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Agenda Item # 13

BOARD MEMORANDUM

This provides a summary of VTA’s current paratransit program and a description of cost-saving initiatives underway, in partnership with our paratransit contractor, Outreach, Inc., related to paratransit vehicles, fueling, operating facility, and vendor contracts.

BACKGROUND:

VTA does not and has never provided paratransit service directly.   Since July 1993, VTA has contracted with Outreach, Inc., a local nonprofit agency, to provide paratransit broker services.   VTA’s current agreement with Outreach is in effect through June 30, 2011.  Outreach receives and schedules trip requests, builds daily vehicle schedules, handles daily service changes, and subcontracts and monitors the daily service provided.  Currently, Outreach subcontractors (taxi and van service providers such as ATC and Yellow Cab) provide operators, maintenance services, vehicles, facilities, and management staff for paratransit trips scheduled through Outreach.

At the April 2006 meeting, the VTA Board of Directors approved a plan that included also contracting with Outreach to manage the paratransit eligibility and appeals process, simplifying the process and providing a single point of contact for customers needing paratransit services.   Outreach began performing these additional functions on July 1, 2006.

Also at the April 2006 Board meeting, Chairperson Chavez requested staff to provide an informational memorandum to the Board of Directors examining the possibility of shared fuel purchase, to extend VTA’s benefit of not paying gasoline sales tax to Outreach.   VTA staff responded that it would provide a comprehensive memorandum on efforts by VTA and Outreach regarding fuel, facilities, vehicles and vendor costs.

VTA and Outreach have worked together to develop several strategies, detailed below, to continue to provide a cost efficient and quality paratransit service.

DISCUSSION:

VTA is eligible to procure vehicles at a lower cost using a master contract the State of California has developed for vehicle procurements throughout the state.   Also, vehicle procurements for paratransit vehicles are eligible for federal grants, with only a 10% or 20% local match depending on the grant source.

By procuring the vehicles directly, VTA can obtain cost savings for the paratransit program.   Higher vehicle financing charges and vehicle handling charges that the paratransit operations subcontractor (currently ATC) amortize and pass on as part of their operating rate would be avoided.

For these reasons, VTA initiated a program to directly fund and provide vehicles to the contracted paratransit vendors.   VTA is proceeding with this strategy in distinct steps based on funds available in our capital program and grant programs.   The key component of this strategy is to ensure that enough vehicles are on hand for January 2007, when Outreach’s revised agreement with its subcontractor, ATC, goes into effect (this is discussed in the “Vendor Contract” section).

In consultation with Outreach, 231 vehicles are needed for paratransit operations.   Fifty-eight of these vehicles are already provided by Outreach, leaving 173 to be funded and provided by VTA.

• Outreach procured 36 of the 58 vehicles using grants from the Federal Transit Administration’s (FTA) Section 5310 Elderly and Disabled Transportation program administered by the State of California.   These capital funds are available to non-profit organizations that provide services to individuals with disabilities and the elderly.   Outreach has been successful obtaining these funds during the annual funding cycles.
• Outreach also procured 22 Toyota Prius hybrid vehicles.   VTA and Outreach partnered on an application to the Bay Area Air Quality Management District (BAAQMD) to obtain a $42,000 grant to offset the procurement price for 21 of these vehicles.  This was obtained through the BAAQMD Vehicle Incentive Program, which provides a $2,000-per-vehicle subsidy for the procurement of low-emission vehicles, such as the Prius.

Outreach has extensively tested the Prius in paratransit service and found it to be a reliable, functional, fuel-efficient, and cost-effective vehicle.   The purchase cost is comparable to the current sedans, but the Prius delivers almost twice the fuel economy.  The vehicle has comparable interior space to current sedans and will function well for ambulatory passengers and other passengers who can transfer from a standard wheelchair.  Most non-electric wheelchairs will fit in the hatch compartment of the Prius.

VTA and Outreach have developed a plan to obtain the remaining 173 vehicles needed to support paratransit operations.   These 173 vehicles include 100 ramped, accessible minivans; 13 larger, lift-equipped vans; and 60 sedans (Prius).

The VTA Board of Directors, as part of the FY 2006 and FY2007 Biennial Budget Review approved a total allocation of $6.1 million in the FY 2006 and 2007 capital budgets to procure the 173 vehicles.   The VTA Board also approved $346,000 to procure automated vehicle location/ GPS equipment for each vehicle.

• The first 113 vehicles, costing $4.6 million, are being procured by Outreach from the State of California contract.   These vehicles will be delivered later this year so they can be placed into service in January 2007.
• An additional 60 Prius sedans, costing $1.5 million, will be procured using a combination of federal and local funds.   In fiscal year 2006, VTA received a $495,000 appropriations request (earmark) from Federal Section 5309 Bus/Bus Facilities Programs funds to procure paratransit vehicles.   The remaining $1,005,000 is provided by VTA in its FY2007 capital budget, as described above.

VTA has included the need for future paratransit vehicle replacement procurements in the Short Range Transit Plan for federal grant and local capital planning purposes.   VTA will also pursue additional earmarked federal funds to support this important program.   An FY 2007 earmark request of $700,000 has been submitted.

