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sr-092810-4a~r `/~-. City Of ®~~y ~®MA9601~ 9\~i~®® i Santa Monica City Council Meeting: September 28, 2010 Agenda Item: ~~'N- To: Mayor and City Council From: Stephanie Negriff, Director of Transit Services Subject: Options to Generate Additional Transit Revenues for Big Blue Bus Recommended Action Staff recommends that the City Council review and provide input on options to generate additional transit revenues for Big Blue Bus, including: 1. Transit-oriented development (TOD) on sites owned by Big Blue Bus. 2. Pursuit of legislative action through its lobbyist to modify the State vehicle code to allow installation of bus exterior digital advertising. 3. Fees on all new developments to support transit service and amenities. 4. Employee transit passes provided by employers. 5. An increase in parking citation rates designating the incremental revenue to support Big Blue Bus operations. Executive Summary At the May 25, 2010 City Council Meeting, Council instructed staff to research potential alternative revenue sources for Big Blue Bus that would provide ongoing funding streams for service operations .and maintenance. Staff identified five local revenue options to support transit operations, which include: lease revenue enhancements through transit-oriented development (TOD) on real estate purchased by the City with transit funds; exterior bus advertising; developer fees dedicated to transit operations as a traffic mitigation strategy; expansion of employer subsidies for transit passes; and increased rates for parking citation fines. The first option aligns with the recently adopted LUCE plan and calls for environmentally sustainable transit-oriented development on underutilized industrial parcels within walking distance of future EXPO light rail stations. The City owns several sites that meet these criteria. Over the next year, staff will be evaluating development strategies for Council consideration as part of the Downtown and Bergamot Transit Village master planning effort being led by PCD and will bring back recommendations about which sites could be developed for TOD and alternative approaches for achieving this 1 development. Lease revenue from development of these sites would go directly to the Big Blue Bus Fund to support transit service and transit programs. These sites are the BBB surface parking lot at 612 Colorado Avenue, between 6th and 7th Streets, comprising 1.3 acres (Attachment 1); the City-owned Metro Expo Line Bergamot Station site comprising 5.6 acres with 5 corrugated steel buildings totaling approximately 75,000 square feet and 3.9 acres of surface. parking (Attachment 2); and the Metro Expo Line Terminal Station site on 4th Street at Colorado comprising 2.4 acres (Attachment 3). The second option utilizes the emerging media of digital bus advertising, one of the most effective ways to increase advertising revenue. The new technology has been successfully implemented by transit agencies in major metropolitan markets including the Chicago Transit Authority, resulting in a revenue increase of up to 400% over static print poster advertisements on buses (Attachment 4). The third option focuses on fees on all new developments as single, up-front payment to BBB which could be based on the estimated construction cost of the number of parking spaces that the developer would not be required to provide, as a result of reduced parking requirements. A nexus study is underway for a transportation impact fee on new development that would include support for transit. Ongoing payments to support transit for the life of a development would be based on the additional amount the developer would have had to spend annually for operation and maintenance of parking if parking requirements had not been reduced. These fees could be used to support transit infrastructure, operations, and pass programs. The fourth option expands BBB's current practice of customizing transit pass programs for major trip generating institutions. BBB currently has transit pass programs for the two largest employers and institutions in the service area, UCLA and Santa Monica College, which have resulted in dramatic increases in transit ridership and accessibility to higher education. Participants in the UCLA.and SMC pass programs now comprise 30% of all BBB passengers. Implementation of similar unlimited ride transit pass programs in cooperation with other employers and institutions would certainly result in fewer trips made by car and more by bus. The fifth option considers increasing the rates for parking citation fines, designating the incremental revenues for Big Blue Bus operations. Background The fare increase that was implemented on August 29, 2010 will be sufficient to resolve the structural budget imbalance only through FY 2012-13. Additional revenue must be generated to maintain a high quality