How Sharp Financial Acumen Can Loosen the Grip on Local Transit Budgets

Sam VeraldiBlog

The questions circling the future of public transit have put transit professionals in a precarious position. How will you predict the level of service needed to meet the demands of your riders? How fast will the demand for ridership come back to pre-COVID-19 levels? How will business, schools, and leisure travel change? Will our world be relegated to shopping online and conducting business by Zoom?  Will the future of restaurants be via DoorDash?

It’s an understatement to say that assembling an accurate budget amidst this uncertainty will be challenging. More specifically, how can you budget for all of the things we do in a new world?

Our nebulous financial future may force you to reprioritize your focus on revenue, expenses, operating budgets, assets, and head counts. Many agencies have been in a deficit since last year and are still in recovery mode. It could be hard to secure additional funding in these areas. Your financial acumen will be challenged, requiring you to better understand how to make the best of a messy situation.

To do so, it’s time to change tactics.

Getting the most out of your staff and intellectual capital

Transit is struggling to hire and recruit new talent. Instead of spinning your wheels with frustrating recruitment efforts, focus on optimizing your current state of staffing with these two tactics. The first is to critically evaluate your current employee base and look for ways to get more out of your intellectual capital. That could come in the form of training, increased responsibility for key members, and presenting them with opportunities to participate in senior leadership meetings. The second is to find more uses for technology and applications that make your teams more efficient and effective. These tactics focus on upgrading the skill set and efficiency of all employees, and identify those with the vision and talent to propel service offerings to new heights.

Setting and interpreting operational metrics

Knowing how to interpret operational metrics will help you be successful without straining your budgets. Understanding the five to seven key drivers of organizational performance— and having the ability to measure, monitor, track, and share them—will further demonstrate your financial competence and reinforce your control of your organization to vested stakeholders. It is vital to select and design meaningful performance measures that create shared ownership between staff and stakeholders. Set the right measurement for each objective, define the composite indices, set the proper thresholds and targets, and evaluate and re-evaluate frequently.

Understanding your asset lifecycle

Lastly, capital planning will become more important than ever. Senior leadership wants the greatest yield out of all your physical assets (e.g., buses, shuttles, vans, etc.). To accomplish this feat, you must have an understanding of the asset lifecycle:

  • Requirements Definition
  • Asset Planning
  • Asset Creation/Acquisition
  • Operations/Maintenance
  • Asset Monitoring
  • Renewal/Rehab
  • Disposal

For example, a heavy-duty large bus has a recommended life of 12 years or 500,000 miles.  Therefore, you should maintain and preserve each asset to achieve the maximum life and use, just as you would maintain your own personal vehicle. That means performing each phase of asset lifecycle planning to ensure maximum preservation and usage. It also makes sense to have a portfolio replenishment schedule in place in order to avoid replacing a bus fleet in the same year—a schedule that replaces 10% of the fleet each year is a good practice.

For any large asset you have, maintaining each asset with a keen eye toward keeping up with preventive maintenance schedules will be paramount. No matter the asset, whether it’s buses or office equipment, it is critical to know its economic shelf life and ensure that you follow an uncompromising maintenance schedule to get maximum usage. Lastly, you must remember to properly dispose of an asset when it has expired.

Aligning transportation goals with those of your community

Refreshing your financial acumen in a post-COVID-19 world will ensure transit agencies can run an efficient operation. However, you have a golden opportunity to take this a step further and base your services not only by what your financial books dictate, but also the strategic goals of the municipalities and people you serve.

Let’s say your municipality’s strategic goal is to be a prosperous city that promotes the expansion of economic activity in its downtown and commercial corridors, fosters a healthy climate for new and existing businesses, and provides economic opportunities for all residents. And let’s say operators of the municipality’s transit system had a successful financial year by meeting all your financial targets, but you didn’t offer service to the downtown business district or support ADA ridership.

If that’s the case, then you didn’t succeed in providing a service that would help the municipality achieve its strategic goals. That is simply unacceptable.

And in a period of recovery, where riders and stakeholders rely on you for community mobility, you do not have time for the unacceptable. Our future as transit planners depends on our ability to align with our municipalities’ strategic goals, and sharpen our efforts on improving the intellectual capacity within our organization, develop a good set of operational metrics, and knock capital planning out of the park.

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