Public Transportation Guidebook for Small- and Medium-Sized Public-Private Partnerships (P3s) (2017)

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26 C h a p t e r 3 This chapter captures the current state-of-the-practice in the public transportation industry by reviewing eight ongoing or recently completed P3s. This chapter introduces a case study methodology and profiles case studies of ongoing or recently completed small- and medium- sized P3 initiatives and highlights domestic and international perspectives on O&M partner- ships with some elements of risk transfer. To address the wide range of P3 options available to transit agencies, at least one case study from each of the five categories of P3 initiative were selected, resulting in eight case studies for the best practices review. Selected case studies include P3s that have been or are currently being implemented by transit agencies of all sizes from a variety of geographies across the nation. All case studies meet the P3 definition summarized in Chapter 2 and are classified as small- or medium- sized P3 initiatives using the sizing evaluation introduced in Chapter 2. Two O&M profiles that do not meet the guidebook’s classification of small- and medium-sized P3s have been included to provide insight into the current state of the practice of O&M P3s and contracting methods. The eight case studies profiled in this chapter are summarized in Table 5. The case studies were selected based on the following: • Category: Two case studies from each of the five categories of P3 initiatives were selected to capture the wide range of P3 options available to transit agencies. • Location: Case studies were purposefully selected from a wide range of geographies across the United States, including both rural and urban perspectives. • Transit agency: Selected case studies represent transit agencies of all sizes, including agencies ranging from those exclusively operating small buses, to large bus-only agencies, to several of the largest transit agencies in the country operating bus and rail services. • Private partner: Case studies include P3s with a variety of private partners that provide a number of different services and types of risk transfer for the transit agency. • Type: Case studies were selected based on the type of services or risk transfers the P3 provided to the transit agency. • Size: Case studies cover a range of small- and medium-sized P3 initiatives, as defined for the purposes of this guidebook. Case studies were selected based on financial impact, risk transfer, revenue potential, and complexity criteria. Initiatives with an overall size of small or medium were included in this guidebook. • Status: Case studies that are ongoing or recently completed were chosen to generate best prac- tice findings that represent the current state-of-the-practice. This facilitated identification of interviewees intimately involved with each initiative who could provide lessons learned that were fresh and innovative. Each case study included at least two phone interviews—one with the transit agency and another with the private partner. A list of tailored questions was provided prior to the interview. Interviewees Case Studies

Table 5. Selected case studies by P3 category. Category Name Location Transit Agency Private Partner Type P3 Size Status Capital Improvements MBTA Boston Landing Station Boston, Massachusetts Massachusetts Bay Transportation Authority (MBTA) NB Development Group Design Build Finance Naming Rights Medium Under Construction MARTA Dunwoody Station Extension Atlanta, Georgia Metropolitan Atlanta Rapid Transit Authority (MARTA) State Farm Insurance Co./KDC Real Estate Development & Investments Design Build Finance/Station Access Small Under Construction Operations and Maintenance Various Agencies International California International Transit Agencies San Mateo County Transit (Sam Trans) Keolis Commuter Services MV Transportation O&M Concession N/A Ongoing PSTA Direct Connect Pilot Program Pinellas County, Florida Pinellas Suncoast Transit Authority (PSTA) Uber, Lyft, and United Taxi TNCs Small Pilot Program Real Estate ARTIC Concession Management City of Anaheim, California Anaheim Regional Transportation Intermodal Center (ARTIC) Lincoln Property Co. Vending and Retail Concessions Small Ongoing RTD Depot Square Bus Station Boulder, Colorado Regional Transportation District (RTD) Pedersen Development Company Joint Development/ Design Build Small Completed 2015 Marketing Agreement HART Advertising Technology Tampa, Florida Hillsborough Area Regional Transit Authority (HART) Commuter Advertising Advertising Medium Ongoing TRAX Sponsorship Paris, Texas Rural Transit District – Ark-Tex (TRAX) Paris Regional Medical Center (PRMC) Sponsorship/ Advertising Small Ongoing Innovative Technology New York MTA Wi-Fi and Wireless Service New York City, New York New York Metropolitan Transportation Authority (MTA) Transit Wireless Wi-Fi and Wireless Service/Design Build Finance Operate Maintain Medium Ongoing

28 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) were asked a general list of questions about either the transit agency or the private partner and spe- cific questions about the initiative. Interview questions are provided in the Excel spreadsheet accom- panying this guidebook, available at www.trb.org/Publications/Blurbs/175901.aspx. The research team also asked the interviewees to verify the details of each project, as summarized in the project profiles contained in this chapter. The interview team included a lead interviewer and a note taker. The following sections profile case studies conducted as part of this research (Table 5). Each case study includes project identification, initiation, planning, implementation, and the primary lessons learned. During each interview, the interviewer provided the public and private partners with the following 10 elements of success of a P3 and asked the interviewees to rank them as extremely critical, moderately critical, somewhat critical, or not critical to the success of their P3s: • Regular and continuous monitoring • Appropriate contract methods • Understanding each entity’s desires/objectives • Communication between stakeholders • Staff competency • Consultant support • Leadership/project champions • Funding/financing • Enabling legislation • Experience with past P3s The answers regarding these 10 elements of a P3 and each case study’s lessons learned informed this guidebook’s best practices, which are presented in Chapter 5. The level of detail surrounding each section of the case studies may differ based on the amount of information provided by each interviewee and its pertinence to each specific case study. 3.1 MBTA Boston Landing Station Boston, Massachusetts Sponsors Massachusetts Bay Transportation Authority, Massachusetts Department of Transportation Partner NB Development Group, LLC Agency size Large Category Capital improvements Type Design Build Finance/naming rights Service provided Design, build, and finance a new commuter rail station and also fund O&M for 10 years Risk transfer Delivery risk, capital costs P3 initiative size Medium Status Under construction 3.1.1 Project Description NB Development Group (a development entity affiliated with the athletic company, New Balance) signed an agreement in 2013 with the Massachusetts Department of Transportation (MassDOT) and Massachusetts Bay Transportation Authority (MBTA) to design, build, and fund

Case Studies 29 an approximately $20 million commuter rail infill station, covering 100 percent of the station and track construction costs. The station (currently under construction) is part of a larger develop- ment of approximately $500 million to deliver New Balance’s new world headquarters building and other commercial and sporting components. NB Development Group also agreed to fund a portion of the operating and maintenance costs of the station for the first decade of operations. Purpose The purpose of the project is to build a commuter rail station to benefit the local community, New Balance employees, and MBTA riders, and create a destination in the Brighton area of Boston. By adding this station, many employees, riders, and the general public will gain better access to Brighton. Need MBTA recognized a need for the new commuter station but had no means to finance the project. Without initiation by NB Development Group, the project would not have launched when it did. MBTA strives to serve riders as efficiently as possible and a new station that accesses a growing population outside of Boston will add another level of efficiency for riders. 3.1.2 Identification History The Brighton area in western Boston had previously been served by three commuter rail stations, but these were closed and demolished to make room for the Massachusetts Turnpike in the 1960s. In 2007, the City of Boston commissioned a study for a potential infill station on the MBTA’s Framingham/Worcester commuter rail line. However, limited funding and other, higher priority projects prevented further advancement of the project. Funding The owner of New Balance and NB Development Group had lived in the neighborhood for 50 years and was looking to develop New Balance’s new world headquarters building and other commercial and sporting components in the area. NB Development Group identified access to public transportation as a critical element to the success of its development. Local elected officials were also supportive of improving public transportation options available to the com- munity. Public and private stakeholders in the community agreed that a station would serve as a catalyst for economic development and help improve mobility. Noting the funding limitations of MassDOT and MBTA, New Balance offered to partner with the agencies to deliver the infill station at Boston Landing. Enabling Legislation In the identification and initiation phases of the project, there were no local legislation or regulations that restricted the partnership between MBTA, MassDOT, and NB Development Group. Massachusetts does have some P3 enabling legislation, however it did not directly benefit this project. 3.1.3 Initiation In 2011, NB Development Group worked with the Massachusetts Secretary of Transportation, MassDOT, two state representatives, and city council members to develop a letter of intent for the station. The letter of intent was executed on March 21, 2012. NB Development Group hired a designer and other consultants to start the planning process and worked to develop an official memorandum of agreement , signed on November 12, 2013. While organizing the memorandum of agreement, each entity was clear on coordination and responsibilities: MassDOT authorizes the

30 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) project, MBTA manages the railroad, Keolis operates the commuter rail, and NB Development Group designs, constructs, and funds the project. Major considerations included: • The most significant point of negotiation was funding. When approached by developers, MassDOT indicated that it could not provide capital or O&M funding for the station. To advance the project, NB Development Group agreed to fund the capital costs of the station and 10 years of O&M costs. O&M costs were to be funded by NB Development Group through an annual contribution of $47,000. O&M costs were calculated by MassDOT by measuring MBTA O&M costs for other commuter rail stations and factoring in inflation. • A sponsorship/naming rights agreement is embedded in the O&M portion of the memorandum of agreement. In return for NB Development Group’s annual O&M contribution, MassDOT has transferred naming rights of the station for 10 years to NB Development Group. Afterward, NB Development Group will have a right of first refusal. • Schedule impacts on existing passengers during construction and once the station was opened were a concern for legislators further up the commuter rail line. NB Development Group built a temporary bypass to serve existing passengers during construction, which has resulted in reduced speeds and have impacted operations. According to the initial planning study, increased travel times related to trains stopping at the new station were fairly nominal overall, further supporting the development of the station. 3.1.4 Planning NB Development Group chose a construction manager at risk contracting method. According to the Commonwealth of Massachusetts Auditor General’s office, under this contracting method, the owner selects the construction manager at risk firm early in the design stage. As the design pro- gresses, the construction manager at risk firm provides construction management services, such as constructability reviews of the design, construction scheduling, and project cost estimates, to the owner. At some point during the design stage, the owner and the construction manager at risk firm negotiate a guaranteed maximum price for the project. When the contract is amended to include the guaranteed maximum price, the construction manager at risk contract becomes a cost-plus contract with a guaranteed maximum price, and the construction manager at risk firm assumes responsi- bility for the performance of the work, including the work performed by project subcontractors. The owner pays the construction manager at risk firm the actual cost of the work plus the agreed- upon fee up to the guaranteed maximum price. Change orders resulting from scope changes and unanticipated site conditions encountered during construction may increase the final contract cost. NB Development Group introduced the construction manager at risk contractor early during the planning phase to help with design and negotiate the final arrangements with the MassDOT and MBTA. The project was initially viewed by NB Development Group as a vertical building construction project, but in reality the project was more of a horizontal civil and public works project because of the added complexities of working in an active right-of-way. 3.1.5 Implementation Delays Key MassDOT and MBTA staff members with knowledge of planning, construction, and design needs helped to support negotiation and make informed planning decisions for projects on an active right-of-way. However, these staff members were not involved in initial discussions because these discussions involved high-level officials who did not have detailed knowledge of flagging and other specific planning and design requirements related to construction in an active railroad right-of-way. Including staff members with knowledge of the design and planning process requirements in initial meetings may have helped avoid delays during the project’s development phase.

Case Studies 31 Capital Cost Agreement Cost was the biggest concern during the planning stages. NB Development Group and Mass- DOT used other recent station construction costs to estimate potential costs of the new station. The site also presented the potential for cost increases related to construction scheduling and coordination. This resulted in a 6-month delay, with a new construction start date of August 2015 and targeted completion date in late 2017. The project remains under construction and is scheduled to open in 2017. Other issues related to the complexities of constructing on active, historic right-of-way have impacted scheduling. For example, the contractor recently experienced delays related to undocu- mented and unknown subsurface elements unearthed in a long-time rail corridor. 3.1.6 Champions Boston Landing Station was supported by the owner of NB Development Group, community officials, state legislators, and key members of MassDOT and MBTA. These project champions, especially the owner of NB Development Group, were crucial to the success of the project. If NB Development Group, directly backed by the owner, had not agreed to support close to 100 percent of project costs and 10 years of O&M costs, the project would not have occurred. 3.1.7 Key Benefits Interviewees listed the following key benefits related to the initiative: • By providing a connection to the existing neighborhood, NB Development Group and MBTA were able to offer access to transit not only to their employees but also to the greater Boston area. • Boston Landing Station further supports economic and community development in the Brighton neighborhood and greater Boston area. • Additional ridership supports MBTA commuter rail ridership and helps the Boston Landing area to grow as a destination. • The project was built almost exclusively with private dollars, providing significant public benefit with very little public investment. • The visibility of this project demonstrates the potential of P3 projects in Boston and encour- ages future P3 projects in the region. • The project offers lessons learned for future P3s. 3.1.8 Lessons Learned Each interviewee was asked to identify any lessons learned or elements that they would have done differently. Lessons learned identified by NB Development Group include: • Assemble a skilled team. Actively engage staff members responsible for operating the trains and signal functioning earlier in the process. Having the right stakeholders in the room during initial discussions could have potentially reduced schedule delays. • Select an appropriate contract method. Reevaluate the selected contract method, CMAR. Choosing a contracting method more commonly applied to deliver civil works—rather than com- mercial buildings—might have reduced project costs and prevented delays prior to construction. Lessons learned identified by MassDOT include: • Leverage previous P3 experience. Work with a private partner that has public sector knowl- edge and understands the way the system works. For example, if a contractor is knowledgeable

32 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) about active right-of-way flagging requirements, the contractor will build it into the budget and schedule. This was not the case for the Boston Landing Station, resulting in related scope expansion, budget increases, and schedule delays. • Assemble a skilled team. Create a team with experience to facilitate negotiations and sup- port the overall success of the project. The Boston Landing Station was a great example of a project beginning from the ground up through a traditional planning process. These projects are generally more successful than projects that are identified outside of the planning process. Additional lessons learned are summarized below: • Determine each partner’s responsibilities and costs up front. Private sector partners expect certainty when discussing and agreeing to fund project costs. Polishing an agreement up front that details cost responsibilities and contingency plans is important to manage partner expec- tations of responsibilities over the life of the project. • Manage schedules and expectations. Similarly, government processes may move more slowly than private sector expectations. MassDOT and MBTA are held to safety and design standards that go beyond a typical vertical construction project. Also, MassDOT and MBTA are managing multiple projects at one time and must appropriately manage work load and timing for engi- neering and planning staff. The agreement should have reasonable expectations for schedule and schedule contingencies to manage partner schedule expectations over the life of the project. 3.1.9 Conclusions Boston Landing was a unique case where the private partner was responsible for initiating the P3 by approaching the public partner. The public partners faced limited funding to develop the project, but transferred much of the risk to the private partner, who agreed to pay for the upfront capital costs, and 10 years of O&M costs. The public partner leveraged naming rights as an important asset in return for the 10-year O&M commitment from the private partner. Both partners felt that while this was a successful project, the P3 would have benefited from engaging technical railroad staff persons or contacts much earlier in the development process. Such con- tact would have provided a clearer understanding of the potential risks associated with building over an active right-of-way and might have significantly decreased schedule delays. 3.2 MARTA Dunwoody Station Extension Atlanta, Georgia Sponsor Metropolitan Atlanta Rapid Transit Authority Partner State Farm Insurance Co./KDC Real Estate Development & Investments Agency size Medium Category Capital improvements Type Design Build Finance/station access Service provided Delivery and financing of station expansions, improved access Risk transfer Delivery and financing risk P3 initiative size Small Status Under construction

