Transit Agencies Search for Silver Lining to Financial Hardship

Is there a silver lining to the budget crises that have plagued public transit providers across the U.S.? We posed that question to top executives at some of the nation's hard-hit transit properties.

Posted March 2010

MARK PANGBORN

GM, Lane Transit District, Eugene, Ore.

It is an interesting question. As we look at having to make significant reductions in services, raise fares and cut administrative costs, it has forced us to rethink what we do and how we do it. On the service side it has raised the issue of the balance between productivity and coverage. Jarrett Walker wrote a very comprehensive article about the matter for the Journal of Transport Geography 16 (2008) 436-442. As we discuss what service to cut, I have used this article with staff and our board of directors to help clarify the purpose of public transit in our community. In the 28 years I have worked for LTD, I have seen a shift in public opinion and with the issues of greenhouse gas emission and peak oil, the role of transit into the future is also in flux. This service cut has forced the organization into re-examining our role in the community. It has also forced staff to think about how to make what service we do end up providing more efficient, i.e. Jarrett Walker’s discussion about spacing of stops, more efficient run cuts, staffing issues such as splits and mini-runs (part-time driver work). Efficiency and priority of service is also a concern on the administrative side. How important are some of the functions that we perform? Could we get by with less staff time devoted to certain functions? What is the relationship between pay and benefits of our staff and what comparable positions in the private sector?

In the end, public services can be more sensitive to political decisions than financial decisions. What happened to the United Auto Worker and General Motors is a good example. While times were good, both management and labor agreed to generous benefits and pay for everyone, labor and management. When times got bad, labor and management had to rethink pay and benefits or General Motors was in danger of going out of business and they came up with a plan to reduce pay and benefits and find other efficiencies. In the public sector, especially with public monopolies, there is not always the same financial bottom line. When revenues decrease, services are cut which means a cut in staff. Wages and benefits are not always re-adjusted but if done properly, it should be the catalyst for an organization to go through a thorough examination of how they operate and look for efficiencies. I note that “lean management” concepts are now being discussed and tried.

STEPHEN BLAND

CEO, Port Authority of Allegheny County, Pittsburgh

Without doubt, the financial shortfalls of recent years at most transit agencies also provide tremendous opportunities for change and long-term improvement. I would touch on three areas.

First is mission clarity. When resources are plentiful, it’s very easy to get sucked into initiatives with dubious purpose. Once we’re in them, it’s usually very difficult to get out, even when we recognize that the effort is no longer fruitful. Resource shortfalls force difficult choices — sometimes we find that the choices are very easy, and we can remove ourselves from initiatives whose time has simply passed.

Second, these are excellent times to reconnect with our communities. In setting priorities, public dialogue is extremely important. While not always pleasant, honest exchanges with our customers, employees, unions, elected officials and other stakeholders over service priorities, fare structures, funding streams, cost structure and project priorities can provide clarity to future direction. When budgets are stable, it’s difficult to get anyone’s attention. In times of crisis, getting attention is the easy part. What’s more difficult is focusing that attention into positive energy, like establishing community priorities. However, focused effort toward doing so can both help build support for an agency going through “a rough patch,” and better position the agency for success when the environment improves.

Finally, tough times are an excellent opportunity to test and develop organizational talent. Let’s face it, we all get lazy when there’s no challenge, and it’s easy for lots of staff to look good. The creativity that rises to the surface within an organization when times are tough, and it’s “all hands on deck,” is extremely rewarding to see. As leaders in the industry, what we’ll generally find is that our people want the organization to succeed and prosper — in good times and bad — and they’re willing to do what it takes to make it so. These are the times when true leadership emerges, and sometimes it comes from very surprising places.

True change is seldom planned — it’s generally forced. In the current environment, our agencies are being forced to change. Some of the best advice I ever received was — there will always be good times and bad times. The key is to recognize that neither will last forever. When times are good, plan for when they get bad; and when times are bad, position yourself for when they get good!

JOE CALABRESE

CEO/GM, Greater Cleveland Regional Transit Authority

- Even those that have been in the transit industry for years and are strong transit supporters are getting a better understanding of just how important what we do actually is to the lives and well-being of our customers.

- It is a chance to modify some services that have been less than productive for years, but have been politically untouchable.

- Restructuring may make the agency a better and more sustainable one.

- Gray hair, or no hair, can be sexy.

DAVID ARMIJO

CEO, Hillsborough Area Regional Transit, Tampa, Fla.

As with any business practice, this recession requires transit agencies to focus on their core business: moving people safely and efficiently and perhaps as important, growing revenue, locally. More specifically, each agency must focus on the fundamentals, and the biggest cost is labor. Managing cost, controlling overtime, negotiating benefits with insurance brokers and with employees via union contract agreements is needed. Conversely, increasing revenues by restructuring fare policies to encourage patronage via increased use of monthly passes and day passes can positively impact the bottom line. For example, HART ridership is up about 1% for the year, but fare revenue is up 6% with riders migrating from cash to passes. Our university pass sales are up 28 percent this year. Fare per boarding has increased from 88 cents to 98 cents per boarding in the past 18 months. In these difficult times, growing the farebox has helped HART to maintain service levels without service reductions.

