The focus of this report has been on the state’s highway system. However, the state also spent some $259.2 million on bus, marine and rail programs in 2005, with $172.1 million of that money being spent on local bus system operating assistance grants. Most of the bus money is directed at two systems in Southeast Michigan – SMART and DDOT. For years, there has been discussion of merging these two duplicative organizations into one comprehensive system. However, there has been no action.
There is no better example of the need for consolidation in the number of local units of government and governmental agencies. As noted above, several high powered study groups commissioned by state government have called for consolidation in the number of local units, and/or for joint provision of local services. Governor Granholm has also called for such action.
For the sake of southeast Michigan’s bus riders, we recommend that no further funding increases be provided to these two organizations until they are merged in a way that will assure better customer service and lower costs. A new agency to oversee these two existing agencies is not the answer – a truly merged system is needed. However, union agreements in the new organization will have to be renegotiated under terms that are more in line with other large city regional bus systems. Otherwise the merged organization will not be able to improve service and bring costs into line.
As with highway agencies, we would recommend that performance standard goals be established for all local bus agencies in the state, including these. Local bus agencies should be required to measure performance against these goals, and to report performance against the goals. The performance standards and reporting should include benchmarking to other similar size systems around the country. Funding should at least in part be dependent on meeting goals. A portion of funding should also be tied specifically to ridership levels. The Legislature’s 1998 Transportation Funding Committee recommended tying 50 percent of transit operating funding to a combination of efficiency and effectiveness factors and this should be further considered. 
As an incentive to a merged southeast Michigan system, we would recommend that the legislature appropriate a fixed amount of money, perhaps as much as $20 million dollars, that would be available to be released in increments should the two systems merge and achieve progress towards the established performance goals. One other condition should be required before the merged system has access to any of this incentive money. That condition is for the city of Detroit and the merged agency to adopt legislation and/or rules that would allow for competition from private van services/jitneys on reasonable terms. Current Detroit ordinances require use of 12-passenger vans only, and require fares to be set by a rate commission instead of by market forces. Current Detroit ordinances are overly restrictive, and are designed to protect cab services from competition. Providing for private dial-a-ride and other forms of licensed van services could go a long way to allowing citizens access to the kinds of transportation services they need and deserve.
Finally, while a long shot, we would ask the Michigan congressional delegation to work on converting the ISTEA-LU $100 million Detroit-Ann Arbor rail “study” earmark to funds that would be available for bus operating and capital costs, and/or for Detroit-Ann Arbor Amtrak- based commuter rail operating and capital costs. Otherwise, this money will all be used on “planning” and is unlikely to ever be used on anything that actually materializes. If the money were available for Amtrak commuter service on the Ann Arbor to Detroit line we could obtain the best possible service and frequencies possible on the existing freight line, and get a good test of the feasibility of rail transit in southeast Michigan. In addition, if the money could also be used for a merged DDOT/SMART, for instance to support the merger, it would also be put to very good use. Again, we realize it would be very difficult to get Congress to approve such changes, but given Michigan’s economic condition and recent changes in the Congressional leadership, perhaps something could be worked out.