts resulting from volume parts purchases; greater efficiency in the use of maintenance equipment; and increased vehicle utilization. 61/oinl Cmlo for Uri>.., Mobility "Conn7octtd Fleet MorinleMnct, BrtWII'd County, FWridJJ," frivllle Stctor Brjds. Nunrbv 12-1 (HOUSIOfl: Rict Cmto, Apri/1989). 105

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Review of Issues Leading to Initiative -Space Coast operates in a very competitive and skilled labor market. The system was unable to retain fuUy-trained mechanics because they could eam much more in the private sector, so as vehicle mechanics became fully competent they left for higher wages in private industry. Space Coast was forced to pay additional maintenance costs because it was in a perpetual training mode. In addition, Space Coast only had one maintenance facility located in the southern part of Brevard County, yet service had to be provided throughout the county, which covers 72 miles of Florida's east central Atlantic coastline. One of the requirements of the bid was that the successful proposer had to have a vehicle maintenance facility in the central/northern sector of the county. Methodology Used to Evaluate Initiative-Because Space Coast received only one proposal, it was required to do a complete cost analysis and obtain approval from FTA to make the award to ATE. The cost analysis showed that Space Coast would save approximately 20 percent of its maintenance costs in the first year alone. Over the five-year term of the vehicle maintenance agreement, estimated savings were $500,000. In addition, in a human resources analysis, no Space Coast maintenance employee was laid off as a result of contracting out vehicle maintenance. At the time ATE took over vehicle maintenance, four of 13 authorized positions were vacant. The balance of the employees either went to work for ATE, stayed with Space Coast as bus operators, transferred to other County departments, or went to work for another Space Coast contractor. All employees maintained the same pay level with the exception of the employees who went to work for ATE. These employees received increases in both wages and fringe benefits. Perceptions of Parties Involved-Space Coast management has been extremely satisfied with the maintenance contracting arrangement. In addition to realizing cost savings, there has also been an improvement in the quality of mainteJ!ance. The increase in the reliability and utilization of vebicles results in tremendous benefit for the transit agency and its patrons. The agency believes that maintenance promises greater efficiency and lower costs and they indicate they will continue with the contracted fleet maintenance program. Conclusions By contracting with ATE Management & Service Company for bus fleet maintenance, Space Coast Area Transit was able to reduce maintenance costs by an estimated 20 percent in each year of the contract While ATE has offered efficient maintenance service resulting in cost savings, they also pay their mechanics bigher wages 106

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than those paid by Space Coast prior to contracting. The contracted fleet maintenance program has been a success, and Space Coast has continued to contract for these services for the life of the initial five-year contract. Rebidding of the contract was scheduled for late 1992 107

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SUMMARY OF INTERVIEWS Selected transit officials from the 17 major transit systems in Florida were interviewed to gather information concerning each system's involvement in transit privatization initiatives and to ascertain their perceptions and attitudes concerning various privatization activities. The major focus of tbe interviews was on the contracting of operations, maintenance, and administration. In panicular, transit officials were asked to summarize their involvement in contracting and to explain the reasons for deciding to contract activities Constraints to contractin g were also identified as pan of the interview process. The interviews were not formal in the sense that a specific set of questions was developed. Each interview was conversational in nature, with the intention of allowing the respond ent to express his/her views with as little influence from the interviewer as possible. As a result of the interviews, major issues were identified, all of which should be addressed in order to successfully implement privatization initiatives in Florida. These issues are discussed in more detail in the following section entitled "Identification of Privatization Issues," In the area of contracting operations in Florida, 13 transit systems currently contract or recently contracted for some or all of demand-response service, while six transit systems currently contract or recently contracted for some fixed-route bus service. Three systems currently contract or are in the processing of contracting for tbe provision ofvanpool service and one system contractS for the provision of commuter rail service. In addition, each of Florida' s transit systems contracts for various maintenance and administration activities. A summary of the interview results as they relate to each of these contracting categories is provided below. Demand-Response Service Contractin g of demand-response service is common in Florida; however, the implementation of such contracts has not always resulted in successful experiences. Several systems indicated that cost were achieved, but at the expense of quality and reliability of service Other systems report successful contracts that result ed in both reduced costs and improved or simi1ar quality and reliability of service. One system indicated that, despite the fact that the fully-allocated cost of directly operating the service was less than the bid cost, the demand-response service was still contracted. The resulting oontract is perceived to be successful, but apparently at a greater cost than direct o peration of the service. 108

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The following were given as the primary reasons for contracting demand-response service by o ne or more of Florida's transit systems: 1. Cost Savings When cost analyses were conducted, the bid price was almost always found to be less expensive than the projected cost of direct operation. Florida systems either used fullyallocated cost analysis or incremental cost analysis to determine the estimated cost of direct operation. 2. Unique Service Demand-response service is viewed as a unique and specialized transit service that often is best provided by private systems that may provide the service at a lower cost and be in a better position to adapt to a rapidly changing transit-dependent market in Florida. In addition, it is surprising to learn that, in many cases, public transit unions do not view the provision of demand-response service as an integral part of their job. Although this service is unique, vehicles that are used to provide the service are usually easier to drive than the larger 40 foot buses, making it easier for contractors to hire and train drivers. 3 Americans With Disabilities Act (ADA) Requirements This act requires that, over time, all public transportation systems become fully accessible to disabled persons, including those using wheelchairs. All fixed-route systems must offer or ensure the availability of comparable demand -r esponse service.63 In order to meet these additional requirements, many transit systems are turning to the private sector for assistance. 4. Increasing Demand There is clearly a rapidly growing market for demand response services. A$ a result, much expansion of this service has been a direct result of latent demand. Latent demand refers to "demand that is not active," the potential demand of persons who are not presently in the market for a good or service.64 In addition, demand-response service must "Ccuer for Urlurn Trrm.rpotflltiDn Rutllldt, 'FloridD FiwYe"' Trrm.rpotflltiDn Plml Technical Menwrrwlunt #I' CAtllr far Utl>an Trrm.rpotflltiDn Rutllldt, 1990), p. 4. "Ccuerfor Url1t111 Trr111Sp011111i< lWtllldt, 'F/oridD Technical Menwrrwlunt #3-Popu/41Wn and Dtmtllld Fom:...u' (Tamp
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be expanded to meet additional requirements set forth by the ADA. ADA bas contributed to a further increase in tbe demand for this service. Fixed-Route Service The extent of contrac ting in fixed-route services is significantly lower than that of demand response services. However, some fixed-route contracting efforts have been implemented at Metro Dade Transit (Private Enterprise Participation demonstration project), Manatee County Transit (one fixed-route, some demand-response, no longer contracted), Broward County Transit (feeder bus service to Tri-Rail), Palm Beac h County Transit (feeder bus service to Tri-Rail, no longer contracted) and Lee County Transit (beach trolley in fiscal year 1990 only). Opinions and comments were compiled from the indicated systems as well as those not contracting any fixed-route service. The following reasons were given for the contracting of fixedroute servi.ce by one or more of Florida's transit systems: 1. Cost Savings As discussed in the Metro-Dade Transit case study, the results of the Private Enterprise Participation (PEP) demonstration program resulted in significant cost savings, but at the expense of quality, safety, and reliability of service. 2. Limited Resources -Palm Beach County Transit contracted feeder bus service to Tri-Rail since the resources to directly-operate the service were not available at the time. By contracting, they were able to implement the service quickly using private sector vehicles. However, significant problems occurred with the financial stability of the privat e sector firm, and Palm Beach Transit has since acquired the resources for direct operation of the feeder bus service. 3. Special Services (e.g., beach trolley)" Often, special services that run distinctly separate from the regularly connected ro11tes are good cand i dates for contracting to the private sector. Lee County Transit contracted for the provision of a beach trolley service in fiscal year 1990. 110

