Growing Government in Giant Steps: A County Takeover of Palm Tran Connection?

Now that the county has decided to end the relationship with Metro Mobility Management Group a year from now, a serious proposal has surfaced to bring the operation into the government – with county-owned vans and equipment, and with county employees with their higher salaries and generous benefits.

If executed as described, it would require the hiring of 416 new county employees, a 7% growth in total staff and a 72% growth in the Palm Tran Organization.

By staff’s estimate, the county would need to purchase 241 new vehicles, and build new facilities for administration, fleet storage and maintenance. In addition to $43M in capital investment, the annual costs for labor and operations would be $34M – 23% higher than today’s $28M with the Metro contract.

How could this possibly make sense?

To understand the thinking, you first have to acknowledge that operations under the Metro contract over the last year have not been smooth. Vehicles in service are older and more worn-out than promised, customer service problems have persisted, and the experience of the elderly and disabled riders has not met expectations. Commissioner Shelly Vana, to her credit, has pushed for changes after going out and experiencing using the service herself. The promise of the Metro contract was for acceptable service levels at lower cost than the previous vendor – a bar that has been difficult for the vendor to achieve.

What is Palm Tran Connection?

Palm Tran Connection delivers about 820K trips a year to a ridership of approximately 13K individuals who are eligible through either the federal Americans with Disabilities Act (ADA) – an unfunded mandate affecting entities that otherwise provide public transportation (700K trips and 11K riders) or the state’s Transportation Disadvantaged program (123K trips and about 2K riders). TD riders are 90% subsidized by state funds. Using the current year’s $28M budget, the cost per rider is over $2000 per rider, and the average cost per trip is $34 (calculated by dividing the $28M budget by 820K trips/year).

Although there are federally defined requirements for eligibility (ie. what qualifies as “disabled”), it is not strictly a welfare program as riders must pay a fare to use the system, currently $3.50 per trip (about 10% of the cost). If you work the same numbers for the Palm Tran fixed route system, it is not too much different. ($87M fixed route budget divided by 12M trips is $7.25/trip – making the $1.25 average fare with discounts about 17% of the cost).

So what are the real issues?

We will stipulate that Connection provides a needed service to the county’s disabled population, and as long as the county is in the public transportation business, the service is required under the ADA (although the county does exceed requirements by providing service beyond the “3/4 mile from fixed route” demanded by ADA.) The problem is to provide a reasonable level of service at a reasonable price.

Privatization of county functions where it makes sense has been a long-term goal of TAB, as there is body of evidence that suggests that the private sector, particularly when operating in a competitive environment with an incentive to maximize customer satisfaction at the lowest cost, is best suited to delivering a needed service. A government agency, by its nature, is often hampered by other conflicting considerations (eg. politics, union demands, special interests, etc.)

The current Connection system is a hybrid. The contract is sole-sourced, and part of the function (customer service, scheduling) is performed by the government as the county places itself in between the riders and the provider. The vendor’s customer is the county, not the riders.

How much different would it be if multiple vendors could provide the service, perhaps in smaller service areas than the county as a whole. Companies and drivers could be regulated much the way taxi and limousine services are today. By introducing customer choice into the mix, with the county subsidy delivered through a voucher system, the customer service levels would improve – much as they do in any competitive area.

Private sector competitive based solutions for service delivery versus government run enterprise is an age-old question, usually decided along ideological lines. Given the political makeup of Palm Beach County and those who represent their districts, I would expect the “government run” position to have an edge in this discussion. Before taking that step though, we would hope that the Commissioners consider that de-privatizing Palm Tran Connection is most likely an irrevocable step. Regardless of future changes in ridership level (2014 is projected to be 9% less than 2013) or customer needs, a new 416 person county organization with significant capital assets would be here to stay.

Some Alternatives

Some alternatives to a total government-run Connection provided by staff include partial moves such as in-house dispatch, in-house takeover of service in Belle Glade only, and having the county own the vehicles and leasing them to the vendor.

We think allowing competitive service delivery, a voucher system, expediting the growth of existing transportation companies who wish to enter this space would be a rationale alternative as well. In areas that need to be served for which there is little competitive interest, a sole-source vendor should be sought, much like the existing model. Providing incentives for the mobility impaired to utilize the fixed route system is also desirable.

Many government entities face similar challenges, and a number of best practices have emerged. Please see “Best Practices in Transportation for the mobility impaired.”

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