Merging administrative costs could save Bay Area transit agencies $100M 

Bay Area transit agencies spend significantly more in administrative costs than their peers across the nation, expenditures that knowledgeable observers believe could be slashed by merging some functions of the region’s 28 different operators.

Area transit agencies spend nearly 20 percent of their collective budgets on administrative functions such as purchasing, planning, dispatching and marketing, according to the Metropolitan Transportation Commission, the Bay Area’s lead transportation group.

Nationally, such costs are just 15 percent of operating budgets so, by that logic, Bay Area transit agencies should be able to slash 5 percent of their collective $2 billion annual budgets, or about $100 million, each year, said Steve Heminger, executive director at the MTC.

“We really think this is related to the fact that we’ve got more than two dozen transit operators here,” Heminger said. “We’re duplicating administrative costs that are not duplicated in other areas.”

Heminger believes the region’s 28 transit agencies — all with different staffs and different governing bodies — could save money by merging institutional functions. Possible candidates for merging include maintenance yards, grant and planning offices, marketing teams and purchasing offices. Instead of each agency employing its own staff for such duties, employees could work jointly for different operators.

“We often talk about how many agencies we have and what that means,” Heminger said. “Here is concrete evidence of that — we have $100 million a year that could otherwise go to service and our passengers.”

The idea of consolidating Bay Area transit agencies has been debated for decades. Former MTC director Quentin Kopp first proposed the idea about 30 years ago.

Kopp cited the various transit providers in the North Bay — which collectively carry a fraction as many passengers as does Muni — as prime candidates for consolidation. However, his efforts were routinely shot down by local politicians, who rallied support to save the local lines.

“It’s an incredible waste of taxpayer’s money to support these different systems,” Kopp said. “But local politicians are too farsighted to realize this.”

Stuart Cohen, executive director of the local transit advocacy organization TransForm, said that while outright agency mergers might be cost-prohibitive, a merger of specific functions would be worthwhile even if it only saved one-tenth of what Heminger estimates, because that total could be used to avert service cuts.

Both Cohen and Heminger are involved in the MTC’s Transit Sustainability Project, a long-term outlook for the Bay Area’s public transportation agencies.

While talks of consolidation often bring up concerns of job layoffs, Cohen said that with local transit agencies facing massive budget deficits, the alternative could be worse.

“Doing nothing will result in layoffs,” Cohen said. “Doing nothing is no longer an option.”

Operating budget

Compared to their urban peers, Bay Area transit agencies spend well above the national average on administrative costs. Below are the percentage of total costs represented by administrative costs in major markets.

Bay Area operators: 19.9
Atlanta: 19.9
Seattle: 16.5
Los Angeles: 16.0
Washington, D.C.: 15.8
Philadelphia: 15.1
New York: 11.7
Boston: 9.7
Chicago: 9.4
National average: 14.3

Source: MTC

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Will Reisman

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