STAFF REPORT

SUBJECT: Clean Air Express MEETING DATE: November 19, 2015 AGENDA ITEM: 10 RECOMMENDATION: A. Approve a Memorandum of Understanding with the City of Lompoc for operation of the

Clean Air Express from January 1, 2016 to December 31, 2017. B. Direct staff to work with north county agencies to develop a long term agreement for

operation of the Clean Air Express. . STAFF CONTACT: Steve VanDenburgh SUMMARY: The City of Lompoc manages the Clean Air Express for SBCAG under an MOU that expires June 30, 2016. The city recently notified SBCAG that it would be ceasing operations early because its contract operator (Storer) had lost the lease on its maintenance facility and was having difficulty retaining drivers. Lompoc and Storer have agreed to enter into a new two-year MOU and contract with a one-year renewal option. Under the new contract, Storer’s compensation would increase from $118 to $130 per revenue hour resulting in an annual cost increase of about $112,000. The new contract includes a no-cancellation clause for the two years. Other options for operating the Clean Air Express were evaluated but with the limited time available proved to be infeasible since they would result in a service interruption. The Clean Air Express is very successful and popular, but has been plagued with periodic crises because agreements for operating and funding the service have been ad hoc and short term.. The current revenue sources—fares and Measure A North County Interregional Transit program funds—are inadequate to meet operating and capital needs. A long term agreement is needed to find a permanent home for the CAE. It is recommended that staff be directed to work with North County operators to reach such an agreement. At its November 4th meeting, the North County Subregional Committee recommended that the board approve the new MOU with Lompoc and to provide direction to staff to seek a long term agreement for operation of the CAE. DISCUSSION: On August 28, 2015, the City of Lompoc gave a 90-day notice to SBCAG that it was terminating the Memorandum of Understanding for operation of the Clean Air Express service. The MOU’s term extended through June 30, 2016. However Lompoc indicated that its contract operator, Storer Transit Systems, was quitting the service on November 29, 2015 due to losing its lease on its maintenance facility and difficulty retaining drivers. Therefore Lompoc indicated it was terminating its administration of the service on the same date.

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Since August 28, SBCAG staff has been trying to find alternate operational arrangements to keep this popular service from having to be suspended in December. Discussions have included the County of Santa Barbara as an alternate entity to maintain the fleet’s 15 buses while Storer provides drivers. This option did not prove feasible. Staff also explored with the City of Santa Maria staff having their contract operator (First Transit) resume operations of the service. But city staff did not believe in the short time available that it could fully develop a service and cost proposal, discuss it with City Executives and the City Council, negotiate an MOU with SBCAG, and do all the other things necessary to be able to start service on December 1. So this option, likewise, proved to be infeasible. Staff also continued discussing with Lompoc and Storer operating the service under a new MOU and contract. Given the short timeline to find a new operator, it appears that the best option will be the latter – renegotiating with Lompoc and Storer. As Attachment #2 indicates, Lompoc and Storer are prepared to continue to operate the service under revised MOU and contract terms. Storer has found a new maintenance facility in Lompoc for a monthly rate lower than the rate they were paying before the property they were leasing was sold out from under them and their lease canceled. They have negotiated a month-to-month lease at their new facility through the end of the calendar year and would enter a two year lease with the approval of the MOU and contract with Lompoc. In Attachment #3, they agree to continue to operate the service for an additional 30 days, to the end of December, to give the respective SBCAG and Lompoc policy bodies sufficient time to consider the revised MOU and contract. The Clean Air Express service is 100% funded by the Measure A North County Program funds (and fares), so a recommendation from the committee to the board to approve an MOU is required. This recommendation occured on November 4 for board approval on November 19. In order to keep the service operating for the full two year period and avoid another crisis during that term, the MOU attached (Attachment #3) incorporates the general agreement that:

The MOU would be for two years with an optional third year.

There will be a no cancelation clause (except for cause) in the first two years of the new version of the MOU and underlying contract.

The operator will provide a form of insurance to guarantee that the service will be able to operate for the full two year base term.

Per Attachment 1, the costs of the service are likely to go up $112,000 annually due to a $130\hour rate that Storer is requesting compared to the $118/hour current rate.

The higher hourly contract rate will allow Storer to pay higher driver wages to address the recruitment/retention issues that they have been experiencing. The North County Subregional Committee recommended that the board approve the new MOU with the City of Lompoc for operation of the Clean Air Express and direct staff to work with North County agencies to develop a long term agreement for operation of the service. Interim Operator Options At the October board meeting, board members inquired about the option of using an “interim” operator, presumably to operate the service from January 1 through the end of the current contract term of June 30, 2016. This would allow for an RFP to be issued early in 2016 and a new service contract to be awarded through a competitive bidding process rather than essentially sole-sourcing the service to Storer for two additional years. If this option were to be initiated, the normal RFP process would have to be dispensed with and bids would have to be requested from a small list of companies that meet certain criteria. First,

