AGENDA # 13a

 

MEMORANDUM

 

TO:                  Mayor and Town Council

 

FROM:            W. Calvin Horton, Town Manager

 

SUBJECT:       Report on Memorandum of Understanding for Transit Services

 

DATE:             January 14, 2002

 

 

The purpose of this report is to provide for the Town Council’s consideration historical information on the development of the Memorandum of Understanding for Public Transportation Services.

 

BACKGROUND

 

On November 12, 2001, the Town Council adopted a Resolution Directing the Town Manager to Prepare a Report on the Memorandum of Understanding (MOU) for Public Transportation Services. The MOU is the document that outlines the cost sharing relationship among the Towns of Chapel Hill and Carrboro and the University of North Carolina at Chapel Hill.

 

Historical Background

 

In 1974, the Town of Chapel Hill and the University entered into an agreement for the Town “to establish and operate a mass transit system in the community and on the University campus….”  In the late 1970s the Town began to operate the public transit system and shared the costs with the partners, the Town of Carrboro and the University of North Carolina. 

 

In 1985 and 1987 respectively, the Town of Chapel Hill entered into separate Memoranda of Understanding with the University and the Town of Carrboro.  The terms of the agreements were for five years and provided a framework for the provision of public transportation services.  Please see Attachments 1 and 2. 

 

Separate annual contracts between the Towns of Chapel Hill and Carrboro and the University described specific responsibilities and operational expectations.  The Memoranda of Understanding and the annual contracts were based on the cost allocation formula developed in 1978.

 

Cost Allocation Formula

 

In 1978, the Chapel Hill Transportation Board developed the initial cost allocation formula as a method for the partners to share in the costs for transit services.  The formula recommended by the Board was a variation of several methods of allocating costs that were identified in a 1978 report titled, “…Cost Allocation Formula Development,” prepared by transportation consultants, Barton-Aschman Associates, Inc. 

 

Some of the concerns regarding the cost allocation formula included:

 

  1. The formula was complex, required numerous calculations and was difficult to understand without study or regular use.

 

  1. Estimates of budget cost changes to the partners from service adjustments were difficult to accurately predict without a complete calculation of the cost allocation formula.

 

  1. Reductions in service by one local partner could result in a cost increase to another partner.  This was because of the reallocation of fixed cost among all remaining services.

 

  1. There was a disincentive to increasing ridership.  If any partner’s share of overall ridership increased, that partner’s cost could increase, even without any increases or improvements in service.

 

  1. Some calculations were not applied uniformly to expenditures and revenues.  The cost of the off-campus trips taken by “University Pass Riders” was shared between the Towns and the University, while all of the revenue from the sale of the passes was retained by the University.

 

  1. Ridership data was collected through an extensive on board ridership survey which was done twice each year, in the fall and the spring.

 

The cost allocation formula, while based on measurable data, was difficult to understand and complex to administer.  The formula made it difficult for the partners to predict, determine and explain their budgetary share for providing public transit services.  Please see Attachments 3 and 4.

 

More Recent Discussions Regarding Revisions to the Cost Allocation Formula and the Memorandum of Understanding

 

In 1995, a joint staff committee was formed to review the cost allocation formula and identify alternatives to the existing cost allocation formula.  The staff committee was comprised of representatives from the Towns of Chapel Hill and Carrboro and the University.  The staff committee agreed to the following points in guiding their review of the cost allocation formula:

 

1.            Be a fair process.

2.            Distribute costs equitably to the users and the partners.

3.            Simplify the allocation of net cost.

4.            Help control costs.

5.            Promote increased ridership.

6.            Maximize the use of non-local funding.

7.            Improve the budgeting and planning process.   

 

In December 1996, the Chapel Hill Town Council received a report from the Town Manager which discussed the recommendations of the joint staff committee. The report was referred for review to the University, the Town of Carrboro and the Transportation Boards of the Towns of Carrboro and Chapel Hill.

 

The key points regarding revisions to the cost allocation methodology were as follows:

 

  • The net cost of all transit services would be allocated among Chapel Hill, Carrboro, and the University in the same proportions as each partner’s share of the total of the population of all three partners.

 

  • The Towns’ population would be the latest official population numbers as published by the State each fall.  The University’s population would be the official “Headcount” of all graduate and undergraduate students, plus all of the permanent full-time and part-time faculty and staff for the University and UNC Hospitals compiled for the same year.

 

  • All federal and State funding received would be used to reduce the local net cost of service.

 

  • The first year net cost of any new service would be paid by the partner requesting that service. The costs in subsequent years would be allocated to the partners according to the agreed upon cost allocation methodology.

 

  • The revenues lost due to the operation of fare-free or subsidized services would be paid by the partner requesting such service.

 

  • Routes or services that do not meet minimum productivity standards would be eliminated unless the local partner(s) sponsoring such service paid for its entire operating cost or all three partners agree that such service is important to the system.

 

  • All partners would meet regularly to review and discuss transit services.

 

The Chapel Hill Town Council at its January 13, 1997 meeting adopted a resolution authorizing the Town Manager to execute a Memorandum of Understanding with the University and the Town of Carrboro.  The 1997 Memorandum incorporated the revised cost allocation methodology which included a transition to population based net cost sharing.  The final 1997 Memorandum, executed by the partners, was for a term of two years.   Please see Attachments 5 and 6.

 

In September 2000, the Chapel Hill Transit Task Force began to meet to discuss ways to improve the transit system.  The Task Force was created in part as a result of discussions at a “Transit Summit” coordinated by the Town of Carrboro. The members of the Task Force included representatives from; the University and student government, the Towns of Carrboro and Chapel Hill, the Transportation Boards of Chapel Hill and Carrboro, and citizens.

 

The Task Force held a series of meetings which resulted in recommendations for a number of changes for improving transit service and increasing ridership.  The Task Force also recommended the implementation of a fare free transit system for all passengers contingent on funding availability. 

 

The Chapel Hill Town Council and the Carrboro Board of Aldermen considered options for implementing fare free service and other service improvements during the 2001-2002 budget process.  The University and the student body also agreed to fund the implementation of fare free service. The adopted 2001-2002 Annual Budgets of the Towns of Chapel Hill and Carrboro included funding for fare free and other Transit service improvements.

 

CONCLUSION

 

We would be pleased to receive direction from the Town Council and to provide any additional information that would be helpful in consideration of this matter.

 

ATTACHMENTS

 

1.                  November 1985 Memorandum of Understanding between the Town of Chapel Hill and the University of North Carolina (p. 5)

2.                  May 1987 Memorandum of Understanding between the Town of Chapel Hill and the Town of Carrboro (p. 12)

3.                  Cost Allocation Formula for the Chapel Hill Community Transit System (p. 18)

4.                  December 4, 1996 Agenda Item regarding the Memorandum of Understanding for Transit Services (p. 20)

5.                  January 13, 1997 Agenda Item regarding the Memorandum of Understanding for Transit Services (p. 45)

6.                  July 1997 Memorandum of Understanding between the Town of Chapel Hill, the Town of Carrboro, and the University of North Carolina (p. 48)