[Team 3] Improving Transit Efficiency: The Role of Performance-Measurements in Resource Allocation Decisions for Transit

The Metropolitan Council’s regional transit system faces a major budget deficit next biennium:

“For regional transit, including Metro Transit, Metro Mobility, suburban transit services and Northstar Commuter Rail, it will mean $18 million less in projected revenue for the 2010-11 biennium, and a projected shortfall that now grows to $62.5 million for the two-year period that starts in mid-2009” -- Metropolitan Council

The primary reason for the shortfall: declining car sales. Tax on car sales account for 30% of the metro regional transit system’s annual budget. As car sales decline, so do transit subsidies. Transit ridership, however, is up:

“Over the last four years, Metro Transit ridership went up 17.4% to nearly 82 million rides, a 27-year high.” -- Metropolitan Council

Despite increased transit ridership, the Met Council wants to avoid another fare increase. Ina recent statement, Peter Bell, Metropolitan Council Chair, made it clear that the Metro Transit would work to maintain service and keep the current fare structure despite declining revenue:

“The last thing we want to do, given the economic times and growing demand, is cut service or raise fares. Ironically, other transit systems in the country are being forced to do exactly that. We’re hoping not to go there.”

This begs the question: How can transit meet increased demand despite decreased funding?

There is a $67 million short-term solution: The Metropolitan Council expects to spend $70 million in federal stimulus dollars for capital expenditures to support transit.
But what about the long-term? Is there an opportunity to increase the efficiency of existing transit services to meet new demand while maintaining costs?
Some public finance and budgeting experts argue that performance measurement and budgeting can help. Just recently, the U.S. Government Accountability Office began advocating performance measurement and budgeting as an opportunity to “improve public management and increase the efficiency and effectiveness of public programs.”

By linking organizational goals with internal resources, outputs, and outcome, performance measurement and budgeting stands to change how public agencies make resource allocation decisions.

But can performance measurement and budgeting be used to improve the efficiency of transit systems – or, more specifically, to improve the efficiency of Metro Transit? In the past 20 years, many states and regional transit systems have signed on to performance measurement and budgeting as a means to monitor and improve ridership and cost-effectiveness.

However, there continues to be a great diversity of opinion and approaches to the use of performance-based funding systems for public transportation by states and regional funding entities.

Currently, Metro Transit does use some performance measurement as a means to monitor progress toward “enhancing transportation choices and improving the ability of Minnesotans to travel safely and efficiently throughout the region.” Additional performance measures are used to evaluate new capital projects – such as the Northstar Commuter Line.

But how might Metro Transit apply some of the existing approaches to measure and, hopefully, improve the efficiency of the operation of its own transit system?

A review of existing approaches revealed promising practices in applying performance measurement to transit operations. One such approach was implemented in Muncie, Indiana (see Figure 1).

While implementing a similar performance measurement system might be a first step in improving Metro Transit’s ability to improve the efficiency of its service and resource allocation decision, additional research and steps are needed.

First, Metro Transit should consider building a better understanding of the applicability and appropriateness of performance measures to its own unique transit systems. Lastly, as Metro Transit relies on a system of funding formulas to manage the allocation of state funds for operations, it would be useful for MnDOT and Metro Transit to gather research about successful and not so successful efforts
of other transit agencies to control or reduce operating expenses while maintaining optimal levels of transit service.

Given the similar predicament in other states and transit regions, this body of research is likely to be growing.