Improving Transit Integration Among Multiple Providers, Volume II: Research Report (2015)

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40 Many transportation agencies want to make sure that the benefits of the deci- sions that they make regarding integration or improvement are worth the costs associated with the project. However, as this research has shown, sometimes projects have benefits that may actually cost more than the status quo or benefits that are qualitative and not measurable in terms of cost. Even when cost is not the most important reason for undertaking an integration effort, assessing the success of a project can help agencies strengthen the public’s trust that funds are being used effectively. This chapter uses examples from the research to present models of how agencies determined the costs and benefits of their integration projects. This chapter identifies the costs and benefits from the project profiles and case studies, and reviews costs and benefits in some detail for the ORCA case study. A guide for evaluation of transit projects is included in Appendix I as supplementary information to this research report. Analytical Approach The framework for conducting the assessment of costs and benefits for the case studies con- sisted of gathering documented data and information from each of the six transit agencies, reviewing the information, developing interview questions for the site visits, gathering informa- tion from interviews, determining if the data and information were adequate, understanding whether cost and/or benefit information was used to evaluate the project, comparing qualitative costs and benefits for each case study, and determining how cost and benefit information could be used to support decision making. Data-gathering efforts and site visits were led by members of the research team. Ridership, budget, and revenue data were requested in addition to agreements and formulas for cost and revenue sharing. The data/background information prompted questions specific to the cases which were asked as a part of the site visit process. The interviews were essential to establishing an understanding of costs and benefits for the cases studied. Sample interview questions regarding costs and benefits included: • What benefits does the project have—for the community, various constituencies and stake- holders, riders, the agency’s budget? Do you have any information (anecdotal or otherwise) to help us understand the benefits better? • How was the project advertised or marketed to the general public and riders? What has been the response? Do you have any data to measure the response (rider surveys, customer satisfaction surveys, etc.)? • Has the project accomplished the goals you set out to achieve? If so, do you have any information (metrics, data, etc.) to support your view? C H A P T E R 4 Assessment of Costs and Benefits “Not everything that counts can be counted, and not everything that can be counted counts.” —Albert Einstein

Assessment of Costs and Benefits 41 • Were costs and/or benefits or business case analyses used to support project selection or implementation? • For McAllen Central Station: Did vacancy rates around the transit facility change? Is there before and after data to support that finding? • For McAllen Central Station: Did land values around the transit facility change? Is there before and after data to support that finding? Based on the results of the interviews and the draft case study write ups, follow-up questions were asked of the transit agencies to clarify statements about costs and benefits and to obtain information to support statements made in the interviews. For example, one interviewee claimed that “millions of dollars were saved by consolidating contracts” and information to support that statement was requested. With requested data/information and draft case study write-ups in hand, costs and benefits of the transit integration efforts were identified. Common themes among the case studies emerged and are documented in this chapter. Additionally, the results were used to inform how costs and benefits could be used in transit integration decision making and when other forms of evaluation may benefit both the decision-making process and project implementation. Measuring Success: Costs and Benefits in Transit Integration Many agencies consider cost effectiveness as a primary factor in the consideration of integration efforts. For large construction projects with federal funding, a cost-benefit analysis is required. How- ever, when other more important aspects of the decision-making process need to be considered, a traditional cost-benefit analysis may not be the most useful tool. The case study research has shown that this is usually true of an integration project among transit agencies. That is why the selection of the type of evaluation to perform is an important one. In some cases, quantifying costs and benefits may display results that are necessary to win over decision makers. In other cases, it is more important to provide a qualitative analysis that helps those decision makers understand the overall benefits of the project. Additionally, attempting to monetize some costs and benefits can prove problematic for some integration efforts, as different ways of measuring achievement (results) can vary among agencies and by project (Weisbrod et al., 2007). For instance, some agencies are used to measuring performance in terms of their monetized amount (travel cost savings) and other agencies measure performance in qualitative terms (such as livability or customer satisfaction). Finding a common understanding for the policy analysis may require a variety of evaluation tools and techniques. Different types of integration and coordination (e.g., functional vs. institutional) may need different analyses. For example, the coordination of fare structures or the use of a universal fare card may require different analytical parameters than the merger of two transit agencies into a single consolidated entity. Additionally, agencies undertaking complex, multi-year service and/or fare integration efforts may find it difficult to isolate the “cause and effect” data cleanly because of other factors that mask the results or influence the project itself. However, all of the 19 agencies profiled in this research began their efforts with goals for success. None of the agencies entered into the effort believing that the integration effort would solve all of their problems or address all of the goals equally. Some, however, had very discrete goals they had hoped to achieve even if they had not fully developed an evaluative matrix to guide them. This is common for agencies that may intuitively understand the situation they are trying to fix. Many agencies do not have available quantitative or qualitative information or an evaluation process to support an assessment of costs and benefits of integration projects. For example, while many agencies count passengers and transfer activity, they do not have the funding to perform

