Establishment of Cost-Sharing Arrangements

One of the typical outcomes of various agencies working together to identify available transportation services and accurately estimate their attendant costs is a clear realization of the scarcity of available resources to finance transportation services at a level of service and quality to the satisfaction of all the agencies involved. While local transit agencies and health and human service agencies in many areas have had a history of coordinated transportation, including sharing transportation costs, the passage of the ADA created a significant resource squeeze on public transit agencies. ADA significantly increased the mobility of many Americans by requiring public transit agencies to provide paratransit transportation to all ADA-eligible riders within specified service areas. While many transit agencies were already providing some level of paratransit services prior to the ADA, the passage of the ADA resulted in a significant increase in the demand for paratransit rides provided by public transit agencies.

Due to the increase in demand and the comparatively high cost of providing paratransit services, many transit agencies chose to define their paratransit services fairly restrictively under ADA. Transit agencies looked to contain costs by enforcing strict ADA eligibility criteria and by implementing service changes including switching from door-to-door service to curb-to-curb service. These measures often resulted in a number of individuals, who formerly used the pre-ADA paratransit services provided by the transit agency, finding themselves ineligible or left unable to access the paratransit services provided. While demand for paratransit services has increased, Federal, and sometimes state resources available for paratransit services have been decreasing. Public transit agencies will find it increasingly difficult to provide services to a broader range of individuals, many of whom may have been formerly transported by human service agencies. Without the establishment of cost sharing arrangements between transit and health and human service agencies, the level of service provided by public transit agencies to health and human service agency clientele under ADA could further decline.

Cost sharing arrangements can provide the underpinning of a coordinated approach to transportation service delivery. Cost sharing can help ease pressure on available transit agency resources, thereby allowing the paratransit provider to provide enhanced levels of service such as door-to-door and regularly scheduled rides to specific groups to a work or activity center. The basis for cost sharing arrangements can either be negotiated, or, as is often the case, calculated using a uniform cost accounting of transportation expenses. The establishment of a uniform cost accounting system to identify and classify applicable transportation expenses, is often the first step in developing cost sharing arrangements. A uniform system of accounting for costs allows participants to share a clear understanding of their respective costs, which can serve as the basis of an agreement between agencies when trying to coordinate. In most instances, once the cost sharing agreements are in place, health and human service agencies provide resources to the paratransit provider for an agreed upon level of service or on a per trip cost basis. Cost sharing is not only restricted to transfers of resources to the transit agencies; local health and human service agencies often pool their own resources in rural areas where a transit agency may not exist.

The following two examples illustrate how the formation of cost sharing arrangements occurred, what provided the basis for the arrangement, the agencies involved, the challenges faced, and the benefits realized through these arrangements. For additional information about establishing cost sharing arrangements, please see "Planning Guidelines for Coordinated State and Local Specialized Transportation Services," Checklist of Transportation Planning Steps, Steps 8 and 9.⁸

A. Lane County, Oregon - Sharing Costs to Ensure Higher Levels of Service and Leveraging Local Match to Increase Paratransit Funding

In Lane County, Oregon, prior to the passage of the ADA, the Lane Transit District (LTD) was actively mainstreaming special needs riders onto fixed-route by outfitting all buses with lifts while also supporting a limited dial-a-ride service. LCOG, the region’s MPO, also serves as the Area Agency on Aging and administers services for seniors and persons with disabilities. In the mid-1980s LCOG entered into an agreement with LTD to administer contracts throughout the region for specialized transportation services. The metro-based service, now called RideSource, was the result of an effort to pool resources and provide paratransit to local health and human service agency clientele and eligible elderly and persons with disabilities.

When the ADA required that transit agencies take responsibility for the provisions of paratransit services comparable to those available on fixed-route, LTD continued to contract with LCOG to coordinate and implement the ADA-required service. ADA requirements have significantly increased the demand for rides provided by the RideSource program to the point where they are providing 100,000 trips per year using a fleet of 20 vehicles. LCOG owns vehicles and leases them to the respective agency selected to operate services. Special Mobility Services is the current operator of the RideSource program.

Funding for specialized transportation in Lane County comes from a combination of revenues. In 1985, the state adopted a statewide cigarette tax that flows into the Special Transportation Fund and is distributed on a population-based formula. Other sources of revenue include: rider fares; Medicaid medical trip reimbursements and non-medical trips reimbursed at 50% of the full cost through a cost sharing arrangement with the Oregon Department of Human Resources (DHR); some Older Americans Act funding dedicated for rural volunteer based services; and other agency contract agreements. The majority of funding for the RideSource program (55%) is derived from the LTD’s general fund. Each year, LTD budgets revenues and transfers them to LCOG to help pay for the RideSource contract. LCOG re-bids the contract periodically to ensure that costs remain competitive and to establish a base cost for service.