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Problems and Constraints in the Contracting of Operations In cases where the contracted demand-response and/or fixed-route service was deemed unsuccessful, two reasons were indicate d as being the major prob l ems contributing to the sboncomings and/ or failures of the contractual arrangement. 1. Design of Contract Regard l ess of whether a transit system has contracted service in the past, nearly every respondent indicated the design of the contract as the most imponant factor in achieving success in contracting. 2. Limited Number of Qualified Providers -In order to achieve competition in the bidding process, it is necessary to have a sufficient number of qualified providers willing to respond to the RFP. Numerous respondents indicated that a limited n umber of qualified providers were operating in the respective local areas. Also, in most cases, the amount of service/size of contract was indicated as n ot being significant enough to artract a national firm. In addition, several factors were indicated by Florida's transit systems as being constraints to contracting in operations. These constraints are summarized below: 1. Union Opposition The implementation of any privatization activity that was previously performed by public agency employees clearly affects existing labor. When previously directly-operated services are contracted, the demand for existing system labor declines. When new services are contracted, the potential for hiring new system employees is reduced. As a result most transit labor unions are opposed to privatization. In addition, public transit employees are protected under Section 13(c) o f the Urban Mass Transponation Act of 1964, which states: ... it shall be a condit ion of any assistance under section 3 of this AcJ that fair and equitable arrangemems are made ... to protect the interests of employees affected by the assistance .... Such arrangements shall include provisions protecting individual employees against a worsening of their positions with respect to their employment...." Clearly, union opposition and supporting legislation are key issues in the decision to implement privatization activities. Many transit systems have been able to deal with this issue in different ways. The contracting of new service does not directly affect existing employees and, 111

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therefore, is the easiest way t o contract service; however, this can still have impli cations for future n egotiations with the union. Employees could also be displaced from existing jobs to other positions with.iil the organization or to positions within the contractor organization (could be negotiated in contract). It is not always clear when Section 13(c) is violated and, as wit h any legi s l ation, it is subject to interpretation. It is anticipated that this issue will be add ressed more thoroughly in subsequent tas ks of the study. 2. Political Opposition Often, political opposition to privatizatio n exists in the local area in which a transit system operates. Nearly every transit system is ulti mat ely governed by a Board of Directors or a City /County Commissio n, each of which is comprised of political decisio!llllalcers in the community. As a result, if opposition does exist politically, implementatio n of privatization acti vit ies can beco m e extremely difficult, regardless of the reason for the opposition. Political opposit io n can stem from a number of reasons, in c luding strict philosophical grou nds, nega tive experiences i n the past, a perceived lack of control, and diminished op p ortunities for patronage, among others. 3 Amount o f Service/Size o f Contract The amount of service and the resulting size o f the contract determine the interest of private secto r o rganizations in respo n ding to RFPs for operat i on of transit services. Several transit officials in Florida indica ted t ha t t heir system was not large enough to find portions of service significant e no ugh to attract qualified providers t o respond. However, a few res pondents did indicate that contracting the en t ir e system may be large enough to attract qualified providers. This cons t raint is not necessarily an issue for the l arger systems in Florida. 4. Number of Qualified Pro viders/Limit e d Experience It is believed that the shortage of qualified providers is a constraint that is closely associated with the amount of service/size of contract. As the size of the contract increases, the potential for receiving more r esponses from qualified providers increases. Many respondents indicated t h at few qualified providers wer e available in their local area and that the amount of service they could potentially purchase was not perceived as significant enough to attract private firms from o u tside the area. In addition, it is believed that private providers have li mited experience in providin g these types of transit serVices. 112

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5. Perceived Loss of Control In some ins tances, decisionmakers perceive a loss of control to be associated with the priva,tization of transit system activities. This perception may originate from political decisionmakers as weU as from the operational decisionmakers of the transit system. Apparently those who have this perception are uncertain about the ability to supervise and monitor private sector entities if they were to contract. 6. Negative Experiences in tbe Past In some instances, respondents indica ted that negative experiences with which they or other decisionmalcers had been associated prevented them from considerin g a more integrated use of the private sector in the delivery of transit services In each of these cases, the system was reluctant to undertake any initia tives in which they perceived a high degree of uncertainty based on past experiences was percieved. 7. Requirements of Small Providers Requirements set forth in contracts often prevent small providers from responding to an RFP. Examples includ e excessive bid deposits, excessive performance bond requirements, and insurance requirements. Malntenuce As indicated in the inventory of co ntracted activities, 15 Florida transit systems contract for some vehicle maintenance activities, and 14 Florida transit systems contract for some non vehicle maintenance. Since 17 systems were included in the survey it is clear that contracting vehicle and non-vehicle maintenance are popular contracting activities. The interviews revealed the primary reasons for contractin g various maintenance activities. The reasons indicated below were noted by one or more of Florida's transit systems. 1. Cost Savings Respondents indiCated that cost savings can be achieved through the use of private contractors for vehicle and non-vehicle maintenance. This is particularly true for those systems with limited facilities, a light maintenance workload. and few maintenance staff. Private maintenance firms enjoy economies of scale as a result of specializing in specific: maintenance tasks. The type of maintenance may range &om engine rebuilding to computer maintenance to janitorial service s. 113

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2. Specializ.e;d Expenise When specialized slcills are required to complete specific taSks. that specialized skill is oftep not required all year long. As a result, it is not cost-effective for a transit system to maintain a staff that includes employees with this specialized expertise. It is much more efficient to contr act for this ski ll when it is needed. Examples of specialized skills may include those associated with major vehicle repairs, computer repair, and others. 3. Cyclical Workload Maintenance facilities at transit systems often have cyclical workloads throughout the COUISe of a year, resultiDg in the need for additional maintenance staff when the workload reaches its peak. Transit systems may decide it is more efficient to maintain a maintenance staff that is sufficient to handle the average workload and t hen contract any maintenance over and above that average. 4. Lack of or Inadequate Facilities In instances where the existing maintenance facilities for vehicle maintenance are limited and/or inadequate, the transit syste m may be forced to contract needed maintenance functions in order to properly maintain its vehicle fleet. 5. Warranties Several respondents indicated that one of the major advantages of contracting for maintenance is to receive a warranty for pans and labor fr o m the private company. F or example, if an engine is rebuilt in-house and has to be repaired within a shon period of time, the transit system must pay for th e labor for the second repair. However, if th e engine rebuild bad been contracted, pans and l abor may have been covered und er a warranty Administration Most transi t systems in Florida contra ct for numerous activities within the administrative categories including planning. marketing. human relations, finance/accounting, and other administrativ e se rvices. Included in the Other category is the activity of management services. Five transit systems curr ently or recently have contracted for the management of the transit system. That is, a privat e company is responsible for th e management and operation of the entire system. The 114