42 Improving Transit Integration Among Multiple Providers detailed studies to assess origin-destination activity, fare type utilization, or other metrics that would assist in evaluating a project’s performance. It is also common for costs associated with contem- plated integration efforts to be difficult to quantify for a public agency. Agencies may not have a detailed cost allocation model to help them understand the costs associated with service increases, for instance. Or, they may not know how much staff time is being allocated to individual projects. In these cases, the first step in assessing the outcomes of the integration effort will be determining the correct benchmarks for analysis given (1) the goals and/or objectives of the integration, (2) the stakeholders involved, (3) the data that is available, and (4) the usefulness of the analysis. This leads to the question: What’s the Best Way to Measure Success? Agency Profiles: Overview One constant remains throughout the agencies profiled or the cases studies examined: each agency believes that its integration effort was “successful.” That means—absent any formal assessment or evaluation—the project sponsors believed that the integration efforts rendered benefits that they believed were worth the time, money, and political energy expended. Based on that construct, conducting post-implementation assessments of costs and benefits of integration projects is not as important to agencies as simply articulating the overall benefits expected or achieved even if the data to support the evaluations may be readily available. Further, stakehold- ers in one case even said they wouldn’t have wanted to conduct a detailed assessment of costs and benefits when they began. They were concerned that tallying the costs and staff resources required to implement the integration project would have stopped the project, which in the end resulted in tremendous benefits to the agency and the public. While only 3 of the 19 agencies stated that cost-benefit data was available, 17 of the 19 agencies have achieved their expected outcomes, some of which included cost savings, including: • Seventeen projects have achieved their expected outcomes, while two projects’ achievements are yet to be determined. • Eight projects realized cost savings for agencies and/or passengers. • Thirteen projects increased coordination between services and/or facilities, improving the efficiency of transit operations. • Five projects increased ridership. • One project realized livability, economic, and environmental benefits, such as a reduction in greenhouse gas emissions. As determined in the site visits, the case study agencies all had information available on which to measure success. And, in all of the profiles, the success was typically measured in terms of benefit to the customer. In nearly every case, when systems integrate, passengers benefit. Some of these benefits can be confirmed, but others are less easily tracked. In some cases, saving money was not contemplated as a goal; rather, improved service delivery was the driving force. As stated by one representative from the Research Triangle case study from North Carolina, “Doing it right costs more money sometimes.” Some examples of customer benefits illustrated in the profiles include: • Jointly operated or coordinated routes—Riders can get to more places, faster. • Joint facilities—Riders can make connections to more services more easily. • Integrated fares—Riders pay less and pay more easily, and the system overall is easier to understand and use. • Integrated information—Riders more easily understand the system/network overall and how to use it.

Assessment of Costs and Benefits 43 • Shared facilities—Riders get faster and more reliable service and improved transfers. • Cross-boundary travel—Services better match rider travel patterns which do not follow jurisdictional boundaries. That is not to say that there were not cost savings that occurred as a result of the integra- tion efforts undertaken. Several integration efforts documented in the 19 agency profiles indi- cated that cost savings were realized. And in several of the case studies, there were savings that occurred as a result of integration or consolidation. However, for these agencies, cost savings were more an anticipated outcome, rather than the impetus for change. In other cases, costs actually increased as a result of the integration effort, such as that undertaken in the Puget Sound region when initiating a regional transit pass. Cost increases may result from any integration effort where the goal is to improve service to the customer. In several cases, the unexpected outcomes resulted in consequences that stymied the agen- cies’ efforts to undertake integration. Whether it was jurisdictional reluctance to cede control, or additional funding needed to fully execute the integration effort, the unanticipated outcomes can become the risk factor that may prevent either successful integration or any integration at all. Table 4-1 presents an overview of the expected outcomes. Profile Expected Outcomes Achieved Valley Metro Phoenix Metropolitan Area, AZ Developed a regional transit system Developed unified brand (Valley Metro) Integrated fare system Integrated passenger information system Created a regional call center Yes Butte County B-Line, CA Resulted in cost savings Improved service quality Yes MTC Transit Sustainability Study, CA Reduced transit agencies’ costs to be eligible for future funding Increased coordination through implementation of the institutional recommendations TBD Yes LYNX FlexBus, FL Increased suburban transit use Enhanced local travel connectivity Simplified regional transit network Provided FlexBus for localized travel TBD MORE TMCC, FL Facilitated seamless regional transit mobility management and service delivery, using multiple existing agencies and service providers Increased mobility Improved cost effectiveness in transportation service delivery Integrated service design TBD Quad Cities, IL, IA Linked the three transit systems with 10,000 passes sold annually Established new service (the Loop), which has generated 34,000 annual riders Yes CATA/Clinton Transit/ Eaton, MI Realized financial savings by eliminating long trips into Lansing through the transfer arrangement with CATA Retained local control by keeping vehicles and service within Clinton County Yes Suburban Transit Association (STA), MN Improved service quality and customer information Developed a uniquely branded transit system which is as integrated as possible Yes New Jersey Transit, NJ Expanded and strengthened intermodal connections Improved wayfinding Improved and increased signage Improved and increased passenger facilities Created an architecture that can support other regional planning efforts Yes Table 4-1. Expected outcomes and results. (continued on next page)