Case Studies 33 3.2.1 Project Description The Metropolitan Atlanta Rapid Transit Authority (MARTA) partnered with KDC Real Estate Development & Investments (KDC) to deliver an expansion to the existing MARTA Dunwoody Station as a transit oriented development (TOD). TOD is often completed using a P3 with a pri- vate real estate developer managing the actual development and management of the non-transit facility, such as residential, retail, or office space, and a public transit agency who manages the transit facility and provides direct access to the transit service. KDC is currently constructing the first of four buildings for State Farm Insurance Co., a 16-story office building, adjacent to the Dunwoody Station. The station extension will include a new access point, a structure connect- ing the station to the new office building, providing access to the existing platform. KDC, the developer of the State Farm campus, approached MARTA with a request to expand the existing station, offering direct station access to a planned 22-story tower. The tower is part of a larger development that will include up to 2.2 million square feet of office and retail space. State Farm prioritized employee transit access for its new Dunwoody campus by selecting a location near the existing Dunwoody Station. In return for station access, KDC agreed, on State Farm’s behalf, to finance and deliver the station expansion project under a developer’s agreement. The private partner took on the risks associated with the development of the facility expansion while the public partner, MARTA, granted an easement to KDC and supervised the construction in the active right of way. MARTA is also responsible for owning and maintaining the public property while KDC will own and maintain the private portion of the extension. Both the private and public partner in this agreement prioritized providing a more accessible public transit station for the riders: employees, tenants, customers, and residents. KDC’s monetary contribution to develop the MARTA station extension provides direct access to public transit for State Farm employees which further enhances the development of the new regional campus. Purpose The purpose of the Dunwoody Station extension P3 was to utilize the funding and resources of KDC to extend MARTA’s Dunwoody Station and provide enhanced transit access to riders, customers, and employees. MARTA provided a project team that assisted KDC with on-site con- struction management and working in the public right-of-way. Further, the public and private partner project teams worked together to produce design plans for the extension. The public and private partner aligned under a developer’s agreement to ensure a cohesive construction of the station extension. After construction is complete, each partner is responsible for maintaining its respective properties. Need KDC realized that, in order to provide its clients enhanced access to transit, KDC would need approval to connect to public property, specifically MARTA’s station. When MARTA was approached by KDC to extend the Dunwoody Station, with long-term plans of fully develop- ing the land adjacent to the station, MARTA recognized the benefit. Both partners benefit from improved transit access for employees, which increases MARTA ridership. MARTA’s Office of TOD and Real Estate lists the “Dunwoody Station Development Oppor- tunity,” State Farm’s construction site for their new campus, on its website. MARTA identifies the intersection, at Hammond drive and Perimeter Center Parkway, where the station exten- sion will be located, as an opportunity to develop one of the most successful TOD nodes in the metro area. The area is roughly seven acres of undeveloped land and is conducive for TOD-style development due to its accommodation of mixed uses and residential dwelling unit density up to 30 dwelling units per acre. State Farm and KDC are setting the stage for this new TOD devel- opment area.

34 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) 3.2.2 Identification History In February 2014, State Farm announced its plans to build a new four-tower campus in Atlanta, with one of the towers located above MARTA’s Dunwoody Station. The Dunwoody Station is located on the Red Line and is in Atlanta’s Perimeter Center. The area around the sta- tion is semi-suburban with retail stores, office buildings, housing options, and restaurants. State Farm plans to house 10,000 employees at the new site. State Farm currently has approximately 5,000 employees in the metro Atlanta region. The 2.2-million-square-foot campus is expected to be completed late 2016. This construction project is the largest corporate office project in metro Atlanta’s history. One of State Farm’s prerequisites for a new regional headquarters location was proximity to an existing MARTA station. After State Farm identified Dunwoody Station as a potential loca- tion for the company’s campus, the development company, KDC, began conversations with MARTA, as State Farm’s development partner. Funding The Dunwoody Station extension P3 project is funded by the private partner. State Farm is covering 100 percent of the costs of the station expansion which will serve as a connection to the existing station. MARTA noted that the agency would not have agreed to the project if State Farm had not agreed to finance the project and, therefore, the funding was an extremely critical element of the success of the project. Enabling Legislation There was no legislation that precluded MARTA from partnering with State Farm and KDC for the Dunwoody Station expansion project. MARTA said that the developer’s agreement was not handled or treated like a P3 mainly because the agency labels P3s as large capital improve- ment projects. 3.2.3 Initiation KDC, as State Farm’s development representative, approached MARTA and the discussion of the station extension began with several work sessions or “all-hands meetings” between the private and public partners. MARTA agreed that the preliminary decision to proceed with the partnership was not difficult. MARTA saw the station extension as mutually beneficial. How- ever, as stated in lessons learned, MARTA would have considered including administrative reimbursement in the contract had they known the costs that would be incurred by the transit agency. Throughout the planning and design process, KDC worked closely with MARTA’s staff to develop the preliminary and final plans. MARTA’s staff provided guidance to KDC on MARTA specifications, guidelines, and design plans. During the final work session, KDC presented the development plans to MARTA’s TOD and Real Estate team and MARTA’s Board of Directors. After KDC completed 60 percent of con- ceptual design, MARTA started the approval process of the contracts. However, reaching the final agreement was one of the biggest obstacles according to MARTA. Both KDC and MARTA definitively agreed on a point in time when State Farm would fund the station extension, and further, when State Farm would fund the maintenance of this additional structure attached to the station.

Case Studies 35 The developer’s agreement approval process included negotiating the mechanics of the agree- ment and specified how and where the construction would occur. The developer’s agreement included some of the following arrangements: • KDC was not obligated to own and maintain a portion of the station extension until KDC began construction on the station connector. • After construction is complete, MARTA will own the property and KDC will operate and maintain the station connector. • KDC agreed to build to MARTA’s specifications and construction guidelines. As long as MARTA signed off on the construction and landscape plans, there were no other commit- ments on KDC’s end. A senior staff member at MARTA organized the work sessions between KDC and MARTA. KDC was able to outline the schedule, approvals, and permits necessary to start construction. This meeting was critical in the initiation process of the project and allowed all MARTA depart- ment heads to funnel the information to their team members. The line of communication was open from the very initial stages of the project which played a key role in the success of the project. Ultimately, the developer’s agreement was approved by MARTA’s Board of Directors Project Team MARTA does not have a P3 office or point of contact. However, there is a TOD manager in the Office of TOD and Real Estate, who supports public-private initiatives. MARTA’s project team is made up of the senior director of TOD, the manager of TOD, and the project implementation lead. The project implementation lead is the point of contact for the public agency during the implementation of this P3. The private partner, KDC, is a commercial real estate company that was hired by State Farm to run the coordination with MARTA, the public partner, during the development of the station expan- sion. The KDC project team is made up of the division president and the regional vice president. The all-hands meeting attendees included MARTA staff from the engineering, planning, design, construction, and legal departments. The responsibilities of MARTA staff fell into three areas: • Legal (documentation, contracts, permits, and approvals), • Engineering (specifications of new construction of the Dunwoody Station), and • Operations (KDC and MARTA reserving track time to complete construction). Communication The Dunwoody extension P3 project does not have a formal communication plan outlined, however, thus far, communication throughout the project has been constant because of the sensitive work that KDC is conducting in MARTA’s active right of away. Both partners noted that communication is extremely critical for the success of the project. MARTA said that KDC has gone above and beyond with enabling transparency between the public and private partners. During the design and planning phase of the project, KDC and MARTA were communicating every other day with each other. Now, in the construction stage of the project, KDC and MARTA are speaking on a daily basis. Contract Although MARTA encourages a competitive bidding process through a request for pro- posal, the Dunwoody Station extension project was more suitable for a developer’s agreement. KDC approached MARTA and the initial phases concluded with a developer’s agreement. The

36 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) developer’s agreement is a contract between MARTA and KDC that details the obligations of both parties and specifies the standards and conditions that KDC must abide by during the development of MARTA’s property at Dunwoody Station. Both KDC and MARTA agree that a speedy competitive process was of advantage to both partners, allowing each to support the project expeditiously and cost-effectively. 3.2.4 Planning Mutual Objectives The partnership between MARTA and KDC proved to be efficient because each party agreed on the benefits of the project. Both partners noted that it was critical to understand the mutual objectives of the public and private partners early in the initiation phase. Identifying the mutual benefits was especially beneficial during the design process because the station extension needed to match MARTA’s standards while simultaneously providing adequate access to the station for riders. Additionally, it was important for KDC and MARTA to coordinate in order to observe MARTA’s construction parameters and guidelines, which ultimately led to timely project completion. Delays KDC originally had concerns that the document and approval process would delay the sched- ule. But other than small weather delays, everything has remained on schedule. However, as delays occurred, MARTA incurred additional costs due to the engineering consultants on hand. Some of the other difficulties encountered were: • The new development of State Farm’s regional headquarters is proximate to MARTA’s Dunwoody Station and MARTA wanted to ensure construction was performed to proper stan- dards. This meant that MARTA utilized more staff than expected to be on site and assisting the developer. • Initially, some KDC designs did not meet MARTA’s design standards. With time, KDC adapted to MARTA’s terms. • The construction of the connector impacts the active right of way. There are trains operating during each day and time of the week which caused some scheduling difficulties. Ultimately, KDC worked with MARTA to reserve track time. According to both the private and public partners, the project phases (design through con- struction) were smooth and coherent, mainly due to the open and constant communication between MARTA and KDC. Support The public partner, MARTA, noted that community support was critical during the initia- tion and planning phases of the Dunwoody Station extension project. The City of Dunwoody embraced the P3 project and supported the partnership between MARTA and KDC. Additionally, the Governor of Georgia spoke of his support at KDC’s groundbreaking cer- emony in May 2014, as well as the Mayor of Dunwoody, who mentioned that “Dunwoody’s location, amenities, and proximity to superior transportation resources” will be key to the devel- opment of the new campus. 3.2.5 Implementation KDC is currently responsible for building a three-level connector to MARTA’s Dunwoody Station with a walkway that will keep employees and other riders from having to cross the street at the corner. Construction is expected to finish by the end of 2016.

Case Studies 37 KDC is tracking data points to measure the success of the project. KDC is also monitoring its partnership with State Farm and MARTA based on State Farm employee ridership using the State Farm internal tracking mechanisms and the percentage of employees using MARTA. State Farm wanted the station to benefit not only the company’s own employees but also the greater community. Therefore, the new entrance is accessible to the public in the immediate area. Ulti- mately, both partners hope that the development will ease some of the traffic in the area and encourage greater use of transit. Regular Monitoring The project site is located in an active public right of way and therefore it is critical that regular monitoring occurs on MARTA’s behalf. MARTA is often in contact with the on-site KDC team to guarantee that MARTA tracks remain in good condition and the construction is not causing any issues. Due to this constant contact, KDC is receiving quick responses and attention from MARTA which keeps the project schedule on track. Cost Neither MARTA nor KDC tracked the cost of internal staff hours while securing the partner- ship. However, MARTA reports the true cost to implement the project, including internal staff and external consultant support, totaled over $2 million. MARTA set up its timecard system so that staff could bill to specific projects and track time associated with on-site administration and reviews by police, staff, and consultants. Additional Development State Farm was the first company to develop adjacent to MARTA’s Dunwoody Station but it has been announced that three additional 20-story buildings are being added to the develop- ment. In addition, a new park will be situated along Hammond Drive, across the street from the recently proposed mega-development, High Street. Similar to State Farm, companies are mov- ing office locations in search of increased density and walkability. The growth in the Dunwoody area has been greatly influenced by the MARTA Red Line which services the area. The partner- ship between MARTA and KDC, originally initiated by KDC and State Farm, brought forth this boom and has elevated the community. 3.2.6 Champions The TOD manager at MARTA is the primary contact for KDC and the champion within MARTA. The TOD manager is responsible for connecting KDC with all MARTA departments involved in the project, including legal and planning. In addition, the general manager of MARTA brought all departments together during the early phases of the project. The initial meeting between MARTA and KDC was organized by this senior staff member. Additionally, MARTA’s project implementation lead was a champion in collaborating with KDC. The MARTA and KDC attorneys involved in the project already had a working relationship which expedited the negotiation process. Ultimately, the legal teams pushed the developer’s agreement to approval. As reported by both MARTA and KDC, the legal teams from each part- ner were champions of the project. MARTA identified the KDC project team as a champion because of their ability to reason and be transparent with all parties involved. KDC was the biggest advocate for the project. Both MARTA and KDC recognized State Farm itself as a champion for the project. The transit connection was a small piece of the overall regional campus but it was the most integral piece because it was happening first.

38 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) 3.2.7 Key Benefits Each interviewee was asked to identify key benefits of the project. Interviewees listed the following key benefits related to the initiative: • KDC, a local development company, has a great standing relationship with many of the MARTA staff, including the legal team. The advantage of using a familiar company was beneficial for the project. • MARTA’s openness to working with a private company and dedicating a position within the agency, the TOD manager, who was able to bolster the goals and objectives of all partners involved was beneficial. MARTA’s support and advocacy for the project leads MARTA and Atlanta to maximize stations, access, and ridership. • Other private companies in the Atlanta area have contacted MARTA and want to make invest- ments with the transit agency in order for their companies to have access to MARTA stations. 3.2.8 Lessons Learned Each interviewee was asked to identify any lessons learned or elements that they would have done differently. Lessons learned identified by KDC include: • Encourage early stakeholder involvement. Bring key stakeholders to the conversation early in the process. This collectively demonstrates a willingness to complete the project in the time- frame and with the parameters needed. If there isn’t a clear understanding, then the project could lose direction. • Promote transparency between the private and the public partners. The private partner must be able to compromise and be a true partner to keep the line of communication open and the project on track. Lessons learned identified by MARTA include: • Determine each partner’s responsibilities and costs up front. Consider requesting for pub- lic partner administrative costs to be covered or reimbursed by the private partner. MARTA incurred more internal staff costs than anticipated throughout the project. • Assemble a skilled team. Evaluate staff at hand and understand where additional support is needed. MARTA did not have general engineering support and noted that creating a proj- ect management office could create a more fluid process and project. MARTA treated the Dunwoody Station extension project with KDC as a pilot program. • Embrace flexibility throughout the project phases. MARTA noted that learning how to be more flexible than normal agency standards was beneficial to the success of the partner- ship. There was a balancing act that took place and compromise with a workable partner was encouraged. MARTA reported that 5 to 10 years ago this partnership would not have existed. However, positive internal leadership that was willing to make compromises paved the way for other departments to fall in line. 3.2.9 Conclusions This P3 is an example of a two-partner collaboration with a clear mutual objective of increas- ing ridership in the area by promoting the use of transit through transit-oriented design and development. MARTA leveraged and monetized existing assets, such as the easement to build atop its active right-of-way and the ability to provide direct station access to the private partner’s new development in return for the private partner’s commitment to fund the entirety of the new station’s construction. Initially, the private partner was not designing the station extension to

Case Studies 39 comply with MARTA’s required standard design and construction guidelines. Had these guide- lines been introduced at the onset of negotiations, the P3 would have seen fewer pre-development delays. This was an example where both teams should have fostered open communication among key staff personnel at the beginning of the process. 3.3 PSTA Direct Connect Pilot Program Pinellas County, Florida Sponsor Pinellas Suncoast Transit Authority Partners Uber Technologies Inc.; United Taxi; Lyft Agency size Small Category O&M Type TNCs Service provided Technology O&M Risk transfer O&M risk P3 initiative size Small Status Pilot Program 3.3.1 Project Description Pinellas Suncoast Transit Authority (PSTA) partnered with Uber, United Taxi, and Lyft, to offer riders a subsidized transportation alternative for underserved transit areas in Pinellas County. PSTA launched the Direct Connect pilot program in February 2016 as one of the first of its kind in the nation, with Uber Technologies and a local cab company, United Taxi. Similar to taxi companies, Uber is a TNC. A rider can use the Uber application on a smartphone to request a driver in the area for a ride to one’s desired destination. The partnership provides riders in the Pinellas Park and East Lake area near Tampa, Florida, (where PSTA recently recommended or actually eliminated fixed-route services), with an alter- native means of transport to PSTA bus stations. In 2015, PSTA identified Pinellas Park and East Lake as two areas in Pinellas County where fixed-route service is experiencing low ridership. PSTA, following a lead from a Florida state senator, approached Uber to assist the transit agency with serving the underserved areas of Pinellas Park and East Lake. During the pilot program, Uber and United Taxi are providing service to the designated area in exchange for a subsidy provided by PSTA. During the 6-month pilot program, PSTA has agreed to pay half of the taxi or Uber fare, up to $3 for qualifying passengers. The rider must request a ride within the geofence area that PSTA has provided to receive the discount. The geofence sets a boundary around a specific area of Pinellas County, and the rider must travel in the Uber or taxi to or from a PSTA bus stop to qualify for the subsidy. Wheelchair van service is available for those needing assistance by calling PSTA’s on-demand line for “same-day PSTA service.” Currently, the service is only offered in the Pinellas Park and East Lake areas. Pinellas Park is one of PSTA’s busiest areas and the East Lake area’s bus service was removed due to low ridership (75 riders per day). This innovative partnership brings together competing transportation providers to serve riders in Pinellas County.