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empl oyees work for the private company rather than the public agency. Contracted management services appear to be successful for these.Florida transit systems. Interview Conclusions A review of all interview responses indicates that, with few exceptions, transit system officials in the state of Florida are willing to listen to potential opportunities with respect to private sector panicipation in the operation of a transit system. However, although these officials indicate an openness to consider privatization opportunities, there remains a hesitation to accept the uncertainty associated with the implementation of contracrual arrangements. This, in addition to the constraints expressed previously, hinders any significant efforts toward private sector involvement. As a result, numerous issues must be identified, explored, and resolved if privatization is to become an accepted method for delivering and enhancing transit service in Florida. The results of the interviews helped to identify the issues and questions that are presented in the next section. 115

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VI. IDENTIFICATION OF PRIVATIZATION ISSUES The purpose of this section is to discuss the privatization issues identified in Tasks 2 and 3. The identification process was based on information collected in the review of legislation, r eview of transit system privatization initiatives, and interviews with transit officials. Tills discussion is not intended to be comprehensive but rather to clarify the major issues that should be addressed in subsequent tasks of the study Each of the issues must be explored and resolved if further implementation of privatization initiatives is desired in Florida's transit indusuy. Others have acknowledged many of the issues identified in this section and are currently addressing them in national studies, such as the M.I.T. study currently underway on contract design for transit s ervice contracting. These national studies will be incorporated into subsequent tasks of the study to the extent possible, depending on the timing and availability of results. Each of the issues is identified and briefly discussed below for the contracting of operations, maintenance, administration, and other issues; each is followed by examples of questions that could potentially be addressed in subsequen t tasks. 1. Contract Design In many of the interviews with transit officials, the design of the RFP and the contract were identified as key indicators in successfully contracting with a private sector entity. Unsuccessful privatization efforts in Florida were generally blamed on shortcomings of the contract. For example, many transit officials associated with the contracting effort at Manatee County Transit attributed the failure of the initiative to a contract that was difficult to understand and that had no clearly identified incenti ves and penalties. Should incentive and penalty clauses be included in the RFP and contract? Should the contract requirements vary depending upon the size of the contract and the type of service? How can a contract be designed to ensure that decisionmakers do not perceive a loss of control? 117

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2. Contract Administration a n d Eolorcemeot Regardless of bow well a contract is d es i gned, failure ma y result if the contract is not pr operly administered and enforced. A performance evaluation process should b e included t o m onitor how successfully t h e contractor is fulfiWng the obligations o f t h e con tract. Clauses that include incen tives and penalties s h ould be strictly f ollowed and enfo r ced What is the best process for eval ua ting the performance of a contracto r ? How can incentive, penalty and evaluation clauses be implemented an d still minimize the level of effort required to administer a contract? 3. Division or Responsibility The responsibilities of the p u blic agency and the private contractor are usually defined in the contract and vary considerab l y from transit system to transit system. For example, at Broward County Transit, t h e contractor is responsible for handling the scheduling, dispatching, and provision of demandresponse services Other transit systems, such as Palm Beach County Transit, prefer to be responsible for scheduling demand response service and then dispatching that information to the contractor, who then provides the service. Transit systems have varying degrees of confide nce in private sector providers. The level of confidence is related to the level of responsibility given to private sector e n tities. Is there an optimal division of responsibility? Can guidelines be established for the division of responsibility to enhance the probability for a successful contractual arrangement? 4. Number or QuaWied Providers Transit officials identified the limited number of qualified providers as a potenti all y s erious contracting problem. For examp le, the service contract put out to bid by Metro-Dade Transit for the PEP program resulted in a single bid from Greyhound lines, Inc. Similar responses were reported in other contracting situations in Florida Many transit system officials with no contracting experience indicated uncertainty regarding whether a sufficient number of qualified providers existed. 118

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Are qualified providers available in Aorida? If so, what can be dooe to encourage qualified providers to respond to service bids? Wbat are the advantages and disadvantages of using the same contractor versus using several contractors simultaneously and over the course of time? Can contract structures be developed to encourage a more competitive market in the furure, i.e., stan small and slowly expand with market? 5. Optimal Size oC Contract This issue suggests that perhaps qualified providers do exist but either are not interested in providing transit services or do not feel the size of the service contract warrants the investment. Oearly, the larger the contract, the more responses a transit system can expect to receive. In addition, when a contract reaches a certain size, a transit system can also expect to receive bids from national firms. It is uncertain what size contract would attract a sufficient and/or maximum number of providers to respond. Is there an optimal size for a service contract? Wbat are the advantages and disadvantages of large and small contracts? 6. Quality and Reliability of Contracted Services Some privatization experiences in Aorida have resulted in disappointment in the q uality and reliability of the service provided by the private entity. However, many experiences in the United States have been positive in the sense that cost savings were achieved while maintaining or improving the quality and reliability of service. How do these negative experiences differ from successful ones implemented in other areas of the United States? What, if anything, can be done to ensure quality and reliability of service provided through privatization? How should contract incentives and penalties be tied to the quality and reliability of contracted services? 119

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7. Proru or Private Contractor The idea of a private entity making a profit in the provision of public tran.sit services is controversial to many decisionmakers and citizens. As a resul t, bow profit is built into the contract and bow much profit is permitted is an important issue for consideration. Should transit systems be concemed with the amount of profit achieved by a priva te sector entity? Should transit systems offer performance incentives that would increase profits if a specified level of performance were achieved? 8. Cost Allocation Methodologies The use of fully allocated cost analysis to estimate the cost of directly-Qperating a portion of service is extremely controversial in the transit industry. Most transit officials believe that incremental or marginal cost analysis is a more accurate representation of the cost of directly-operating service. One argument against fully allocated cost analysis is that it requires a portion of administrative overhead to be included in fully allocated public costs but that no overhead is included in the private bid. Numerous other shortcomings of FACA were identified in Technical Memorandum #1. Which method of allocating costs is appropriate? What are the arguments for and against each cost allocation methodology? Should the cost allocation method be a function of the size or type of contract? 9. funsit Labor Implications As indicated previously, Section 13(c) of the Urban Mass Transportation Act of 1964 protects public employees from being adversely affected by privatization. This becomes an extremely iniportant issue if the desire is to implement privatization on a wide scale. This is particularly true for fixed-route transit services since most transit labor unions view this type of service as their primary responsibility; however, in many cases, unions do not view the provision of demand-response services as being an integral part of their job. 120

