Memorandum

City of Lawrence

Public Transit Office

TO:	David L. Corliss, City Manager
FROM:	Robert A. Nugent, Public Transit Administrator
CC:	Diane Stoddard, Assistant City Manager
Date:	November 2, 2010
RE:	Transit Maintenance Facility Lease and Amendment to MV Contract

Please place the following item on the agenda for the November 9, 2010 City Commission meeting:

Approve Maintenance Facility Lease Agreement with the University of Kansas and approve amendment to MV contract, if appropriate.

Background:

In August 2009, the City Commission received a status report on the coordination activities between KU and the City. One of the issues discussed during this presentation was the possibility of developing a joint transit maintenance facility for use by both entities. At the time the City/KU planning team believed that a joint transit maintenance facility was important in order to enhance our coordination efforts which will ultimately allow for better use of our resources. Based upon the information discussed at the meeting, the City Commission agreed that it was appropriate to pursue a joint maintenance facility, and that KU should take the lead in issuing its RFP. 

In February 2010 the Commission authorized the Mayor to execute a Memorandum of Understanding (MOU) with KU indicating the City’s commitment to a formal lease arrangement with KU on a joint transit maintenance facility, and authorize City staff to proceed with the purchase of buses for the University with unallocated ARRA funds, and authorize the City Manager to sign a formal amendment to the contract with MV Transportation, reducing associated facility costs in the City’s service contract.  

The MOU set forth a variety of provisions regarding facility, one of which indicated that the City would provide $2 million in ARRA funding toward the procurement of buses for the University. The purchase of these buses for the University allowed flexibility for the University to front the necessary capital costs for the financing of the facility. These vehicles were ordered in early 2010.

The construction of the maintenance facility is well underway and is slated to be completed in December 2010 just prior to the end of the existing MV facility lease.  

Cost Compared to Current Facility Arrangement with Contracted Provider: 

By entering into a lease agreement with KU for the use of a joint maintenance facility the City is projecting a significant cost savings over the next ten years of approximately $518,000. These projections are as follows:

Year	Current to Contractor	Under Lease to KU	Difference
2011	$192,098	$165,462	$26,636
2012	$199,787	$166,153	$33,634
2013	$205,634	$166,860	$38,774
2014	$213,860	$167,583	$46,277
2015	$222,414	$168,324	$54,090
2016	$231,311	$174,102	$57,209
2017	$240,563	$180,099	$60,464
2018	$250,186	$186,324	$63,862
2019	$260,193	$192,785	$67,408
2020	$270,601	$200,353	$70,248
			$518,602

In addition to these cost savings the following benefits should be experienced which are consistent with our ongoing efforts to coordinate services between KU and the City:

• Recognition for Sustainability – The new facility earned an award from the KU Center for Sustainability in recognition for creativity in addressing issues of environmental, economic, and social responsibility. The new facility was designed to meet new energy efficiency standards that are a 30% improvement over code, and includes a bioswale for improved stormwater management on the site. All furniture for the facility was collected from the KU Surplus Property Recycling program, which significantly reduces waste from discarded furniture as well as expenses, resources, and greenhouse gas emission related to production and shipping of new furniture.
• Centralized Dispatch – Our current operation has two separate dispatching locations. In the new facility all dispatching will take place in the same room. This allows for much better communication between dispatch staff and provides a future opportunity for additional coordination of service between KU and the City.
• Streamlined Telephone System – Combining elements of the telephone system allows for better communication between City and KU operations as well reduce the opportunity of confusion for those calling for trips and information. This serves to improve the public’s perception of transit.
• Shared Software – Using a single (common) software allows for more coordinated provision of service. Some service efficiencies may be experienced as a result. This will also provide the opportunity for the potential combining of paratransit trips in the future.
• Driver Flexibility – Operating out of a single dispatch allows for more flexibility in the assignment of drivers. This flexibility should improve the ability of the contractor to fill assignments and respond to operational situations in a short period of time. The results of this should be an improvement in service interruptions experienced by the pubic.
• Centralized (On-Site) Fueling – This will greatly reduce the ability of both the city ad the University to control fuel prices as well as provide flexibility in fuel types (i.e. biodiesel mix).
• Bus Wash – With the new bus wash buses can be washed at a higher frequency. This improvement helps lengthen the life expectancy of vehicle body metal by reducing damages from rust. It also will greatly improve the public’s perception of transit.
• Vehicle Storage and Parking – At our current location the long term storage of vehicles is done on gravel lots. These lots require considerable maintenance and make it difficult to maintain a clean fleet.
• Maintenance Work Bays – The new facility has six (6) work bays while the current facility has only two (2). The additional work bays allows for more vehicles to be worked on at any one time. It also allows for the prioritization of vehicles in order to assure enough vehicles for service rollout. The extra bays also allows for possible changes in the factors used to determine which vehicles need to be shipped out for repairs.
• Long Term Investment in Rolling Stock - Provides an opportunity to become more proactive instead of reactive in the maintenance of the fleet.
• Building Image – The new building creates a tremendous advantage in recruiting and retaining quality employees for our contractor. In the long term it provides a quality facility for future contractors. 

