HomeMy WebLinkAbout1998-02-03 - AGENDA REPORTS - ATC VANCOM CONTR AMEND (2)CITY OF SANTA CLARITA
INTEROFFICE MEMORANDUM
TO: Mayor Heidt and Members of the Cityu cil
FROM: George A. Caravalho, City Manager
DATE: February 3, 1998
SUBJECT: POTENTIAL CONTRACT AMENDMENTS WITH ATCNANCOM
City Council receive staff presentation and provide guidance for negotiating amendments to the
contract with ATCNancom.
On August 5, 1996, the City entered into a five-year contract with ATC/Vancom to operate all City
transit services. The method of compensation to the contractor is the cost per revenue vehicle hour
for each of the three transit services provided by the City. For the first full year of the contract, these
rates were the rates submitted by ATC in their proposal to the City. In each subsequent year, the
rates would be adjusted based on the Los Angeles County Consumer Price Index.
The contract provides that if total revenue vehicle hours increase or decrease by more than
20 percent, the City will negotiate with the contractor to adjust the contract rates and timetable for
service charges. The initiation of Sunday service in October 1996, the improvement of frequency
on three routes in September 1997 (partially offset by reduction in tripper service), and the extension
to Stevenson Ranch requested and funded by Los Angeles County in September 1997 resulted in a
25 percent annualized increase in service hours. ATC has requested an increase in rates to cover
losses they are now incurring to provide service.
Increasing ridership has been the primary goal of the Transit Division. This cannot be accomplished
without providing a superior product that satisfies customers. A quadrupling of ridership since 1992,
with growth showing no sign of slowing, is a testament to the Division's success. The Transit
Division has also focused on using resources prudently. Continuous improvement in productivity
(as measured by passengers per revenue vehicle hour), with the lowest cost per revenue vehicle hour
of all major fixed route transit systems in Los Angeles County, demonstrates success in those areas.
These accomplishments have exacted a toll on the delivery of transit service. Lack of capital funds
and the need to react quickly to growth opportunities necessitated that the Transit Division acquire
older buses to satisfy demand. The aging of the fleet acquired new in 1991 and the increasing
average number of annual miles per bus have placed additional strain on vehicle maintenance. The
POTENTIAL CONTRACT AMENDMENTS WITH ATClVANCOM
February 3, 1998 - Page 2
facilities for vehicle maintenance and storage were inadequate when the system began in 1991, and
staff began seeking funds for a new facility in 1993. Continuing growth exacerbates this inadequacy.
Staff is continuing to pursue all possible funding opportunities, but it will take at least three years
for a new facility to be constructed after adequate funding is obtained.
The City and ATC have been meeting over the past three months in an attempt to come to terms over
rates. One issue being examined at these meetings is what it really costs to operate service. A
second issue is the amount of additional cost the City can incur without cutting services or scaling
back committed projects. Staff has determined that in FY 1998, approximately $306,000 additional
costs can be incurred, increasing each succeeding year by about 3 percent. While service hour
reduction is not necessary, service hour increases would have to be postponed for about three years.
Unless new funding materializes, likely candidates for postponement of new service hours include
service initiation on Sierra Highway north of Soledad Canyon Road, Plum Canyon Road, Haskell
Canyon Road, Copper Hill Drive, and McBean Parkway north of Newhall Ranch Road.
While the problems with the 1986 Neoplans may be the image many people associate with ATC,
ATC has made positive contributions to the service. Dial -a -Ride productivity has improved from
2.4 passengers per revenue vehicle hour to 3.5 passengers per revenue vehicle hour (national average
is 2.8), with trip denials and customer complaints reduced to almost zero. Driver turnover, which
had been 32 percent under the previous contractor, has decreased to 12 percent, with employee
morale the highest in the six-year existence of Santa Clarita Transit. Preventive maintenance
inspections, which were behind schedule or. missed completely under the old contractor, are now
done on time. ATC initiated the Customer Ambassador Program, even though under no contractual
obligation to do so. It is staff s opinion that ATC is the best provider of transit services and has
found ATC management very responsive to our needs.
FAA"" U414 1 \/_ Y -ft •
1. No action. ATC does not have contract cancellation rights. However, they could default if
they believed that the losses incurred are too great to continue operating the City service.
2. Negotiate with ATC. This option would have the most positive impact on service delivery and
may have the best long-term fiscal impacts to the City. However, a gap exists between what
the City can afford without reducing service hours and what ATC is requesting.
3. Rebid the contract. This option contains several risks: A low -ball bidder may promise to
deliver high-quality service for a much lower cost, then fail to deliver; or all of the proposals
may come in at a higher cost than the City can negotiate with ATC. Staff time would be
diverted from customer service to the rebidding process; and if a new contractor is chosen,
service disruption would most likely result during the transition period.
POTENTIAL CONTRACT AMENDMENTS WITH ATCNANCOM
February 3, 1998 - Page 3
When reviewing the alternatives, it is important to consider the following: (1) The impact of the
decision on the delivery of transit services to the customer; (2) The long-term cost implications to
the City; and (3) The real cost to operate transit service regardless of who the operator is, including
the City's option of not contracting operations.
FISCAL IMPACT
Undetermined until conclusion of negotiations or rebid of contract. There will be a fiscal impact,
as it appears that the true cost of operating transit service is more than the City is currently paying
the contractor.
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