SPUR Talk: The Business of Public Transit

Photo: BART
Photo: BART

Note: Metropolitan Shuttle, a leader in bus shuttle rentals, regularly sponsors coverage on Streetsblog San Francisco and Streetsblog Los Angeles. Unless noted in the story, Metropolitan Shuttle is not consulted for the content or editorial direction of the sponsored content.

It has customers. It takes in revenue. It provides a service. Public transportation sounds like a business, doesn’t it? “I’m a transit customer. We’re exchanging value. I took BART to get here. The value I got was getting here quickly and affordably, and I got a pretty relaxing trip,” said Justin Lokitz, partner and strategy designer for Business Models Inc., during a panel discussion on public transit’s business model held today at SPUR Oakland. “I exchanged money for a ride–that was it.”

According to Ratna Amin, SPUR’s Transportation Policy Director, “business model planning tools can help our agencies adapt and thrive in a competitive transportation era.”

BART’s weekend ridership has been dropping over the past three years, explained Dennis Markham, Manager of Financial Programs and Planning for BART, who was also on the panel. “Some of it is due to TNCs (Uber and Lyft), but also because we’ve had a lot of closures for maintenance, so our reliability is limited.”

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Today’s SPUR talk on business models for transit. Photo: Streetsblog/Rudick

Markham said BART customer surveys show that noise, cleanliness, and homelessness are big factors keeping people away from BART. He said they have taken substantial steps to clean up some of the worst stations, such as Civic Center, and that the new rail cars–once they are widely deployed–will be quieter. “Employment continues to go up, but ridership [relatively] goes down . . . if you give the customer a not-so-great experience, how can you expect them to ride the system?”

In addition to a drop in off-peak ridership, trips to the airport are down, he said. But, as reported in previous Streetsblog stories, there are paths to being competitive in these realms–and one of them is to run shorter trains more frequently so that people don’t have to wait twenty minutes for a train. Lokitz pointed out that a key to business success is to be a “relatively consistent train system.”

Meanwhile, Travis Fox, Chief Performance Officer for the SFMTA, explained that his agency has to balance the needs of its Muni system with other street users who bike, take paratransit, park, walk, and use taxis. Like BART, they were also taken by surprise by TNCs. “We didn’t really have much competition,” he said, before TNCs–at least not in terms of sustainable modes of transportation. “I think that what we have done, or tried to do, is put out a service that is constant and everywhere, and is fairly priced.”

Fox explained that Muni is committed to offering safe and equitable transportation. “But what can we do to recruit more discretionary and choice riders?” He said they can improve the fare structure to encourage people to use Muni for more than commute trips. “One of the things we’re about to launch on Muni Mobile is a day pass, at two times the price of a ticket–this way you can go to work, and then everything else is free.”

But he also said Muni should focus on its strengths, such as cost, and not necessarily try to take on TNCs head-to-head. “We can’t offer door-to-door rides, or privacy–but that’s not what we strive for. And we’re not going to offer bottled water or Jolly Ranchers.” He also pointed out that on some trips, say on the underground rail portions of trips, Muni can actually be faster than the competition.

However, he implied that Muni could also try some of the relationship-building strategies of for-profit enterprises, but it’s tricky. “If Delta sent you an email that said ‘Hey, we haven’t seen you in a while, here’s a $100 pass,’ you’d be okay with it, but if we did that? We have a significant potential trust gap. It’s a tough one.”

The introduction of faster ferries increased ridership. Photo: GGBridge Highway & Transportation District
The introduction of faster ferries increased ridership. Photo: GGBridge Highway & Transportation District

Ron Downing with the Golden Gate Bridge, Highway and Transportation District, meanwhile, gave a history lesson on his agency, and talked about how it started out simply administering tolls on the bridge. Transit service was provided by Greyhound until the late 1960s, when bus service was transitioned over to the district. “Our mission was modified in 1969 to use surplus bridge tolls to fund transit,” he explained. “It’s a pretty unique model; the only other place they use that is NYC, with the Port Authority Bridges.” Greyhound had used older buses on the route with no air conditioning and hard seats, so the district upgraded the buses with reclining seats and luggage racks to help draw people out of cars on the clogged routes from Marin and Sonoma to downtown San Francisco.

“Now customers expect reclining seats, AC and wifi,” he said. The agency also started providing ferry service from Sausalito, Tiburon, and Larkspur; those services have since grown. He said customers respond very well when they cut travel time. “When we introduced high-speed catamarans, it shaved 15 minutes off the 45 minute travel time, and ridership response has been incredible.”

Disappointingly, there was not a word about fare integration or inter-agency schedule coordination and cooperation. The challenges of attracting and retaining customers seemed to be viewed only from within their own agencies and systems.

As Lokitz, the one non-transit-agency person on the panel, explained, good businesses partner with each other to provide better service to customers. And they should be asking themselves: “Who are the key partners, who are the other agencies that we can work with that help create value?” he said. “This is the way you should think about business models.”

For more events like these, visit SPUR’s events page.