In anticipation of changes regarding the transit facility, a provision was included in the existing agreement between the City and MV Transportation that requires MV to adjust its expenses that relate to facilities if changes occur in the facility location or ownership. In February 2010 the City received formal indication from MV quantifying the amount of reduced cost the City would recognize if we were to proceed with another facility. This formal indication only pertained to the actual fixed costs directly associated with the facility. Changes in operational costs were not able to be determined at that time due to future implementation of service changes and vehicle replacement. Since this formal indication in February service changes have been implemented and the majority of vehicles have been ordered. With these changes, and with a more complete understanding of the operational requirements needed at the future facility, we have been able to perform a more comprehensive analysis of both fixed facility and operational costs.

In order to take full advantage of the new facility we recommend operational changes pertaining to fueling and cleaning of the fleet. These operational changes are necessary due to the on-site location for fueling and the new bus wash system that will be included at the new facility. Currently buses are being fueled by drivers. At the end of the day before the vehicles are returned to the existing operating facility drivers travel to a fueling station and to fuel buses. For the City this location is relatively close to the operating facility on Haskell. For KU buses, drivers must travel to the KU fueling station on campus which adds a considerable amount of non-productive driver time to the cost of their operation.

The new, more automated, bus wash system provides great improvement over the existing (hand wash) system. However, it makes it necessary to change the process in which we clean the buses. Considering that fueling will be on-site at the new facility MV and City and KU transit staff recommends adding two new MV maintenance utility personnel to perform this task instead of drivers. We also recommend combining this task with the process of washing and detailing the fleet.

Another operational change will be how we maintain buses. Even though the City is replacing all of the fixed route fleet in the near future there will be an increasing demand on mechanics due to the changes in the vehicle types and technologies. An example of this is the addition of hybrid vehicles and the change to smaller, more difficult to maintain vehicles to the City’s fleet. Two other factors must also be considered. These are the increasing age of the KU fleet (maintenance costs are equally shared under mutual agreement) and the need to fully utilize additional work bays. Considering these factors we are recommending adding an additional MV mechanic at this time.

These additions to MV personnel, and MV’s contract with both the City and KU, will be partially offset by reductions in driver costs due to the change in fueling procedures and recent changes in routing.

Transit Maintenance Facility Lease:

After construction, KU will make available to the City property located at 1260 Timberedge Road in the Timberedge Industrial Park of Lawrence Kansas for use supporting maintenance and operation of public transit services. The property is slated to be completed by approximately December 15, 2010.  The facility will be built pursuant to the RFP issued by KU. The term of the City-KU lease will begin January 1, 2011 and extend for ten years. 

Base rent for the Transit Maintenance and Operations Facility will be set at $125,495 for the first five years.  For years 6-10, the base will increase 4% per year.  Should the lease be extended beyond year 10, the rate will adjust annually based upon the consumer price index. 

In addition to the base rent the City and the University will share in certain allocated costs, such as utilities, grounds maintenance, snow removal, etc. The City’s portion of these allocated costs shall be determined by a ratio derived from the average monthly mechanics hours and administrative hours spent on transit service delivery.  Currently, that formula requires the City to pay 48.38% of the allocated costs. 

Action Requested:

Staff seeks City Commission approval of a lease agreement between KU and the City for the property located at 1260 Timberedge Road in Lawrence, Kansas for use as a maintenance and operating facility in support of public transit services and authorization of an amendment to the MV contract removing the facility costs and making operational adjustments as described.