40 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) Purpose The Direct Connect partnership’s goal is to provide viable and reliable connectivity where public transit services do not exist or may be discontinued in the future. Customers in the Pinellas Park area are able to take advantage of alternative transportation services and reach bus stations in the area, which ultimately connects the rider to the larger community of Pinellas County. Need In 2015, PSTA carried out a comprehensive review of its existing transportation network and community needs to identify inefficient routes. The review process identified regular fixed routes that served low-density areas of the county. In order to save money, PSTA eliminated several fixed-route services, including the Pinellas Park and East Lake routes. At the time, PSTA was spending $150,000 on the Pinellas Park route and PSTA projected that the Direct Connect partnership would cost $40,000 for six months to operate, saving the transit agency $70,000 to provide fixed-route service to the same area. Because of the elimination of the fixed-route services, there was a need to provide a second- ary transit network in the affected areas and PSTA identified Uber and United Taxi as a way to bridge the gap. PSTA aims to fill gaps within its public transportation network using Uber and taxi drivers to provide first-mile and last-mile connectivity. 3.3.2 Identification Funding Benefits PSTA identified the partnership with Uber with the assistance of a Florida state senator, who connected PSTA with the University of Florida. The Florida state senator, a transportation advo- cate, was aware of the partnership between Uber and the University of Florida and introduced PSTA to the Safe Ride program. Uber offers University of Florida students a discount for rides that begin and end within the designated zone and specified hours. The designated zone roughly covers the entire campus. Uber offers the discounted service to riders Wednesday through Saturday, between 10 p.m. and 3 a.m. In the fall of 2015, PSTA met with Uber to learn more about the University of Florida Safe Ride program and the “geofence” installed in Gainesville, Florida. By late 2015, Uber and PSTA were working together to negotiate a contract. The partnership enabled PSTA to offset the $150,000 previously spent annually on the fixed- route bus serving the area, freeing resources to fund more productive transit services elsewhere in Pinellas County. There are no data on cost savings yet. However, when the pilot program is complete, more details will be released. Support PSTA recognized the need to creatively serve riders in the areas where fixed routes were removed. Further, the substantial political support from the area’s state senator generated pub- lic support for the pilot program. Enabling Legislation There were no restrictions or legislation in place that precluded PSTA, Uber, and United Taxi from entering into a contractual partnership. Specifically, with the support of the area’s state sena- tor, PSTA avoided restrictions by using an identical contract for all parties involved in the program. 3.3.3 Initiation After PSTA identified Uber as a potential partner in late 2015 to help serve the areas where fixed-route services were cut, PSTA contacted Uber to discuss the possible “first- and last-mile”

Case Studies 41 complimentary pilot program. Agreements were negotiated over a 3-month period. The process included legal teams from both entities and focused on the following elements: • Data Sharing: – Uber places limitations on shared data. The data recorded in Uber’s system is by trip date, which includes sensitive data such as specific passenger information. – Uber and PSTA agreed that aggregated data would suffice for the purposes of the contract. Each month Uber is required to send the aggregated data to PSTA. – Uber and PSTA settled on a shared data agreement that suited PSTA and its private part- ners. The monthly data supplied by Uber is adequate for PSTA’s monthly data submissions to the federal government to be eligible for federal funds. • Identical Contracts: – In order to address any legislative issues, PSTA created a contract that is consistent for any and all partners participating in the pilot program. – The identical contract requires the same standards from TNCs, taxi companies, and any other private organization. – The contract requires the partner to provide aggregated data each month to the transit agency. Project Team After finalizing contractual agreements, the project implementation team consisted of the Uber regional general manager, the chief executive officer of PSTA, and a senior planner at PSTA. The team worked closely together to prepare for the launch of the pilot program. Communication Throughout the contracting and implementation phases of the Direct Connect partnership, both private partners and the public partner were in constant communication. According to PSTA, during the contracting phase, the executives of all parties involved were included in the discussions. After the contract was negotiated through a combination of face-to-face meetings, phone calls and emails, it was necessary to keep an open line of communication to successfully launch the pilot program. Following the launch of the program, the partners continued to com- municate as needed or on a monthly basis when each of the private partners needed to submit aggregated data through email. Other than the monthly check-ins, the partners did not arrange a specific communication plan. 3.3.4 Planning After the contract and initiation phases of the project, most of the planning was in place for the launch date, when PSTA and its private partners extended efforts to market the event and the service. However, after the event, Uber worked to engrain this new service into the rider’s every- day life. Usually Uber functions without heavy marketing due to word-of-mouth advertising of the company’s smartphone application. However, the Uber project team had to implement new ways of marketing other than word-of-mouth to introduce the new service in Pinellas County. PSTA relied heavily on the marketing strategy of Uber because the transit agency did not have the means to run its own marketing campaign. Mutual Objectives The objectives of each partner directly tied to the mission of each organization. For the pilot program, Uber’s goal was to serve the community and foster a relationship with cus- tomers. PSTA’s goal was to serve the riders in underserved areas and to grow a relation- ship with a TNC. The objectives of each entity were mutually supportive and promoted a cohesive program.

42 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) 3.3.5 Implementation The Direct Connect pilot program is advertised on PSTA’s website as “Taking You to the Bus Stop.” This is exactly what the program offers within the service zone. The Pinellas Park area is served by two designated bus stops: on US 19 in front of the Walmart and the Pinellas Park Transit Center. The East Lake area is served by two bus stops: at Tarpon Mall and the Shoppes at Boot Ranch. United Taxi is the only provider that serves the East Lake area, while Uber and United Taxi offer services in Pinellas Park. The service is user friendly. If the rider has a smart phone, they choose a provider, download the Uber or United Taxi app, and apply the promotion code to request a ride. If the rider does not have a smart phone, they can call United Taxi directly. PSTA pays half the fare, up to $3. Uber accepts credit cards via the app and United Taxi accepts both credit cards and cash. PSTA’s Direct Connect program works for the rider as follows: • Trips must begin or end at a designated stop. • Trips must be requested and completed within the designated zone. • Hours of operation are 7 a.m. to 7 p.m., Monday through Saturday. After the launch of the pilot program, marketing of the new service became the most essential task. As described above, PSTA relied on Uber’s marketing to increase ridership and inform the community of the new resources in the area. Uber saw a large increase in riders over the first months of the pilot program, and PSTA noticed a steady increase in riders using the service and benefiting from the discount. The pilot program ended its 6-month term in August 2016 and PSTA has chosen to extend the contract with its partners for another 6 months (beginning in December 2016) and envisions signing an annual contract. Since the initiation of the pilot program, Lyft has joined the program and a news article reported that Uber supports customers without smartphones to call in and request a ride. PSTA estimates that under the new contract, riders will pay, on average, $1 per ride to access the nearest bus stop. Further, as discussed, PSTA had previously spent $150,000 annually on the fixed-route service through the Pinellas Park area and now the transit agency is budgeting $40,000 for the 6-month pilot program. In January 2017, Uber announced that it is expanding the Direct Connect program to eight bus stops in Pinellas County. All trips taken to or from the eight bus stops will be $5 off the regular Uber price but PSTA projects that it will save more than $70,000 annually. 3.3.6 Champions There are prominent champions of PSTA’s pilot program and each champion ties together a piece of the program to ensure success. As mentioned previously, the area’s state senator initi- ated conversations between Uber and PSTA, which launched the initial partnership. The two leaders from Uber and PSTA, the senior planner and the regional general manager, respectively, championed the project through the launch phase. In addition, an executive of United Taxi was heavily involved with the PSTA partnership. The executive was proactive and approached PSTA to offer its services for the pilot program. 3.3.7 Key Benefits Each interviewee was asked to identify key benefits of the project. Interviewees listed the following key benefits related to the initiative:

Case Studies 43 • By providing a connection to the nearby bus stops, PSTA, Uber, Lyft, and United Taxi are able to better serve the community and specifically that area. • The TNCs and taxi company benefit from the program by achieving the goal of integrating their services within a city’s transportation network. The private partners strive to give riders the option to not have a car by providing real alternatives. This pilot program is making public trans- portation much more accessible and is the first step to achieving the long-term goals of the TNCs and taxi company. • PSTA hit a milestone in this partnership by successfully working with a TNC and integrating the partner into its existing transportation system. PSTA hopes to continue the relationships with TNCs and United Taxi to identify other opportunities to serve the community such as paratransit services. • The visibility of this project demonstrates the potential of similar P3 projects across the country. 3.3.8 Lessons Learned Each interviewee was asked to identify any lessons learned or elements that they would have done differently. Lessons learned identified by Uber include: • Encourage early stakeholder involvement. Actively engage project team members during the contract phase to speed the process along and move to an earlier launch date. Considering this pilot program was the first of its kind, the process moved slowly. However, other partnerships across the country are learning from these lessons and moving quickly with local partners. • Understand the surrounding market. Identify the appropriate public transportation stops for the program. It’s important to find a conveniently located transit stop that TNCs can serve and connect the riders. • Leverage a partner’s skill and experience. Improve the marketing of the program by properly advertising the new service before, during, and after the launch phase of the program. • Assemble a skilled team. Create a team with experience to facilitate negotiations and support the overall success of the project. The project team and the champions of the project led to the success of the program. • Be open to innovation. Persevere through the project regardless of the opposition. PSTA led the charge with this new pilot program and has opened doors to serve its own community as well as creating opportunities for other agencies across the nation. 3.3.9 Conclusions The PSTA Direct Connect pilot program is an example of partners committing to using innovative technology to fill in transportation gaps in the area. By utilizing an innovative transportation model, the public partner saved money compared to the previously operated fixed-route services. By using identical contracts with multiple private rideshare providers, the public partner has eliminated any potential perceived bias and has encouraged private participation. The public partner was also wise to work with internal and external staff to set clear program participation boundaries, which eliminated confusion for riders and private partners. The partners found that this P3’s launch could have benefited from additional marketing and stakeholder engagement, especially since this transportation model is a new concept for most riders. Involving local stakeholders in the implementation process earlier would have helped to educate and prepare potential riders for this innovative new service. This pilot was considered a success and contracts between all partners have been extended until June 2017.

44 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) 3.4 O&M: International and Domestic Perspectives Profiles The following profiles (or vignettes) provide two examples of O&M contracts, describing the current state of the practice in an area in which no true domestic examples of P3 presently exist. The first profile examines the partnership between Keolis, a French transportation service com- pany, and various transit agencies in Europe and Australia who operate large P3s. While Keolis’ current P3s do not fit the small- and medium-sized P3 definition presented in this guidebook, they have been briefly profiled in this section to present an international perspective of cur- rent successful O&M P3s, to offer some valuable general lessons learned that may be applied to small-and medium-sized P3 initiatives. The second profile examines the contract between MV Transportation, a U.S.-based transportation service company, and the San Mateo County Transit District (SamTrans). This transportation service agreement provides an example of a typical U.S. bus O&M contract in which some degree of risk is transferred to the private partner. The key difference between the international example and the domestic example is that there is more risk associated with the private partner. The partnership between SamTrans and MV Transportation is more closely related to contracted O&M rather than a P3. 3.4.1 International Perspective: Keolis Keolis provides transit services around the world and is the largest private sector transport group in France. The company’s services include passenger railways, bus systems, and airport services. Keolis operates several transit services in the United States, including commuter rail in Boston, Massachusetts, and Northern Virginia, and a bus service in Las Vegas. The company is actively pursuing partnerships with transit agencies to implement O&M agreements across the country. Keolis has successfully implemented large O&M P3s in France, Sweden, Australia, and many other countries around the world. These arrangements include the transfer of significant risk from the public transit agency to Keolis, which acts as a partner rather than simply a contrac- tor. The terms of this partnership are specified in Keolis’s contracts with public transit agen- cies, which include specific and measurable performance standards that Keolis must achieve. This holds Keolis accountable while providing the company with flexibility on how it delivers transit service. Keolis has P3 contracts to provide service in Queensland and New Castle, Australia; Lyon, France; and Stockholm, Sweden. In Lyon, Keolis worked with the public partner to develop a brand new transportation network. This included new routes into the city and a redesign of mode-changing locations, informed by extensive stakeholder engagement. Nearly overnight, Lyon experienced a 30-percent increase in ridership. The company believes strongly that its continued success is due to Keolis having a financial stake in the success of the partnership, or “skin in the game,” which demonstrates to public partners that it is committed to operating a successful system that will enhance the entire city and increase ridership. Keolis’s innovative O&M contracts include a significant amount of revenue risk. By negotiat- ing the contract to transfer revenue risk from the public to the private partner, Keolis has a large interest in increasing ridership and revenue. The contracts include performance targets with monetary implications, and Keolis receives a portion of the revenue stream. When the contract is structured so that the private partner takes on more risk, the private partner has more skin in the game and, therefore, is more likely to significantly lower costs, improve service, and increase customer satisfaction. Keolis envisions this practice in the United States and is working to bring this partnering approach to O&M contracts in the United States.

