City of Lawrence

Public Transit

 

TO:

Dave Corliss, City Manager

 

FROM:

Cliff Galante, Public Transit Administrator

 

CC:

Diane Stoddard, Assistant City Manager

Cynthia Boecker, Assistant City Manager

 

DATE:

April 23, 2008

 

RE:

Transit Budget Information/RFP Process Summary and Status

 

Background Information:

 

RFP Process/Service Options:

The City is currently in the last year of a five-year transportation service contract with MV Transportation, Inc.  Per the direction of the City Commission, staff has worked closely for many months with the University of Kansas in drafting and issuing a joint request for proposal for contracted transportation services for both City and University transit operations beyond 2008 when existing contracts expire at the end of this year.  The new five-year contract period would begin on January 1, 2009 and expire on December 31, 2013.

 

The RFP was drafted in a manner to provide the City Commission with as many options as possible regarding what they felt was the most appropriate way to proceed with service in the future.  Specifically, contractors could submit a proposal for combined City and University services or individually if it was determined a combined scenario was not in the best interests of the City or University.  In addition, contractors were to provide pricing based on a variety of service levels – status quo, 30% reduction, and 50% reduction in City service.  This was done in recognition of the budget challenges the City is currently facing.  The RFP was issued in January 2008 and companies were solicited nationwide to submit a proposal. 

 

Proposals were submitted under the combined scenario as well as individual proposals to operate only City or University transit services.  A team of City and University staff members are in the process of evaluating the proposals.  Students at the University of Kansas very recently passed a referendum for universal access to the University’s transit system.  This will mean that all students will be able to ride the bus with no bus pass required as the cost will be covered in student fees.  Due to this recent action, which is anticipated to increase service demand for the University, final pricing has not yet been received from the vendors. 

 

Budget Impacts:

While final pricing must still be evaluated, City staff has prepared the attached draft budget impact analysis.  This analysis estimates that the City’s share for transit related expenses will increase by nearly $1,000,000 in 2009 assuming no change in service levels and not including capital needs.  This amount is derived by estimating an approximate $800,000 increase in operating expenses along with making up a $232,000 one-time transfer from reserves that added to revenues for 2008 and enabled service levels for 2008 to stay at 2007 levels.  This revenue must be made up from other local sources in 2009, since continuing to drawdown remaining available funds in the transit system equipment reserve will adversely impact the City’s ability to match available Federal capital funds received to be used for bus replacement.

 

Available federal and state funding sources are currently being fully maximized and leveraged with local funds.  Staff is uncertain if Federal funds will increase for FY09.  Historically, federal funding levels have increased on average 3% annually.  To be conservative, the projected budget needs does not factor any increase since Federal funding levels for FY09 since that funding amount will not be known for certain until well after the City FY09 Budget process is completed.  Furthermore, it is anticipated that state funding levels will remain the same in FY09, meaning that all of the budget increase must be provided from local sources. 

 

There are many reasons for the increased cost in 2009 that include personnel, maintenance, and facility expenses.  However, the primary factor for the increased cost in 2009 is the rising cost of fuel.  This results in the majority, but not all, of the $800,000 projected operating expense increase.  One of the options that City staff is exploring is to have the contractor be required to fuel at City pumps where the City could better monitor and track the amount of fuel being consumed for transit vehicles.  Historically, the City has had the contractor be responsible for fueling where the contractor has included such costs into their pricing.  Under the terms of the existing contract with MV Transportation, Inc. there was not a fuel escalation clause.  Fuel is being charged at approximately $2.00/gallon for FY08 under the current contract, which is not sustainable as diesel is currently over $4/gallon.

 

Summary:

Transit will be a large budget issue for the City Commission for the 2009 budget.  The estimated figures are meant to provide a general picture for the Commission of how expenditures are expected to increase assuming no change in service.  As the City staff and University officials bring forth their recommendations from the RFP process, there will be much more detail and options for the City Commission to consider, including options for service reductions.