AGENDA ITEM NO. 10.2 CITY OF ELK GROVE CITY COUNCIL STAFF REPORT AGENDA TITLE: Consider 1) approving a proposal by MV Transportation for a new reverse commute service rate of $25/hour; and 2) authorizing staff to notice new fare rates and services for reverse commuting MEETING DATE: January 25, 2012 PREPARED BY DEPARTMENT HEAD: Richard Shepard, Public Works Director / City Engineer RECOMMENDED ACTIONS: Staff recommends the City Council consider: 1) Approving a proposal by MV Transportation for a new reverse commute service rate of $25/hour; and 2) Authorizing staff to notice new fare rates and services for reverse commuting. BACKGROUND INFORMATION: On December 14, 2011, City Council heard an item discussing costs of implementing reverse commute services between Elk Grove and Downtown Sacramento in order to support the relocation of the California Correctional Health Care Services (CCHCS) Department. Consistent with existing contract requirements, it was estimated that the net cost of this service would be approximately $94,000 per year. This net cost was estimated assuming the following: 1 Elk Grove City Council January 25, 2012 Page 2 of 6 Estimated Cost of New Reverse Commute Service New service costs at the $190,000 contracted rate of $53.09/hour Less new revenue based on 100 new monthly permits at a reduced <$96,000> cost of $80/month Estimated net annual cost $94,000 Since a majority of the reverse commute service would come from using buses that are “dead-heading” (returning empty), Council requested that staff negotiate with MV Transportation, Inc. (MV) to reduce the contracted rate to a level that would make the service revenue neutral to the City. Council also asked that a history of the MV contract staff be provided for discussion purposes. The purpose of this agenda item is to address these requests and seek approval so that staff can pursue an amendment to the contract with MV and begin the process of implementing the new transit rate and services. REVERSE COMMUTE RATE NEGOTIATION STATUS MV has offered to provide a reverse commute service rate of $25/hour. It should be recognized that this is a significant reduction from the existing contracted rate of $53.09/hour. In exchange for this reduced rate, MV has asked that the City consider approval of the following requests: 1. Waive responsibility of future liquidated damages (LD) potentially incurred on the reverse commute service. In addition, commit to a review and discussion of current proposed liquidated damages and process improvement for the methodology of making LD assessments so that they are made timely; 2. Allow MV to use a standard lease tire in lieu of Michelin XVR tires; and 3. Clarify the contract in the area of responsibility for parts and repairs in excess of $2,500. ANALYSIS: Staff acknowledges MV’s interest in working collaboratively to negotiate a new rate that is revenue neutral to the City even though the Contract 2 Elk Grove City Council January 25, 2012 Page 3 of 6 requirement would encumber the City to pay for the current contracted rate of $53.09. The proposed rate of $25/hour is more than a 50% reduction. In addition to a significantly reduced hourly rate, MV would also cover the additional costs incurred for providing this service. According to MV, these costs will average approximately $40,000 per year and include: • Additional training; • Additional insurance coverage; and • Additional dispatch services. As for the other requests from MV, staff offers the following analysis: ISSUE #1 - A) Waive responsibility of future liquidated damages (LD) potentially incurred on the reverse commute service. B) In addition, commit to a review and discussion of current proposed LD and process improvement for the methodology of making LD assessments so that they are made timely STAFF RECOMMENDATION ISSUE #1 A. City staff supports this request. City staff and MV believe it is important to provide this new reverse commute service at levels that meet or exceed customer satisfaction. However, because the reverse commute rate is significantly less than the normal contracted service rate and MV will have to absorb the additional costs incumbent upon providing the new service, MV would like the City to consider granting a relief of LD assessments specifically related to the on time performance of this service. As a means to monitor the quality of this new service existing performance metrics will still be maintained and evaluated and routes adjusted as needed but the actual assessment of LDs for on-time performance would not be made. B. City staff supports this request. The contract allows for a very formal dispute resolution process that relies on binding arbitration through Judicial Arbitration and Mediation Services (JAMS). Staff and MV believe it best to have a lower level dispute