Title
Contract Amendment for Market Rate Adjustment to First Transit, Inc. Fixed Route Transit Services Agreement (Ordinance S-49272)
Description
Request to authorize the City Manager, or his designee, to execute an amendment to Agreement 146890 with First Transit, Inc. to address wage rate challenges in the regional labor market for bus operators, mechanics, and utility workers. Further request to exercise the two-year option to extend the agreement through June 30, 2025, including the amended contract rate pricing. The contract amendment will result in additional costs of $7,549,730. Further request to authorize the City Controller to disburse all funds related to this item. The contract’s total not-to-exceed amount will increase to $303,838,157.
Report
Summary
Ongoing challenges in the labor market have made it difficult for many industries to hire and retain workers. The workforce shortage is especially acute for the transit industry. In February 2022, the American Public Transportation Association conducted a survey of its member transit agencies. Key takeaways from that survey include:
- 92 percent stated they are having difficulty hiring new employees, with bus operations positions the most difficult to fill.
- 66 percent indicated they are having difficulty retaining employees.
- 71 percent said they have either had to cut services or delay service increases because of worker shortage issues.
- 52 percent have increased their starting pay in response to worker shortages.
- 38 percent have implemented sign-on bonuses, 39 percent implemented referral bonuses, and 17 percent have implemented retention bonuses.
In January 2018, Phoenix City Council awarded the West Transit Facility Fixed Route Services contract to First Transit, Inc. and provides local and circulator bus service throughout the region. The five-year contract started July 1, 2018, and continues through June 30, 2023, with a two-year option to extend the agreement through June 30, 2025. The contractor is responsible for all aspects of transit service provision including personnel administration, operations, and maintenance. First Transit also performs the selection and hiring of personnel qualified for the operations and maintenance of the facility, vehicles, and equipment.
Locally, Phoenix’s fixed route transit operations contractors, including First Transit, have experienced operator, mechanic, and utility worker shortages since July 2020. This labor shortage has resulted in deficiencies in transit performance, including service delays and missed trips, as both contractors are finding it challenging to hire and retain operators to complete service and maintenance personnel to keep vehicles in a state of good repair. Prior to the pandemic, First Transit’s percentage of missed service was consistently between 0.5 percent to one percent (between 3,000-5,000 miles) of scheduled miles a month. Since the pandemic, missed service has increased to between four percent and eight percent (23,000 to 46,000 miles) a month, with some months as high as 10 percent (55,000 miles) missed a month. The resulting delays and missed service have also resulted in increased passenger complaints, climbing from an average of about 4.6 to 6.7 per 10,000 boardings.
Despite increased vacancy rates for bus operators and mechanics, First Transit has demonstrated a commitment to maintaining maximum service levels with an increased level of effort to recruit and retain staff, including instituting recruitment and retention bonuses, and attendance and performance bonuses for existing employees.
The preceding efforts have helped recruiting efforts by First Transit, but the company has a 7 percent vacancy rate for bus operators and 12 percent vacancy rate for their maintenance staff. Because the contract remains under-resourced, and transit performance levels continue to be adversely impacted, the City of Phoenix Public Transit and Valley Metro staffs have been working with the region’s service providers to develop contract amendments to bring the wages into closer alignment with the current labor market.
Operating under similar labor circumstances, and experiencing unprecedented levels of missed service, the Valley Metro/Regional Public Transportation Authority and Valley Metro Rail boards recently approved contract increases for their bus and light rail operating contractors. Phoenix’s review and acceptance of each contractor’s price proposals would serve to help bring parity to transit personnel wage rates across the region.
Financial Impact
The increase in the cost per mile (local) for the for the remainder of each year of the contract is shown below. Bus operator wage rates in the West Valley have historically trailed the rest of the region due to differences in contracting cycles and differing costs of living.
Contract Year 5
LOCAL
- Original Cost Per Mile: $6.634
- Proposed Cost Per Mile: $7.198
Contract Year 6
LOCAL
- Original Cost Per Mile: $6.898
- Proposed Cost Per Mile: $7.482
Contract Year 7
LOCAL
- Original Cost Per Mile: $7.199
- Proposed Cost Per Mile: $7.811
The amendment includes revised special event service and bus bridging pricing, should the City require ad hoc services during the term of the contract agreement. Such services vary in duration and are reimbursed at an hourly rate. Special event service and bus bridging cost considerations are already factored into the overall amended pricing.
First Transit operates over 6.5 million service miles on the City’s behalf. As such, the proposed increase to the cost per mile equates to a $7,549,730 increase over the remaining 2.5 years of the contract, necessitating a need to increase the contract authority by this amount.
The original contract funding is in an amount not to exceed $296,288,427 for seven years, with the contract amendment bringing the contract total to $303,838,157. The wage rate and contract amendment would take effect retroactively on Dec. 1, 2022.
Due to budget savings from missed Fixed Route service, the FY 2022-23 budget will be unaffected by this price change.
Concurrence/Previous Council Action
The Citizens Transportation Commission recommended approval of this item on Nov. 17, 2022, by a vote of 9-0.
The City Council previously approved the West Transit Facility Fixed Route Services agreement with First Transit, Inc. on Jan. 24, 2018 (Ordinance S-44210).
Department
Responsible Department
This item is submitted by Deputy City Manager Mario Paniagua and the Public Transit Department.