City set to seek two transit contract options

ROCHESTER — Rochester City Council members opted to continue to contract for at least some services related to city transit.

"It would be more expensive to go this other way, and we do not know how to come up with the money right now," council member Patrick Keane said of the option to directly employ city bus drivers and support crews.

The city contracts with Transdev, which purchased First Transit last year, to operate the city-owned bus fleet under Rochester Public Transit. With two years remaining in the contract and a new rapid-transit service set to come online in 2026, the Federal Transit Administration suggested reviewing transit service.

Part of that review included a study of four options, including the potential to take operations in house, which has been requested by the union representing drivers hired by Transdev.

"These are your constituents. They live in your wards, and they do city work," said Local 1005 of the Amalgamated Transit Worker Union representative Adam Buzbee, highlighting benefit shortfalls under Transdev as the union negotiates a new contract with the company.

A transit study conducted by the Dallas-based engineering firm AECOM under the oversight of the Minnesota Department of Transportation estimates moving to a completely city-operated system would add $3.6 million to the annual cost of citywide transit services, which include Zumbro Independent Passenger Service and the future Link Bus Rapid Transit system.

Buzbee questioned the added cost. "Where, anywhere in the world, is it more expensive to cut out the middle man?" he said during the council's open comment period. "It doesn't make sense."

Transit and Parking Director Ia Xiong said the added cost goes beyond paying the drivers and other staff, pointing to software and equipment that would need to be purchased and operated.

"It's not just the human aspect of that; it's everything to support that," she said, pointing out that Transdev is able to spread support costs throughout its network of services in other cities.

Jill Cahoon, AECOM vice president of transit and rail planning, said the study included four options ranging from maintaining the status quo under a new contract to taking over full operations. All options were considered with anticipated future needs considered.

The results pointed to a $23.1 million to $24.9 million cost for a new contract after 2026, with an anticipated $300,000 overall cost increase if the city opts to hire its own maintenance staff.

Seeking to split contracts between multiple vendors would cost an estimated $24 million to $26.1 million, with the option of moving all operations under direct city oversight expected to cost $27.4 million a year.

Approximately 80% of the cost for operating the city's transit system is covered by state and federal funding, with the remaining funds generated locally through fares and ad sales. Xiong said it's unclear how much added funding would be received if operating costs increase without expanding the service.

"The state does not have an extra 80% of that (added expense) to grant to us," she told the council Monday.

Council member Norman Wahl said the proposed change could fail to provide added benefits for transit users.

"I don't necessarily see that we will make leaps and strides in service by going the more-expensive route," he said.

Keane said he worries the service could be reduced in order to cut future costs related to increased expenses.

"There would be a human cry against transportation, and that is what I'm trying to fight against," he said.

Council member Mark Bransford said he understands why bus drivers want to join city staff but said the cost is too steep, especially since it would likely require tapping into local tax funds or other revenue.

"It's just a lot of money," she said.

Council President Brooke Carlson agreed, citing constituents who are already worried about the city's proposed 10% increase to the tax levy, noting a $3.6 million in added expenses could cause another 5% to 6% levy increase in the future.

"It's just really an awful decision to have to make," she said, pointing to the bus drivers gathered in council chambers.

Council member Molly Dennis said she believes the city was taking a wrong step in not ending the practice of contracting for driver services.

"I think this is something that would benefit taxpayers in the long run," she said of hiring drivers as city employees. "It would benefit residents. It would benefit communication and oversight."

The council voted 6-1 to seek proposals from companies for two options: A new contract for services similar to those provided by Transdev or a modified contract with plans for the city to hire its own maintenance staff.

Xiong said seeking proposals for both options will give the city a better understanding of potential cost differences, while still providing time to make sure a new contract is in place by the end of 2026.