44 Improving Transit Integration Among Multiple Providers Profile Expected Outcomes Achieved PAAC Busways, PA Reduced operating costs for the transit agency (fewer service hours) Improved travel times for passengers Strengthened the regional transit network overall by sharing busways Established and strengthened relationships between systems Strengthened the Port Authority’s reputation as a “team player” and supporter of regional services Yes McAllen Central Station, TX Centralized transportation at a single location Facilitated transfers between regional and international services to local bus routes Provided economic development benefits for local retailers on Main Street Yes Dallas-Fort Worth TRE Commuter Rail, TX Improved operating speeds and service reliability through infrastructure upgrades such as grade separation and double- tracking Facilitated regional fare that allows passengers to transfer between DART, The T, and DCTA services Yes Addison/Rutland County Connector, VT Increased ridership Developed new longer distance commuter services Resulted in cost savings Improved service quality Yes ORCA Universal Fare Card, Puget Sound, WA Improved operating speed Provided more accurate ridership data Improved revenue data Improved regional revenue reconciliation Yes Linx Mobility Management Co-op, Yellowstone, WY, MT, ID Increased regional mobility Increased ridership Increased revenues Increased awareness of transportation network Yes Urban Transit Association (ATUQ), Québec, Canada Influenced the passage of the Québec Public Transit Policy in 2006 Resulted in cost savings through group purchasing, with savings averaging 15% Purchased 509 hybrid buses (diesel and electric), which will begin to arrive in 2014 and continue delivery for years Established benchmarking used by members to implement corrective actions to improve performance Yes Madrid Regional Transportation Consortium (CRTM), Spain 50% increase in ridership since creation of CRTM while population has grown by 36% Supported the modernization of the city center Improved connectivity between Madrid and surrounding municipalities Yes Durham Area Transit Authority (DATA), NC Provided a more seamless transit system Spent transit dollars more effectively Improved the level of transit service Increased customer boardings Improved farebox recovery ratio Decreased operating costs per rider Reduced regional redundancy in maintenance functions for five years Yes Northwest Transit Alliance, OR Improved service for customers Improved efficiencies for transit agencies Improved employer and employee attraction and retention Improved access to businesses Improved visitor experience Reduced vehicle miles traveled with related reductions in greenhouse gas emissions and fossil fuel use Increased ridership Lowered fossil fuel use and carbon emissions Leveraged a unique funding opportunity to take action to meet identified needs Yes Table 4-1. (Continued).

Assessment of Costs and Benefits 45 Case Studies: Summary Findings For the six case studies analyzed, agencies identified a range of benefits from the integration projects, some of which are quantifiable and some of which are described qualitatively. However, quantified cost data was provided only for capital projects that were the focus of the integration efforts in McAllen, Texas, and the Central Puget Sound region, Washington. Costs related to the staff time to implement integration projects were common to all case studies but were not quantified in any way. Butte County B-Line was unique among the case studies in that the results of the consolidation of administrative functions were quantified. They reported a reduction in administrative costs as a percentage of the operating budget that went from 6% to 7% prior to consolidation to 3% after consolidation. Without further analysis, it is not clear whether the savings were due solely to the reduction of administrative costs or if the operating budget grew post-implementation at the same time that administrative costs, which tend to have more fixed variables, remained constant. A summary of the costs and benefits identified in the six case studies is provided in Table 4-2. As with the profiles, certain common themes were revealed by the description of the benefits reflected in the in-depth case studies. In all case studies, the integration effort was reported to benefit ridership, either by increasing or retaining ridership, improving passenger convenience, or making the system easier to use. More specifically, the following were some of the common benefits: • Customer service improvements and customer convenience—such as better service through centralized call center, centralized ADA certification, and ease of use of fare cards—were identified in eight instances. Some case studies indicated more than one instance of this benefit. • Cost savings from joint procurements and joint contracting were identified in six instances. • A regional fare structure or fare instrument was identified six times. • Simplification of the route structure and schedule and elimination of transfers were identified in five instances. • Administrative cost savings due to consolidations or improvements were identified four times. • More efficient use of facilities and equipment as a result of the integration was cited in four cases. • Improved ability to secure funding was identified in four cases. In addition to the common benefits reported, several overarching themes emerged from the case studies that warrant further discussion. Before and After Studies An analysis of the conditions prior to implementation and conditions after implementation are useful in determining the success of the project. The before and after conditions for joint capital projects are easier to demonstrate than many other coordination efforts. For example, intercity bus services stopped at different locations around McAllen, prior to construction of the Central Station. The conditions pre- and post-implementation can be shown visually through photographs, providing an evaluator with a basis for seeing some of the impacts of the station. Stakeholders claim that the project has revitalized downtown. While before and after photo- graphs do not provide a quantitative basis for evaluation, they provide a valid basis for a qualitative evaluation. Most case study agencies reported that the resulting condition is better than it was prior to the integration project, due to the benefits that the project has yielded. Some stakeholders asked themselves what it would be like without the project and find it hard to imagine. However, with