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What can be done to impleme n t privatizatio n without violating Section 13( c)? How can privatization be implemented without alienating the transit labor unio n? If reduced wage rates and more stringent wor k rules are a real benefit of contracting, can these benefits be achieved any other way, e.g., tou gher labor negotiations? Should the public transit union be e n couraged to prepare an inhouse bid for contracted service? If the public transit unio n wins a bid, should they be put under contract just as a private sector entity would be? Will cost savings continue when contractor wage rates increase over the life of the contract? 10. Contracto r Defanlt Every transit system should be fully aware of the possibility of default by private contractors. Awareness of this issue, however, often becomes a deterrent to the consideration of privatization. Clearly, everything possible must be done to determine the health and viability of the private sector entity at the time of the proposal evaluation. Requirements such as bid deposits and performance bonds, among others, may also be required to ensure that the private firm is serious about the contract. What are the appropriate mechanisms for minimizing the probability of defa u lt by the private sector entity? Should ownership of facilities, vehicles, and equipment be maintained in order to minimiu the impact of default? How is ownership of equipment and facilities treated in cases of contractor default? Should multiple contractors be used to prevent the transit system from becoming dependent upon a single contractor that could potentially default on a contract? 11. Service Cotltinlllly Maintaining service continuity when using contracted services is often a concern of transit system officials. Some officials expressed particular concern regarding the need for consistent customer perception and identity with the public transit system Other officials indicated that contracting should be limited to only those services that 121

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are distinctly separate from the normal bus service, such as deman d-re sponse service and express or feeder bus service. Can contracted route s successfully connect with directly-operated routes? Should contracting be limited to only distinctly separated services that do no t connect with the normal bus service? How much conu-actor identity should the public transit system allow? Should a transit system relinquish the capacity to provide cenain services and become dependent upon the contractor? 12. Motivations for Transit Privatization The motivations for privatizing activities within a trans it system have been identified in this and the previous technical memorandum; however, the strength that these motiv ations h ave in influencing decisions within a transit system was not addressed. This issue sho uld be consid ered further to determine who ultimately is willing t o take the risk and suppon pri vatiza tio n effons This includes decisionmakers such as gen eral managers, transit system Board members, state legisl ators, C ongress men, etc. What are the primary motivations to privatize in the transit industry? Are t he motivations strong enough for transit systems to support privatization initiatives and be willing to accept the risk involved with implementation ? If motivations are not stron g enough, would it be necessary for legislators and transit system Board members to be the imperus t o encourage or mandate privatization initiatives? 1 3. Appropriate Malnteo .lDce Activities for Contracting Fifteen of sevente en Florida transit syste!ru} contract for some vehicle maint enan ce, with the Dlajority of contracted activities relating to major repairs/ove rhauls and body /paint work. Several systems also indicated contracting for vehicle cleaning, routine maintenance, and bus tires. What types of maintenance s ervices are best contracted to tbe private sector? Do system size, system characteristics, and location play a role in determining which maintenanCe activities are best contracted to the private sector? 122

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Can maintenance cost savings be achieved in any other way besides contracting, such as improved main tenance worker productivity, tougher labor negotiations, procurement of pans in bulk, etc.? 14. Monitoring Contracted Maintenance Monitoring contracted maintenance services is most important when a private entity is responsible for all maintenance associated with a fleet of vehicles. For example, in the PEP demonstration project in Miami, the contractor was responsible for maintaining a fleet of 40 vehicles. In this a.rtangement, monit oring usually consists of periodic inspections of the vehicles by the transit agency. The extent of monitoring should be specified to ensure that adequate maintenance is being provided It is often difficult to determine whether a vehicle is being adequately maintained based on a visual inspection. Should transit systems allow private conuactors to operate and maintain vehicles owned by the uansit system? If so, what is the best way to monitor the performance of conuacted maintenance services? If both operations and maintenance are to be contracted, should they be separate contracts with different vendors? 15. Administrativ e Services Generally, the contracting of various administrative activities, such as marketing and le gal services, occurs as needed by a transit syste m. In some cases, transit agencies contract for overall transit management services. Five systems in Florida currently contract or have recently contracted for ttansit management services. What types of administrative services are best conuacted to the private sector ? What are the advantages and disadvantages of contracting for management services? Just as with the contracting of conventional transit services, transit systems in Florida could become more involved in other privatization relationships, such as joint 123

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development, cross border leasing, and turnkey arrangements. However, these public/private arrangements are typically implemented by large transit systems, such as MDTA. In order for these arrangements to be feasible, the public/private arrangement normally requires a contract size in the range of millions of dollars Therefore, emphasis on these arrangements may not have much applicability in Florida beyond MDTA Are there any opponunities for other privatization arrangements in Florid a's transit systems? Should FOOT encourage these types of arrangements in Florida? 17. Legislative Initiatives Legislative initiatives have been important mechanisms for encouraging and mandating privatization in the United States. Legislative initiatives range from privatization mandates to general enabling legislation. An example of a mandate is observed in Colorado legislation, where the Regional Transportation District (RID) is required to contract at least 20 percent of its bus service, as measured by vehicle hours. An example of general enabling legislation is the Florida Transportation Corporation Act, which was passed to promote and develop transportation facilities and systems by new and alternative means. Should legislative initiatives be considered for F1orida to establish guidelines for the implementation of privatization? Could legislation help ease or eliminate some of the uncertainties identified? Does the Florida Department of Transportation want to take an active role in encouraging or discouraging privatization? 18. Issues Spedftc to Florida Each of the issues identified previously apply to privatization and the transit industry in general. Several issues specific to Florida have been identified and are provided below in the form of questions. These issues could be explored in detail as part of the subsequent tasks of the study. Could tourist markets be better served by mass transit services tlu:ough the use of privatization? 124

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Does Florida's elderly population require different types of transit services that might be better provided by the private sector.? Do the compensation differences between the public and private sectors for transit operations and maintenance in Florida impact the potential and motivation to privatize? Is the charter bus service indusuy in Florida capable of responding to requests for proposals for various transit services? Can private jitneys be strategically used to enhance the overall transportat i o n system, particularly in Miami? Is the modest transit usage in Florida relative to other parts of the country an important factor in the decisio n to use privatization? Proposed me t hods for addressing the identified issues will be provided in an issue paper to be prepared following the completion of this technical memorandum. The proposed methods will be limited to those that CU1R and FDOT believes would best assist Florida's transit systems. 125