  • mx

    “One of the things we’re about to launch on Muni Mobile is a day pass,
    at two times the price of a ticket–this way you can go to work, and then
    everything else is free.”

    While this is a great thing, it’s also a good display of transit not operating like an actual business. No sane business would pour millions of dollars into equipping the entire system with Clipper and then not implement this there. Commuters who tap their cards like always will be charged a higher fare than people who figure out they have to download an app, register, and then buy their day pass in advance (riders don’t always know how many trips they’ll be taking in advance either).

    If you want to talk about a “trust gap,” fare capping would help. Agencies could promise “we’re not here to rip you off; just tap your card and we’ll guarantee you’re charged the lowest possible price for a day/week/month of whatever you use.” And this rewards loyalty: more frequent riders save automatically. As noted in the article, fare and schedule integration would take this one step further.

  • LazyReader

    In any business, you have to sell 10,000 items for a dollar a piece or one item for 10,000 dollars or some ratio in between to cover your expenses; once you’ve worked those numbers, that’s defined as feasibility. The transit industry defines feasibility as being able to obtain funding from a secondary, tertiary even quaternary partner to cover expenses your fares otherwise couldn’t cover on it’s own, i.e. the Taxpayer, be it municipal, county, state, even federal.

    Through the mid-20th century, private transit companies served the vast majority of US cities. After World War II, these companies operated profitable, albeit declining, businesses in the face of rising automobile ownership. A handicap was that transit companies were considered public utilities and highly regulated. They had to seek government permission for route changes, fare raises, and service changes. They operated privately, but had to ask permission to implement change. 1964 with the Urban Mass Transit Act. The act promised federal capital grants to public agencies that took over private transit companies. Within a decade, the private transit industry was virtually wiped out, replaced almost completely by tax-subsidized public agencies; virtually all of which are sinking in debt; BART is no exception. And BART having shiny new trains doesn’t matter if meth addicted tweekers keep spazzing out and defecating in them.

    BART’s staff gave a laundry list of things it can do to address this; raise fares, crack down on fare jumpers, increase advertising, increase parking fees, charge companies that send buses to pick up employees at BART stations, and automate trains to eliminate drivers. Will BART implement any of these changes? Nah. Even if they did, it would not cover their operating deficits. Including 142 Million in public health and pension liabilities, not to mention BART’s 10 Billion dollar maintenance backlog. Even when they voted to raise property taxes to cover 3.5 Billion in rehabilitation that still leaves 6.5 billion unfunded. Instead of fixing existing BART lines, they’re going thru with $6.1 Billion in new construction for extension to San Jose and Santa Clara. BART’s costs have cut bus service to local riders.

  • +10

    I don’t understand why fare capping isn’t more of a thing, on a daily, weekly or monthly basis. I mean, I get that Muni can basically make money by people getting monthly passes and not using them, but the economics don’t seem that worth it compared to simply getting everyone to use the system more.

    Also, a day pass for an exact 2x cost is pretty good, but I feel like this doesn’t really save most people that much money? Outside from the 90 minute transfer windows, I feel like I rarely rack up 3 separate rides. Certainly on some adventurous weekends, but almost never during the work week.

  • david vartanoff

    Relationship building starts with putting the full schedule on the street all day, every day. Coupons, bonuses, are meaningless when the bus doesn’t show up. More importantly, management who don’t understand this need either retraining.

  • mx

    Well said. If you want to run transit like a business, start by not randomly closing your business during operating hours.

  • keenplanner

    SPUR should have called this event “Why Bay Area Transit agencies fail the public.” We had 4 remarkably non-visionary guys touting their respective agencies’ business future projects and fare box ratios. New BART cars. Yep.
    Travis Fox failed to mention that part of MUNI’s business model is to forbid Golden Gate Transit buses to pick up in-bound passengers in SF. You can’t get on on Lombard and get off at Civic Center. Wait for MUNI. This makes sense in a competitive business environment, but it’s idiotic when you’re a public agency whose mission is providing mobility.
    We now have access to origin-destination data and can map out people’s commutes. What if there was a region-wide transit agency that used this data to design truly relevant transit routes? Picture local and express buses to and from undeserved communities to emerging job markets.
    To do this, we would need to combine all but a few of the local transit providers and have one big Bay Area transit organization.
    This is obvious to local transportation planners and advocates and hopefully to transit planners at MTC. So why does MTC ignore this and fail to do something that would serve more Bay Area transit users?
    Will the departure of Steve Heminger signal a new era in which MTC goes from smug to meaningful?
    Time will tell.

  • keenplanner

    Totally. I was thinking that if MUNI could stop fare evaders they’d both up their revenues and reduce or eliminate the main complaint about riding MUNI: Buses are full of stinky vagrants and crazy people.

  • keenplanner

    …but tourists will like it b/c they won’t have to cough up $2.75 every time they want to ride the bus.

  • p_chazz

    Tourists already have a daily pass: https://www.sfmta.com/fares/1-day-visitor-passport

  • mx

    Yeah but at $22 for a 1-day pass, there’s zero reason to buy one unless you want to ride cable cars all day long. Even buying two cable car round trips and three single rides is cheaper.

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