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AAATA chair Eric Mahler and deputy CEO John Metzinger hold a 2017 budget award

Goodbye, Hybrids

"There was shock," says AAATA CEO Matt Carpenter. "People didn't know."

by James Leonard

From the March, 2019 issue

When the Ann Arbor Area Transportation Authority released its 2018 budget in September 2017, it included a blunt warning: "The agency is projecting a funding gap totaling approximately $13 million over the next seven years." If nothing changed, it would have to cut services as early as 2020.

In the mid-2010s, before Carpenter came on board, AAATA had repeatedly misjudged the cost of service expansions. He and deputy CEO John Metzinger found the problems began in 2012 and 2013, when the agency added more frequent service on Routes Four and Five along Washtenaw and Packard to Ypsilanti. Then, in 2014, it underestimated the cost of its five-year Transit Improvement Plan (TIP).

The TIP itself was a fallback, after local governments turned up their noses at then-CEO Michael Ford's proposed thirty-year, $218 million plan for a countywide transit system. Still, Ford called the TIP "a game changer" for Ann Arbor, Ypsilanti, and Ypsi Township. The three communities all passed new taxes to pay for added routes, more frequent service, and evening and weekend runs.

Carpenter says the original plan was to use the TIP millage to cover the deficit on the previous Ann Arbor-Ypsi service expansion. "But when the millage passed, we didn't get enough money to cover what we'd done earlier."

Eric Mahler, who joined the board in 2013, says the 0.7-mill tax did not cover "a lot of indirect costs like support facilities, increased employee hours, bus replacements. To meet the operating costs we had to pull out of our capital costs."

From there the problem cascaded. "In the past we used flexible [federal] dollars to pay for replacing our buses," Carpenter explains. "When we moved that money over to pay for Routes Four and Five, we didn't have the money to pay for" buses, and "started to eat into our reserves."

Mahler, now board chair, doesn't blame Ford for failing to recognize the agency's "structural shortfall." Nor were the CEO's high personal expenses, revealed though

...continued below...

an Ann Arbor News investigation, responsible for his departure in 2014. Thanks in part to his success with the TIP, Ford was hired away by the Regional Transit Authority of Southeastern Michigan to lead its planned four-county transit system. Also criticized there for his high personal expenses, Ford was terminated in 2017 after voters turned down a $5.6 billion millage. He now heads Denver's Regional Transit District.

Mahler says the seriousness of AAATA's budget trends became clear two years ago, when Carpenter and Metzinger implemented more sophisticated financial forecasting tools. They revealed that over the next seven years, the agency was looking at a cumulative $1.4 million shortfall in its operating budget and $8.6 million in capital expenses. Just replacing the fifteen buses due to retire in 2019 would eat up half the agency's reserves.

Carpenter says the board told him "we need to fix this without affecting our customers [or] taxpayers ... And eighteen months after that budget we have not cut back on services," he reports proudly. "We have not raised our fares."

The solution was tough. "We eliminated two positions, changed budgeting for fuel, [and] reduced legal, printing, recruitment, technologies, [and] security fees. We shaved half a million dollars off the budget"--$4.4 million over seven years.

That wasn't nearly enough. "The single biggest thing we did was change our approach to how we buy buses," says Carpenter. They have just over 100 buses, most of them Gillig hybrids. The first of those are due for retirement this fall, and plans called for replacing them with newer hybrid models.

Five years ago, the agency calculated that each hybrid saved $112,000 in fuel expenses over its lifetime. But Carpenter says they sell for $688,000 apiece--$200,000 more than a regular transit bus--and falling oil prices have since reduced the projected savings.

So have more efficient non-hybrid buses. Carpenter says Gillig's latest "clean diesel" models are 95 percent as efficient as the hybrids AAATA is retiring--4.64 miles per gallon versus 4.88. So AAATA decided to forego new hybrids in favor of "clean diesels." Forty-three are already on the road, with eight more arriving this year.

"That was hard," says Carpenter. "We know how important environmental stewardship is." But it saved $8.6 million over seven years, wiping out the projected deficit. "The financial situation is resolved," Carpenter says.

Ridership was up 1 percent in fiscal year 2018. "Route Four was having standing load only on Sundays," reports Carpenter. "So we're expanding service on Washtenaw on Sundays"--from hourly to every half-hour.

Rider fares cover only about 20 percent of the system's cost--even busy Route Four doesn't pay for itself.

"It comes close but I doubt it," says Carpenter. "No public transit system in North America makes money."     (end of article)

[Originally published in March, 2019.]


On March 16, 2019, David Sullivan wrote:
I'm glad to see that AAATA finally take their expenses seriously. I still believe they could save more money by not buying fully loaded models and by buying smaller sized busses.

On March 17, 2019, Wm Mann wrote:
AAATA needs to purchase and run smaller buses.

I have observed buses for years, in after-commuter hours, running with one or two passengers.

It seems just common sense for putting smaller less costly busses into service.

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