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Phoenix-area bus, light-rail cuts avoidable, analysis shows

by Sean Holstege - Jul. 17, 2011 12:00 AM

The Arizona Republic

When the Valley's economy was unraveling in 2008, transit service was an early casualty.

Three years of cuts ensued. Dozens of bus lines were eliminated, rerouted or truncated. Wait times grew, and fares shot up on buses and light rail.

Some of those transit cuts, and the resulting hardship for many riders, might have been averted if the Valley's transit network were run by a single unified agency, an Arizona Republic analysis indicates. Unified transit systems are common among fast-growing Western cities.

As it is, in Maricopa County, 11 local transit agencies provide bus and rail service, creating redundant costs in administrative personnel and contracted services such as bus operations and security.

At $70 million a year, administrative costs make up nearly a quarter of the system's total operating costs, making the Valley the third most top-heavy region in the country, according to data from federal and local agencies.

Some local leaders believe those costs can be cut and are talking favorably of an eventual merger of transit agencies.

"In a perfect world, I'd set up a base regional transit system, managed by a single regional agency, based not on city lines but on travel needs," Mesa Mayor Scott Smith said.

He and about a dozen other transit officials say a single agency could not only save the taxpayer-subsidized system money but also eliminate service gaps, such as poorly timed connections between cities, that inconvenience current riders and keep away prospective ones.

Efforts to integrate the system over the years have been stalled by city leaders who fear losing local control and not being able to meet their constituents' needs.

It is difficult to estimate how much, if any, savings the Valley would achieve by unifying the system. Transit experts say a unified system here has a built-in potential for savings because many redundancies in overhead might be reduced.

To estimate potential savings, The Republic analyzed federal and local transit reports and finance records to obtain Valley agencies' spending on administrative costs per mile of service, a standard industry measure, then compared that figure with those of five peer Western cities with unified systems.

Metro Phoenix's per-mile cost in fiscal years 2009 and 2010 was slightly higher than the average of the five.

If the Valley had lowered its overhead costs to the average of those five cities, it would have saved $7.5 million over two years, the analysis found. If it had matched Salt Lake City's much lower cost, it would have saved $41 million. Salt Lake City has a unified bus, light-rail and commuter-rail system.

On the other hand, Denver, which has a unified system, had higher per-mile administrative costs than Phoenix. The range of costs illustrates how overhead expenses can vary depending on a system's scope of service.

If Phoenix had saved any money with a unified system over the two years, it might have prevented some of the $27 million in cuts to direct transit service made since fiscal 2009. More cuts are being proposed systemwide.

The Maricopa Association of Governments, which allocates transportation funding for the region, has taken no action toward unifying the transit system.

But "with the downturn in the economy, this may be a good time to look at this," MAG's transportation director, Eric Anderson, said.

The Valley's two multicity transit agencies - Metro, which runs light rail, and the Regional Public Transportation Authority, or RPTA, which runs Valley Metro bus service - are taking early concrete steps toward unifying.

Late last year, the RPTA moved into Metro's downtown building and the RPTA's executive director announced his retirement. That paved the way for Metro's and the RPTA's governing boards to vote in May to put one executive in charge of both systems. The RPTA's board balked at creating one agency or board, however. Multiple agencies

Many passengers already think a single agency manages the Valley's buses and trains.

When they board a bus, they see Valley Metro's green-and-purple logo. The same ticket or transit pass accepted on any bus is valid on light rail. One call center handles all questions from bus and rail riders.

Valley Metro, however, is the brand name for a complicated web of public agencies.

The cities, the RPTA and Metro all buy and sell transit service to one another. The RTPA and some cities own the buses, and Metro owns the trains. The transit agencies generally hire any of 10 private companies to drive and maintain their vehicles.

The RPTA, governed by a board of representatives from 16 Valley communities, handles marketing, customer service and bus-route planning for all of the communities. The arrangement is unique among U.S. cities.

The Valley's transit system includes 109 bus and rail lines and van-pool services, operated under 14 separate contracts.

That means when a bus line crosses city limits, cities share costs based on proportional route miles. They split fare revenue based on where passengers board.

Fares cover about a quarter of the operating costs; the rest is paid by regional and local sales taxes and some city funds.

Arizona is among five states that don't help pay for transit operations.

The fragmented system creates redundant functions and staff that can add to costs.

RPTA boss David Boggs, for example, earned $258,000 last year, including benefits. His counterpart at Metro rail, Steve Banta, made $293,000. Transit directors at each of the Valley's larger cities earn at least $80,000 a year. If the agencies were combined, spending on such salaries would likely be less because fewer administrators would be needed, Banta and other transit officials say.

Other redundancies are found in contracts. Most of the larger cities contract with outside companies to operate buses and have a staff or a hired consultant to manage the work. One city's transit department may have a handful of employees, while Phoenix's has more than 100.

Banta and Boggs, who retires from the RPTA in December, have been talking for months about sharing costs. A new efficiency task force met for the first time in May. It looked at 20 areas to combine functions, such as lobbying, marketing, computer support, document management and security.

