recommendations for revitalization: saving the metro metro internal consulting task force neal...

Recommendations for Recommendations for Revitalization:Revitalization:Saving the MetroSaving the MetroMetro Internal Consulting Task ForceMetro Internal Consulting Task ForceNeal Dutta, Jeronimo de Miguel, Bobby Gautam, Jon Neal Dutta, Jeronimo de Miguel, Bobby Gautam, Jon KaminKamin

The Mandate

• To resolve urgent need for capital and operating funding.

• To resolve flawed funding allocation structure.

• To create and implement a communications strategy that supports these initiatives.

Objectives

• Address both immediate and systemic issues in Metro funding.

• Develop a comprehensive communications plan that supports this pursuit of funding.

• Adhere to Metro’s long-standing core mission, values, and planning initiatives.

Agenda for Change

Analysis - 1. Immediate Needs (Neal)

2. Systemic Funding Allocation (Bobby)

3. Integrated Communications Plan (Jon)

Recommendations1. Bond Issuance to address capital

needs.

2. Enhanced Operational efficiency:• Fare Hikes, Advertising sales

3. Lobby for creation of appropriate long-term funding allocation structure.

4. Utilize dormant ad space to rally public support for Metro funding.• PR initiatives

Problem: Urgent Funding Needs• Capital Crisis:

– Aging infrastructure in disrepair.

– Passenger safety and security at risk.

– $1.5 Billion needed over 6 Years - $250 million/year

• Operating Budget Shortfall– Additional $25 Million in revenue needed

to cover operating expenses in FY 2005.

Analysis: Decision Criteria

• Balances 2005 Operating Budget.

• Provides immediate capital funding for infrastructure renewal.

• Feasible to implement.

• Maintains passenger satisfaction with services.

Alternative #1: Streamlining

• Reduce salary, operational expenses by 5% through service cuts and related layoffs.

• Advantages: – Balanced operating budget for Fiscal Year

2005.

• Disadvantages:– Low morale; may impact quality of service.

– Alienation of passengers hit by service cuts.

– Conflict with labor unions.

• Raise all passenger fares by 5%– Fares are ‘sticky’: few alternatives.

• Advantages: – Balances operating budget for 2005.

– Relatively small increase.

• Disadvantages:– Third consecutive increase – riders

becoming increasingly dissatisfied.

Alternative #2: Increased Fares

• Minimum issuance of $500M over 2-6 years.– Federal backing of interest payments.

• Advantages: – Satisfies immediate infrastructure needs.

– Passenger experience enhanced by new infrastructure.

• Disadvantages:– Interest expense increases operational

shortfall.

Alternative #3: Bond Issuance

• Metro leases just ¼ of potential ad space. – This revenue stream can potentially be

doubled.

• Advantages: – Balances operating budget for 2005.

• Disadvantages:– Passenger resentment to bombardment of ads.

– Reduced aesthetics, contrary to Metro policy.

Alternative #4: Ad Revenues

• Issue $500 million in bonds over two years to satisfy immediate capital requirements.

• Increase sales of ad space by 50% in 2005 and 33% in 2006 to cover interest expense.

• Increase fares by 5% in 2005 to cover operating budget shortfall.

Recommendation

Operating Budget

Passenger Satisfaction

To a great extent

Not at allSomewhat

Capital for Infrastructure Feasibility

Streamlining

Increased Fares

Bond Issuance

Ad Revenues

Blended Solution

Satisfaction of Decision Criteria

Overall

2005 2006

Passenger Revenue 511.72 539.10

Advertising Revenue 43.50 63.84

Other Operating Revenue 25.15 25.07

Operating Subsidies 436.40 477.30

Total Operating Cash Flows 1,453.17 1,582.82

Estimated Interest from New Transit Bonds 12.50 27.50

Projected Cash Flow to Expenses 1,451.80 1,579.76

Projected Net Cash Flow 1.37 3.06*(in $Millions)

Projected Cash Flows*

• Negative media coverage has exposed Metro’s serious lack of resources.

• Two potential reasons for this economic shortfall:1. Lack of sufficient levels of government

support.

2. Operational mis-management (as suggested by negative tone in media).

Problem: Lack of Annual Support

Analysis: Not Metro’s Fault…

• Second-highest cost-recovery ratio.

• GAO commended Metro management for capital investment practices.

• It is widely recognized that passenger fares are insufficient to meet operating expenses.

• Various Government contributions: – Do not contribute to operating expenses.