Use of a publicly controlled facility would reduce paratransit expenses by eliminating the facility lease payments the Outreach subcontractor makes, which they then pass on to Outreach and VTA as part of their operating rate.

After review, VTA and Outreach determined that a location at 100 W. Younger Street, currently being leased at no cost by VTA from the County of Santa Clara, would be an appropriate location.   This location includes parking and a 3,000 square foot modular building.   VTA’s lease with the County for this location is at no cost in exchange for VTA allowing the County Sheriff to use some VTA property.  This location is centrally located, convenient to freeways, and next to Santa Clara County’s fueling station, which will be used for fueling the paratransit vehicles.  This element is discussed further in the section on Fueling.

VTA’s real estate staff is drafting a license agreement between VTA and Outreach for this location, detailing the proposed operation, insurance, term, termination, improvements, and other necessary clauses.   The location will be provided at no cost to the paratransit program, saving approximately $250,000 annually now being paid by ATC for their operating location.   ATC would start moving their operation to this location in late 2006, for full service in January 2007.

VTA and Outreach have also discussed the possibility of using an additional location for parking and dispatching paratransit vehicles, if necessary, for additional capacity or improved geographic coverage.   Some suggested satellite locations include the Santa Teresa Park & Ride in South San Jose, the Evelyn Park & Ride in Mountain View, or the I-880 Park & Ride in Milpitas.   Other sites may also be available.

VTA, as a public transit agency, is exempt from the federal excise tax of $0.183 per gallon and part of the state excise tax ($0.06 per gallon) on fuel.   Our fuel procurement strategy was focused on providing this $0.243 per gallon benefit to paratransit operations.   Currently, paratransit can only take advantage of the state excise tax savings.  The federal excise tax savings are only available to a government agency (in this case Santa Clara County) that is purchasing the fuel directly and then providing it for a government use.  For additional paratransit cost savings, VTA is working with Outreach on a fuel purchase arrangement with Santa Clara County for the paratransit vehicle fleet.

This savings is one important reason why the 100 W. Younger Street site is attractive, as it is located across the street from the County of Santa Clara fueling facility at the corner of Younger and San Pedro Streets.   This facility would be available for fueling the paratransit vehicles on a 24/7 basis.   The County is able to obtain gasoline at very competitive rates, due to their bulk purchasing volume.  Adding paratransit fueling to this mix will increase the volume and further assist in obtaining lower rates.  Also, since the County procures fuel directly from a fuel company and pumps it directly into the paratransit vehicles, the paratransit program will be able to take advantage of the federal fuel excise tax savings.  The County has been very cooperative in working with Outreach and VTA on the fueling program.

Vendor Contract

Outreach contracts with two types of vendors to provide paratransit services.   Contracts are currently held with three local taxi companies (Yellow Cab is the principal taxi provider).   Paratransit service using taxis is an efficient, cost-effective practice to provide service to individuals with disabilities not requiring a lift-equipped vehicle (persons with visual impairments or cognitive disabilities are two examples).  Taxi service accounts for approximately 25-30% of all paratransit trips.  Most vehicles used in this service are taxis and are not exclusively used for paratransit service.   A small number of vehicles are lift-equipped to be able to handle trips throughout the day for clients with disabilities that do require lift service.

Outreach contracts with ATC, a nationwide transit provider, to operate sedans and accessible vans (both minivans and larger vans) and to deliver the remainder of the paratransit trips.   In September 2005, ATC was acquired by Connex North America and renamed Veolia Transportation.   As part of its contract, ATC purchases and provides almost all the vehicles necessary to operate its portion of the service.  ATC currently operates out of a leased facility on South 10^th Street in San Jose.

ATC’s current contract with Outreach expires at the end of December 2006, and an extension has been negotiated by Outreach.    The new contract amendment will be effective on January 1, 2007. The contract has a five-year term with a 180-day termination provision by either party.   This new amendment removes cost risk items from the vendor contract by taking advantage of the VTA leveraged resources described above and shifting some functional responsibilities to Outreach at a lower cost.  The vendor’s risks and costs are greatly reduced, as they do not need to procure and finance a multimillion dollar vehicle fleet; assume the risk of a volatile fuel marketplace; or obtain a market rate lease for a parking, operations, and maintenance facility in the Valley’s expensive real estate market.  Removal of these items also resulted in a lower profit margin for ATC.

Also, some functional responsibilities were shifted from ATC to Outreach.   This mainly includes vehicle maintenance and fueling staff.   Vehicle maintenance will be performed through a contract with the County of Santa Clara, with oversight by an Outreach maintenance supervisor.  The County staff maintains an extensive county fleet and also maintains VTA’s non-revenue vehicles.  Outreach will employ fuel attendants necessary to move vehicles to the County fueling facility.

Other reductions of ATC staff in supervision, building maintenance, and dispatching were achieved.   In total 21.5 FTE positions were reduced, while Outreach staff increased by 3 FTEs to accommodate the new tasks.

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