Case Studies 45 Approaching Public Partners Keolis pursues transit agencies in three phases. Expression of Interest Phase. The interest phase can last up to 12 months and includes background work to research the potential project(s). The goal is to identify optimal projects, which balance upfront costs and future costs, especially because revenue streams usually do not ramp up until 12 to 24 months into the project. Mutual Interest Phase. Keolis confirms that the appropriate public partner is interested in the P3 project. It is important that the mutual objectives of each party are in agreement with the proposed approach. Team Selection Phase. The extra time while working with the public partner and influenc- ing the program or contract outcome also gives Keolis time to develop a team that is capable of winning the project. P3s and flexibility do not need to be mutually exclusive. Advice for the United States Transit agencies contemplating P3s should consider the following points. Encourage Innovation Within Public Agencies. In Belgium, for example, the majority of its 6,000 buses are fossil fuel free. The United States is far from this scale of innovation. Negotiate and View the Private Entity as a True Partner. If transportation partners align their interests to be both financially and socially successfully, faster P3 growth could occur in the United States. Private and public partners have a role to play to bring innovation and create more sustainable cities in the United States. Find the Balance Between Price and Quality. It is important to conduct a public sector comparator, which estimates the project cost the public partner would pay if it were to deliver the project directly, without a P3. This provides an objective analysis of the relative value of the P3. Private partners in a P3 should consider the following points. Price the Project Appropriately and Strategically. It’s important that the private partner protects itself from the public partner’s abilities to increase passenger fares or other prices. If price elasticity is high, then the private partner will most likely lose revenue. Adopt Contract Language that Emphasizes the Partnership Between the Two Parties. There are various ways of doing this within the contract, such as escalation mechanisms, reviews of the partnership (including leadership), and the appropriate risk transfer. Consider a Long-Term Contract. A long-term contract and operation term allows for many unknowns to work themselves out, such as population growth, economic ups and downs, legis- lative change, and more. By entering a longer contract, the private partner is creating protection from these unknowns by allowing time for the market to correct itself. 3.4.2 Domestic Perspective: SamTrans Contracted Transportation Services SamTrans in San Mateo County, California, has partnered with MV Transportation to oper- ate its fixed-route urban bus, paratransit, and other demand-response services over the past

46 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) 15 years. This transportation service agreement provides an example of a typical bus O&M contract in the United States in which some degree of risk is transferred to the private partner. The key difference between the international example, Keolis, and the domestic example, MV Transportation, is that there is more risk associated with the private partner, Keolis. The part- nership between SamTrans and MV Transportation is more closely related to contracted O&M and is, therefore, not classified as a small- and medium-sized P3 as defined in this guidebook. This profile is included to offer public transportation agencies insights into successful incentive- based contracts that can become integral parts of potential P3s. The performance-based contract incentivizes MV Transportation to minimize deadheading and reduce the customer complaint rate, improve service productivity, and reduce customer service call wait times. MV Transportation is also responsible for maintaining the transit buses used to provide these fixed-route services. MV Transportation’s FY 2014 operating budget was $15.9 million for fixed-route services and $10.5 million for demand-response services, which account for approximately 21 percent of the transit agency’s $123.8 million O&M costs in FY 2014. MV Transportation was selected to continue operations in 2012 following a competi- tive bid process. Risk The transit agency is taking great risk by transferring nearly one-fourth of the system’s O&M responsibilities to a private entity. However, by transferring this risk, SamTrans saves costs and serves the community in a more efficient way. The contract includes several performance stan- dards for the private contractor to meet. The contract also includes bonuses to incentivize MV Transportation to exceed base expectations. On the contrary, if MV Transportation does not meet expectations, an “assessment” or penalty payment is assessed (more details on the contract are listed in the implementation section). Implementation In FY 2014, MV Transportation’s fixed-route service was estimated to serve 2.6 million SamTrans passengers and travel 2.1 million revenue miles. MV Transportation’s demand-response service was estimated to serve 313,000 passengers and travel 2.6 million revenue miles. During MV Transportation’s previous contract term, the company achieved a record-breaking number of miles between road calls and exceeded the standards for on-time performance and accident frequency. There were only minor changes made to the new contract after 2012 and the performance standards remained the same. Other agencies that worked with MV Transporta- tion have inquired about the contract, specifically the bonus portion, so that they can implement these features in their contracts. The performance standards include: • Vehicle safety: 110,000 total miles between preventable accidents in any one calendar month • Service-related complaints: 12.0 to 12.9 per 100,000 passengers in any one calendar month • On-time performance: 85.0 to 85.9 percent in any one calendar month Specifically, the standards and incentives are as follows: • Vehicle safety. To emphasize the importance of rider safety, bonuses are paid if MV Trans- portation achieves a level of total mileage operated each month with no more than two preventable accidents. Bonuses are in increments of $500 starting at the contract stan- dard of 110,000 total miles and cannot exceed $7,500 for zero preventable accidents in a

Case Studies 47 calendar month. The in-text table below illustrates the various bonus levels based on total mileage: Total Mileage Bonus Assessment Zero preventable accidents in the month $7,500 155,000 or greater $5,000 150,000 $4,500 145,000 $4,000 140,000 $3,500 135,000 $3,000 130,000 $2,500 125,000 $2,000 120,000 $1,500 115,000 $1,000 110,000 $500 104,000–109,999 $0 99,000–103,999 $250 94,000–98,999 $500 89,000–93,999 $750 84,000–88,999 $1,000 79,000–83,999 $1,250 74,000–78,999 $1,500 69,000–73,999 $1,750 64,000–68,999 $2,000 59,000–63,999 $2,250 58,999 or less $2,500 maximum • Service-related complaints. If service-related complaints exceed or fail to meet the standard of 12.0 to 12.9 complaints per 100,000 passengers the incentives/assessments are as follows: Complaints per 100,000 rides per month 9.9 or less $1,500 bonus 10.0–10.9 $1,000 bonus 11.0–11.9 $500 bonus 12.0–12.9 Standard 13.0–13.9 $250 assessment 14.0–14.9 $500 assessment 15.0 or more $750 assessment • Americans with Disabilities Act (ADA)-related complaints. A $5,000 bonus is paid to MV Transportation if there are no validated ADA-related complaints in a month. • On-time performance. MV Transportation operations are required to achieve a minimum of 85 percent on-time performance. If on-time performance exceeds the standard the incentives will be as follows: Performance Incentive 90% and above $7,500 bonus 89.0–89.9% $6,000 bonus 88.0–88.9% $4,500 bonus 87.0–87.9% $3,000 bonus 86.0–86.9% $1,500 bonus 85.0–85.9% Standard

48 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) The partnership between SamTrans and MV Transportation benefits from cost savings, time benefits, and flexibility. MV Transportation is responsible for staffing administrative employees and operators, which takes away not only the financial burden from SamTrans but also the burden of recruiting and training. In addition, MV Transportation provides around- the-clock service which is not possible for SamTrans because of the local wage order rules and regulations. Without time restrictions, MV Transportation is flexible and can operate routes that require 24-hour service, such as the airport. The SamTrans O&M contract is an enhanced contract but is not a P3. Although there are many incentivizing performance standards included in the contract, the contract does not include a revenue risk transfer. If the contract were structured so that MV Transportation took on more risk, such as the Keolis agreements profiled, MV Transportation would have more of a financial stake in the agreement and might be incentivized to further reduce costs, improve service, and increase customer satisfaction. 3.5 ARTIC Concession Management City of Anaheim, California Sponsors City of Anaheim Partner Lincoln Property Company Agency size Medium Category Real estate Type Vending and retail concessions Service provided Concession services Risk transfer Property management, O&M concessions P3 initiative size Small Status Ongoing 3.5.1 Project Description The City of Anaheim partners with the private property management company Lincoln Prop- erty Company (LPC) to deliver concession services to the Anaheim Regional Transportation Intermodal Center (ARTIC), a multimodal transportation hub located in the City of Anaheim, California, which opened in December 2014. The intermodal center serves Orange County Trans- portation Authority transit bus, Metrolink commuter rail, Amtrak intercity passenger rail, Anaheim Resort Transportation shuttle bus, Tres Estrellas de Oro bus service to and from Mexico, Megabus, and Greyhound intercity passenger bus, taxis, and other public and transit agencies, and provides bicycle access. The 67,000-square-foot center, owned and built by the City of Anaheim, houses 12,000 square feet of retail and restaurant space, which LPC is responsible for leasing and operating. Purpose The City of Anaheim built ARTIC to provide regional connectivity and direct transporta- tion access to Anaheim’s resorts and sports arenas and the greater Southern California region. Once the proposed California High Speed Rail line is completed through Anaheim, ARTIC will serve as a California High Speed Rail station, connecting the rail service to existing regional

Case Studies 49 transportation as well as potential bus or streetcar transit connections that are being studied as part of the Central Harbor Boulevard Transit Corridor Study to provide direct access from ARTIC to the Disneyland Resort and the city’s convention center. The 12,000 square feet of commercial space in ARTIC was envisioned to become a premier transit-oriented downtown destination with lively shopping and dining. However, the City did not have the internal resources or experience to lease and manage this type of commercial space. The purpose of the ARTIC P3 was to provide the City with a cost-effective approach to success- fully secure high-end tenants and operate and manage the retail space while minimizing risk of lost rental revenue to the City. In December 2013, a year before the station opened to the public in December 2014, the city entered into a formal property management and leasing agreement with LPC to manage the entirety of ARTIC. Need In 2007, the City released a Request for Expressions of Interest and Procurement for Public- Private Development on the 16-acre ARTIC site. However, with the onset of the 2008 financial crisis, the City postponed the P3 component of the ARTIC project and looked for means to move the public transportation portion of the project forward. In 2013, the City re-released the request for proposal (RFP), which included a detailed set of goals and objectives that the private partner was to address. The RFP included non-negotiable project timelines and milestones, as well as key performance indicators the private partner would have to achieve throughout the life of the P3. 3.5.2 Identification Funding The City had secured the funds to design and develop ARTIC at the time the RFP was re-released and had developed a preliminary financial plan to operate the facility in its opening years. These funding sources have come primarily from rental revenues from the station and assessment funds. During the first 2 years of operation, the City used Anaheim Tourism Improvement District funds to operate a portion of the center. The Anaheim Tourism Improvement District is a self- assessment of 2 percent of the room rent collected by all of the hotels located within the district boundaries (which include The Anaheim Resort and the Platinum Triangle areas of the City). Up to 25 percent of the Anaheim Tourism Improvement District revenues may be used for transportation activities within the district, with the remaining 75 percent used to market the area. The Anaheim Tourism Improvement District contributed $2.1 million in 2014–2015 and $1.9 million in 2015–2016 to offset operating expenses for ARTIC. Funding Strategy Collecting optimal revenues from a large retail center such as ARTIC requires achieving a high occupancy rate with stable tenants at competitive rental prices, while operating as efficiently as possible to keep annual operating and maintenance costs low. The City recognized that the best way to achieve rental revenue targets was to engage a private partner experienced in securing tenants and effectively managing large commercial spaces. At the time of the center’s opening, LPC had secured five tenants: a local convenience-style store with food, beverage, and travel essentials; a coffee shop; a frozen yogurt/pretzel vendor; and two sit-down restaurants. In 2015, a private bus company offering trips to and from Mexico opened a kiosk and became the sixth tenant of ARTIC.

50 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) Cost The City’s FY 2015–2016 budget included $3.9 million to operate ARTIC, including the cost of utilities, property insurance, labor, maintenance, and management fees to LPC. Offsetting these costs was $1.6 million in budgeted revenues to be generated from tenant lease agreements, park- ing, advertising, and sponsorships. The actual excess of expenses over revenues, which totaled $1.9 million for FY 2015–2016 was paid for by the Anaheim Tourism Improvement District. The City of Anaheim did not track the internal staff costs to develop the P3 project. Consul- tants were hired to assist with the development of the RFP whose cost was included in the overall development budget. City representatives state that the services provided by the consultants were critical in supporting to the process. Enabling Legislation There were no legislative restrictions that precluded the project and the partnership between ARTIC and LPC from occurring. However, the ARTIC project itself was only made possible because of a major re-zoning effort undertaken by the City, which favored mixed-use develop- ment. This re-zoning allowed the City to develop ARTIC as a true mixed-use transit-oriented transportation hub. 3.5.3 Initiation Through the competitive bid process, the City evaluated LPC on various criteria such as the capabilities of its project team (including its partnerships with sub-consultants) and the in-house leasing staff, as well as the company’s financial capacity. The City officially awarded the contract to LPC in 2014, primarily because the City found LPC’s “one-stop-shop” leasing and management model essential to successfully realizing the City’s vision for a vibrant com- mercial space within ARTIC. Furthermore, the City valued LPC’s strong local presence and experience managing other large commercial properties in Anaheim. LPC’s local reputation and existing client relationships within the commercial real estate community were seen as assets to the P3 that the public partner could not provide. Additionally, LPC, a national firm, also had experience effectively managing projects similar to ARTIC such as Charlotte, North Carolina’s Transportation Center. LPC manages the entirety of the ARTIC facility with the exception of the physical train tracks, which are owned and maintained by Amtrak. LPC is responsible for operating, cleaning, and maintaining all common areas within the center; this includes responsibility for any common areas outside of the traditional retail space, such as the train platforms, passenger waiting areas, and bathrooms. LPC oversees contracts of on-site engineers, maintenance staff, and security guards who work within ARTIC; and any physical maintenance, such as work on the HVAC systems, elevators, or roof repairs, are all handled by LPC under the ARTIC contract. Tenants are responsible for cleaning and managing the interiors of their facilities. Project Team The City of Anaheim Department of Public Works provides various comprehensive ser- vices to meet a variety of the city’s infrastructure, construction, and development needs. The Department of Public Works, under the Director of Public Works, led the project internally with the City’s Transit Manager leading the planning activities and the City Engineer leading the construction activities. Following the opening of ARTIC, city oversight transitioned to the Convention, Sports & Entertainment Department which oversees five centers in the area: the Anaheim Convention Center, Angel Stadium of Anaheim, City National Grove of Anaheim, the Honda Center, and ARTIC. The Deputy Director of Administration and Operations of the

Case Studies 51 Convention, Sports & Entertainment Department manages the ARTIC operations and is the lead contact for LPC. The private partner, LPC, is a national real estate development and management company that has been in business since 1965. LPC boasts a diverse portfolio of residential and commer- cial properties around the country. Headquartered in Dallas, Texas, LPC has a large regional Southern California office in Irvine, 30 minutes from Anaheim. LPC services include real estate development, leasing, and asset management. LPC has two dedicated property management staff on site, a property manager and an assistant property manager, who are responsible for managing the various contractors for maintenance, janitorial services, engineering, and security on a daily basis. Communication The City of Anaheim team developed a detailed operations plan with milestone dates before its initial meeting with LPC. Once the partnership was formalized, the two points of contact from the public and private partners met once a week to discuss the project’s progress. The nature of these meetings evolved as the project moved from pre-development, to leasing, and finally to the operations phase. LPC adheres to the initial performance guidelines set forth by the City and both weekly informal and monthly formal communication and reporting proce- dures from the beginning of the process have helped to foster a collaborative partnership. The LPC property manager is required to submit weekly operational reports and monthly financial reports to the appropriate contact at the City. Informally, both partners noted that they spoke to each other by phone at least once a week to stay in touch. The LPC property manager noted that if there is any major incident involving operations or security, she notifies her contact in the City immediately. 3.5.4 Champions The success of ARTIC was due, in large part, to the numerous project champions in both the city and throughout the region who helped secure the additional funding to develop ARTIC and who were instrumental in shepherding the project through the permitting approval processes. The Director of Public Works at the City of Anaheim was a champion of the project and allowed the team to think outside the box, ultimately leading to the partnership with LPC. 3.5.5 Planning Monitoring As mentioned, formal monitoring processes were established at the beginning of the partner- ship. The partners meet weekly to discuss the state of the facility and LPC must report about performance indicators, monthly revenue, and tenant status. The key performance indicators that LPC must report on include the status of their compliance with agreements created by the partners and approved by the Department of Public Works such as the O&M plan, the pest control plan, and the security operations plan. Other indicators include identification and removal of graffiti, identification and remediation of property damage, trip hazards, emergency incident response, availability of public and freight elevators, and spillage or refuse in any common area. Key perfor- mance indicators in the agreed-upon reporting schedule include performance requirements and standards that LPC should uphold, a time for detection, and a deadline for response. ARTIC is a city-owned facility that was, in part, funded through taxes and special assessments, so the residents and business owners in Anaheim were invested in the success of the facility. The public held both parties accountable for the state of facility through customer feedback and