transit system thereafter. Rather than depend solely on further fare increases, Council instructed staff to identify funding sources 2 including revenue from an increase in rates for parking citation fines and revenue derived from new developments. Staff has identified four potential sources of additional revenue and has provided information on the parking citation option, which staff does not recommend. Discussion Transit-Oriented Development, Joint Development BBB staff has investigated Los Angeles County Metro's Transit-Oriented Development (TOD) program which has so far resulted in over a dozen mixed-use projects built over and adjacent to rail stations and bus maintenance facilities. Attachment 5 illustrates the Metro Joint Development TOD surrounding the Hollywood/Vine Red Line Station. Metro TOD staff has provided BBB useful insights into this revenue-enhancing development process. In this model, the transit agency which owns the land issues an RFP seeking a highly-qualified developer partner to enter into along-term land lease and design, obtain entitlements, and build and manage a project in return for a specified continuous revenue stream paid to the transit agency. The period of such a land lease is typically 65-99 years. As part of LUCE implementation, PCD has begun station area master planning for the Bergamot area and Downtown which incorporate the potential TOD sites. If the City Council determines that redevelopment of the potential TOD sites is warranted, the City would either need to determine the type of development it would like to see-on the site, or offer the site to the development community to propose uses consistent with LUCE. A request for development proposal could include specific criteria including requests for LEED certification, developments that provide for high employment generation, or the like. The current land use of the south side of Colorado Avenue between 6th and 7th Streets (612 Colorado) as a surface parking lot, facing downtown Santa Monica and only 600 feet from the Terminal Station of the future Metro Line, is inconsistent with the goals of 3 the LUCE to create a more pedestrian-friendly, transit-oriented city. It is located within range of over 15 transit routes. Currently located behind blue glass panels, the site is occupied by 117 parking spaces for BBB employees and BBB non-passenger service vehicles (Attachment 1). With the creation of an entirely new streetscape on Colorado in coordination with completion of the Expo Line, the site will occupy a prominent position on the new gateway corridor to Downtown. Staff intends to return to Council with an analysis of the City's future need for this site. If redeveloped for private purpose, lease revenues from the site would be assigned to the BBB Fund. The Expo Bergamot Station is the site that provides the greatest transit trip generating potential in the entire City. Comprising 5.6 acres, the site is the largest parcel attached to a station anywhere along the entire Expo Line. Because the percentage of trips made by transit falls off sharply the further the distance from a transit station according to numerous published studies, it is imperative that land -uses and site- design maximize transit use. The Bergamot Transit Village master plan will incorporate the site into a complete neighborhood focused on the Expo Light Rail station. The site was purchased using Transit Funds allocated from Transportation Development Act funds. The Expo Bergamot Station site will likely result in additional lease revenue which would enhance the BBB Fund. The Expo Light rail line is proposed to terminate at 4~h and Colorado, on property acquired in part using State of California Transportation Development Act funds. Plans are still being prepared as to where the Expo Light Rail Line will enter the property and how the remainder of the site may be used. Conceptual visions for the site with potential TOD were prepared and presented to the Council during the Expo stations discussion on July 13, 2010 and continue to be refined. Should there be private development somewhere on the site, a portion of the lease revenue would be assigned to the BBB Fund. 4 Digital Advertising on Bus Exteriors Another opportunity for revenue enhancement is the addition of digital bus ads on the curb side of Big Blue Buses. A recent Transit Collaborative Research Project commissioned by the American Public Transportation Association shows that this type of new media could greatly enhance the image of and the revenue from transit advertising programs. The Big Blue Bus has been working with the City Attorney's office to determine if there are any legal barriers that would prohibit a digital ad program. California Vehicle Code Section 25353, which generally governs the size, location, glare and brightness of light-emitting signs, might require modifications to allow signs like this