46 Improving Transit Integration Among Multiple Providers Research Triangle, NC  Staff time to study and implement coordination projects  Implementation of a new regional call center  Implementation of regional software for automatic passenger counts  Increased costs of overseeing merged transit service  Increased customer satisfaction with regional call center  Improved ability to bill cities for regional call center calls through new software  Regional pass program makes travel easier and more cost effective for riders using more than one transit system by eliminating the transfer penalty Case Study Costs Benefits Valley Metro, Phoenix, AZ Staff time to study and implement coordination projects Costs of branding, such as new signs, paint schemes, marketing materials Increased ridership Improved public perception of transit and public willingness to fund system expansion Simpler, more accessible system resulting from regional fare structure, consistent branding, and common passenger information Cost savings from joint contract between RPTA and City of Tempe realized from: –Shared contractor staffing –More efficient use of facilities and equipment Cost savings from consolidating senior staff functions due to organizational merger of Valley Metro Bus and Valley Metro Rail Reduced overall costs from consolidation of dial-a-ride program Butte County B-Line, Butte County, CA Staff time to study and implement the consolidation Consultant study to assist with consolidation elements such as the cost- sharing formula, routing, and schedules Costs of branding and marketing Increased efficiencies and lower operating costs due to single contractor and single fleet More effective use of transit facilities and equipment Reduced administrative costs by consolidation, from 6%-7% of annual operating costs to 3% of annual operating costs Elimination of duplicate service Improved service productivity as measured by passengers per vehicle mile Simplified route structure and schedule making the system easier to use Timed transfers reduce total travel time for linked trips Comprehensive customer service Increased ability to secure outside funding Twin Cities, Minneapolis, MN Staff time to implement coordination efforts such as coordinated fares, pooling vehicles, AVL integration, public information, establishing operating protocols on shared transit corridors Duplication of AVL equipment on bus rapid transit line due to lack of coordination Reduced flexibility for smaller suburban agencies to adapt to changing needs under the regional agency Common fare instrument makes system more seamless to riders Single fare structure is easier to understand More legible route network due to unified route numbering system More efficient use of transit vehicles due to single owner and streamlined fleet management Improved customer convenience through centralized regional transit information Increased operating efficiencies from shared scheduling and dispatch due to integrated AVL system for all but one operator Enhanced public information provided through real-time system implemented with AVL system Optimized flow of transit vehicles through coordinated operational protocols on dedicated downtown transit corridors Table 4-2. Summary of case study costs and benefits.

Assessment of Costs and Benefits 47 Case Study Costs Benefits  Improved customer satisfaction with real- time information system  Reduced customer information calls due to real-time information  Improved customer experience by eliminating transfers among multiple paratransit providers  Regional ADA certification makes the process easier for customers  Contractual merger of transit system (DATA/TTA) improved on-time performance, service quality, service frequency, and fleet condition. Additional results are: –Reduced crime at a major transit hub –Cost savings due to bulk purchases Central Station, McAllen, TX  $4.9 million capital cost to implement in 2000  $2.4 million in upgrades in 2010  $492,000 annual operating and maintenance budget in 2001; $178,407 in annual lease and concession revenues from private sector (bus lines, advertising) budgeted for 2001; anecdotally, station operations is reported to “break even” currently  Staff time to coordinate and develop the project prior to implementation  Increased ridership  Improved convenience and quality of passenger experience  Improved bus circulation on downtown streets  Improved passenger and vehicular safety  Single facility improved operations for inter- city bus operators by: –Sharing costs and amenities; quality of facilities and amenities are perceived to have a greater value than the amount paid –Simplifying passenger transfers –Broadening the market  Contributed to the economic vitality of downtown McAllen  Facilitated opportunities for public transit operators in the region to collaborate on other initiatives such as joint procurement, regional radio system, and regional fare card ORCA Universal Fare Card, Puget Sound, WA  $42 million capital cost to implement  $7.5 million annual operating and maintenance cost  Staff time to coordinate and develop the project prior to implementation  Staff time to coordinate ongoing operation  Increased credit card fees  High degree of customer satisfaction  Simplification of fare media making it easier for the public and bus drivers to understand  Updated image that appeals to “tech-savvy” riders  Readily available and accurate data resulting in: –Increased confidence and accountability in revenue distribution –Reduced reconciliation and audit costs –Increased business account revenue –Reduced cash handling costs –Reduced bad debt –Reduced fraud by elimination of paper transfers –Redirection of customer service staff to other activities  Faster boarding times that may reduce dwell time and therefore reduce operating costs  Improved relationships with the business community  Enhanced information sharing among transit agencies  Improved ability to secure outside funding  Joint procurement of software for automatic passenger count data resulted in cost savings for some agencies Table 4-2. (Continued).