52 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) media coverage. Furthermore, as the property manager who is responsible for upholding the tenant agreements within each retail space, LPC is held accountable by both its tenants and the facility’s patrons. Planning Delays The management agreement with LPC Transit Management, LLC, was officially executed on December 17, 2013, just a year before the center opened on December 6, 2014. For the 12 months before the opening of ARTIC, LPC worked to fill the concession space. Due to the quick pace of the project, it was essential that LPC quickly followed the City of Anaheim’s direction. One of the biggest challenges for the City and LPC was planning the operations of a facility with no historical data for ridership or usage. Some of the assumptions considered were the staff- ing level needs, hours of operations, and janitorial needs. Fortunately, LPC’s assumptions were robust enough to meet the needs of the facility. 3.5.6 Implementation In December of 2014, ARTIC opened to the public. At the time of the opening, ARTIC was near full occupancy, with only one retail vacancy that LPC had yet to lease. In addition, over the 18 months there has been no turnover of leased spaces and the final retail space still remains unoccupied. 3.5.7 Key Benefits Interviewees listed the following key benefits related to the initiative: • Finding a flexible private partner was a key benefit to the success of ARTIC property manage- ment. The private partner joined the team after construction started and was able to quickly understand the goals of the new development. The City of Anaheim noted that, without a partner that could step into the project and take off running, the development would not have nearly been as successful. • Outsourcing the leasing and property management responsibilities was a critical element for the City of Anaheim. In evaluating the options, the City decided to outsource the property manage- ment of ARTIC and have a private party lead those efforts under the direction of the City. • Considering the City needed a private partner to take on the leasing and property management role, the private partner was able to be innovative in acquiring tenants. The private partner, with a national and local reputation, secured tenants that the City might not have been able to identify. 3.5.8 Lessons Learned Each interviewee was asked to identify any lessons learned or elements that they would have done differently. Lessons learned identified by Lincoln Property Company include: • Establish one critical point of contact. LPC operated the facility as a one-stop-shop and took responsibility for leasing, property management, parking, security, and more. It is beneficial to have a private partner on site every day to keep the City informed with any necessary feedback. Lessons learned identified by the City of Anaheim include: • Maintain one critical point of contact. Stay involved with the project and maintain a point of contact. The City of Anaheim always kept the line of communication open with LPC. Sched- uled weekly meetings forced transparency and ultimately no glitches throughout the project.

Case Studies 53 • Leverage a partner’s skill and experience. Engage your private partner in the development and design process as early as possible. Professional property managers have insights as to how to design tenant spaces to increase functionality, optimize revenue generating space, and decrease operating and maintenance costs. Furthermore, if a property manager/leasing engagement is involved during the design process and they are able to secure anchor tenants during pre- development, the major long-term tenants can also provide design input up front. This will save time and money during the tenant fit-out process before the retail space opens to customers. Additional lessons learned are summarized below: • Determine each partner’s responsibilities and costs up front. Issue an RFP outlining the public partner’s clear and full expectations in the beginning. This allows the private partner to understand the needs of the City and ARTIC up front. It is essential for both partners to under- stand each other’s goals to avoid any miscommunication later in the project. Because of the City of Anaheim’s clear, concise RFP, there was a detailed vision for the project team to follow. 3.5.9 Conclusion The ARTIC P3 is an example of a successful partnership where the public partner acknowl- edged its inexperience at leasing and managing retail spaces and engaged a private partner with the industry expertise to best deliver a high-quality transportation facility. However, the project would have benefited long term if the public partner had taken advantage of the private part- ner’s industry experience during the initial stages of project development when designing the commercial spaces. Once operational, the private partner provided weekly and monthly reports of previously agreed-upon items to the public partner. This type of monitoring and seamless communication has helped foster trust between the two teams. 3.6 RTD Depot Square Bus Station Boulder, Colorado Sponsors Regional Transportation District of Denver and the City of Boulder Partner Pedersen Development Company Agency size Medium Category Real estate Type Joint development/Design Build Service provided Joint development Risk transfer Delivery risk P3 initiative size Small Status Completed 2015 3.6.1 Project Description The Regional Transportation District (RTD) of Denver and the City of Boulder partnered with Pedersen Development Company to deliver the new underground Depot Square Bus

54 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) Station in Boulder, Colorado. Pedersen built a new bus rapid transit (BRT) facility for the City of Boulder and RTD, and, in exchange, secured the right to deliver a TOD apartment building adjacent to the station. By partnering with Pedersen, the City of Boulder and RTD realized ben- efits such as higher ridership associated with jobs and housing located near the new BRT station; opportunities for encouraging more affordable housing near the BRT station; and infrastructure and operational cost sharing. Pedersen’s $55 million Depot Square TOD is anchored by the BRT station. It is part of Boul- der Junction, a 160-acre, mixed-use development that includes housing, lodging, public spaces, and the fully renovated and repurposed historic Boulder Depot. The development integrates the needs of RTD and the City of Boulder’s vision for Boulder Junction. In 2004, the City of Boul- der purchased 8 acres and RTD purchased 3 acres for a bus facility to serve as the terminus of a BRT line. RTD worked closely with the City on plans for the bus facility. In 2010, a design-build RFP was issued for the transit elements of the project, including an alternative option to submit conceptual plans for TOD on the site. The RFP language was delib- eratively less prescriptive and allowed for the development community to create an arrangement that addressed transit needs while also facilitating private development on the RTD site. While RTD owns the land, the eventual arrangement was structured such that the various land uses are similar to condominium ownership, with the private partner delivering 71 affordable housing units and selling part of the property to a hotel developer. As such, there is an ownership orga- nization to which each party involved pays certain proportional fees to help manage the overall property. The public partners and private partner successfully delivered a TOD project that would not exist without the innovative ideas of the private partner. Purpose RTD’s primary goal was to deliver a new bus facility. However, RTD and the City of Boulder wanted to deliver a well-executed, transit-oriented joint development. The purpose of the new bus facility is to serve the growing number of commuters in Boulder and Denver. Recently, the Colorado Department of Transportation completed a widening project of route US 36, which connects Boulder to Denver. The US 36 Express Lanes Project is a multimodal project that built an express lane in each direction on US 36, in addition to the two free general-purpose lanes. The express lanes accommodate high occupancy vehicles (HOV), BRT (which started running in January 2016), and tolled vehicles. The RTD Depot Square Bus Station was completed in time for the opening of the enhanced route US 36. Need RTD and the City of Boulder recognized the need for a bus facility and the benefit of building adjacent transit-oriented development, which includes mixed-use space to further develop the Boulder Junction over the long term. The public partners sought a private partner to construct and manage TOD adjacent to the station. According to the project’s public partners, the private sector had broader capabilities to construct the transit center, identify hotel and retail partners, and develop affordable housing. 3.6.2 Identification The project was identified in the mid-1990s when RTD and the City of Boulder were looking to expand commuter parking. The City proposed using the land across from the highway for a parking garage. In an effort to expand services in Boulder, the City and RTD identified the need for the transit center, Depot Square Station, to bring a state-of-the-art transportation center for regional transit connections. After identifying the transit need for the region, the City worked

Case Studies 55 with RTD to design and build the RTD bus rapid transit station. The new transit center serves several routes, including HX and S, and the Flatiron Flyer, as an end-of-line station. Addition- ally, the transit center provides an east Boulder end destination for RTD services, connecting with local bus service in Boulder as well as access to the multiple Regional and Express routes available from the six Park-n-Rides along the US 36 BRT corridor. The Depot Square Station is a 45,655-square-foot underground bus facility that has six bus bays and a fully staffed ticket/sales information booth, and is patrolled by RTD security 24 hours a day. The underground bus facility is located beneath the apartments and parking garage. The underground design idea was presented to RTD and City of Boulder by the private partner in the RFP response. In 2003, RTD received a federal Congestion Mitigation and Air Quality (CMAQ) grant toward development of a “Transit Village.” The CMAQ program provides a flexible funding source to state and local governments for transportation projects and programs to help meet the require- ments of the Clean Air Act. Funding from the program is available to reduce congestion and improve air quality in metropolitan areas that do not meet federal standards. The City of Boulder used the first segment of the CMAQ grant money to conduct a master planning study in which the City identified a specific location for the new underground BRT station. In 2004, RTD agreed to jointly acquire land with the City of Boulder with the intent to create the “Transit Village.” The initial plan was to use the land for a standalone bus loop and keep the development separate. However, through the years, the plan developed into a project where transit and development would be physically integrated as a TOD project. CMAQ funds are available for obligation for a period of 3 years and, therefore, the City of Boulder and RTD were required to use the remaining portion of the grant by the end of 2006. To ensure the use of the funds, the City and RTD released an RFP for the bus facility as a design- build project. The RFP included delivery of a bus station and parking and was drafted and released by the City of Boulder to align with the master planning process. The selection com- mittee was composed of three members from the City of Boulder and two members from RTD. Although the diversity of the committee added perspective, it also created confusion according to the developers because of the lack of a leader. All questions had to be directed to the commit- tee rather than one point of contact. When Pedersen needed clarification regarding the devel- opment contracts or plans, it took longer to get a response because the question needed to be answered by each member of the committee. Pedersen won the competitive process because of the affordable housing element of the pro- posal. The company had just built an apartment building near the future bus facility and when it sold the apartment building it included a “cash in lieu fee” which required the developer to allow the construction of affordable housing directly across the street from the building. This set-up was key to Pedersen’s success in winning the RFP. Additionally, Pedersen was the only respondent that proposed to deliver the bus facility underground, which was a key factor in its selection. Support There was support for this project because of the long lasting planning process. Many politi- cal leaders in Boulder, including the former Mayor, were proud of the committed partnership between RTD, the City of Boulder, and Pedersen to complete the project. Although there was local and political support for the Depot Square project, it took the City of Boulder and RTD 7 years to release an RFP for the development. The project ultimately was a public-public-private partnership and with so many key members involved in the project, the process was long and strenuous.

56 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) Long-Term Goals The City of Boulder is roughly 30 miles from Denver, the largest city in Colorado. The BRT system was necessary for the City of Boulder to meet the capacity of travelers commuting to and from Denver. Both RTD and the City of Boulder understood the need for not only transit opportunities but also development in the City. Pedersen Development, a small development company, was eager to find a place in the Colorado market, and the Depot Square Bus Station development was a fitting venture. Enabling Legislation There was no legislation that precluded the partnership between the City of Boulder, RTD, and Pedersen Development. RTD encourages private development, capital expenditures, and joint development for land use, especially when transit ridership is promoted through the design and operation. RTD and the City of Boulder had the necessary rights and ability to have a joint development on RTD’s property. 3.6.3 Initiation and Planning Pedersen Development won the competitive bid process in 2011. However, the City of Boul- der, RTD, and Pedersen spent more than 2 years negotiating the terms of the development contract. The structure of the contract was elaborate and consisted of the following negotiations: • A second contract created a contractual relationship between the developer and the public partners for the design build contract. • RTD received approval to enter into a condominium agreement (common interest commu- nity) with the developer and the City. • An agreement was reached for placing the RTD property within the condominium structure. • Development fees and permit fees were initially waived for the developer but later negotiated through the transaction process. Originally, Pedersen assumed that because the contract was joint (between RTD and the City of Boulder), the fees would be waived for use of public right of way. However, the City ultimately did not agree to this and the developer paid all devel- opment and permit fees. Boulder’s Transit Village Area Plan contemplated fee waivers and infrastructure improvements by the City, which the City later chose not to pursue. Project Team The project team consisted of the City of Boulder’s financial team, executives, and commit- tees; RTD’s general counsel and team; and Pedersen’s development team. The legal teams of each partner were closely tied to the contractual phase of the development and the management teams of each partner were involved during the planning and implementation phases of the development. Communication There was no formal communication plan between the City of Boulder, RTD, and Pedersen during the contractual and development phases of the Depot Square Station. Two public part- ners were involved, which doubled the work and communication for Pedersen Development. In addition, many of the components of the project were finalized before the RFP was released and the partners had to sort through many more decisions later in the process than expected. Overall, communication occurred during face-to-face meetings in the contractual phase and through email and phone during the development of the new BRT station. The partners did not have a scheduled communications call or meeting to address the needs or concerns of the projects. Rather, the team talked as needed when issues came up.

Case Studies 57 3.6.4 Implementation After the planning processes was complete, construction started in August 2013 and was origi- nally expected to finish within 18 months. The schedule of the project was as follows: • 2003: CMAQ funds awarded to the City and RTD. • 2004: The City and RTD jointly bought 11 acres of land for the project. • 2011: RFP was released and Pedersen was awarded the project. • 2013: Construction commenced. • 2015: Construction finished and the Depot Square Bus Station opened. Associated Cost Throughout the course of the project planning and implementation, RTD did not track inter- nal staff labor and time. The only actual costs that are known to RTD are the transit compo- nents of the project, including bike and pedestrian. Total transit costs were roughly $18.5 to $18.6 million. Project Cost The City of Boulder and RTD contributed a combined total of $9.4 million toward the devel- opment of the Depot Square Station project. Most of the public contributions came from the CMAQ grant. Transit-Oriented Development The overall mixed-use project cost $50 to $55 million, which includes a 150-room hotel, a BRT station, 771 permanently affordable apartments, a five-level parking structure, and a re-development of Boulder’s historical Depot into a restaurant. The parking components are managed by a parking management system and consist of a parking structure with 382 stalls, public parking, hotel parking, RTD parking, and apartment parking. The Boulder Junction at Depot Square Station includes the following components: • An underground BRT center, • East Boulder’s end destination for RTD services—local bus service and multiple Regional and Express routes, • 150-room Hyatt Hotel, • The Depot Square apartment complex with 71 affordable housing units, • A parking garage with 386 parking spaces with 75 spaces reserved for RTD patrons, • Daily free parking for patrons that live within the RTD district, • 27 bike racks, capable of holding 54 bikes, throughout the development and available for RTD riders, and • A two-level restaurant called Depot Roadhouse. The project was completed in 2015 and is located at the northeast corner of Pearl Parkway and the new Junction Place road. 3.6.5 Champions Throughout the negotiation phases of the project, RTD’s general counsel was a champion in moving the process forward. Since the contract was legally based, each element of the contract needed to be vetted and therefore attorneys from each side of the partnership were very involved with this phase of the project.