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PRIVATIZATION BIBUOGRAPHY ATE Management and Service CompaJ>y, Inc:. Private Sector Comracting for Transit Services: Operator Handbook.' Cincinnati, OH : ATE Management and Service Company, Inc., 1987. Abrams-Chuwooey & Associates., et. aL '1n.trod1.1ctiou to Transil Operations Planning= Participant NotebooL" n .p., unpublished, 1991 Adiv, Aaron. 'Specia l ired Transportation Services at the Uaiversity of Michigan A Case Study in Public-Private Cooperation." Transponalion ReseOICJI Reeord 1098. Wasbingron, D.C. : Transportation Res e arch Board, 1986. Research & Communications, Inc:. Privatiwticn Report. New York: Alexander Research & Communications, Inc., 1.988-1990. American Public Transit Association. MlllUJging MobiliJy: A New Genhingroa, D C.: American Road and Transportation Builders Association, 1991. Apogee Research, Inc. Financing Infrastructure: INIQWltion.s at the Loco! UY
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Bos, Dieter. Pub& E:Ncpri.rc Economics. AmSterdam, The Netherlands : Elsevier Science Publishers B.V., 1989. Bricka, Stacey G, Dr. Philip K. Po rter, and Gary L. Brosch. 'A Compendium of Privatization Activities.' Tampa, FL: Center for Urban T ransportation Ro.eorcb, 1991. 'Bush Order Eases the Path t o Privatization. Goveming (July 1992): 21>. Butler, Keooeth W 'Mega Turnkey: Th. e New Wave in lnfrastructore Financing.' PTI Joumal (March/Apru 1989): 2+. ----, "!'urukey Projects and Innovative Funding.' Paper presented at the UMTA Fourth ADDual Symposium, lnoovative rtnancing Tools Session, March?, 1988. Butler, Stuart M, ed. 'The Privatization Option, A Strategy to Shrink the Size of Government." The Heritage u<1ures No 42. Washington, D.C. : The Heritage Foundation, 1985. California Department of Transportation, Office of Privatization. 'Request for Qualifications: Ftnancial Consultant for Toll Revenue Transporta ti o n Project Propo$01s.' Irvine, CA: California Department of Transportation, March 1990. ----, "Guidelines for Conceptual Project Proposals for Toll Revenue Transportation Projects." Irvine, CA: California Department of Transportation, March 1990. ----. "Requesl for Qualifieation.s For ToU Revenue Transportation Projects.' Irvine, CA: California Department of Transportation, November 1989. California DepartmeDI of Transportation and California Private Transportation Corporation. 'State Route 91 Orange Lanes: AB680 Conceptual Project>Proposal' Irvine, CA: Califotllia Private Transportation Corporati on, 1990. 1 ___ "Development Franchise Agreement State Route 91 Median Improvements: Orange and Riverside Counties, California.' SacrameDio, CA: n.p., 1990. Carnegie Council on Ethics and Uilernatiooal Allain. "Carnegie Council\DR.T !ntematiooal Privatization Projea.' Newsletters. Volume Nos. 1-8. 1991. --'Putting Gove=DI Out of Business: Privatization in the Americas.' Conference Summary. New York: Carnegie Cotmeil on Ethics and International Affairs, 1992. Carter-Goble Asaociares, Inc. 'Privale SC
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---; "Public Transil Systems Study Part I, Capital aud Operating Requiremeuu; Tampa, Fl.: Cettter for Urban TriU1.$porutioo Research, Un.iversily of South 1989. "Transit Service Cosu and the Role of Tra.Mit in Serving Larger and More DcD.!C Urban Areas: ---,Tampa, Fl.: Ceoter lor Urban Transpor1atioo Reoearch, Un.iver>ity of South Florida, 1989. ----: "Privatiz.atioo in Mw Transil Teclmical Memo raodum 1101: Overview of PrMotir.ation: Tampa, Fl.: Cooter for Urban Transpor1atioo Research, Un.iversity of South Florida, 1992. "Florida F'!VeYear Transponation Disac!vanta&ed Plan Teclmical Memoraodum 1111: Tampa, Fl.: Cooter lor U rbao Transpor1ation Research, UI!Mrsity of South Florida, September 1990. "Florida f'we Year Transpor1ation Disadvantaged Piau Teclmieal Memoraodum #3 Population ---and Demand Foree&SU. Tampa, FL: Cooter for Urban Transportation Research, University of South Florida, Juoe 1.992. ---, "1990 Perf ormance E valuation of Florida Tra.Mit Systems Par1 I Trtod Allalysi.s, 1984-1990." TlUDpa, Fl.: Cooter for Urban Transpor1ation Research, Un.iversity of South Florida, April 1992. Cervera, Rober1. Tnmsit Service Coto-g: Cr<4m..Sirimmillg or Defo;il Skimming? Berkdey, CA: Urban Mass Transportation Admioistration Research and Tr..UW.S Prosram, 1988. auc.go Operates Unique Transil Program for Suburbal> Commlllers. The Urlxln T1r1Atp01Ulit>n Moniter. Volume 6, Number 3 (Febnwy 21. 1992 ) : 1. City of Phoellix Public Transit Deparuneot. "Requm for Propooals, F'oed Route Transil Scrvic:e: Phoenix, AZ:. City of Phoenix, 1992. C larkson, Kcnoelh W and Philip E. F'cder, Jr. The 11414 of Privatiation ill FlctidiJ's Growth. Coral Gables, Fl.: School of Business Admioisttation, University of Miami and Sanla MoDica, CA: Local Governmeot Center, the Reason Fouodation. n.d. Commuter TtiUL$portatioo Senices, l.lle. The ETC Htrntlbook: A Comnaue MantlfP'ID'l Guuu for Employee Loo Al!geles, CA: Commute: Trauportatioo SeMce4, August 1990. ComprehensiYe Techoolosiea<:roalional, hie. "Mioority Businesa Panicipo.tioo io Publiefl'rivate PartDership$: A Manual on Joint Devei
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Olnu>. Anbur M. Equ4Jity a>ld Ejfiacley The Big Tradeoff Wasbingsoo, D.C.: The Brook:Uigs !Jutinltioo, L97S. Pagano, A.olhony M "Privale Se<%or Allenutivu for Publl< Tra.osp(,natioo: TrQJlS]XNf4lion (!luvtuty. o..p.: o..p. ( o .cl.): 4--44 9. Par k er, Jeffrey A., &: Associates. 'Cross B order Leuing illlhe Trusit Industry.' WashiogJoo, D.C.: Jeffrey A Parker &: Associate.!, December 199! Pe1Ul.5Ylva.oia Ullive:sity. 'Privatization of Public Tr:lnlit." Pbiladelpbia, PA: Urban MU< TransporUrion Ad.miohttatiorLt 1988. PERINl/DM.lM/HSST. "Caltrans Privatizatio n ProjeCI l.A.X to Palmdale Trusi4 Volume 1, Ettcutive Summary. San Francisco, CA: PERlN!fDMJMfHSST 1990. PERINl/DM.lM/HSST. "Caltrans Privatization ProjeCI l.A.X to Palmdale Trusi4" Vollune J. TechnlcDI ProposDI. San Francisco, CA: I'ERlNI/DMJM /HSST, 1990. P eny, James L, and Timi)"Dll T B obiuky. Co mparative Performance in Urban Bus Transit: Assesoing Privablation Strategies". Public AdmirWI1rJzioll ReviDV, Volum.e 46, Number 1 (Januaryfl'ebnwy 1986): S7-66. Peskin, Robert L, Sl.lbh&sh R. and Scott D Bubru. "Transit Privalizalion in De"""r: EJ:perieoce ill. the rlt$1 Yeas." Papu presented atTransporwloo Research Board Annual MeetiDg, Denver, 1992. Petenco,Jobn E. 'A Bond Deal Abroad is a Pee k a1 the Privatization Future Here: Governing (July 1992): 87. Poole, Jr., Robert W. "Contracting for Urban Traooi4 Policy Study No. 200.' Santa Mollica, CA: Reason Foundation, 1983. ---,: 'Electronic Toll Collection: Key to Solving Urban Freeway Congestion, Policy Study No 1.22." Santa Mollica, CA: Reason Foundation, 1990. --"Objoc:tioos to Privatizalion. Policy &view. Washiogloo, D C.: The Fouodatioo, 1983. ---: Prival e Tollways: R=lviDg Gridlod: in Southern California, Policy Study No 111." San t a M onica, CA: Reasoo Foundalion, 1988. --'lovt$l Ia lnfrastruc:ID:re Privalil.e." WDI/ Sout IOW'Nl1, MayS, 1992. Porter, Philip K., aatl M'>cbocl L. Dat>is. "'l'lu: Value of Privaie Property in Education: Innovation, Producti o n, and Employw." HtlrWII'd JCU1f141 of I..Dw OILd Public Policy Cambridge, MA: a.p P oslel'o ak, Blookd.,;. & Lomd. The Competuliwn o f SIJJie hiVOliulticn Laws 1988 EdWon. Booton, MA: Tbe Privalizaliotl CoUDc:iJ, IDe:., J.9e8. Price Walerbowe. "Fuuly Alloealed Cost AAalyW Guidelinu for Public Transit P roviden." Wa.sblngJoo, D.C.: Price Wa.terbOU>C Of5c,e of GoveromeOI Setvlce.\, 1987. ---,: 'F'mal Report oa lhc F'.....,ce Provisions of the AB 680 Transponatioa Projecl Development Francblse Agreements n.p.: Price Wa!erbouse, 199L 135