48 Improving Transit Integration Among Multiple Providers the exception of Butte County B-Line, it is unclear that any of the agencies gave early consideration of a before and after analysis in the implementation of their integration efforts. Contract Consolidations and Consolidation of Administrative Functions Isolating the costs and savings of consolidated functions can be a complex undertaking. For example, two of the case studies reported cost savings from consolidation of service operations contracts. Specifically, both Butte County B-Line and Phoenix Valley Metro consolidated multiple ADA paratransit service contracts under a single larger contract, resulting in more cost efficiencies from reduced management and administrative staff, economies of scale in fuel purchases, and efficiencies in facility usage. While it is generally agreed that cost savings were realized, there is not much data to support that conclusion. One reason cited for the lack of good data is that cost savings were reinvested into additional service, making it difficult to isolate the cost savings realized. Even if gross costs remained the same, the cost per revenue vehicle hour should reflect a reduction due to the contract cost savings. Another reason cost data from contract consolidations is difficult to obtain is that variables other than contract consolidation can have an impact on cost. For example, fuel costs can increase or decrease outside the control of the public agency or private provider and can cause costs to rise. If the agency is not able to isolate this factor, the cost savings due to consolidation may be overstated or understated. Cost savings due to administrative consolidations reported in the case studies are also difficult to confirm. The administration of most transit services is provided by public agency employees. When administrative positions are no longer required due to integration efforts, employees can be reassigned to other duties and not simply eliminated from the payroll. While the reassignment results in increased overall productivity for the agency, measuring the cost savings is often lost. For example, in Butte County, the City of Chico did not consider the cost savings from admin- istrative consolidation because it did not track the administrative costs for managing transit services. Administrative costs were attributed to positions that had additional functions and the positions would not be eliminated due to the transfer of the transit function to the County. Thus, the City did not consider the transfer of the administrative function to be a cost reduction. Cost Sharing and Revenue Sharing All cases studied included some form of cost and/or revenue sharing as an important feature of the integration effort. The role of cost and revenue sharing in integration efforts as it relates to assessing costs and benefits is significant in the following ways: • Agreed-upon formulas are proxies for quantifying the real or perceived benefits realized by participating jurisdictions. By negotiating a cost- or revenue-sharing formula that is deemed to be fair and equitable, each participant is acknowledging a benefit in some way from the shared cost or by sharing revenue. It often reflects the fact that they are willing to give up a share of revenue that they might have otherwise received, or that they are willing to pay more than they might have otherwise had to pay for a service due to the overall benefits from the integration project. • Significant efforts are expended to arrive at and implement a fair cost- or revenue-sharing agreement. Staff time, legal services, accounting procedures, and reporting mechanisms to develop and maintain the agreements result in a cost to the integration project. • Negotiations for cost- and revenue-sharing agreements influence the level of cooperation among jurisdictions to achieve integration. The results of the cost- and revenue-sharing negotiations can strain the partnerships needed for integration and may ultimately cause partners to “opt out” of the project. The agreement is a key element of the success or failure of an integration project.