– 2% of operating revenue comes from dedicated sources; national average is 33%.

– No longer eligible for Urbanized Area Formula Program.

Analysis: Not Metro’s Fault…

• Equitably incorporate Federal, State assistance.

• Sustainable, feasible.

• Consistent with Metro Mission, Objectives, Values.

Analysis: Decision Criteria

The Proposed Solution

• Lobby for the tabling of a Bill through Congress.– Proposal for a coherent, sustainable source

of funding.

– Federal Government should match contributions made by each of the three states / regions.

• Guarantees some quantity of support from Federal Government.

The Proposed Solution

• Fixed levels of obligation for each contributor.

• Regions experiencing extreme fiscal difficulties will be able to apply for partial relief.

LU/Tokyo Seoul

To a great extent

Not at allSomewhat

TTC Ours

Equitable Funding

Sustainable / Feasible

Mission

Satisfaction of Decision Criteria

Funding Strategy: 5 Years On…• Concentrate on consumer-friendly

methods of increasing passenger-revenues.

• Allow Metro to sustain greater operating cost burden, decrease reliance on governmental assistance.

Problem: Acquiring Funding

• Efforts to procure funding can be greatly enhanced with public support.– Public comprehension of problem

Pressure for funding Government acknowledgement of will of constituents.

• Ability to convince public of need will be critical factor in ultimate success.

• Many Metro riders are key influencers.– Commuter segment – dominated by

Federal Government employees.

– Media representatives.

• Target key influencers to re-shape public opinion, indirectly secure funding.

Analysis: Metro Riders

• Clean, safe, reliable, inexpensive transit.

• Few viable alternatives: – Horrendous traffic

– Rising gas prices

– Lack of affordable housing in core

– Therefore, ridership is ‘sticky’.

• Metro riders often have few alternatives: will be highly receptive to communications.

Analysis: Metro Riders

• Public support may be difficult to secure.– Service deterioration has created negative

image.

– Compounded by negative media exposure.

• The compelling, rational response…– Lack of funding Infrastructure decay.

– Management is not part of the equation.

– Harness negative spotlight into rallying cry.

Analysis: Negative Exposure

• Generate support amongst key influencers.– Will pressure Government to act.

• Revitalize image.

• Cost-effectiveness: – Asking for funding, credibility could be

damaged.

Decision Criteria

• Strategic communications campaign.

• Central message: – Lack of funding leading to deterioration -

more money will fix Metro.

– Focus on Metro’s social, economic impact.

The Proposed Solution

• Targeted: reach interested parties directly.

• Transit advertising commands high recall / comprehension rates.

• Cost-effective: do not need to pay for space.

The Proposed Solution

• Shift blame from WMATA to Government.

• Pressure will force Government to consider funding proposals.

• Secure at least some portion of immediate $1.5B funding needs.

Expected Outcomes

• Internal advertising.– Transit ad space.

– Metro website, sympathetic lobby groups.

– Only cost is for media development ($500K - $2M) and opportunity cost of lost ad sales.

• Extensive PR (through traditional media).

Implementation

• Successful Precedent: Toronto Transit Commission

Implementation

Save the Metro!

The Metro depends on public support.

To find out how you can help save Metro,

click here.

• Integration with Web Communications

Implementation

• Integration with Web Communications

Implementation

A part of your life.Metro is a major contributor to DC’s Social, Economic and Environmental well-being.

Years of budget cutbacks have left the system in dire need of upgrade. Over the next 5 years, Metro will require $1.5 Billion just to meet today’s service levels.

Metro needs your support. Contact your local, state and federal representatives, and tell them Metro deserves more.

• Save the Metro

Save Metro

• Usage of Transit Media Space; fully integrated.

Where would you be without Metro?

Metro needs your support. For more details, call 1-800-4WE-MATA

Public transit saves

Metro needs your support. For more details,

call 1-800-4WE-MATA

our community.

Implementation

• Public Relations push: need 3rd party support.

Metro Needs $1.5B – SmithImmediate, long-term funding sought for complete overhaul of system infrastructure.

-Kamin, Gautam, de Miguel, Dutta

• Graphics: Breakdown of funding needs• Federal response

Public Transportation: A Renewed Call for Support

Implementation

• Printed material distribution, one-on-one conversations.– Set-up information booths at key

downtown stations during evening rush hour.

• Do not need to speak to every rider!– Active citizens will demand information.– Will also contact Government

representatives.

Implementation