MNTRC Newsletter Vol. 21, Issue 1: Summer 2014

How can public-private partnerships help transit agencies?

Hokey Min, PhD, James R. Good Chair in Global Strategy

Passengers disembarking bus

Many people use TARTA buses to access jobs, shopping, and services.

Bowling Green State University News – Thanks to high gasoline prices and stifling traffic congestion, more city dwellers are riding transit. That demand has put pressure on transit agencies to expand routes, improve infrastructure, and hire more workers. But those things are costly, especially in a time of government cutbacks and budget reductions. This means agencies must increase their financing options without burdening taxpayers or government. Can public-private partnerships (PPP) help fill that gap? It’s already being tested in the Toledo area.

To increase a ridership among three target customer bases (work commuters, shoppers, and disabled individuals), Toledo Area Regional Transit Authority (TARTA) realized it should offer more customized transit services (e.g., customer-friendly routes and schedules), modernize its equipment and facility, and retain/recruit good drivers. All this requires adequate financing and investment. Various factors led TARTA to consider a PPP model.

Kroeger market shopper

Partnering with Kroeger helped TARTA fund bus rides for grocery shopping.

It started with two supermarkets

Here’s how it works. A list was made of all major businesses and services along TARTA routes. These would be potential partners. Among this list, two grocery chain stores recently formed a partnership with the TARTA, which can be a template for the formation of other PPPs. Given that the six branch locations of Kroger and the five branch locations of Meijer were on the current TARTA routes, TARTA agreed to promote both Kroger and Meijer stores with a slogan stating, “Shop at Kroger/Meijer ride with TARTA for free!”

In returning favor to TARTA, both Kroger and Meijer pay an annual fee to advertise their logos on the side of the circulator. This fee helps TARTA defray the costs of bus maintenance, repair, and crews. This partnership arrangement created a win-win outcome (i.e., greater publicity and revenue) for both parties. For example, Kroger and Meijer customers were given more incentives to ride with TARTA while allowing them to shop at supermarkets that they like. A similar partnership is under development with St. Luke Hospital to increase patient visits via TARTA buses.

Incentives are an effective catalyst for PPPs

Agencies that wish to follow this example could develop their own incentives such as transit schedules and routes tailored toward the locations and working hours of partnering private businesses; free ride or reduced fare for the customers and employees of those businesses; fostering a positive public image of the businesses that give donations and sponsorships; and potential tax credits or abatements.

To make these incentives an effective catalyst for PPPs, the transit authority should first specify the minimum eligibility to consider these incentives and then determine which incentives should be offered to which private businesses. Also, once PPP agreements are reached by sides, they should clarify specific contract provisions regarding expected PPP outcomes, cost sharing between the transit authority and its private partner for transit service improvement, rules for dealing with unforeseen events and defaults, and conflict resolution mechanisms.

The future could hold more opportunities

Currently, the TARTA’s PPP incentives are limited to free ride and advertisement for partnering private businesses such as supermarket chain stores. To create more PPP opportunities, the TARTA could target a greater pool of private enterprises benefiting from the TARTA services such as the locally-based corporations (e.g., Owens-Illinois, Campbell Soup, Ford, Chrysler) with a larger number of employees and multiple shifts.

To properly monitor the progress of PPPs and minimize wasteful resource allocation, a systematic and periodic evaluation process should be in place. These could include considering the PPP performance criteria aligned with the mass transit service goals; establishing a performance management system; and developing feedback mechanisms and corrective actions.

Anyone interested in the full paper can reference “Public-private partnerships for improving the regional mass transit system: a case study of the Toledo Area Regional Transit Authority,” International Journal of Logistics Systems and Management, Vol. 17, No. 2, pp.160–179.