Assessment of Costs and Benefits 49 Examples of the case study uses of cost- and revenue-sharing models demonstrate these points. • For Twin Cities, the revenue allocation model has had a long and contentious history, illustrat- ing the challenge of balancing suburban transit needs with urban transit needs and sharing tax revenues fairly within the region. Dating back to 1981, the revenue-sharing process has involved the state legislature, the Met Council, Suburban Transit Association, and local jurisdictions. Association members objected to the 2008 revision to the Met Council-imposed formula, but stakeholders believed that renegotiating the formula to be more equitable would be challenging and that funding was also not the most significant challenge of coordination. The history of these negotiations has colored the interagency relationships and affects the coordination efforts. • For Valley Metro in Phoenix, a jurisdictional equity formula is at the heart of the coordinated regional service. The basis of the formula is to distribute sales tax revenues by jurisdiction to achieve equity. Over time the formula has been refined to account for multi-jurisdictional routes and projects by allocating tax revenues on a sub-regional rather than on a jurisdictional basis. The jurisdictional equity policy allows for sub-regions to exceed their allocated tax revenues by up to 2.5%. • Fare revenues and operating costs for ORCA are shared by the seven participating agencies that use the smart card system. Fares are returned to the system used by the ORCA card holder. In the case where more than one transit agency is used for a trip (a linked trip), the fare rev- enue returned to each agency is proportional to the fare of the two trips. Agencies were concerned about the potential for revenue loss on interagency trips so Sound Transit com- mitted to cover the revenue loss if fare revenues fell below 67% of historical intersystem fare revenue. Operating costs are shared using a formula based on each agency’s share of ORCA trips. Sound Transit paid for the first two years of operating costs to encourage smaller agency participation in the project. Sound Transit’s financial contributions to the project were vital to the participation of the smaller agencies and reflect the value Sound Transit placed on participation by all agencies in the ORCA system. • In Butte County, existing cost-sharing agreements needed to be considered prior to the consolidation of services. The complexities of determining how to share costs caused the consolidation to be phased, with the administrative functions being consolidated first. It took another four years before a cost-sharing formula was agreed upon and the operations were consolidated. The policy committee’s objective of sharing costs was to minimize the financial impact on any single jurisdiction while ensuring the formula was fair and equitable. The long negotiating process resulted in a cost-sharing formula for fixed-route services based on a jurisdiction’s population (50%) and total service hours within that jurisdiction (50%). For paratransit services the formula is based on a jurisdiction’s population (50%) and total boardings (ridership) within that jurisdiction (50%). Ultimately, the investment of resources in developing a cost-sharing agreement helped finalize the consolidation of services. Lessons Learned: A Post-Implementation Approach As mentioned earlier, it is not uncommon for transit agencies to implement significant orga- nizational changes, such as those described in the case studies and agency profiles, without revisiting their decisions and/or outcomes. There are many reasons that this is the case. Public agencies and their elected officials may be reluctant to publicize decisions—even those made under the construct of transparency—that did not render the efficiency or effectiveness that was assumed. Additionally, with integration efforts, many stakeholders are active in the deci- sion making. Public agencies typically act on implementing complex integration projects after a lengthy process involving the public, stakeholders, staff and/or consultant analysis, followed by a decision by the policymakers. As a result, the involved parties may believe that a consensus has been achieved and may consider it counterproductive to reopen the process.

50 Improving Transit Integration Among Multiple Providers Although outcomes might not be evaluated using a formal process and structure, agencies sometimes undertake a formal or informal “lessons learned” process where they report back on the integration efforts as a way to highlight the positive impacts and explain how the negative outcomes occurred. While useful in most cases in assisting agencies to understand the challenges that arose during implementation, the value of these lessons learned can suffer if they are overly sanitized to protect the decision makers or agencies themselves that may have had a role in the challenges. This may happen when the lessons learned are documented and made available publicly. The informal lessons learned at the staff level are often the most honest and revealing when the results are not being documented. But, transit agencies can and do report on the data that is important to them. Of the 19 agencies profiled, all had some level of data that they believed could be used to supply a report card on the integration effort—primarily cost and ridership data. What may have been missing, how- ever, were clear expectations and benchmarks for cost and ridership that were established when the integration effort was initially being considered. Benchmarks can assist decision makers in understanding the nature of their policy decision and provide a clear way to measure success either quantitatively or qualitatively. Although all the profiled agencies reported to have collected ridership and cost data in some form, it is difficult to determine whether the agency data would be useful in measuring the out- come of the integration effort. Even in cases where benchmarks have been established, the data may not be useful. However, reviewing performance data and associated benchmarks may help agencies dig deeper into their results to determine whether additional analysis would be needed to assess transit integration’s success. Perhaps the best example of the difficulty in attributing ridership changes to integration efforts is the use of ridership data. Nearly all public transit operators in the United States collect and report ridership to the National Transit Database. However, changes in ridership can be difficult or impossible to attribute to a service change due to the number of variables that influence ridership, such as concomitant fare changes, conges- tion, and market forces (e.g., gas costs, employment, travel demand). It is also difficult to isolate the impact of a service change if the implementation of the integration effort spanned multiple years, as external issues can have a significant effect. Similarly, available cost data is often not directly related to the cost of the integration effort but may reflect other market forces. This is where additional analysis may be needed to tease out the results being measured. For instance, while overall system ridership growth may not be the result of integration efforts alone, growth in submarkets, such as for trips beginning on one system and ending on another, can be attributable to integration if further analysis such as an on-board survey confirms that assumption. Cost-Benefit Analysis in ORCA Case Study As the case studies indicate, integration projects are not always undertaken based on an assess- ment of costs and benefits or with a plan for evaluating outcomes. ORCA provides a case where elements of such an assessment are present and are easily described. ORCA Overview of Costs and Benefits Assessment The ORCA card is a contactless smart card that can be utilized for fare payment on seven public transportation providers in the Puget Sound region in the State of Washington. The system took approximately 13 years to implement from the earliest feasibility studies in 1996 to its launch in April 2009. This case study is a good example of how a well-planned and successful integration project relied on estimated cost and revenue impacts and detailed project goals and objectives in the

