MN: Rochester council weighs future transit options ahead of 2027 contract expiration

Creating a transit system fully staffed by Rochester city employees would add at least $2.5 million in annual expenses.

That's the estimate provided in a study of transit options as the city nears the final two-years of an extended contract with Transdev, which purchased First Transit last year.

The contract provides bus drivers and maintenance workers, as well as other services, for the city-owned fleet.

"Their contract expires at the end of 2026," Transit and Parking Director Ia Xiong told the Rochester City Council on Monday. "Alongside that is the Link BRT project scheduled to be opening also at the end of 2026. ... It's all kind of merging at the same time."

She said the combination of the planned new rapid transit service and the expiring Transdev contract led the Federal Transit Administration to recommend the city conduct an operations study and determine how Rochester Public Transit will operate in 2027. It set a November 2024 goal for a decision.

The Transdev contract has reached its renewal limit, so any new contract for transit operations must be part of a competitive bid process, which last occurred in 2016, when First Transit was issued the contract over three other companies, including Transdev and the local Rochester City Lines.

Xiong said a significant change in operations, as well as seeking new contract proposals, would likely take a year or more.

Jill Cahoon, vice president and transit and rail planning leader with Dallas-based engineering firm AECOM, presented four options for future transit operations: Maintaining the status quo with a single contracted provider, seeking individual contracts for each provided service, contracting for some services but moving maintenance operations in house, or moving all services in house.

Maintaining a similar contract for services provided by Transdev is estimated to cost $23.1 million to $24.9 million a year, with a 10-year cost of up to $274 million when added capital expenses are considered, Cahoon said.

Dividing services between contracts would increase the top estimated 10-year expense by $13 million.

"That actually makes things more expensive because it takes more work to work with multiple vendors," Cahoon said.

Falling between the two is having the city take over maintenance services while still contracting for bus drivers. The added cost over the existing practice is expected to be $200,000 a year or $2 million over 10 years.

It's also the option city staff plans to present to the City Council on Nov. 4 for a vote.

The proposal comes after nearly two years of Rochester Public Transit drivers lobbying to become city employees.

"Now is the perfect opportunity to bring RPT (drivers) in house as a true public transit service for all tax-paying citizens," bus driver Adri Gomez told the council in December 2022 as the sale of First Transit was pending.

Local 1005 of the Amalgamated Transit Worker Union representative Adam Buzbee and others have repeated the call during council meetings, pitching it as an opportunity to improve service.

On Monday, Xiong said the operations study using information the national transit database revealed transitioning to take on 140 new staff members, including drivers and needed support staff, would cost $27.4 million for operations, adding an estimated $25 million to costs during a 10-year period.

She said the added costs aren't expected to equate to better service, since it would provide the same number of buses and drivers on Rochester streets.

"This is not driving how we provide our services," she said, adding that an outside contractor can provide efficiencies through years of experience and services spread throughout many markets.

City Administrator Alison Zelms said it's uncertain how the city would fund the added expense, since state and federal funds, which cover approximately 80% of local transit costs, would likely not increase unless service increased.

Local funds required for transit operations are currently generated through fares and advertising sales, but Xiong said decreased ridership following the pandemic has increased reliance on reserve funds.

Without added state or federal revenue, she said the likely options to cover added cost would be relying on property tax dollars or cutting services to take operations fully in house.

Council opinions ranged from maintaining the status quo to waiting for more information regarding the option for making drivers city employees, but several members said they could support the staff recommendation.

"I do not think there is council support to bring everything in house," council member Patrick Keane said.

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