resolution process that can be used to determine the validity and appropriateness of LD assessments. It is proposed that this 3 Elk Grove City Council January 25, 2012 Page 4 of 6 lower level of dispute resolution be resolved at the City Manager or designee level. Beyond that, any unresolved disputes shall use the dispute resolution process established in the contract. Both MV and City staff also agree that it is in the best interest of both parties to make timely assessments of LD. On future invoices, LD should be identified by MV since the data to determine LD originates with MV. These self assessments will be reviewed by City staff and approved or disapproved, with specific reasons. This will provide more timely feedback and additional transparency to the purpose and reason for LD assessments which in turn will allow MV to improve performance so that LD can be minimized or completely eliminated in future invoices. ISSUE #2 - Use standard lease tires in lieu of Michelin XVR tires. MV would like to use tires that can be obtained through a standard lease agreement with their nationwide vendors. The MV contract requires that the Orion and New Flyer buses have tires that are speed rated at 73 mph or greater. The only tire which meets this requirement is the Michelin XVR which is approximately six times more costly to operate for MV. MV’s current cost to operate the Michelin XVR tires runs approximately $8,000 per month, the cost to operate a standard lease tire would be $1,333 which is a net monthly savings of $6,667. Though the standard lease tires are not speed rated for 73 mph, the prevailing speed on the freeways in the region is 65 mph and the standard lease tires would meet or exceed the 65mph speed rating. STAFF RECOMMENDATION ISSUE #2 City staff supports this request as long as the standard lease tire meets industry standard quality levels and will be able to operate at the 65mph speed limit used on the surrounding freeways, and provided that MV indemnify, defend and hold harmless the City from any claim that may result from use of the standard lease tires. Furthermore, the City expects that MV will warrant that it will not operate the buses under conditions that would exceed manufacturer warranties of the buses or the tires and that at the end of the contract term, the buses will be returned to their original manufactured settings with new XRV tires. 4 Elk Grove City Council January 25, 2012 Page 5 of 6 MV has agreed to these terms. ISSUE #3 - Clarify the contract in the area of responsibility for parts and repairs in excess of $2,500. The MV contract requires that MV provide all parts under $2,500, and that the City will pay for all parts over $2,500. This is not in dispute. The MV contract also requires the City to pay for capital repairs which would include all parts and labor regardless of cost. For example, the City has paid all parts and labor necessary to refurbish older buses. The City has also paid for major repairs to buses when prior approval is obtained. The City does not pay for routine maintenance (i.e., brakes, calipers, misc engine repairs) Current practice requires the City to approve of capital repairs prior to initiating work. MV has asked that the City consider preapproval of certain repair activities which would streamline the execution of the work. STAFF RECOMMENDATION ISSUE #3 City staff and MV support this request and are working to define a list of pre-agreed services that would be considered capital repairs. HISTORY OF CONTRACTED MANAGEMENT POSITIONS BY MV Council asked that staff provide a history of MV management. Staff and MV have realized that there are some discrepancies in their respective data sets that describe the history and are therefore working to resolve these discrepancies before they are presented to Council. Regardless of the discrepancies, both City and MV staff will be available to discuss during the meeting this item is presented, if needed. IMPLEMENTATION OF NEW REVERSE COMMUTE RATE The staff report for the December 14, 2011 Council Meeting is attached. In that report staff asked for direction on providing the reverse commute service to the CCHCS at a rate of $80/month which is less than the regular rate of $100/month. Should this rate be approved for implementation, staff will begin the outreach process in accordance with Federal Transit Administration requirements and City policy. 5 Elk Grove City Council January 25, 2012 Page 6 of 6 FISCAL IMPACT: Assuming Council approves of the new $25/hour reverse commute rate, and assuming 100 new monthly fares will purchased at $80/month, the annual service costs should have no net cost to the City. If monthly fares are purchased at a lesser quantity or price, the Transit Fund has no funding mechanism other than General Fund subsidy to provide this service.