Assessment of Costs and Benefits 51 planning stages to support decision making but did not do post-ORCA assessment of costs and benefits. Objectives and Initial Analysis In January 1996, a Phase I Feasibility Analysis for Regional Fare and Technology Coordina- tion for Central Puget Sound was completed (IBI Group, 1996). The report concluded that a smart card fare collection system can provide significant benefits to customers, employers, and participating transportation agencies. This report also included an analysis that estimated a range of potential cost savings and impacts that could potentially be realized through the implementation of a new smart card fare collection system. Because of the comprehensiveness and complexity of its fare program, King County Metro Transit was used as the primary model for the analysis. The intent was to prepare a comprehensive summary of specific needs, issues, impacts, and opportunities that, while focusing primarily on Metro’s operations, would also be applicable to other agencies with similar program elements. The feasibility analysis concluded that based on Metro’s 1994 fare program operations and maintenance costs, the net future impact on these costs resulting from smart card system imple- mentation (exclusive of new revenues) was estimated to range from a “best case” cost savings of approximately $360,000 per year, to a “worst case” cost increase of $88,000 per year. New revenue generation opportunities on the order of $613,000 to $995,000 per year were estimated. The report further cautioned that the estimates were preliminary only and that the estimates depended on several key assumptions. An estimate of capital costs of the system was included in the feasibility analysis as well. The smart card system RFP was released in 1999; however, the procurement process was suspended for over a year due to the passage of a voter initiative (I-695) that severely reduced or eliminated funding for all bus agencies in the region. Once new funding sources were identified, the procurement process was re-started. A notice to proceed was issued to the selected vendor in 2003 and the card was officially launched in 2009. Needless to say, the features of the fare card system and the organizations involved in its implementation changed over the several years from vendor selection to project launch. The 1999 RFP clearly summarized the objectives by which the success of the project would be measured, stating, “The project should: • increase ridership and customer convenience • increase agency revenues • reduce operating costs, or provide demonstrable added value for cost increases.” (King County, 1999) Although the focus was clearly on costs, the RFP notes that “Many benefits to the planned fare collection system are not measurable, as they comprise as yet unexplored customer and business opportunities for the transit industry.” In fact, the RFP further includes a list of 24 goals for the new fare collection system, some of which can be measured quantitatively or qualitatively. Thus, the project was initiated with a cost and revenue analysis, clear objectives to reduce costs and increase revenues, and a list of 24 goals. In all, it was a good foundation for evaluation of certain elements of the project, if not of the project as a whole. Post-Implementation Review ORCA was universally affirmed to be worthwhile in all the stakeholder interviews conducted in the case study. The benefits of the fare card system were articulated at some length, while the

52 Improving Transit Integration Among Multiple Providers costs were acknowledged to be greater than originally estimated. With regard to the key objec- tives outlined in the RFP in 1999, the project had mixed results based on stakeholder interviews as shown in Table 4-3. Of the 24 goals included in the RFP, none had quantified measures associated with them. For example, “increase ridership” was a goal; however, no quantifiable measure, such as “increase ridership by x%” was established. A simple evaluation of goal achievement was under- taken through the document review and interviews conducted for this research to determine if the goal was, was not, or may have been achieved. ORCA stakeholders indicated that seventeen to nineteen of the goals have been achieved, three may or may not have been achieved, and four were not achieved. All but one of the goals that were not achieved relate to technological capability or regulatory issues that were barriers to achievement. For example, the goal to install equipment and fare media adaptable to auto uses such as parking and bridge toll payment has not been achieved due to technology constraints of the existing system. Of the goals that were achieved, four were to explore the potential for various partnerships. Through stakeholder interviews it is apparent that exploration of these potential partnerships was completed, but none were deemed feasible due to technology limitations or regulatory barriers to implementation. Two of the goals that may or may not have been achieved were to increase ridership and to reduce passenger boarding and bus dwell time. Both of these goals could have quantifiable measures associated with them, such as “increase ridership by x%” or “reduce dwell time by x%”; however, neither of these benchmarks was established. Also, even though ridership data is available pre- and post-implementation, there is no way to determine if ORCA increased ridership, due to many other factors that affected ridership over this period, such as the economic downturn and significant service changes; it would be nearly impossible to attribute causation to ORCA or any other single factor. Similarly, data to support the goal to reduce passenger boarding and bus dwell times was not available. Even if data for average bus dwell times was available, it would be difficult or impos- sible to determine if changes to system-wide dwell times were caused by faster boarding times with ORCA or other operational changes. However, an additional detailed dwell-time analysis that measures time associated with fare payment by media type on the vehicle could potentially demonstrate the impacts of ORCA on dwell times and might be worth the additional data collection cost. By reducing dwell times, service hours can be reduced and the system can be made more efficient. This is an example of how data availability could be quite meaningful. Consequently, even though the data can be relatively expensive to collect, the impact of dwell time on service planning and its potential for reducing operating costs may well be worth the data collection investment. The pre- and post-implementation system features/benefits of ORCA are so radically dif- ferent, along with other administrative changes within the agencies, that it is not possible to do a determination of whether it is a cost-saving project. Even if the data was available, RFP Objectives Achievement Increase ridership Undetermined Customer convenience Exceeded expectations Increase agency revenues Undetermined but possibly achieved Reduce operating costs, or provide demonstrable added value for cost increases Undetermined; operating costs probably not reduced, but added value may have been achieved Table 4-3. Achievement of objectives for smart card system.