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TbotDpooo, Thtodore A. Bmrier 1<> hMile Stor Participation on I'IIMc T1W1Sp(NIIItior.. Albany NY: Urban Mus Trusporutio.a Administration. 1986. Tom Wbinle Plaooing and Dcvdopment Consulting. Study. Vccio; CA: Tom Wbinle Planning and ConsultiDg, April 30, 1990. Touebe Ross. "Privatization in America: An Opinion Survey of City and CoUDt)' Go-erumenu on Their u .. of Privatization and Their lnfr astrucrur e Needs.' Washlaitoo, D.C.: Touebe Ross & Co, 1987. --'Su.te Goverwne n t Privatization in America: An Opinion Surve y o f SU.te Government> o n Their Use of Privatization.' Wa.shingtoa, D C.: T ouebe Ross & Co., 1989. TrtlllSIU:d o naJ Financt, Volume 3, Number 1 (Jun e 1991). F'm anct, V o lume 4 Number 2 (April1992). "Transit Authority is liable for Private Contr a ctor's Improper Drug Testing.' Mass Transit La>I!Yer/Admirtistmtor (October 28, 1992): S. Transportalioll R esealdl Board. 'Bus Tr:wit Serrioe Strategies.' Rtse=h Rmrr 1051. D .C.: R=arcl> Board, 1986. ---: 'Partnetsbipo for lnnovali = Private-Sector Contributioas to 1nnoYatioo in lhe Highway lnduslry.' NatitJMJ Coopttallvt H'lghway !Wt=h S)nJJwis of High"-ay Pnzaict No. 1 49. Washington, D.C.: Transportatio n Researeb B o ard, 1989. ---: 'Privale.Secto r lnvol.vemeot aDd Toll Road Fl oaneing in lhe Provision of Highwa-ys.' Tttvlrpcltatlon !Weon;h Reco rd 1107. Washington, D.C.: Transportation Researeb Board, 1987. --Newslirte. Volume 17, Number 2, (June 1991). U.S. Department o f Transportation. " S urf ace TraDSpo11atlon Ef!icieney Act of 1.991.' Washington, D.C.: U.S. Dep artment of Transporta tioa, 1991. ---; 'National Transit SUIIllllaries and T rends For lhe 1990 Section lS Report Yeas." Washington, D C.: Federal Transit A dministration, June 1992. ---: "Transit Pro6les The Thirty l.azge$1 Age ncies Po r lhe 1990 Section lS Report Y eas.' Washingtoa, D .C.: Urban Mass Transportatio n Admioi.slntion, 1991. --'DIIa Table& Pot lhe 1990 Section lS Repo_rt Yeas.' Washington, D.C.: F ederal Tr:wit A dminialnDoa, Oeoember 1.991 . "Trllllil PrcliJea Urba.oized Asw Excwling 200,00J Population For the 1990 Section ----ilS Report Year. Washingtoa, D.C.: Federal Tr ansit Admioi.dratioa, No-ember 1991. "Transit Pro6les Agencies in Urbanized Aseu with a Populalloa of Less Than 200,00J F or the 1990 _ _,S ecti o n LS Report Year.' Washington, D.C.: F ederal T ransit Admioisttatioa, December 1991. ---: "Public Transportation in tho Ulliled P erf onniii
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----: Fully Al/oCtlkd C>st Analysis ParticipiJ11t Referersbips in Rural Transit: A Technical Assistance Resource for the Rural Transit Community." WashingtOn, D C.: U.S. Department of Transportation, January 1991. ---. Pui>lic TfiJIISportanon in the United Stales: Perfomtance and Conditicn. Washington, D.C.: Urban M.S. Transportation Adminisrration. February 1991. ---. "Private Sector ContractiDg Workshop Manual for Rural and Small Urban Pubtic Transportation Provider$." Washington, D.C : U S Departme n t of Transportation, November, 1988. "!'he CompetiliYe Coo!TactiDg Process Participant Reference Notebook. Notebook for the --:Competitive Transit Service ContTaeliug Workshops. Washiogton, D.C : Urban Mass Transportation Administration_ a..d. ___ "The Private Sector and Public Transit. Pubtication for the Fourth Annual Symposium Confereoce A$al Pcrpective. New York: Quorum Books. 1990. Vickers, John, and GeorglC Yonow. "Ecoo.omic Perspeclives on Privatizatioa. foutn41 of Economic Pmpectives, VolumeS Nnmber 2 (SpriDg 1991) : 111-132. Vuchic, Vubn R. ChNI Public ThPupoiWtiotl: Systems and TeclwJiotDI. Enslewood Cliffs, NJ: Prentice-Hall, 1981. Wagner, Jane. 'Privatization of U.S. Hi3hway Begins i.n Pueno Rico." llllmii1IWMJ Business (April 13-26, 1992): 3. Walkes, Michael A., ed. Taaic3 and Techniques. 1'7oceedintp of an Symposium. n p : The Fr ... r Institulc, 1988. 141