to be attached to public transit vehicles. The California Transit Association (CTA) is willing to work with the Big Blue Bus to advocate for State code modifications. The newest digital ad displays consist of ultra thin LED screens which are mounted to the curbside of a bus and are highly durable as illustrated in Attachment 4. They have been tested for durability in light contact with other vehicles, fixed objects, and through multiple bus wash cycles. They also have advanced sensors that dim or brighten .the sign as outdoor light changes. The signs can be programmed to remain static or go dark in a defined location (e.g. on freeways). Ads are transmitted to the boards wirelessly which allows for fast, paper-free postings -reducing labor and printing costs. The cost of these units varies depending on a variety of factors such as warranty, service programs, and sign type, but a general estimate is $50,000 per sign unit. There are two companies that currently make this type of sign; one of them is a local California-based firm. Digital ads allow for greater flexibility and increased customization. Rates can be broken down by day parts allowing an advertiser to buy just a morning rate or just an evening rate. A restaurant could buy time from 6 a.m. to 10 a.m. to promote their breakfast special and additional time in the evening to promote a dinner special. In addition, increased advertising real estate offers greater public benefit by allowing more space for public service announcements or city sponsored events. For example, concerts on the 5 pier could be added to the rotation and could change weekly to promote just that week's headliner. The process for implementing this program will take approximately 18 months once the State vehicle code is modified. If Council expresses an interest in pursuing this new program, the Big Blue Bus would work with the California Transit Association to lobby the State to amend the vehicular codes to allow this type of ad sign. Concurrently, Big Blue Bus would engage amarketing/advertising firm to further study revenue potential and establish pricing and rate structures and product offerings that will maximize revenue. The current estimate of maximum revenue potential from BBB's existing static signs is $4.1 million (Attachment 6). This assumes no discounts, full rack rate sales, and all ads sold 100% of the time. With the same assumptions, estimates show that the maximum revenue potential with a fleet with 25 digital signs could be as high. as $16.5 million (Attachment 7). Based on current sales models, staff estimates that 25 digital signs would generate an additional $4 to $6 million. Fees on New Developments to Support Transit Service and Amenities Current City zoning requires developments ranging from the single family residence to large multi-use centers provide enough parking so that everyone who visits, works or lives there park on-site. With the introduction of the Expo Line and related bus improvements, the shift from driving will increase and even further reduce the parking that will be needed. If parking requirements are modified as part of a public process and code revisions, developers could be required to pay a congestion mitigation fee equivalent to the amount that they would have had to pay to build and maintain the number of parking spaces that would no longer be required. The decrease in parking operating and maintenance costs due to the decrease in the required number of parking spaces could then be passed to the Big Blue Bus as an ongoing annual payment for the life of the project for infrastructure, vehicles, operating costs and transit fare programs. 6 As part of LUCE implementation, anexus study is underway for a transportation impact fee on new development that would include support for transit. The amount that such an initiative would generate depends on the size, number, and timing of projects approved for construction after the new regulations became effective, and the degree to which the regulation would permit developers to substitute previously required parking with support for transit programs. The amount of revenue collected in such a program would depend in part on the size, number and timing of new developments. Employee Transit Passes Provided by Employers The concept of using institution/employer provided photo ID cards as the transit fare medium whereby each ride could be electronically recorded and tallied for precise reimbursement has worked very successfully for both BBB and UCLA. Many employers in the City already issue employee photo ID badges with a magnetic stripe that could be coded to be read by bus fareboxes. Use of photo ID badges on fare media also reduces unauthorized sharing and use of passes significantly. Federal law currently allows employers to provide transit passes as non-taxable income. Requiring all new employers. to provide this transit