Since the passage of the ADA, the cost on a per ride basis has risen despite service to an ever increasing number of riders. LTD has continued to increase their funding for paratransit services out of their general fund to meet increasing demand, from $281,000 in FY 93-94 to $623,000 budgeted for FY99-2000. LCOG and LTD anticipated increases in demand and costs under ADA and set policy to restrict services in order to contain costs such as adopting strict eligibility guidelines under ADA, providing curb-to-curb rather than door-to-door service, and incrementally increasing fares aimed at attaining the ADA maximum allowable fare. As costs have increased, LCOG has sought to develop revenue-sharing agreements with health and human service agencies to ensure continued high levels of paratransit service, to provide the level service needed by the agency for their clientele, and to eliminate fares for persons receiving agency support for transportation.

LCOG has worked with State DHR agencies to establish cost-sharing agreements, whereby the State and LCOG share the cost of providing transportation. LCOG calculates the full cost of providing rides using a cost allocation model and provides local matching funds as a percentage of the cost. The DHR agency pays the remaining portion of the cost as per the matching agreement and agency riders are not charged a fare for these trips. Local revenues are then used as match in obtaining additional Federal revenues for specialized transportation.

Critical to putting this agreement in place was the development of a full cost allocation model for transportation in 1992. LCOG used consultants' assistance to conduct an analysis and implement a cost model to determine the actual cost of each component of the RideSource program. RideSource is the "umbrella" for a number of service components within the contract that are designed to meet a variety of needs:

• RideSource is the curb-to-curb service that meets the requirements of ADA
• RideSource Shopper is a once-a-week shopping service that operates on service route model
• RideSource Escort utilizes volunteers to accompany persons who need door-through-door assistance to medical appointments
• Other components that provide transportation services for eligible Title XIX (Medicaid) clients and clients of the Pearl Buck Center for the developmentally disabled (DD).

In calculating costs for agency agreements, many costs, such as office time and expenses did not clearly belong to one service component or another. Even the cost of operating certain vehicles needed to be allocated since clients of various programs often ride on the same vehicle. The model, as described by LCOG, categorizes all expenses as either fixed or variable costs under one of eight expense categories⁹. The total expenses under each of the eight expense categories are allocated between the various service components according to one of six cost drivers as follows:

Information on driver hours, rides, vehicle miles, and subcontracted transportation come from records of operations which are available by type of trip (i.e., RideSource, RideSource Shopper, RideSource Escort, Title XIX, agency contracts). Using the cost drivers to allocate the expense categories by type of trip based on that actual information, LCOG develops cost rates for each different type of ride provided. They use the calculated average cost per trip as the basis for their cost sharing agreement with the State DHR.

More recently, LCOG has approached the state DHR Mental Health and Developmental Disability Services Division and Lane County Developmental Disabilities, the local agency of the DD, to consider cost sharing based upon their service agreements. RideSource provides transportation services to the developmentally disabled on a subscription basis, bringing clients to job sites and training centers by the times specified by the local DD agency. This service is provided at a considerable cost, however. Under the ADA, while LCOG is required to provide the transportation service, they could provide a much lower level of service in terms of service times and scheduling. In an effort to maintain these higher levels of service, LCOG has begun discussions with the agency regarding cost sharing. According to LCOG staff, one of the major challenges in beginning these discussions, as was the case with the DHR, is developing an understanding of the terminology of how the State Mental Health Agency is funded and where opportunities may reside to leverage or increase funding for local specialized transportation.

B. Madison, Wisconsin - Sharing State and Federal Resources to Support Paratransit

In Madison, Wisconsin, the city transit agency, Metro Transit, has been providing paratransit services since 1976 and, more recently, in response to the passage of the ADA in 1991. Madison Transit’s paratransit service was originally envisioned as a service for elderly and persons with disabilities, but had no restrictions on the type of rides they would provide. When ADA was put in place, Metro’s paratransit system was already meeting ADA requirements in terms of the size of the service area. Metro Transit was already providing a substantial share of the transportation services to health and human service agency programs administered by the Dane County Human Service Agency (HSA). The passage of the ADA significantly increased the demand for existing paratransit services, particularly from seniors eligible under ADA’s guidelines. From 1992 through 1996, Metro’s paratransit ridership and costs increased by an annual average of 20 percent.