58 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) In addition, as noted by RTD, the developer was extremely patient and diligent throughout the entire planning and implementation process and was a natural champion of the project. 3.6.6 Key Benefits Interviewees listed the following key benefits related to the initiative: • According to RTD, because the project was delivered as a P3, the transit facility was designed with much more focus by the private partner. The private partner’s focus included finding the appropriate tenants and including affordable housing. The TOD will help RTD’s BRT capacity to grow in the Boulder location. • The City of Boulder and RTD received much more in the development than they had bargained for with the private partner. This partnership demonstrates how to successfully integrate transit and development, creating a true TOD. • The completion of the transit facility and development at Depot Square kicked off the City of Boulder’s overall development goal of the Boulder Junction area. Additional development anticipated includes the following: – 100,000 square feet of mixed-use space with 20 condominium units, – 478,000 square feet of development, and – 200,000 square feet of office space for a technology company. 3.6.7 Lessons Learned Each interviewee was asked to identify any lessons learned or elements that they would have done differently. Lessons learned identified by Pedersen Development Company include: • Ensure full support from all stakeholders involved. It is essential to find leadership continu- ity because it allows each phase to move forward with more unity. • Establish one critical point of contact. Identify one point of contact on the public side to rely on. The partnership process is much more cohesive if the public partner provides a “point person” who can be relied upon by the private partner. Lessons learned identified by RTD of Denver include: • Solidify the project’s goals and parameters. Be up front and clear about the general goals of the project. It is essential in the RFP process to have clarity but also be open to innovative ideas. The innovation often comes from the private sector and the public sector must be open to ideas. • Confirm all elements of the project in the early stages. Solidify the ongoing obligations, liabilities, and cost of O&M before the private partner is involved. • Ensure full support from all stakeholders involved. Find a developer that has a long-term interest in the project. Additional lessons learned are summarized below: • Determine each partner’s responsibilities and costs up front. Define the relationship and specify the roles and responsibilities of each team member involved. This is key when there are multiple public partners involved in the project. It is beneficial to have one public point of contact for the private partner, especially during the contract, planning, and implementation phases of the project. The private partner needs to know who to approach with any issues or concerns.

Case Studies 59 3.6.8 Conclusions The RTD Real Estate P3 ultimately helped shape the City of Boulder’s TOD image through its private partner’s industry expertise and participation and through the public partner’s flexibility and willingness to adapt the P3 scope. While the public partner was originally just looking for a developer to deliver the underground BRT station in exchange for TOD rights adjacent to the station, it was the private developer who introduced the idea of also provid- ing a financial strategy that would allow them to include affordable housing. While this P3 is a success, the process would have been smoother if the public partner had fully defined the need for the P3 and conveyed its expectations and knowledge of project limitations. It is important that all elements of the project are wholly agreed upon by both parties early in the P3 planning stage in order to avoid any delay in project delivery or any tension among project parties. 3.7 HART Advertising Technology Tampa, Florida Public sponsor Hillsborough Area Regional Transit Private partner Commuter Advertising Agency size Small Category Marketing Agreement Type Advertising Service provided Advertising technology and management Risk transfer Delivery, operations, and maintenance of advertising; and advertising technology P3 Initiative size Medium Status Ongoing 3.7.1 Project Description Hillsborough Area Regional Transit (HART) in Tampa, Florida, has partnered with Com- muter Advertising to provide GPS-enabled advertising technology, including digital onboard media and public rider announcements, to generate additional revenue for its system. HART grants Commuter Advertising, a private firm, exclusive access to install its technology to play both public service and paid 10- to 15-second advertising announcements on all 189 of its vehi- cles. The partnership, which bears no cost to HART, generates monthly revenue for the system by securing paid private advertisements. Commuter Advertising is a unique business model design to create revenue for transit agencies while also generating profits for the private partner. With this technology, businesses can chose specific stops for targeted advertising using an online map. Businesses can also upload their media to the online portal to play onboard HART buses at the purchased stops. Commuter Advertising also secures paid public service announcements from other public agencies and gives HART a predetermined number of free messages to com- municate important service information to its riders. All messages follow guidelines designed by HART to ensure that the messages are appropriate for all riders. HART and Commuter Adver- tising have a revenue split agreement with a built-in minimum guaranteed revenue amount in

60 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) place for 5 years. At the time of the P3’s inception, the initial estimate of proceeds to HART was $459,000 over the life of the 5-year contract. Purpose The purpose of the P3 between HART and Commuter Advertising is to leverage private tech- nology and marketing resources to generate revenue for both the public and private partners though the use of the public partner’s assets and clientele. The privately provided onboard technology provides audio and digital scroll screen announcements to provide passengers with important information such as route changes, holiday information, and arrival times. The con- cessionaire also works with local businesses in the Tampa area to secure new revenue for the transit system by selectively advertising along the route. Need In this P3, both partners bring different, yet equally important, assets needed to make this opera- tion a financial success. Commuter Advertising is a private company with a very specific business model, which depends on gaining access to, and operating on, public transit systems. The private partner needed to enter into a mutually beneficial agreement with HART in order to generate profits. Like many medium-sized transit systems, HART was in need of additional funding sources to continue operations and complete needed capital projects along the system. HART did not have the technology or the resources to create this type of a revenue generating marketing system. So Commuter Advertising’s P3 solution offered HART a way to increase revenues without expend- ing public funds. 3.7.2 Identification Cost The entire cost of this partnership is carried by the private partner. All external costs to install, operate, and market the advertising system are the responsibility of the private partner. Com- muter Advertising paid for all upfront capital costs such as the installation of the device which uses the private partner’s patented technology to display tailored advertising messages based on the vehicle’s location using GPS location technology. In addition, HART tracks the staff hours its technology department spends each month to update the messages created by Commuter Advert- ing, and then HART is reimbursed by Commuter Advertising based on an hourly rate for its labor. While HART dedicated many staff hours to the project during the negotiation phase, they were unable to estimate upfront labor costs to initiate the partnership. Bearing all transit agency costs necessary to support the partnership is an integral part of Commuter Advertising’s busi- ness model to incentivize transit agencies to partner with the firm. Enabling Legislation Since Commuter Advertising’s marketing technology is patented, the company closely reviewed Florida’s “Sunshine Laws” surrounding intellectual property rights. Aside from the potential legal implications specific to the private partner, this P3 did not encounter any state or federal legis- lative issues that would have prohibited the P3 from occurring. In this particular case, internal contracting regulations and procurement processes from HART were considered more critical. 3.7.3 Initiation From Commuter Advertising’s inception, the company’s business model was designed specifically to capitalize on a market opportunity that, in large part, goes untapped—the

Case Studies 61 daily audience riding public transit. While many public transit vehicles promote business and services through physical posters and displays inside cars or at bus shelters, the com- pany’s founder identified an alternative way for businesses to target potential customers on transit. By inventing a patented GPS-enabled marketing system designed to play advertise- ments tailored to a route’s location, Commuter Advertising predicted that its model would increase profits for local businesses, provide riders with timely and interesting information, and generate additional revenues for the transit system. In 2014, the CEO from Commuter Advertising was interested in expanding business into the Florida market. The CEO identi- fied HART as an ideal transit agency to partner with based on its size, ridership, and market potential. The CEO arranged to meet the marketing director at HART at a transit industry conference. The representative from HART believed that this model, at no cost to HART, would be a unique opportunity to generate new revenues for the system. Since Commuter Advertising had already implemented its system successfully at other transit agencies in the Midwest, HART was able to do its due diligence on the private partner by observing the expe- riences of other transit agencies and inferring that this would be a successfully and mutually beneficial partnership. Project Team Commuter Advertising was represented directly by its CEO. As a small company, the group had a relatively small staff at the time of the P3’s inception and the CEO took an inter- est in winning this contract and building trust between the company and the transit agency. On a day-to-day operational basis, HART has a sales representative responsible for finding new advertisers and generating business as well as a technical staff person to compile the advertisements and work with HART’s Intelligent Transportation System (ITS) depart- ment to update the messages every 3 weeks. The private partner expressed that having a competent team on both sides of the partnership was critical to the P3’s success. He noted that the CEO of HART had been very successful at fostering an entrepreneurial environ- ment, encouraging his staff to think creatively when evaluating operational improvements or non-traditional revenue generating opportunities, which ultimately paved the way for this project. HART has two main staff members who interact with the private partner on a regular basis. The Director of Marketing handles the contracts, approving and monitoring the advertisements, and collecting the monthly revenues. The transit agency’s ITS Coordinator is responsible for overseeing the installation of the devices in HART’s fleets, syncing HART’s annunciator system with Commuter Advertising’s technology, and uploading the messages provided by the private partner throughout the system. Communication Both partners agreed that effective and open communication was critical to the success of this P3. Commuter Advertising provides a copy of all audio messages to HART prior to deployment on the routes to insure that the agency is comfortable with the content. Commuter Advertising also provides HART with a monthly report of revenue generated. The ITS department of HART connects with the provider once every 3 weeks to update the messages and discuss any technical issues about the project. Contract Method Commuter Advertising believed that agreeing on the appropriate contract method was a criti- cal step in building trust between two partners to create a foundation for a successful P3. From the various P3s Commuter Advertising had been a part of, the group found that transit agen- cies typically did not have a standard contracting method for revenue generating contracts and

62 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) that their rules tended to apply to vendors receiving payment from the transit agency. In some instances, this type of revenue-generating opportunity may require a transit agency to issue an RFP. However, according to FTA, as long as the contract amount is less than $100,000, a single- source contract is allowable. HART and Commuter Advertising entered into a 3-year agreement with two 1-year extension options. In the first year, the revenue split was 75 percent to HART and 25 percent to Commuter Advertising. For the remaining 4 years, the revenue split adjusted to 80 percent to HART and 20 percent to Commuter Advertising. The initial contract included estimated revenues in the amount of $459,000 over the 5-year period, with each year’s projected revenue increasing over time as shown below. Year Projected Revenues 1 $50,400 2 $78,750 3 $94,500 4 $105,000 5 $131,000 The contract also included a guaranteed minimum payment of annual revenue to HART in the amount of $12,000 if the transit agency’s revenue share did generate above that thresh- old. However, during the first 2 years of operation, the advertising system had not generated the projected revenue originally proposed. While HART is disappointed it will not receive the initially assumed $459,000 in profits over the 5-year period, it understands that Commuter Advertising, a company without a local office, is still in the process of building relationships with clients to generate more private advertising revenue. To incentivize HART to extend the P3 contract past the initial 3-year term, the private partner has increased the minimum amount of revenue HART will receive in the fourth and fifth years to $20,000 annually. This move is critical to the success of the partnership because, without the guaranteed revenues, HART might not be interested in continuing the partnership. Although the revenues have not produced the anticipated amounts, HART believes that the P3 is still a success because HART will be receiving an additional $20,000 for its budget while expending very little effort and no money. 3.7.4 Champions On the private side, Commuter Advertizing understands the importance of wining the trust of transit agencies and creating relationships with potential champions within agencies who can advocate for the partnership. To identify these champions, Commuter Adverting has become active within the transportation community by joining APTA and attending annual meetings and expositions where transit agencies can become familiar with their services. Within HART, the support of two champions were critical for the success of this P3. The marketing director at HART served as the public champion for initially securing the P3 and gaining the necessary board approvals to implement this project. After meeting with the private partner, the marketing director saw this P3 as a way for the agency to raise revenues without taking on any financial risk. Moreover, the marketing director recognized this as an opportunity to use privately funded and maintained technology and services to upgrade the transit system’s announcement system to better inform and serve riders. On the technical side, the transit agency’s ITS coordinator was instrumental in the physical implementation of the new system. The ITS coordinator worked to create compatible files that would com- municate with both the transit agency’s older annunciator system and the private company’s newer technology.

Case Studies 63 3.7.5 Planning Mutual Objectives Both partners have two primary mutual objectives. First, they are interested in maximizing rev- enues through advertisement sales. The private partner is incentivized to generate enough revenue to recover all capital and operational expenses in order to generate a profit while HART’s primary objective is to increase revenues to bolster the system’s annual budget. Second, both partners are com- mitted to providing interesting and informative messages to riders, as well as paid advertisements. Commuter Advertising contracts with other public agencies, such as the Department of Health and Human Services and the Department of Education, to transmit public service announcements to HART’s riders. One of HART’s benefits of the partnership is that it receives free announcements to be played over Commuter Advertising’s announcement system. It is in the best interest of both partners to receive positive customer feedback. HART has a responsibility to its riders to provide an enjoyable riding experience and Commuter Advertising can grow its business only if transit agencies believe that the advertising company’s system will add value to their riders and services. Risk The private partner assumes the financial risk in this P3 scenario. Commuter Advertising is responsible for providing all the technology infrastructure and equipment for the system, and monitoring, operating, and proving technical support when necessary. The private partner is also responsible for marketing their services in order to generate a revenue-producing business, thereby taking on the responsibility for ensuring a financially viable partnership. The public partner assumes a different type of risk in this situation. As a public agency, HART has a respon- sibility to provide positive and appropriate messages for its riders. HART must be judicious when approving advertisements so as not to offend its riders. Monitoring Commuter Advertising stated that continuous monitoring of the advertising system once installed and operational is critical to preserving the integrity of the P3 with HART. It is impor- tant for HART to monitor advertising activity to ensure that messages are positive and appropri- ate for riders. HART also stated that this monitoring was critical at the beginning of a partnership but that over time as trust is built, this time and labor intensive monitoring will diminish. HART has planning aides who already travel its routes to monitor ridership, scheduling, and general service levels. These aides now also monitor and report on how the advertising system is operating. The aides inform HART if the system is running smoothly, at an acceptable volume, and transmitting appropriate messages. In some ways, the P3 is self-policing. HART discussed how engaged and active their ridership was at delivering customer feedback to HART when they are unhappy with service. In the early months, HART received calls regarding some public health announcements that riders believed were inappropriate for children and about a paid advertisement from a private interest group. Commuter Advertising has removed these messages and HART has established clearer guidelines about the advertisements. Issues and Delays Commuter Advertising reports that the speed with which transit agencies review proposals can be slow. This issue was not necessarily unique to HART but rather a product of many public agencies’ approval processes. The head of Commuter Advertising expressed that any time a new, innovative revenue-generating proposal is brought to a public transit agency, there can be a level of skepticism or uncertainty on how the procurement and contract process will be executed, especially because there is no precedent to follow. As transit agency staff are often overburdened with responsibility, being vetted and approved by the transit agency’s internal legal department can be a lengthy process. Additionally, amidst the implementation process, HART experienced

64 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) some staff turnover among the critical contacts within HART that had initially understood and supported the project. Commuter Advertising cited this as a factor that inevitably caused delay as they then needed to build a new relationships with the incoming HART staff. 3.7.6 Implementation The private partner believed that the HART P3 had absolutely been a success for both their company and the transit agency. In order to assess their success, the CEO of Commuter Adver- tising said they continuously ask themselves several key questions: • Is our advertising pool and revenue stream from the transit system growing each year and are we continuing to add value to the transit system’s bottom line? • Are we creating creative messages that reach the riders directly? • Are we providing, and excelling at, superior customer service by providing communication that riders feel is interesting and important to them? • Are we continuing to innovate in our approach? The public partner agreed that the partnership had been successful at generating new revenues for the system. However, revenues did not sum to the total the agency had originally hoped for. HART said that the private partner could potentially generate additional revenue if the company had a local representative working to secure additional private advertisers. 3.7.7 Key Benefits Each interviewee was asked to identify key benefits of the project. Interviewees listed the fol- lowing key benefits of the P3: • It provides revenues to HART without HART having to assume any risk or make any finan- cial commitments. HART receives a guaranteed amount of revenue while the private partner also profits from a successful operation, making this an attractive partnership to both parties. • It offers HART an enhanced announcement system to effectively communicate with riders as part of the P3. Commuter Advertising provided HART with an upgraded method of trans- mitting critical service announcements such as route changes, service delays, and customer service information. • It promotes alternative methods of transportation funding that had not been previously con- sidered or accepted industry wide. 3.7.8 Lessons Learned Each interviewee was asked to identify any lessons learned or elements that they would have done differently. Lessons learned identified by HART include: • Solidify the project’s goals and parameters. Secure all discussed aspects of the partnership through a formal contract. Commuter Advertising initially told HART that they would be placing a local marketing representative in the Tampa area to locally manage the product and secure private clients. This part of the proposed agreement was not entered into the contract. HART believed that the lack of a local presence was a part of the reason the revenues in the first 2 years of operations have not reached the initially proposed targets. • Determine each partner’s responsibilities and costs up front. Set clear expectations of, and limitations on, the private partner’s activities. HART originally believed that most of the advertising would be from local private businesses but, at this point, a large portion of the advertisements is made of up paid public service announcements, which generate less revenue