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given the short run-up to a start of service, this option would only be feasible if the operator has a maintenance facility already established in the county. It would be very difficult for operators from outside the county to locate and lease a facility in the county in 60 days during the holiday season. Given the short term of an interim contract, it is unlikely that a new operator from outside the county would be able or willing to secure a short term lease on a maintenance facility. Second, they would have to have an established pool of licensed bus drivers that would accept the service’s unique work hours. Time spent driving is 1.5 hours in the morning, approximately 6-8 hours of down time during the day, and approximately a 1.5 hour trip back in the evening. Right now, some of the Clean Air Express drivers drive a bus from the North County to the South Coast, park the bus and go to other jobs during the day, and drive the bus home in the evening. One driver works for the City of Santa Barbara’s motor pool during the day, for example. Others are full time drivers for the underlying contractor. They carpool back to the North County after their morning run and drive local transit services their company has been contracted to provide during the mid-day. They carpool back to the South Coast to drive the evening return trip. It would be difficult for an outside operator, in 60 days, to find a pool of drivers that would accept these unique work arrangements. Some of the drivers currently working for Storer could be hired by the interim contractor, but Storer has indicated that the unusual work hours and relatively low pay has made it difficult for them to recruit and retain drivers. Third, they should have some experience operating the Clean Air Express, or at least some routes of the service. They should understand coming in the service scope and their potential costs, could hit the ground running with little to no learning curve, and could quickly prepare an accurate cost based on their previous experience. Operators that meet these criteria may include, but are not limited to Santa Barbara MTD, local private bus companies or Santa Maria/First Transit. Even with this identified list of potential operators, the task of replacing Storer with one of these operators would be very difficult. Santa Maria staff indicated the time limitations for starting service on December 1 were too onerous to overcome. Even with the extension granted by Lompoc/Storer, a January 1 start buys little additional time because of Thanksgiving and Christmas holidays. When a service changes operators, the incoming operator, since they will be responsible for the maintenance of the bus as part of their hourly rate, asks for a third-party inspection of the buses so they can formulate their hourly rate based on the condition of the buses. There are 15 buses in the Clean Air fleet. Previous inspections have taken 45-60 days to organize and conduct, creating another time constraint. Transitioning the service to an interim operator would likely lead to a service disruption. Long Term Operator Options If the board adopts the MOU for the two year extension to Storer, staff believes that as part of the recommendation, staff should be directed to develop before the two years expires a long term operations agreement for the service with North County agencies. Rather than simply putting out an RFP at the end of the two years, staff would facilitate a changing of the organizational arrangement for the service. The new arrangement would be intended to address at least two issues:

1. Improve Service Stability & Capture Staff Efficiencies. Right now, the policy board for the service is the SBCAG board relying on recommendations from the North County Subregional Committee. SBCAG retains the responsibilities for setting fares and fare policies, establishing routes and route times, buying fuel, locating daytime and overnight parking for the buses, maintaining on-board amenities such as wireless service. Prior to 2010, the Santa Barbara Air District and then SBCAG also directly contracted with a company to operate the service. So in addition to the duties described above, SBCAG prior to 2010 handled procurement and contract administration, invoicing, and all customer service issues such as selling passes to customers and handling customer complaints and inquiries. After the passage of

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Measure A, SBCAG took on a whole new range of responsibilities and priorities, so the board directed staff to reduce its role in operating the service by asking a local agency to assume responsibilities for procurement, contract administration, and customer interaction. This would create space for SBCAG staff to work on the US 101 project, other named projects, commuter rail, and new bike\ped and safe routes to school programs. Santa Maria filled this role from 2010 – 2012 before suddenly opting out. Lompoc has filled this role since 2012 before it too, indicated it would opt out. The crises created by these reversals by the local agencies are negating SBCAG staff’s time savings that were supposed to be redirected to the new responsibilities of the agency under Measure A. A new service arrangement should address this issue.

2. Improve 30 Yr. Sustainability / Reduce Measure A Burn Rate.

When the North County program in the Measure A Investment Plan was developed by a stakeholder committee consisting of board members, transit advocates, taxpayers groups, bicycle\pedestrian advocates, there was give and take over the amount of projected Measure A funding that would be dedicated to each project. The final amounts were a negotiated outcome to maximize voter support and the amounts allocated to projects in the Investment Plan did not, and were not, intended to exactly match the amount of funding needed to deliver each project or program. For example, nearly every “named” project in the North County’s program is only partly Measure A funded, relying in part on local, State and Federal matching funds to be delivered. The North County’s interregional bus transit funding for the Clean Air Express service is no different. The $22.5 million allocated from Measure A to the service will not allow for the service to be operated for 30 years unless it is supplemented by other transit funding. After deducting fare revenues from the operating cost of the service, the amount of Measure A funding required to subsidize the service in FY13/14 was $664,520, dramatically higher than it has been in prior years. Including capital expenditures, if the service is operated using only Measure A funds, the Clean Air Express is projected to run out of funding in 10-12 years, well short of the end of Measure A in 2040. SBCAG staff sees value in working with North County agencies to negotiate a long-term agreement for operation of the Clean Air Express to make the service more sustainable. The agreement would provide a “home” for the service with one or more agencies becoming the policy bodies for the Clean Air Express and taking responsibility for all aspects of operating the service including funding operations and capital costs, setting fares, hiring contractors, establishing routes and schedules and determining how Measure A North County Interregional Transit funds should be expended. A long term agreement would avoid the periodic crises that have plagued this successful service. In addition, a long term agreement could allow the service to be integrated with local services currently provided and boost their historically low farebox recovery.