Confronted with rising costs and demand, Metro Transit undertook a ridership study of their paratransit services in 1995 that examined who their riders actually were in contrast to their ADA-certified eligible riders. The study revealed that at least one-third of their ridership was in support of employment or employment training for the developmentally disabled, programs supported by the Dane County HSA. Furthermore, they discovered that many of their riders were supported in part through the state-operated Medicaid waiver Community Integration Program (CIP) and the state-funded, county-operated Community Operations Program (COP) administered through the HSA. The study also pointed out that Metro Transit was providing paratransit services to many clients who might be able to access their fixed-route services. In 1995, the City Comptrollers Office also undertook an ancillary study, which looked at paratransit services within Dane County. The study revealed that Metro Transit was providing approximately 85% of the specialized transportation services within Dane County, despite the city accounting for only 60% of the population.

After considering a number of service change options, including excluding seniors from their paratransit services, Metro Transit staff approached the Dane County HSA to examine possible opportunities for sharing paratransit costs. Staff from Metro Transit and the county were able to develop cost sharing arrangements for designated state transportation funding sources and to secure specific health and human service agency Federal funding to support Metro Transit’s paratransit services. In the case of state and Federal funding sources, the ability of staff to develop cost-sharing arrangements was due in part to circumstances that are particular to Wisconsin. As was expressed by staff, however, these circumstances could be duplicated in other parts of the country with changes to state laws regarding eligible expenditures of health and human services funds.

Wisconsin is one of only a few states in the country with a segregated State Transportation Fund exclusively designated for transportation uses and funded by state gas and vehicle license taxes. Metro Transit and county staff developed an agreement to commingle the funds that each agency received from the state transportation fund in support of transportation provided by the other agency. Requirements for the specific use of State Urban Transit Aid funds (received by Madison Transit) and the State Elderly Transport Aid funds (received by the county), both of which are derived from the State Transportation Fund, are loosely defined. This enabled Metro Transit to use Urban Transit Aid funds to pay not only for their own paratransit services, but also to share the cost for county-provided paratransit services which might otherwise need to be provided by Metro Transit. Conversely, the county agreed that since Metro Transit was providing 85% of the paratransit trips within the county they should receive a portion of the Elderly Transport Aid funds available because they were transporting many senior riders.

With regard to federal funding, a state-adopted Medicaid waiver provided an opportunity for staff of the county and Metro Transit to establish cost sharing arrangements. The state waiver allows a portion of CIP funds, which are aimed at enabling children and adults who are developmentally disabled (DD) or mentally retarded (MR) to live at home rather than in an institution, and COP funds, which are aimed at enabling persons of all ages with disabilities or elderly to continue to live at home, to be allocated to community-based services such as transportation as an eligible expense. While this pass-through of funding from the county to special districts or independent transit agencies is prohibited in many states, Metro Transit is part of the city and, as such, can receive pass-through funding from the county as an eligible transportation provider to the HSA.

As a provider, Metro Transit bills the HSA for paratransit services provided. Metro Transit and the county were able agree on the cost basis for reimbursement based on the transit agency’s database of ridership and their full cost accounting for paratransit services. The county HSA reviews the ridership information, removes any ride that they deem ineligible for reimbursement under the CIP and COP programs, confirms the bill and authorizes Metro Transit to bill the county. The county HSA then bills the state, which in turn bills the Federal government. The money is then passed back through the layers of government and ultimately to the transit agency. As a result of this cost sharing arrangement, the county HSA reimburses Metro Transit for 60% of the cost of the ride. The 40% of the cost of the paratransit ride not covered by the county HSA is covered primarily by the commingled state transportation funds discussed earlier, paratransit fares of $1.25, and other city general fund support. The 40% claimed as local match by the state when it bills the Federal government enables the state to gain more federal dollars in support of these services.

Transit agency staff is continuing to work through the County Specialized Transportation Committee, which includes representatives of the city, Metro Transit, and the Dane County HSA, to further build on these coordination efforts. The committee is currently considering centralized paratransit dispatch for the entire county, which would include Madison Transit’s services and those transportation services provided by the county in the non-urbanized areas of the county. Madison Transit is also attempting to re-orient their entire system to more of a transfer point system, whereby paratransit services could bring able riders to mainstream trunk routes and thereby reduce the total cost of the trip. As part of this re-orientation, the transit agency has adopted tight ADA-eligibility standards in an attempt to mainstream able riders onto the regular service routes when practical, and also is attempting to work with the county to adopt similar standards for its services.