Case Studies 65 for the system and have been found off-putting by some riders. Documenting clear guidelines to which the private partner must adhere to is critical. • Be open to innovation. Take chances on innovative funding strategies if failure poses no risk to the transit agency. HART believes this was an interesting way to expand their funding sources and took the initiative to navigate the initial internal approval processes. Lessons learned identified by Commuter Advertising include: • Secure a project champion. Identify the appropriate champion within the public agency to promote your partnership and advocate for its implementation. Gaining the support and trust of the marketing director at HART was critical in securing the success of this P3. • Promote transparency between the private and the public partner. Commuter Advertising shares all of its client, sales, performance, and revenue information with HART on a monthly basis. This open communication builds trust between the partners and has secured the con- tinuation of the P3 past the initial 3-year period. 3.7.9 Conclusions The HART P3 is a successful example of a partnership where the public partner leveraged its non-monetary assets in the form of its ridership and existing vehicles for full financial contribu- tion from the private partner to implement the advertising initiative. The public partner assumes zero financial risk under the P3. The P3 experienced early issues over advertising content because the public partner had not initially defined the nature of acceptable content on its vehicles, which incited negative feedback from local stakeholders due to advertisements they considered to be inappropriate. HART’s marketing department has since clearly defined advertising guidelines which the private partner now fully adheres to. However, if this had been accomplished earlier, it might have prevented some tension between the riders and HART. This P3 is also an example where a single internal champion promoted this opportunity throughout the agency and was able to secure the necessary approvals and help form the internal communication and monitor- ing policies that would allow this P3 to succeed. 3.8 TRAX Sponsorship Paris, Texas Sponsor Ark-Tex Council of Governments (ATCOG) Regional Transporta- tion District’s Rural Transportation System, TRAX Partner Paris Regional Medical Center Agency size Small Category Marketing agreement Type Sponsorship/advertising Service provided Fixed-route rural service and transit center facility by a public transit agency, made possible by private sponsorship in the form of a marketing agreement. Risk transfer Revenue risk P3 initiative size Small Status: Ongoing

66 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) 3.8.1 Project Description The Ark-Tex Council of Governments (ATCOG) operates the regional rural transit system, TRAX, through a nine-county region in northeast Texas near the border of Oklahoma. Before this P3, TRAX consisted of 60 vehicles throughout the nine counties, working primarily through a demand-response service. In addition, three intercity bus routes operate 12.5 hours each on weekdays. By partnering with local employers, TRAX developed a fixed-route service in Paris, Texas, a city located more than 100 miles from the ATCOG and TRAX main office. The local hospital, Paris Regional Medical Center (PRMC), became the presenting sponsor for the new fixed-route service (Paris Metro) that provides 12-hour service along four routes in the city. One route directly serves the PRMC campus located outside the city center, which was previously inaccessible by public transportation. The bus fare is $0.50 for adults. In addition to an annual monetary contribution of $25,000 over a 3-year period ($75,000 total), PRMC and TRAX also executed a 3-year lease to operate the Paris Metro Transit Center from an unused medical office in downtown Paris. PRMC provides the facility rent free for use by TRAX. Both partners in this agreement prioritized proving enhanced access to healthcare and economic opportunities through the new transit system. In exchange for PRMC’s monetary and in-kind property contri- butions, PRMC has received advertising on route guides, transit stops, and vehicles; a new stop directly outside the hospital; and positive publicity for the PRMC organization. Purpose The purpose of the TRAX P3 was to secure the necessary funding to implement and operate a fixed-route service in Paris through private sponsorships. TRAX decided to offer advertising opportunities to PRMC in exchange for an annual cash sponsorship and an in-kind property donation to house a new transit center, which will have a ticketing agent, customer service rep- resentative, and a lobby to be used as the passenger waiting room. The new transit center will also have dedicated bus parking and a curbside loading area. All vehicles will be parked at the transit center when not in service. Need In the 2013 Ark-Tex Regional Transit Coordination Plan update, Paris was identified as a city in need of fixed-route transit service. At the time, Paris was only served by a demand-response service, which was expensive to operate and was failing to meet local demand. Rides had to be scheduled at least 24 hours in advance, and, due to the limited number of vehicles in the agency’s fleet, seniors and persons with disabilities could be forced to wait for hours after a medical appointment to receive a ride home. The planning and implementation of a fixed-route service in Paris was documented as a priority for TRAX and a planning grant was awarded to ATCOG/ TRAX in 2014 to begin the process. After securing the regional buy-in through the updated coordinated plan process, the TRAX transportation manager began to discuss how to fund and operate a new fixed-route service that would serve major city anchors such as the hospital, com- munity college, and the bus stop for intercity Greyhound Connector Service. 3.8.2 Identification Funding Once TRAX had committed to implementing the project, the transportation manager identi- fied three primary funding needs in order to initiate and maintain the fixed-route service and complement the paratransit service in Paris: • Capital Funds: TRAX did not have additional funds to purchase new vehicles or to construct new bus stops or a new facility.

Case Studies 67 • Operating Funds: While TRAX was well positioned to receive operating funds from the state of Texas, the program required a 50-percent local match. TRAX needed to identify a local funding source to match the state operating assistance funding. • Transit Center: TRAX currently occupied a small office space in an office park that was too small to accommodate existing intercity bus traffic and had no room for a reception area. Funding Strategy Existing TRAX transit operations and capital costs were primarily funded through FTA Sec- tion 5311: Rural Public Transportation Program and FTA Section 5309: Capital Grants Program funds, as well as Texas operating grants which required a 50-percent local match. Like many other rural transportation agencies, funding to maintain operation was limited, and as the plan for the new “Paris Metro” fixed-route service began to take shape, TRAX realized it would need to find alternative funding methods. In total, TRAX estimated a capital cost of $366,207 to purchase the vehicles, create route signage, and update the transit center and $156,000 in incre- mental annual operating expenses. The TRAX transportation manager developed a menu of four sponsorship levels for local businesses and non-profit partners, ranging from $1,000 to $25,000 annually, in the hope of securing the necessary funding in exchange for advertising along the system. The transportation manager approached PRMC with a partnership proposal requesting a sponsorship of $25,000 annually for 3 years, totaling $75,000, and a donation of in-kind space amongst their vacant downtown medical offices to serve as the new Paris Metro Transit Center. In exchange, PRMC would receive: • Installation of one bus shelter on the hospital campus, with advertising ($15,000 value), • Two bus exterior advertising signs (both on the same bus or one per bus on two different buses) for the fixed-route vehicles, • Two bus exterior advertising signs on demand-response buses, • Bus shelter advertising at another location in Paris, and • Exclusive advertising in the route schedule booklet. Once PRMC had set the precedent for investing in the system, TRAX approached other busi- ness organizations to meet the total operating needs of the service. Within a year, TRAX secured $165,000 to initiate and operate the service for the first 3 years from six sponsors and secured the additional funds necessary through Texas DOT grants. TRAX believes a viable funding strategy is extremely critical when considering potential P3s. Cost Neither TRAX nor PRMC tracked the cost of internal staff hours while securing the part- nership. However, TRAX believes that the value of funds committed by PRMC as well as the zero-dollar lease signed for their transit center, far outweighs any internal staff time that was invested. For the private partner, the building leased to TRAX was already built and was being continu- ously maintained by its maintenance staff although it sat vacant. PRMC is responsible for the continued maintenance of the transit center, which they do not consider an additional cost of the partnership because it has not created new maintenance responsibilities. Support While the project had already been identified and regionally supported through TRAX’s Regional Transportation Plan in 2013, this P3 received a tremendous amount of local support and stakeholder buy-in. The executive director of the local United Way introduced TRAX’s

68 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) transportation manager to groups of local residents and business owners through the local chap- ters of the Kiwanis and Rotary Clubs, where she was able to present TRAX’s plan to create the Paris Metro system and reiterate the benefits it would have for the city’s residents. Once PRMC, the city’s largest employer, agreed to partner with TRAX, the transportation manager leveraged their investment to strengthen business proposals to other local anchor insti- tutions and prominent non-profit groups. At the time of Paris Metro’s inaugural run in July 2016, TRAX had secured five more 3-year sponsorships of $75,000 from the community college, the City of Paris, the Paris chapter of the United Way, the Texas Oncology group, and a private foundation. In addition, a local business agreed to sponsor the system at $15,000 for their first year, with the option for annual renewal. Long-Term Goals In the future, TRAX hopes to expand its services to nearby counties by securing additional P3 sponsorships. PRMC would also like to see the service expanded, which would benefit busi- ness by expanding its reach to residents in other Texas counties and potentially in the bordering areas in Oklahoma. Providing a reliable fixed-route service for residents outside Paris with a direct connection to the hospital would benefit the region by opening up healthcare options to residents and benefit the hospital by increasing its numbers of patients. Enabling Legislation This P3 did not require any special legislation. The transportation manager at TRAX noted that in order to achieve the long-term goals of serving nearby counties across state lines, some type of state agreement would be required in order to allow service funded by one state’s trans- portation funding programs to serve another state’s population. 3.8.3 Initiation The partnership between TRAX and PRMC seemed like a natural fit to TRAX because PRMC was the largest employer in the county, the most frequented destination for demand- response trips in the city, and a private company with the resources to invest in the com- munity it served. Project Team The ATCOG Rural Transit District was established in 1989 as a political subdivision of the State of Texas to provide and coordinate rural public transportation services within nine north- east Texas counties. Until 2016, TRAX primarily provided demand-response services, with limited deviated fixed-route services throughout these counties. TRAX’s transportation man- ager was the point of contact for the public agency during the inception and implementation of this P3. The transportation manager received support from TRAX’s executive director who was present for the initial meeting between the TRAX and PRMC executive leadership. TRAX had two staff persons located in Paris working with its TRAX demand-response service and they became involved in the creation of the fixed-route service operations as the “boots on the ground” in Paris. The CEO at PRMC was the initial contact approached by TRAX about the partnership oppor- tunity. However, a community liaison staff member from PRMC eventually became the day-to- day point of contact to coordinate with TRAX’s transportation manager. The PRMC team also included internal lawyers, accountants, and its corporate board located outside of Paris. Both partners believed that engaging competent staff members on both sides was critical to moving the process along in a timely manner.

Case Studies 69 Communication The P3 did not create a formal communication plan for the 3-year partnership period. TRAX will have a full-time staff located in the new transit center, who will be in regular communication with TRAX’s transportation manager located in Texarkana. While PRMC and TRAX have not officially agreed on a formal reporting system, the executive director of PRMC felt confident that an open line of communication and a high level of trust between her team and the transportation manager had been established and that she was comfortable with their existing level of communication. The private and public partner believed that while they did not have a formal plan, communication was extremely critical when planning and implementing the P3. 3.8.4 Champions In 2015, the transportation manager at TRAX began pursuing a public-private partnership with several local entities in Paris in order to create the Paris Metro fixed-route service. How- ever, being located in Texarkana, nearly 100 miles outside of Paris, the TRAX transportation manager wanted to secure a local project champion who would be able to introduce her to the appropriate entities as well as help her establish a sense of legitimacy in the small city. TRAX won the support of the executive director of the Paris chapter of United Way, a highly respected and active organization within the community. With deep roots in the community, the direc- tor of United Way quickly emerged as a local project champion, setting up introductions with business leaders, lending credibility to TRAX, and acting as the day-to-day local presence. Both the public and private partners agreed that United Way played an integral role in promoting this partnership. The private sector also identified the TRAX transportation manager as an important project champion. After the director of United Way made the introductions, TRAX staff members con- tinued to work closely with PRMC, followed up, and kept the process moving. 3.8.5 Planning Mutual Objectives The partnership between TRAX and PRMC seemed like a natural fit to the transportation manager since PRMC was the largest employer in the county, the most-frequented destination for demand-response trips in the city, and a private company with the resources to invest in the community it served. Risk Once the agreements were in place, neither partner identified any major element of risk. The private partner assumed very little risk by entering into this P3. The simple lease agreement assured PRMC that TRAX would be liable for any major property damage sustained at the tran- sit center during its occupancy. PRMC sponsorship secured a low-cost transportation system ($0.50 per ride) that would directly serve the hospital without undertaking any operational responsibilities. Moreover seniors (60 years or more) and persons with disabilities would ride for free. In the long term, the Paris Metro system runs the risk of being unable to secure renewed spon- sorship after the initial 3-year contracts, jeopardizing the fixed-route service. Monitoring The private partner reported that a monitoring system had not been agreed upon to track the number of additional patients brought to the hospital or the benefits from advertising. The

70 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) Paris Metro staff will report ridership data using the reporting system currently used on TRAX rural service lines. This data will be shared with PRMC and other private sponsors. The private partner noted that it trusted TRAX to efficiently operate the system and to abide by the tenant rules agreed upon in the leasing agreement designed to protect their property. Planning Delays Schedule delays were cited as the primary issue encountered while securing the P3 agreement and implementing the new Paris Metro service. Service was initially slated to begin in early March but actually began on July 27, 2016. Both parties believed that these delays were some- what unavoidable as PRMC’s participation was dependent on approvals from the hospital’s cor- porate offices located in Houston. If the private partner had identified a clear internal champion, these delays might have been diminished. 3.8.6 Implementation This P3 did not have a formal contingency plan in place during its development phase to mitigate conflicts that might have arisen with increased costs or extended delays. The capital costs for this project were minimal and standard for a rural transportation operation (new bus stops, four cutaway buses, and an outfitted transit center). So the project did not share the same risks of cost overruns as a large capital project would. The Paris Metro service began on July 27, 2016, and by August 2016 was averaging 150 trips per day. TRAX and PRMC believed that the introduction of the fixed-route Paris Metro system successfully enhanced the mobility of persons in the community. The president of Paris Junior College said “it appears to have opened up the world for our wheel chair bound community members.” TRAX will continue to collect ridership data to measure success by the growth of ridership over each year. Currently it anticipates about 38,000 annual trips, well over the 12,000 annual trips TRAX had been previously providing using demand-response in the area. Additionally, TRAX and PRMC were both considering ways to collect rider surveys to measure success by understanding the individual mobility benefits the service provides to the commu- nity. Lastly, TRAX suggested that a decrease in overall emergency room visits may suggest that the system is succeeding in providing residents with a reliable transportation option to attend scheduled appointments at the hospital, rather than using the emergency room. This success factor would be measured by comparing emergency room data on an annual basis provided by PRMC. Overall, TRAX stated this was a financially successful partnership, due to the fact that Paris Metro service would not have been implemented without the private funds from PRMC and its other private sponsors. 3.8.7 Key Benefits Interviewees listed the following key benefits related to the initiative: • The system serves a rural transportation need that had previously been identified. Paris Metro will provide a fixed-route service along four routes, 12 hours a day to a community with a high population of residents who lack access to a personal automobile or who are elderly or disabled and are unable to drive. • While it was not the motivation of the private partner, TRAX noted that PRMC’s sponsor- ship of the Paris Metro service benefited the private hospital by promoting its commitment to the health and wellbeing of the community it serves. This type of positive publicity would

