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Developing Strategies for Resource-Constrained Transit Growth Through Increased Private Sector Involvement by Michael A

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Developing Strategies for Resource-Constrained Transit Growth Through Increased Private Sector Involvement by Michael A Developing Strategies for Resource-Constrained Transit Growth through Increased Private Sector Involvement by Michael A. Gordon Bachelor of Arts in Economics Boston College, 2011 Submitted to the Department of Civil and Environmental Engineering in partial fulfillment of the requirements for the degree of Master of Science in Transportation at the MASSACHUSETTS INSTITUTE OF TECHNOLOGY June 2015 © 2015 Massachusetts Institute of Technology. All rights reserved. Author ……………………………………………………………………………………………... Department of Civil and Environmental Engineering May 21, 2015 Certified by………………………………………………………………………………………… Frederick Salvucci Senior Lecturer of Civil and Environmental Engineering Thesis Supervisor Certified by………………………………………………………………………………………… John Attanucci Lecturer and Research Associate of Civil and Environmental Engineering Thesis Supervisor Accepted by………………………………………………………………………………………... Heidi Nepf Donald and Martha Harleman Professor of Civil and Environmental Engineering Chair, Departmental Committee for Graduate Students 2 Developing Strategies for Resource-Constrained Transit Growth through Increased Private Sector Involvement by Michael A. Gordon Submitted to the Department of Civil and Environmental Engineering on May 21, 2015, in partial fulfillment of the requirements for the degree of Master of Science in Transportation Abstract Many transit agencies are facing budgetary, institutional, physical infrastructure, and vehicle constraints, which all tend to restrict agency service growth. This research proposes strategies that allow transit agencies to ease these constraints to enable growth through increased private sector involvement. It suggests that the primary attractiveness of engaging the private sector is not to provide the same service at a lower cost, but to significantly increase service capacity and quality while facing these constraints. In the recent past, U.S. advocates of private production of transit services have generally promoted contracting primarily as a cost saving method. However, any immediate savings may or may not continue into the long-term, during which the public agency also loses the capacity to produce the service in-house. The alternate view presented here is that the real value of increasing private sector involvement in public transit stems from the substantial improvements in service quality, effectiveness and speed of implementation, and the ability to secure private partners who become new stakeholders and who support funding for increased levels of service. Transit growth is particularly necessary in cities with rapidly growing areas. In these cases, continued development requires increasing levels of transit service. The Boston metropolitan area has multiple districts where new development is surging. Meanwhile, Boston’s Massachusetts Bay Transportation Agency faces numerous constraints that will limit its ability to grow its agency-operated service to the extent desired to allow for rapid development. In spite of this, Massachusetts needs to take advantage of new development in the Boston area in order to reach its economic growth objectives and statewide target of tripling the non-auto modal share by 2030. This thesis presents the conceptual foundation of operating and funding new service through the private sector, and better coordinating with existing private operators. After suggesting strategies for transit growth through increased private sector involvement, it applies these strategies to opportunities in the resource-constrained Boston region. These ideas could also be easily applied to similar opportunities in resource-constrained agencies across the U.S and internationally. Thesis Supervisor: Frederick Salvucci Title: Senior Lecturer of Civil and Environmental Engineering Thesis Supervisor: John Attanucci Title: Lecturer and Research Associate of Civil and Environmental Engineering 3 4 Acknowledgements To Fred Salvucci and John Attanucci, thank you for all the help and advice you have given me not only for this research, but throughout my entire two years in the program. I appreciate all the time you gave and for sharing your insights into the world of transportation. I am also thankful to the many people who were willing to provide their perspectives and suggestions about this research topic. In particular, Mike Lambert and Kyle Emge frequently answered questions related to MassDOT’s contracting initiatives. At the MBTA, Laurel Paget- Seekins, Dom Tribone, Greg Strangeways, Dave Barker, Brian Kane, and Jeff Gonneville provided additional information or feedback. Ken Woodland and Joannah Quinn shared valuable insight related to the Pacheco Law. George Kocur, Jeff Becker, Mary MacInnes, Noah Berger, Jim O’Leary, Dave Maltzan, Karl Kottenhoff, and Rachel Goldsmith also provided information and perspectives on portions of this research that are greatly appreciated. Thank you to Nigel Wilson and David Block-Schachter for guiding my first year of research. And to everybody in the transit lab, thanks for the help, motivation, or distraction – whatever was needed at the time. To all of my family, especially my parents, thank you for your endless support. And to Lizzie, I could not have done this without your love and encouragement, thank you for always being there for me. 5 6 Table of Contents Abstract ......................................................................................................................................................... 3 Acknowledgements ....................................................................................................................................... 5 List of Figures ............................................................................................................................................. 11 List of Tables .............................................................................................................................................. 13 1 Introduction ......................................................................................................................................... 15 1.1 Motivation ................................................................................................................................... 15 1.1.1 Boston Transit History ........................................................................................................ 15 1.1.2 Boston Population Growth .................................................................................................. 24 1.1.3 MBTA Service: Current and Recent Trends ....................................................................... 26 1.2 Research Approach ..................................................................................................................... 34 1.3 Thesis Organization .................................................................................................................... 34 2 Public-Private Partnerships: Theory and Experience .......................................................................... 37 2.1 Benefits and Costs of Working with the Private Sector .............................................................. 37 2.1.1 Competition ......................................................................................................................... 38 2.1.2 Economies of Scale ............................................................................................................. 39 2.1.3 Labor ................................................................................................................................... 40 2.1.4 Administration .................................................................................................................... 41 2.1.5 Service Improvement .......................................................................................................... 42 2.1.6 Stakeholder Analysis of Private Involvement ..................................................................... 42 2.1.7 Contracting and Risk Allocation ......................................................................................... 43 2.2 Government Programs Encouraging Growth through Increased Private Sector Involvement.... 45 2.2.1 Federal Programs Encouraging Transit System Growth ..................................................... 46 2.2.2 Federal Programs Encouraging Private Sector Involvement .............................................. 46 2.2.3 Massachusetts Programs ..................................................................................................... 48 2.2.4 Local Programs ................................................................................................................... 51 2.3 Financing Transit Service: For Growth and Public-Private Partnerships ................................... 51 2.3.1 Special Assessment and Benefit Assessment Districts ....................................................... 52 2.3.2 Business Improvement Districts ......................................................................................... 53 2.3.3 Transit Impact Fees ............................................................................................................. 54 2.3.4 Tax Increment Financing .................................................................................................... 55 2.3.5 Summary of Alternative Financing Methods in Massachusetts .......................................... 57 2.4 Experiences with Transit Service Provision through the Private Sector
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