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Walther, Erskine S., and Daniel S. Turner, eds. Region IV Tnm.rit Woricshop: Hamessirlg the Priwue Sector. Washington, D.C.: U .S. De p artmen t of T ranspnr
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Metro-Da de Traasl1 Agef1q (MDTA) TABL Contracted OperadoDS Actmli,., MOTA NOTES 100 I too L of Flxe4Route B us Service 1 30 Rail Provision of Service Provision of of Service TABLE36 Conlracle4 MalnteuaD 35 per cent bus, 17 per cent rail, 26 oeic:o:nt m over Ground! 9 oercent buS, 1 Dl rail Data Proeessiag 100 per cent bU&/r ailf m over 144

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TABLE37 Cootracud Administration ActMII.,., MOTA CATEGORY NAME ACI1VJTY NOTES Ptanniog Sectioo IS Re))Ort Transit Develooment Plan SO oercent Maoll2cment Audit Special StudiO$ Route Evaluation Market Analysis 100 oereent p Facilities M arketiDg Mar 100 percent Cam Adve . HlliiWl ResOIIl'CeS Labor Relations EmDlovee T . 100 percent Employee Benefits ReauitiDg Employee Evalualion FI.Dance/ AttounliDg Section 15 Reoort Budaet F'Ul&Dc:ial p MoDihlv Ac:countiDg Audits 100 per cent Pavron Otber GraD1 Admioi$lration Pr 2lloer eent Procuremen t t 100 Mazla&"'llenl Services 1 4 5

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TABLE 38 C o ntra 's. t o Tri-Rail Rail Provision_ of Rail of ofSemce ofSemce TABLE39 Coatra
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TABLE40 Contracted A
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JritoDYille Tra&sportatioa Authority (JTA) TABLE41 Coo1ntte<1 Opel'lltions Activities, JT,\ C;.TEGORY NAME ;.crMTY NOT&S D
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TABLE43 Cootnocted A.dmlolstnotloo JT A CATEGORY NAME ACilVITY NOTES Pla.oolog !SD '" Plan Audit n u,. -' Marketlog Humaa Resou.rces Labor R e latioos = FlllADU/ Aa:ouotiog Section !5 f"lllliDcial A Other Grant Admi.oistratioo ,.._ PrOCIIre me Ill <:. Services 149

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Hillsborough Area Regional Transit (HART) TABL Cootncted OperaUonB AcUviU .. HART 0 ACTMTY Demaod Respouse Provisio n o f Service Fixed Route n". :.!:!!. Commutu Rail Provision of Service 'Qf < -' o ofS TABL C o otncted Maloteoaoce AcUvltles, HART r, :;:; Veblcle Work I rebuild .... Bus Noo-Veblcl< R adio. office r. laWII Data ISO

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TABLE 46 Coatncted Admlaistntioa Acthitie;s, HART C1 NAME ACl'IVITY Planning Section 15 tn Audit ol Studies MarktiiDg ..9 Human Resoan:es Labor Relatic>ns Benelits Evaluation Flnanoe/ A<:coWlt!Da A Olber Grant Admioi.stration I. Scmces <;. -== 151

PAGE 162

PiDellas SDJK:Oast Transi t Anthority (PSI'A) TABLE47 Contracted Opentio ... Activttl .. PSTA CATEGORY NAME ACI'IVIIY NO'IES Scheduling Dis Provision o f Service FlxedRoute 1 route 20ing to RFP Feeder Service Express Service Park nRide Service Hea"l' Rail Provision of Service Commuter Rail Proruion of Service PeoplemOYer Provision of Service Van pools P N011-Vehlde Radios Buildings repair, bus shelter (1 lawn Data 152

PAGE 163

TABLE 49 Coa!rUU
PAGE 164

Tri County Transi t (Lynx ) TABLE SO Cootnu :t.ed OpentlOilS Acthillts, CATEGORY NAME ACI1VITY NOTES DemaodRupoose Scheduling Dis Provision of Service Fixed R oute Rep;ular Service Feeder Service Ex!>= Servi> PatkDrudc Ser"Yicc Hea>Y RaU Provision of Service Commuter Rail Provision of Service Ptopl.., ... r Provision of Senice VllDpools Provisioo of Service TABLE S1 Cootrad.ed MaiateDaa.oe A.ctlvltles, L,a. CATEGORY NAME ACTMTY NOTES V ehicle Vehicle Cleaning Body/ P aint Work Repairs/O..rbuls some enp.e, l.r1..QS.I:nimon., radiator, electrical Routine Maiatcnaooe Bus Tues Noa-Veblole Office &!uiomtn l Radios Buildiaas bus shelt e r iDstallatioa aad maiat Grounds Data Proeeosiq 154

PAGE 165

TABLE 51 Contracted AdmiDislndoa Adivtdtt, L:ru CAi ACTIVITY Planning 1.5. n tPLan Audit Route Markti!Da HIUIWlResoorea I hno l..!!! Evaluation Flauoe / Ao:Oillllllla Section 1.5 F"mencial Otbu Gnnt (' ,....,., Scnices 155

PAGE 166

PabD. Beach County Transportation Authority (Co'lnll) TI\JILE 53 Contnc:t<:d Opuatlons Adhides, Co'I'raa CATEGORY NAM:E AC'I'IVIn' ., Provision of Service FludRoure Feeder Service contracted o 1> Rail Provision of Service == .::=: Provision of Service Provision of Service CATEGORY NAME AC'I'IVIn' NOI'ES Vehicle Vehicle a Body/Paint Work R /Overhauls Mainlen.anoe Bus Tires Non Veltlde 016oe Equipment Radi011 Builttings bus shcltus Grolll)ds 156

PAGE 167

TABLE 55 C ontracted Admjnistratioa Ac:ttvldest Co'I'raD. ACTMn' Planolng LIS n Audit Studies .. MarbiiDJ ,.. HIIIIWI l!esoarct$ Labor Relatioas Beoelils Evaluatioo Fllwlce/ AccowliiDJ 15 Fiuaacial Olber Graot I < !!!1:.. 157

PAGE 168

TaDaba......, Tnmsit Allthority (Taltran) TABLE 56 Contnct
PAGE 169

TABLE 58 Coob'acted Adm j oistntioa Activities, Taltra.D liiAMI> Planning < Transit Pla.o Route Facilities -' Marlc.etlng M HomanRaOCII'Clt$ Labor D Flzwu:e/ Accounting Sedion 15 I Audits Ot1Mr Grant Administration a Procurement Lt.n!Servi= Services 159