passes would benefit the employer, the employee, the transit system and the environment because provision of a transit pass for an employee can cost less than paying into the cost of one parking space for that employee. Increased Rates for Parking Citation Fines Council asked staff to also look at whether parking fines could be increased and the incremental fine revenue designated for Big Blue Bus operations. In FY 2009-10, the City issued approximately 300,000 citations which generated over $16 million in parking fine revenue (including penalties). Therefore, a 10% increase in citation rates could potentially generate approximately $1.6 million in additional annual revenue assuming no change in driver behavior. However, staff does not recommend this strategy for several reasons. The designation of ongoing General Fund revenues for specific non-General Fund purposes is 7 unprecedented and conflicts with the City's adopted fiscal- policy that the- City should avoid targeting revenues for specific purposes whenever possible, allowing maximum flexibility in funding decisions on an annual basis. This proposal is also contrary to City efforts over the past several years to identify strategies to make enterprise funds self supporting rather than be reliant on General Fund subsidies or loans. In addition, citation rates in Santa Monica are closely aligned with those in other Westside cities, so a 10% increase in rates would place the fine in Santa Monica higher than the average in neighboring cities for the most commonly issued citation types (see Attachment 8). It should be noted that parking citation rates were raised an average of 20% only 15 months ago in order to cover the increased cost of enforcement and collection since the rates had last been increased. Also, the general purpose of citation fines is not to raise revenue, but rather to influence driver behavior to ensure that adequate parking is available. Finally, this source of revenue would remain relatively flat year-to-year and would not keep pace with rising expenditures Financial Impacts and Budget Actions The current potential sources of additional annual revenue for Big Blue Bus operations are summarized below: Transit-oriented Development at 612 Colorado Unkriown Transit-oriented Development at Expo Bergamot Station Unknown Transit-oriented Development at Expo Terminal Station on 4 Street Unknown Digital Advertising on Bus Exteriors (curbside) $ 4M - $6M Fees on New Developments to Support Transit Service & Amenities Unknown Employee Transit Passes Provided by Employers Unknown Parking Citation Fine Increases (not recommended) $1.6M or less In addition to the revenue enhancement proposals, the Big Blue Bus and the City will continue to look for opportunities to reduce costs without significantly impacting service levels. Further, transit agencies statewide are experiencing the same types of financial difficulties as the Big Blue Bus, and there may be potential broad initiatives in the future 8 that could provide some assistance. Staffs recommendation is that these and any other opportunities to ensure that the Big Blue Bus fund is self sufficient should be examined before consideration of a General Fund subsidy. Prepared by: Paul Casey, Senior Transit Programs Analyst Approved: Forwarded to Council: ~11~t _ St anie Negriff Rod Gould Di ctor of Transit Services City Manager Attachments: 1. Big Blue Bus Facility Site Plan and 612 Colorado Site 2. Expo Bergamot Station Site Plan 3. Expo Terminal Station Site Plan 4. Digital Ad Board 5. Metro HollywoodNine Red Line Station Joint Development TOD 6. Current Maximum Revenue Potential 7. Maximum Revenue Potential Digital Ad Model 8. Parking Citation Fines Price Survey 9 6' ~I <~ ATTACFIMENT 2 POTENTIAL TOD SITE: EXPO BERGAMOT STATION Exlw SlsUans ~, :. ... Expo Line Trriieil Vilioga ~~ try?s POTE~9TlAL TOD SITE: ATTACHMENT 3 _ _ _ EXPO TERfVIIIVAL 5TATI0~1 DIGITAL AD BOAFRD ATTACHMEf~T 4 z. . ATTACHMENT5 METRO HOLLYWOOD/VINE RED LINE STATION JOINT DEVELOPMENT TOD Hollywood and Vine Jul-2010 1860 spatial 6322 night 6358 bus layover Attachment 6 Static Ads my Kings $2,958,638 Queens $225,475 Tails $1,127,376 Posting Charges -$130,980 Staffing - $121,700 All sold ad spaces rrainus Posting Charges (Non-digital) ar7d Staffing Attachment 7 it 25 iital Ads + Static Ads Kings $2,723,825 Queens $225,475 Tails $1,127,376 Digital Kings (conservative) $12,729,600 Posting Charges -$130,980 Staffing -$170,000 * Based on 25 Digital Boards All sold ad spaces minus Posting Charges (Non-digital) and Staffing Attachment 8 COMPARATIVE PARKING CITATION FINES* Citation Types Beverly Hills West Hollywood Los Angeles Santa Monica Santa Monica + 10% Street Cleaning $65.00 $67.00 $65.00 $61.00 $67.10 Meters $60.00 $47.00 $55.00 $50.00 $55.00 Preferential Parking $60.00 $52.00 $60.00 $61.00 $67.10 * These are the most commonly issued citation types.