Further, agencies need to make service adjustments that improve quality service and enhance revenue. Shifting resources can help increase ridership and generate more revenue. Reducing or eliminating poor performing routes and then shifting those resources to other routes can make a difference. At HART we are seeing ridership gains of 25% to 35% on routes that have been restructured, with fewer bus stops and improved performance. Growing ridership within the network is critical to maintaining ridership in the face of 12 percent unemployment. These changes are making a difference in preserving our ridership is helping us to continue to improve performance.

CAROLYN FLOWERS

CEO, Charlotte Area Transit System

A silver lining is the increased collaboration, cooperation and communication between our unions and the transit agency to work together to try to sustain core service levels and service quality. Sacrifices have been made in the last year to ensure that we can maintain service during the economic downturn. There has been higher level of dialogue. This had led to a higher level of communication and cooperation to try to control costs, to look at options for efficiencies and improving productivity. There has been harder work to sustain the working relationships and get the workforce to understand the fiscal constraints that we are working under. We are all caring about doing the best job that we can under these circumstances.

MIKE SCANLON

CEO/GM, San Mateo County Transit District (SamTrans), San Carlos, Calif.

Public transportation agencies have been doing more with less for years. I like to say that anyone can do this job with money!

The current financial crisis has sharpened our focus, forcing us to ask hard questions about our fundamental purpose and our role as providers of critical mobility to the communities we serve.

That has led us to a stronger understanding of who we serve and how completely they depend on us to get to their jobs, to the doctor, to the store and to live their lives. Because of our customers, it is more important than ever that we embrace the urgent challenge given to us by APTA Chair M.P. Carter – we must tell our story. That story includes the importance of public transportation to energy independence, economic vitality and environmental stewardship.

It also is important to educate stakeholders and the American public about the difference between spending money and making an investment. When we fund public transportation, we are making an investment in the future. Even during the worst of times, there is a need to invest in public transportation. When this crisis is over, we need to be in position to move forward.

PETER VARGA

CEO, The Rapid, Grand Rapids, Mich.

There can be a silver lining to dire financial situations. During hard times you learn to live lean, lose dead weight and pay more attention to your customers. Times like this can be called "creative destruction." Good new ideas can flourish, your team can pull together and come up with good ideas to save money and provide a better service. During this time we were able to keep service to our customers and not increase fares. This is because we prepared for the worse and were practiced at it from a previous time of distress. Because of what we went through when we were the Grand Rapids Area Transit Authority and were living with deficit financing and having to cut service and increase fares, we knew that we wanted to be in a better financial situation. Nine years later we benefited from that practice and experience. It is not easy, but there should be trust that good times will be ahead and a better plan may be in place.

HARPAL S. KAPOOR

Director, Miami-Dade Transit

The financial crisis has forced many public transit agencies to operate more efficiently and live within their means. Specifically for Miami-Dade Transit, it provided an opportunity for us to plan and organize ourselves better, which has enhanced and made our transit service more efficient and cost-effective.

MDT also used this opportunity to make tough decisions — implementing fare increases and right-sizing the transit system to ensure that limited financial resources could support vital transit service without completely comprising the quality of transit service delivery. The financial crisis also lent credence to an axiom we have all become very familiar with in the public transit industry, “Be sure to fix your house with State of Good Repair projects before expanding.”

This belt-tightening has led MDT to more actively use proven performance processes and data to improve its system, such as Six Sigma methodology and data from our new automated fare collection system. These efforts have led to improved on-time performance of bus and rail, substantially reduced overall failures and enhanced internal cost control measures.

Every cloud has a silver lining and we are hopeful that these belt-tightening measures implemented today, will lead to better and more efficient service when the economy improves tomorrow.

PHILIP SHUCET

President/CEO, Hampton Roads Transit, Hampton, Va.

Lean economic times test all organizations.

A hard look in the mirror can reveal opportunities for improvement. To that end, HRT is developing an on-line performance tracking system to show exactly what we are doing with our customers’ and shareholders’ money. While still in development, this online "dashboard" will show on-time performance, budgetary information and the status of capital projects. This "mirror" will help our organization face the reality of our performance and strive to earn the confidence of those who fund the majority of our operations — the taxpayers.

In metropolitan southeast Virginia, where Hampton Roads Transit provides local bus, express commuter bus, river ferry, paratransit and soon light rail service, the faltering economy has pushed the organization to be far more critical of how it uses its resources. The agency is in the second fiscal year of no annual pay increases for non-contract employees. HRT took a proactive step by locking in about three-fourths of its FY 2011 fuel needs, which will help when prices undergo their annual summer-time spike. HRT has seen no change in health care costs from the previous year, but it has had to defer maintenance on its capital plant despite some urgent needs.

The silver lining for the region of 1.5 million people that we serve is no immediate reduction in local bus service, a critical benefit to the majority of HRT customers who rely upon transit services for work, school and recreation. It is focusing instead on driving forward ideas to make service better. While all agencies have worked hard to make the best use of the federal government’s stimulus money, HRT has invested in improved transfer centers, kicked off construction of a long-delayed bus maintenance facility, and upgraded many buses to improve regional air quality.

HRT is committed to providing the best transit service it can in the economic climate of the times.

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