The task force later identified $1.1 million in immediate savings if the Valley transit system operated under one executive and a further $500,000 under one board or agency. Extra costs

By not pooling resources, the network of smaller transit agencies has inherent inefficiencies and pays more for a host of needs, such as buying and maintaining buses and collecting fares.

Among the areas that could be affected:

- Buying buses. In 2008, a consultant told the RPTA that the region could save as much as $25,000 per bus if one agency bought vehicles in bulk, rather than cities placing small orders piecemeal. In the next five years, the region plans to buy nearly 1,000 buses. Based on the consultants' findings, the vehicles will cost $23 million more than necessary.

Phoenix Public Transit Department officials told the RPTA and Tempe later that year the city was unwilling to surrender authority of its procurements. The cost-cutting move never happened.

- Fixing buses. There are potential savings in bus repairs. An example, which plays out with other long-haul routes, is the Route 45 bus, which starts in east Mesa and travels west on Broadway Road through Tempe to west Phoenix. Each of the three cities pays for the service and shares revenue, but because the RPTA manages the contract with the operator, Veolia, and owns the vehicles, they are maintained at the yard in Mesa.

If a Route 45 bus breaks down in west Phoenix, a supervisor, mechanic and maybe a tow truck have to make the trek and bring the stricken bus all the way back, even though Phoenix also contracts with a different division of Veolia and has its own maintenance yard nearby.

- Security. In Mesa and Tempe, a private contractor inspects tickets and enforces security for Metro light rail. In Phoenix, a bureau of the city's Police Department provides the same service for light rail. That leads to potentially uneven enforcement and redundant costs.

- Counting fare revenue. The Phoenix Public Transit Department collects, counts and disburses every penny collected at the fare box or where tickets are sold for buses and light rail. Accountants then pore over monthly ridership reports for every transit line and estimate how many people boarded within each city. The answer determines each city's share of the proceeds. In a unified agency, fare-box money would all be pooled and put back into operations of a regional system as needs dictate.

Decision-making in the Valley's system also can be inefficient.

Every service or fare change gets vetted through three layers of agencies - a city, Metro and the RPTA - and a handful of committees at each.

Because the Valley has a uniform fare policy, and because Maricopa County's Proposition 400 - a 2004 measure that raised sales taxes for transit - pays for much of the service, the RPTA and MAG have to sign off on any changes. Both have their own committee system.

Often the process takes so long that by the time the semiannual bus books are published, showing all of the routes, schedules and fares, a handful of routes have already been changed, RPTA and MAG officials said.

The balkanization also affects riders because each city has varying resources and cannot always afford the same service on the same bus line. Buses may run every 10 minutes in one city and every 20 minutes in the next. Passengers have to get off at city limits and wait.

The Route 29 bus, for example, runs from west Phoenix to Scottsdale along Thomas Road. Because Scottsdale pays for only half as much service on that route as Phoenix, every second eastbound bus stops at the city line, any passengers get out and the bus turns around, leaving them to wait for another bus from Scottsdale on the same route to pick them up and carry them onward.

On one recent trip, Alex Sabine was riding the 29 bus from central Phoenix to his housekeeping job near Scottsdale Road. The first time he made the trip, a few months ago, the bus stopped at 56th Street, and the driver told him to get out. He waited 15 minutes for the next bus. After that, he got the schedule and got used to the system.

Local control

In the Valley, local leaders have historically been slow, even reluctant, to unite their transit programs because it means giving up control.

Some leaders say local control, among other things, means the ability to have a direct say on matters such as which routes in their cities get funded.

Also, in a decentralized system, local leaders say, they can more closely tailor the system to their constituents' needs. Cities also want to preserve the transit investments they have made over the years.

In a patchwork system, however, tensions are inevitable and can hamper progress.

In 2002, the RPTA took over customer service from Phoenix for the Valley's transit call center. The city transferred the phone system but declined to transfer ownership of the software that the RPTA needed to keep Valley Metro's online trip planner current. The city had invested in the system and wanted to protect the intellectual property of the software and data.

As a result, the online trip planner grew outdated, with dozens of bus stops and stop times missing or wrong, transit documents show. Passengers complained.

The RPTA squandered thousands of hours to troubleshoot and work around the glitches, records show. It wasn't until 2009 that the RPTA and Phoenix reached an agreement in which the RPTA bought the software and hardware to update the system.

Cities with extensive transit, such as Phoenix, have asserted control over service within their boundaries in resistance to unification.

In 2007, the RPTA board passed a resolution to begin developing a single transit agency "over time."

Then, in February 2009, the Phoenix City Council passed a resolution barring talk of merging Metro rail and RPTA. The resolution said there was little economic benefit and questioned whether RPTA staff had the skills to operate light rail.

The next day, Phoenix's representative on the Metro rail board, Councilman Tom Simplot, killed an effort to study combining top managers at the rail and bus agencies. Per Metro rules, Simplot's lone, weighted "no" vote counted more than his colleagues' six "yes" votes. The issue was dead.