Options for Increasing Revenues As with any transit service, there are a limited number of ways to address a funding shortfall: fare revenue can be increased, costs can be reduced, external funding can be sought, or these methods can be pursued together. The most recent fare increase was adopted by the board in December 2007 and implemented in February 2008 for the cash fare and 10-Ride pass, and in January 2009 for the monthly pass. At Clean Air Express Working Group meetings in 2013, there was a strong consensus by Clean Air Express partners (Santa Maria, Lompoc, Solvang, Santa Barbara County) to implement periodic fare increases to help close the funding shortfall. Because the Clean Air Express does not receive any state or federal transit funding, fare revenue is critically important to maintain the financial sustainability of the service. With the dramatic increase in operating costs over the last several years, a fare increase will help extend

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the projected termination date of the Clean Air Express, but not for the full length of the Measure A program. SBCAG staff will work with the Clean Air Express partners to formulate near-term options for increasing revenue for consideration by the committee in early 2016, including, but not limited to:

1. Fare increases. This may include a one-time fare increase and\or triggers for future automatic fare increases.

2. “Outside” contributions including the South Coast’s Measure A interregional transit program.

3. Marketing the service to increase ridership and fare revenue. ATTACHMENTS

1. Current and Proposed Costs of MOU with Lompoc\Storer 2. Letter of Interest from Lompoc/Storer to operate service under new terms 3. Letters from Lompoc and Storer extending service for 30 days, to end of December 2015 4. Memorandum of Understanding with City of Lompoc

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ATTACHMENT #1 Clean Air Express Current and Proposed Costs of MOU with Lompoc\Storer

Description Current Proposed

Storer Hourly Rate $118.17 $130.76

Operating Cost $1,054,904 $1,167,295

Subtotal $1,054,904 $1,167,295

Lompoc Admin. Costs $100,000 $100,000

Gross Total $1,154,904 $1,267,295

Gross Hourly Rate Including Admin. $129.37 $141.96

Annual Difference ----- $112,391

Saturday Service Only

Depart Santa Barbara

La Cumbre Plaza State St/South Hope Ave.

10:25am

State St./Alamar 10:30am

Downtown Paseo Nuevo Mall/Macy’s

10:40am

Beach Area/Funk Zone Train Station/209 State St.

10:45am

Arrive Santa Ynez Valley

Solvang – Solvang Park 11:40am

Buellton – Pea Soup Andersen’s 11:50am

Los Olivos – Jonata/Grand Ave. 12:05pm

Depart Santa Ynez Valley

Los Olivos – Jonata/Grand Ave. 4:00pm

Buellton – 485 Ave. of Flags 4:10pm

Solvang – Solvang Park 4:20pm

Arrive Santa Barbara

La Cumbre Plaza State St/South Hope Ave.

5:00pm

State St./Alamar 5:05pm

Downtown Paseo Nuevo Mall/Macy’s

5:15pm

Beach Area/Funk Zone Train Station/209 State St.

5:20pm

Clean, Comfortable Motor Coaches Cash Fare: $7 one way

Call (805) 692-1902 for more information C l e a n A i r E x p r e s s . c o m

Solvang Pick Up and Drop Off

Buellton Pick up and Drop Off Locations

Los Olivos Pick Up and Drop Off

Starting

July 11th!

Charter-Style Bus Service FROM Santa Barbara TO the Santa Ynez Valley

Saturday Service Only

Depart Santa Ynez Valley

Buellton – Pea Soup Andersen’s 9:30am

Solvang – Solvang Park 9:40am

Arrive Santa Barbara

La Cumbre Plaza State St/South Hope Ave.

10:25am

State St./Alamar 10:30am

Downtown Paseo Nuevo Mall/Macy’s

10:40am

Beach Area/Funk Zone Train Station/209 State St.

10:45am

Depart Santa Barbara

La Cumbre Plaza State St/South Hope Ave.

5:00pm

State St./Alamar 5:05pm

Downtown Paseo Nuevo Mall/Macy’s

5:15pm

Beach Area/Funk Zone Train Station/209 State St.

5:20pm

Arrive Santa Ynez Valley

Solvang – Solvang Park 6:10pm

Buellton – Pea Soup Andersen’s 6:20pm

Clean, Comfortable Motor Coaches Cash Fare: $7 one way

Call (805) 692-1902 for more information C l e a n A i r E x p r e s s . c o m

6-30-15

La Cumbre Plaza Pick Up and Drop Off

State St./Alamar Pick Up and Drop Off

Downtown Santa Barbara Pick Up and Drop Offs

Starting

July 11th!

Charter-Style Bus Service FROM Buellton and Solvang TO Santa Barbara