Assessment of Costs and Benefits 53 an assessment of costs and cost savings cannot be done on the implementation of ORCA; however, ORCA stakeholders believe the project is successful based on the goals that were initially established. It should be noted, however, that in the four years that ORCA has been operational, a range of reports on usage and costs is prepared for management of the system. Performance data is collected and reported regularly showing the growth in ORCA usage, the growth in business accounts, customer contact, and key activities for the period. Operating costs and revenues are reported monthly. These reports show increasing usage of the card and decreasing customer service activity, indicating that customers are gaining a better understanding of the system and are using it regularly. Lessons Learned from the ORCA Case Study The ORCA case study illustrates how a post-implementation assessment of costs and benefits of a transit integration project may not be important to managers and decision makers. Yet, goals and objectives established early in the planning process were important to guiding the project and in shaping the RFP. ORCA sponsors clearly believe the project is a success and that the goals have been fulfilled. The lessons learned from this project helped identify potential improvements for evaluating the success of an integration project. The ORCA case study is used here as an example of how additional evaluation tools could be applied if the sponsors believed additional evaluation would be useful. For example, reductions in cash handling due to increased ORCA usage could have been measured and the associated cost savings could have been calculated. The goal to reduce cash and ticket payments could be measured by the percentage of fares paid by cash, while the target could be to reduce it to a certain percentage over time. Also, staff time could be relatively inexpensive to collect and would be useful in evaluating the project had the project sponsors wanted to track that data. Additional data collection could be considered when its ultimate use is likely to affect major cost drivers. For example, data to show how increased ORCA usage could reduce vehicle ser- vice hours may be expensive to collect, but the potential outcome of reducing vehicle service hours could easily make the data collection effort cost effective, particularly for the larger transit operators —Metro and Sound Transit. In ORCA’s case, post-implementation data collection for ORCA has appropriately focused on the performance of the system, and is not necessarily linked to the project goals. However, should policymakers or the community at large have desired it, certain additional data collection such as staff costs to coordinate the project, cash handling cost savings, and dwell time savings may have proved useful and cost effective in determining the impacts of the smart card on the transit systems. Conclusions The literature review and case study analyses show that traditional cost-benefit evaluations are not typically conducted by agencies undertaking integration projects. While all agencies considered the integration projects to be successful, citing numerous benefits, little measur- able data or analysis was available to support that finding. These projects were expected to help resolve a problem or improve on the existing condition and implicitly the benefits were anticipated to outweigh the costs of the projects. Several of the agencies, such as Butte County, the Research Triangle, Valley Metro, and ORCA, did some limited post-implementation evaluation of parts of the integration project—for example, reductions in administrative costs

54 Improving Transit Integration Among Multiple Providers in Butte County and Valley Metro and reductions in customer service inquiries at the other two agencies. However, a quantitative cost-benefit analysis was not considered as it was not perceived to be valuable to the decision-making process. Is a formal assessment of costs and benefits or a cost-benefit analysis necessary for transit integration projects? With the exception of very large and costly projects, which may have their own state or federal requirements for such analyses, most transit integration projects probably do not need a traditional cost-benefit analysis or even a formal post-implementation evaluation. However, some form of evaluation is useful to demonstrate the value of the project to decision makers, project champions, funding agencies, and the public. For those reasons, establishing evaluation methods—with or without quantified costs and benefits—is an important consideration in developing transit integration projects. “If a measurement matters at all, it is because it must have some conceivable effect on decisions and behavior. If we can’t identify a decision that could be affected by a proposed measure- ment and how it could change those decisions, then the measurement simply has no value.” —Douglas W. Hubbard, How to Measure Anything: Finding the Value of “Intangibles” in Business