That would change later when Boggs announced his plan to step down, by which time Banta, who has extensive rail- and bus-management experience, had been at the helm of Metro for a year.

In April 2010, Phoenix flexed its political muscles again, this time at an RPTA board meeting.

During a discussion on spending priorities for Proposition 400, Phoenix's representative, Councilman Michael Johnson, told colleagues he would cast a weighted vote from then on every time Proposition 400 funding came up. The parliamentary move lets Phoenix invoke a 40 percent vote rather than the normal one-city, one-vote system. It means Phoenix can veto any action if it can line up one other city.

Phoenix officials have long argued that the city is right to protect its transit investment because residents there have supported the system with taxes longer than anyone in the Valley. It's unfair, Phoenix officials argue, for suburban residents to expect similar service when they haven't taxed themselves for it.

Simplot noted that when constituents demand improvements, the city's transit department has always been nimble enough to respond quickly - quicker, he thinks, than a centralized agency.

"Our citizens are accustomed to going to City Council to get a solution," said Phoenix transit chief Debbie Cotton. "These are the people they elected, and they want to talk to them, not some anonymous board."

Banta managed service in the unified TriMet system in Portland, Ore., and says he has watched a regional transit agency work.

"You are much more flexible in meeting the needs of customers because your scheduling and development were managed by one group, with a focus on connectivity," he said.

That meant routinely bolstering high-performing routes and trimming lightly used routes, without waiting for budgets to force decisions.

So now, when Valley leaders talk about regional transit, does that mean they're willing to surrender decisions about routes within their city limits?

Smith, the Mesa mayor, and some other leaders say yes.

"I am, because Mesa wins in the long run," Smith said. "It makes sense, because if you can combine activities and provide the same service, that's a 'duh' question. It's inefficient."

Phoenix mayoral candidate Peggy Neely has reached the same conclusion after chairing MAG transportation debates.

"When I got on MAG, I believed we had to protect our borders at all costs," she said. "But we haven't accomplished anything. All we've done is put up borders. Until we have a seamless system, we haven't done our job."

Simplot acknowledges times have changed, and the council is considering amending its 2009 resolution, which he called "harsh."

"With this recession, we can't do business like always. We can't afford it," he said.

He supports fully merging Metro and the RPTA in the short run, and then exploring how to combine the rest.

"The real question is, 'How do you get there?' "

More on this topic

Top-heavy systems

The Phoenix-area transit system has the third-highest percentage of administrative costs nationally among 37 regions nationally with large transit systems. Large systems are defined as bigger than $25 million in annual operating costs, from July 2009 through June 2010, the most recent available.

Sources: Federal Transit Administration, Maricopa Association of Governments, Arizona Republic research.

Peer city costs

Another way of comparing administrative costs is cost per mile of service among peer cities. In fiscal 2009 and 2010, the latest figures available, the Valley's overhead costs per mile were higher than the average of five other growing western cities. If the Valley's cost-per-mile had equaled the average, its administrative costs would have been reduced by $7.5 million. The savings would have been $41 million using Salt Lake City's average.

Administrative costs as cost per mile of service

Sources: Federal Transit Administration, various transit agencies, Arizona Republic research.

The transit web

The Valley's transit system is dizzingly complex. The 109 bus and rail routes and Dial-A-Ride areas are operated under 14 different contracts, each with one or more funding agencies, mainly cities; an operator, and a contracting entity. Funding agencies aren't shown below, but an example of the pattern is Veolia Tempe's contract to run 19 routes. Some routes are funded by Tempe, Arizona State University or the Regional Public Transportation Authority, and others by various combinations of Tempe, RPTA, Phoenix, Chandler, Gilbert, Scottsdale, Mesa and the Gila River Indian Community.

Source: Regional Public Transportation Authority, Arizona Republic research

Source

Phoenix transit figures incorrect for 6 years

City misreported administrative costs to the federal government

by Sean Holstege - Jul. 17, 2011 12:00 AM

The Arizona Republic

The Phoenix Public Transit Department misreported to the federal government the administrative costs of managing transit service for six consecutive years, a review of records by The Arizona Republic found.

In fiscal year 2009-10, for example, Phoenix reported its administrative overhead at $45 million, or 26 percent of its total operations costs of $174 million. The Republic examined budgets, payroll forms, contracts, audits and federal forms and determined the actual administrative cost was $27 million, or 16 percent of operations costs. The Phoenix Public Transit Department confirmed the amount, saying it had miscategorized some costs for that year and the five previous ones because of a clerical error. Phoenix Public Transit Director Debbie Cotton said the city will change the way it reports administrative costs. Metro light rail discovered it made the same mistake, a difference of about $2 million, and will change its reporting methods.

Transit agencies submit financial and operations data to the Federal Transit Administration and can lose federal grants if they fail to comply or submit deliberately misleading figures. The federal agency said the errors by Phoenix are "large" and "concerning" but don't affect grant eligibility. Phoenix's errors got past the transit administration's screening process and a city-hired auditor.