PAGE 170

RegioDlll Transit System (RTS) TABLE 59 Contracted Operati o n s Activities, R1'S r v NOTES DellllUidRespoase of o Fixed Route ..,, Service 0 Service ft =. r. Rail of Provision of Provision of Service TABLE60 Contracted MalDiellallce Activities, RTS CAD:GOR Y NAME ACTIVI'r( NOTES Veblele Vehicle Cl e aninu Body/Paint Work R e pairs/O v erhauls Routine Mainle!Wl
PAGE 171

Ti\BLE61 Contracted Ad.mi.aistratloo R TS CATEGOR Y NAME Plaool og Sectioo 15 Ttansil Plan A ,d;r M...X.Uog A c HIIIIWI Raoorces I > n FloaDCO/ Accouotlog Sectio n 15 D ' Audits Other c. Legal Services Services 161

PAGE 172

East Volasia Transit Allthority (Vo'fr'IUI) TABLE62 Coa.traded Operatlon t .o\ctivit:ies., VoTran r. Demand -Respon se Provi;A, Semce RaU Provision of SetVice 'of Provi.ion of TAJILE63 Contncted MaiDtenaDce Al:ttrllles, Votran c. ',., ...... Vthlclt Wor k .... Roatine M aintenance Non-Vtblde "' G Data 162

PAGE 173

TABLE 64 Contractt
PAGE 174

Escambia CoODty Transit System (ECI'S) TABLE 65 Op<.ratios Activities EC'IS CATEGORY NAME ACTMTY NOTES V.DUUl dRespoose Sclleduling Provision of Service Fixed-Route Regular Service Feeder SeMce ScMce Parlc-n-R;de Service Heavy Rail Provision of Service Commuter Rail Pr ovisioo of Service Pooplemover Provision of Service Vanpools Provisiou of Service TABLE66 CC)Illracted MalD!enallce Adbitles, ECTS CATEGORY NAME ACt'MTY NOTES Vehicle Cl B ody/Paint Work Routille Maintenance BusT"= Noa Vehlde Office _llip_meDl computer system Radios janilorial service Grounds lawD maintenance, landscapi.og Data Processiog 164

PAGE 175

TABL CoDtracted Admjn l strado o A.tch1det, ECTS (' NAME Ptannjo g Se<:tion lS Tr...W. t Plan .... t A udit R o ute Evaluation Market Service MarteliDg a ........ Rosoaroa I " n = FIIWlce/ AccOGild.DJ Sec:tioQ lS Oilier OraD1 r ProcwemCIII ,_,, Serric:ea Senices 165

PAGE 176

Lee Coouty Transit Authority (LeeTnm) TABLE 68 Cootncttd Operado<>S A<:tlvlt!to L
PAGE 177

TABLE 70 Con tracted Admlnistralio o Acl!vtdes Lee'I'raD CA ACI'IVI'IY NOTES ptaoolng Seaionl5 T ra&it Plan in RFP stage .. : Route Evaluation Facilities Mari
PAGE 178

Sarasota County Area Transit (SCAT) TABLE 71 Conll'ac:led Operations Activit! .. SCAT ..... DemandRes(l<>nse ., Provisio n of Fiud-Route Feeder Service D = Service Rail Provision of Provision of Service Provisio n o f Service TABLE 7 2 Conll'ac:led MalnteDance Al:thltles, SCAT CATEGOR Y NAME Vehicle Work body work .. rebuild Routine Mainte!Wice .=.Tires Noa-Vehlclt Oflice Rd c. Data 168

PAGE 179

T ABLE73 C ontracted A dmjn istratioo Activities, SCAT ACTIVTIY NOTES Pl a n ning o 15 '"'' Studies Section 3 ....... .. F a cilities Mari
PAGE 180

l.aJreland Area Mass Transit District (Citrus CoDDeCtion ) TABLE74 Cootnlcted Open.tioos ACI!vldes, Cltruo Coooedloo c NOTES DemaodRe$poose Provision of Service Fixed Route t> Service P ark DRide Service Rail of Service !.:. .:= 'of: Provision of S ervice TABLE7 5 Contnl cted Maintenan ce Adlvllles, Citrus COGDectlon NAME ACTIVITY Vehicle "'""' r body, paint work "' Rowine MaiDten.ance BliS l1t .. NoaVehk:le RaAir.< G Daia 170

PAGE 181

TABLE76 Contracted AdmloiS!r&lloo Actlvid.,, Citrus Coo.oectloo ACTIVITY ptanning 15" ,n Plan -" ,A;, MarketiDg r, Hamau Resoarces Labor Relations ft Flnallce/ Aa:oo.oliDS Section 15 D Fmaocial Olhu Grant Admiaistra.tion r LcgaiServioes 'lco2J "' 171

PAGE 182

Manatee County 'I'rallsit (MCA 1) TABU: 77 Coolnded Opentlo .. AciMiia, MCAT NOTES DemaodR
PAGE 183

TABLE 79 Coolncted Activities, MCAT (', ACTIVIT\( Pluniog Section 15 " . Studie. Mart
PAGE 184

Space Coast Area Trusit (SCAT) TABLE 80 Coulnlcted ()peratiODJ Acdvluet, SCAT CATEGORY NAME NOTES Deml.lldRespouse Provisioo of Fhod-Roate Feeder Park nRide Service Provisioo of . l'toYision of semce TABLE 81 Coatncted Maiateua.oce A.ctlvltleo, SCAT Vddde /( Bus T'ores Noa-Vehlcle Otlicc Data 174

PAGE 185

TABLE 8Z Contracted Admlaistndoo ActMtlcs.. SCAT ACTIVI'IY Plaoning IS t Plan Audit --' Marktliog r Human Rerources Labor .. Evaluation FloaAa./ Aa:oDDliog Section lS rUWicial Othu Grant Adminis,tratiou 175

PAGE 186

Tri-Colmty Commuter Rail Alltbority (TCRA) TABLE 83 Coatracud O pcralioas Activities, T CRA r .......... ACT1VITY DemandRtspoDse or Fixed-Route ... o:. Rail Provi.sio o o f Service Rail r Provision of Provi.sloo of Service TABLE84 CoolniCUd Acllvttla TCRA CA'n:GORY NAME ACT1VnY NOTES Vehicle Vehicle Cleaning Body {Paint W ork Jlepain/Overh>uls Rootiae Mainteoance Bus Tires Noo-Vtlllde Office Radios Builclil!g:s GtoiiAd.s Data Processing 176

PAGE 187

TABLE 85 COGtncted A dmlnltntlOG Adlvl lles, TCRA r n ...-r..nD Y NAME Acnvrt'Y NOTES Planning LlS L"\ LPlan Audit 'D ..... -- u Marktttaa a HuDUUl Raouras .... "' Beaefits n Evaluation Flnaacof M


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