Case Studies 71 likely foster goodwill and favor toward the private partner from existing and potential clients in Paris. 3.8.8 Lessons Learned Each interviewee was asked to identify any lessons learned or elements that they would have done differently. Lessons learned identified by PRMC include: • Find stakeholders that share mutual project objectives. By sharing a mutual objective with the public partner, such as serving the community, a business agreement can be reached rather quickly. Lessons learned identified by TRAX include: • Solidify the project’s goals and parameters before approaching a private partner. Approach a private partner with a professional business plan outlining the terms of sponsor- ship during the first meeting. This shows a potential private partner that the public entity is organized and able to complete the proposed agreement. An illustrative business plan also helps to convey the public entity’s vision right away, which can facilitate faster private buy-in. In this case, TRAX approached PRMC with the itemized sponsorship benefits, as well as mock-up renderings of vehicles and transit signs featuring the hospital’s logo. • Secure a project champion. Leverage existing relationships when looking for introductions to potential private partners. Showing that you have already built trust with someone else within the local business community can lend legitimacy to your organization and your proposal. Additional lessons learned are summarized below: • Ensure full support from all stakeholders involved. Both PRMC and TRAX suggested embarking on the partnership process as soon as possible once a potential project is identi- fied. While this was the first P3 of this nature for either party, neither the hospital or transit agency realized how long corporate approvals could take. • Leverage previous P3 experiences. Past experience in structuring a small P3 can be invaluable when coming to a partnership agreement. Finding an internal project champion familiar with the legal and contractual aspects of a small P3 will accelerate the implementation process. 3.8.9 Conclusions The TRAX P3 is an example of a “small” P3 in a largely rural area. As the single internal champion from the regional MPO, the transportation manager was able to leverage private industry experience with P3s to approach local business and anchor institutions to sponsor this P3. By approaching large private sponsors such as the hospital and college who share the mutual objective of enhancing the lives of local residents through increased mobility options, the partners were able to agree on a financial sponsorship agreement that would benefit the community as a whole, promote the private partners through marketing and advertising opportunities, and bolster business by providing direct fixed-route access to their institu- tions. This P3 was fully initiated by the public partner, TRAX, who had internally created a business plan, identified opportunities for the private partners, and prepared a financial plan for the partnership before approaching the private partner. By securing the public partners approach before initiating the P3, there was no confusion or unclear expectations on either side. This model can be replicated in rural, small urban, and large urban areas by applying the same P3 principles, lessons learned, and best practices employed by the public partner.

72 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) 3.9 New York MTA Wi-Fi and Wireless Service New York City, New York Sponsor New York Metropolitan Transportation Authority Partner Transit Wireless Agency size Large Category Innovative technology Type Wi-Fi and wireless service, Design Build Finance Operate Maintain Service provided Wi-Fi and wireless service Risk transfer DBFOM of Wi-Fi and wireless service; management of advertising P3 initiative size: Medium Status Ongoing 3.9.1 Project Description New York Metropolitan Transportation Authority (MTA) and Transit Wireless are expanding wireless voice, data communication, and Wi-Fi services to all 281 New York City Transit underground rail stations by 2017 and improving security and the customer experi- ence. The estimated cost is $200 million. The service is funded through mobile carrier net- work usage fees, which are, in turn, recouped by mobile carriers from user subscriber fees, as well as the sale of Wi-Fi capacity and sponsorships. All stations have wireless service, as of January 9, 2017. Purpose New York MTA wanted to offer this amenity to riders not only to please them but also to keep up with the fast pace of technology. By adding cellular and Wi-Fi services into the NYC subway system, MTA is offering what riders already expect in almost every part of their lives. Need New York MTA sought the assistance of a private organization to implement the infrastruc- ture of the Wi-Fi and wireless system in the underground system. At the time, MTA did not have the resources nor the experience to install such an intricate system. The need to partner led to a competitive RFP process and the partnership with Transit Wireless. Additionally, MTA wanted to provide riders with Wi-Fi and wireless service as an amenity and a service that enhances safety. During the installment phase, MTA realized the potential of the infrastructure and technology to support operations. 3.9.2 Identification MTA had previously considered opportunities to provide Wi-Fi and wireless services as an amenity to passengers, originally focusing solely on wireless cellular communication because the demand for data and Wi-Fi was not significant. MTA did not have an interest in installing the network in house and determined that a third-party private partner would be more effective at designing, constructing, operating, and maintaining the network system.

Case Studies 73 In 2012, MTA entered into private partnerships called “disposition opportunities” (analogous to a franchise) with four major telecommunication carriers to install wireless service in Grand Central Station. However, there had been internal discord among the consortium members, the budget had doubled, and the initiative experienced significant schedule delays. This experience encouraged MTA to look for other options when considering the implementation of wireless service in all 281 underground subway stations. Transit Wireless was formed more than a decade ago to support MTA’s telecommunication needs. Its parent company, Broadcast Australia, has successfully implemented Wi-Fi and wire- less services in Toronto’s transit stations and Hong Kong’s stations. Enabling Legislation There were no regulations nor any existing legislation that restricted partnership between MTA and Transit Wireless. MTA was able to procure and contract with wireless service providers within its existing purchasing and franchising authority. 3.9.3 Initiation In 2005, MTA released an RFP to provide wireless service to its subway stations, targeting cell tower companies, consortia of mobile carriers, and small telecommunication companies. Transit Wireless responded to the RFP with an innovative plan to design, build, and deploy a sophisti- cated wireless system at all of MTA’s underground stations and serve as a neutral host between MTA and the wireless carriers. Transit Wireless also proposed a 50-percent revenue share with MTA and advanced technology to be used by carriers and MTA at minimal cost to MTA. After a thorough evaluation process, MTA selected Transit Wireless because, as a neutral host, the company would not be affiliated with any one carrier but would instead serve as an intermediary owner/manager of the wireless service among all carriers. Transit Wireless made a capital investment of approximately $250 million. In return, Transit Wireless leased the right to use the antenna system to serve wireless carriers and provide Wi-Fi. Transit Wireless has agreed to share 50 percent of its net income from this venture with MTA or has guaranteed a minimum payment of $3.3 million per year to MTA once all stations have service, with annual increases based on the consumer price index. Contract When developing the contract, MTA applied lessons learned from a combination of past experiences. Transit Wireless also built a financial model that included engineering and design costs and surveyed potential customers to understand potential pricing. This model was used before commencing construction and proved to be attractive to MTA, the customers, and Transit Wireless shareholders. Delays The agreement was renegotiated in 2011 following the impact of the financial downturn of 2008 and after Transit Wireless had received new financial backing to continue the initiative. The modified contract included seven phases of implementation and was grouped to support geographical concentrations around equipment hubs and avoid cherry picking. As some sta- tions have more riders than others, MTA structured the contract to include in each phase a mix of stations to ensure that the private partner would be incentivized to complete each phase and would not stop after installing service at the busiest stations. Transit Wireless was obligated to complete each phase once started. If Transit Wireless did not move to the next phase by a fixed deadline, MTA had the right to introduce a new partner to finish the project.

74 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) 3.9.4 Planning The timeline of the project was as follows: • 2005: RFP released by MTA. • 2007: Agreement signed between MTA and Transit Wireless. • 2008: Financial crisis caused project to be placed on hold. • 2010: Project restored and considerable negotiations resulted in an expanded contract. • 2013: First phase of the project opened, including 30 stations in Manhattan. • 2017: Seventh and final phase of the project was completed. There was internal resistance when MTA announced that it would use a third party to design and build a communication system within the transit system. However, as the con- tract progressed and success was visible, Transit Wireless worked closely with internal staff to change perceptions and deliver the project. MTA also determined that the network system being implemented in the underground stations would offer a significant resource for sup- porting MTA’s operations, including a dedicated public safety Wi-Fi network, the provision of dark fiber for station local area networks, and wireless connectivity for a new train arrival notice system. 3.9.5 Implementation It was clear from the beginning stages of construction that there would be difficulties working in the underground environment. Transit Wireless navigated the 110-year-old subway system to design a Wi-Fi and wireless system that would be able to withstand the rigorous environment and high demand. Major project implementation barriers included the following: • Added costs. MTA did not have the real estate to house equipment and other infrastructure technology within the transit system, meaning Transit Wireless needed to lease space off site to house the head-end equipment for both Transit Wireless and the carriers. • Complications. There were many complications related to constructing a telecommunication network in a 24/7 operating environment in North America’s most active subway and one of the oldest networks in the country. This included schedule delays, obstacles with scheduling track time to install the network, and the requirements for Transit Wireless to follow MTA’s subway schedule (openings, closings, weather delays, etc.). • Scheduling. Major scheduling barriers included delays related to outages, active right of way, and flagging. Transit Wireless eventually learned how to speed up the installa- tion process by installing cameras to support a virtual design office. With the cameras, Transit Wireless was able to fully plan the design of the installation before entering the underground system. The virtual design office allowed Transit Wireless to minimize its need to access the subway system and made multi-disciplinary design review much more efficient. • Gaining trust. Transit Wireless worked to build and gain the trust of MTA, which only hap- pened when their performance met MTA’s expectations and standards. The Transit Wireless project team collaborated with MTA’s operating and construction departments to understand and properly implement to MTA’s construction standards and expectations. • Negotiating with carriers. Transit Wireless used a commercial strategy to involve all major wireless carriers. The strategy involved patiently waiting until the first carrier agreed to partici- pate, which forced all of the major carriers (AT&T, Sprint, T-Mobile, and Verizon) to follow

Case Studies 75 suit and sign contracts with Transit Wireless to offer their services in the stations. This was an added risk that Transit Wireless assumed by serving as a neutral host. This partnership resulted in the following unexpected benefits: • Public safety. Telecommunications networks have an added benefit of improved public safety by providing riders with Wi-Fi and wireless access and improved telecommunication for MTA operations. • Dual concession relationship. Transit Wireless installed, operates, and maintains a dedi- cated Wi-Fi network and provides and maintains fiber optic LANs for MTA’s purposes. The relationship has now become a dual-sided concession relationship where Transit Wireless operates its digital network and shares revenue with MTA while also providing telecommuni- cations support to MTA for its operations. Performance is monitored by MTA and third-party oversight entities such as the New York City Comptroller, who tests the connectivity of the stations. Transit Wireless reported high data utilization, with data usage three times the original estimate. 3.9.6 Champions Multiple executive champions at MTA were crucial to project success. Without their support, some of the internal doubt over the merit and likelihood of success of the project within the agency, which could have scuttled the program, was overcome. 3.9.7 Key Benefits Interviewees listed the following key benefits related to the initiative: • The lessons and experience from this arrangement are transferrable to telecommunications installation at public venues, outdoor spaces, and other environments. The installation of an advanced technology in a 110-year-old underground system with an active right of way has strengthened the expertise of both MTA and Transit Wireless in this respect. • The project helps expand MTA’s knowledge and experience with P3 arrangements. MTA’s variety of P3 experience improves the agency’s understanding of P3 initiatives and the advan- tages and disadvantages of partnering with different configurations of private partners, such as a carrier consortium versus a neutral host. • The neutral host manages carrier leasing and reduces the likelihood of discord among carriers. This relationship alleviates the public sector from having to coordinate between carriers by transferring more responsibility to the private partner. • Because of the consumer’s high demand for wireless connectivity and the industry’s high demand for connectivity and data flow, the business plan now includes a fairly significant revenue stream, which was not originally anticipated. The wireless carriers are experi- encing 3 times the expected data use, which generates more revenue for all the parties involved. • After completion, the safety, security, and customer satisfaction of MTA’s riders is expected to increase thanks to wireless connectivity in all the underground stations. 3.9.8 Lessons Learned Each interviewee was asked to identify any lessons learned or elements that they would have done differently.

76 public transportation Guidebook for Small- and Medium-Sized public-private partnerships (p3s) Lessons learned by Transit Wireless include: • Solidify the project’s goals and parameters early on. Apply a clearly defined contract that sets expectations and boundaries of the project to minimize misunderstanding regarding the scope, schedule, and budget of the project. This partnership developed a relatively robust contract in an attempt to anticipate future issues but there were still unforeseen issues which required re-negotiation between the partners. • Be open to innovation. Installing equipment in MTA stations helped Transit Wireless develop a greater working knowledge of operating in a rigorous environment and creating additional opportunities to provide these types of services in the future in similarly complex environments. • Maintain a critical point of contact and foster relationships. It was important for Transit Wireless to gain support from key staff at MTA, including not just the senior leadership but also the wayside maintenance and other staff who would support system installation. This continuous support was crucial in the project’s team work and installation process. • Support strong working relationships between the partners. For this project, Transit Wire- less and MTA created a dedicated, cross-functional team combining the resources of both entities. This helped to build trust between Transit Wireless and MTA employees, which helped to facilitate the delivery of the project. • Leverage a partner’s skill and experience. Utilize the transit agency’s resources to gain a better understanding of the system. Take into account the perspective of the crew who are intimately familiar with the tunnels and infrastructure. Lessons learned by MTA include: • Determine each partner’s responsibilities and costs up front. Have a clear understanding of project risks and how the risks are allocated. This upfront approach reduces misunderstand- ings between partners. During the initial stages, it was important that MTA appropriately consider all partnership options, including a neutral host, consortium of carriers, and a cell tower company. By weighing the competing options, MTA was able to choose what was best for MTA. This choice might be different for other transit agencies. • Be flexible throughout the project phases. Apply a project delivery solution that ensures success in the particular commercial context. The neutral host partnership eased MTA’s relationships with wireless carriers and reduced conflict throughout the project timeline. • Promote transparency between the private and the public partner. Keep an open book and keep the project highly transparent for the partners. The transparency fosters better rapport and develops more trust between the partners, which facilitates the execution of the program. • Maintain a critical point of contact and foster relationships. Develop strong working rela- tionships built on trust between executive teams from both the public and private side to ensure honest negotiations and seamless delivery and avoid miscommunication. • Solidify the project’s goals and parameters. Apply a project delivery solution that succeeds in the particular commercial context. The neutral host partnership eased MTA’s relationships with wireless carriers and reduced conflict throughout the project timeline. Design the project to ensure the objectives of the transit agency are met. By implementing the project over seven phases, with a mixture of high and low ridership stations in each phase, MTA learned how to prevent wireless hosts from serving only the top stations. • Be open to innovation. Expect challenges and the need for innovative solutions and have an internal project management structure that can react quickly and with binding authority.

Case Studies 77 3.9.9 Conclusions This P3 features a public partner who recognized that the type of technology design and installation expertise could be provided more effectively through a private partner with spe- cific industry experience. Through the competitive RFP process, the public partner was able to review multiple potential partners, and private partners were also able to present innova- tive partnership models that MTA might not have initially considered that could provide additional benefits to the transit agency. Implementing new and previously unused technol- ogy naturally comes with unknowns for both partners. During the RFP process and negotia- tion phase of the P3, the private partners should attempt to anticipate all of the future issues, including total cost, technology and construction challenges, and commercial realities. The partners must also expect that changes will be required to address unanticipated issues and there should be an effective change management process in place to ensure success of the P3.