New CEO’s role: guide transit’s transition

In Eden Prairie, public transit is in transition. 

SouthWest Transit has been rocked by COVID-19-related drops in express-bus service, buoyed by the popularity of small-trip Prime, and challenged by an aging population, the pending arrival of light-rail service, and the need to electrify its bus fleet.

Erik Hansen, the newly hired chief executive officer who began work on June 5, is responsible for navigating that transition. He’s a former city administrator, county commissioner, and local government executive.

And, oh yeah, he’s filling the shoes of former CEO Len Simich, who retired after guiding SouthWest Transit for a quarter century and whose name now graces the agency’s headquarters building and maintenance facility in Eden Prairie.

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“It’s a difficult job, yeah,” Hansen acknowledged in an interview Aug. 29. “But I see these kinds of challenges we’re facing right now as opportunities.”

One of the biggest challenges facing the transit agency, which primarily serves Eden Prairie, Chanhassen, and Chaska, is a sharp, COVID-19-related decline in express bus service to downtown Minneapolis. It’s slowly recovering but is still down 75% from 2019 levels.

Last year, SouthWest Transit had 170,742 express-bus riders after a low of 85,574 riders in 2021. The agency had more than 1 million riders per year on its overall fixed-route system as recently as 2015.

“People aren’t going downtown to work as much, and this is a trend that’s not just us, but a national kind of trend,” said Hansen. “People are working more at home – I think three times more than they used to – and it’s just kind of a fact of life.

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“We’ve lost a couple million dollars in fares, for sure,” he added about express-bus service. “That is a big number, there’s no doubt about that. It’s pretty obvious we need to try to get that back. A lot of it is going to be about how we remarket ourselves to let people know about that service.

“What we need to do,” Hansen said, “is ask the question, ‘How do we get some of that back?’ We’re up 23% over last year in our express-bus ridership, so it is coming back, but it would take 5-6 years to get back to where we were in 2019.”

At the same time, SouthWest Transit has seen gains in its small-vehicle, micro-transit service known in several iterations as Prime, which provides mostly local, short, door-to-door, on-demand trips to the grocery store, pharmacy, work, and any number of other places.

“Right now our Prime service is up considerably; 42% of our business now is micro-transit, as opposed to the way it used to be, which was almost exclusively express bus,” Hansen said.

The two markets for those services are quite different. Express-bus service has primarily attracted white-collar riders who choose the bus over a car to reach work downtown. In a rider survey last year, more than 43% of SouthWest Transit’s express-bus riders reported annual incomes of $100,000 or more. (Nearly 30%, however, did not provide income data.) Prime riders generally have lower incomes; more than two-thirds said they make $50,000 per year or less. (By comparison, fewer than 11% of express-bus riders reported earning less than $50,000.)

Nevertheless, Hansen sees potential for growth in both express bus and Prime services. He says that growth begins with conducting market research on people not currently using SouthWest Transit. Eden Prairie’s growing racial and ethnic diversity, and an aging population, need to be factored in the equation, he added, as does any new-service needs arising from the debut of the Metro Green Line Extension of light rail in 2027.

“A lot of it is about collecting information,” said Hansen. “We had all these set ideas about how things work. But then the world changed. Now, we’ve got to think about it differently.

“To an extent, right now we’re in a little bit of an information-gathering mode. What is the future of where we’re going? Certainly that market research is going to be important.”

Other steps to get there

Because the appointed commission that governs SouthWest Transit also has an interest in the agency’s next version, Hansen expects its discussions later this year will include strategic planning.

Another way the transit agency will pivot is through its operating budget, which runs on a calendar year. That means Hansen’s first imprint as CEO on how the money will be spent is the 2024 budget plan, crafted over the coming months. The agency’s 2022 general operating fund showed revenues of nearly $17.4 million, offset by expenditures totaling almost $15 million. Operations and vehicle maintenance, not surprisingly, were the biggest expense items, together totaling nearly $8 million.

One change expected in 2024 is SouthWest Transit will get its first electric buses. It’s been a fossil-fuel user since forming in 1986, so the transition to all-electric is expected to take time. The agency’s Sustainability Plan calls for 100% electrification of the vehicle fleet, currently 96 vehicles, by 2050.

Said Hansen: “I think our goal should be, ‘How can we be on the cutting edge of that?’”

Likewise, the CEO said artificial intelligence and autonomous vehicles should also be a part of SouthWest Transit’s strategy discussions. He wants the agency to leverage partnerships so SouthWest is an early tester and adopter of those advanced technologies.

At the same time, he acknowledges that some funding decisions are in the hands of other government bodies, including the Metro Council, which oversees transportation in the Twin Cities area overall. SouthWest Transit’s primary funding source is the state’s Motor Vehicle Sales Tax (MVST), a 6.5% tax applied to the sale of new and used motor vehicles in Minnesota. Thirty-six percent of annual revenue goes to metro-area transit.

It’s hard to know exactly what local transit will look like in 5-10 years. But imagine, in addition to express buses continuing to motor downtown and micro-buses flitting here and there, that at Eden Prairie’s four LRT stations, folks from Minneapolis who work at Eden Prairie companies disembark light rail to board electric, autonomous circulators that SouthWest uses to deliver them to their employers’ front door. It could happen.

Whatever is coming, said Hansen, will stand alongside the existing high-quality service that’s been provided to Eden Prairie and its western neighbors for decades.

“It’s an interesting time to be here, for sure,” he said. “Because I think there are a lot of possibilities, and exciting things happening down the road. A little bit of evolution can be a little bit scary for people. That can also be interesting and exciting at the same time.

“What’s really important for the commission, and really important for the public to know, is that we’re still SouthWest Transit. And we’re still going to provide a high-quality service that you’ve come to expect. We just need to adapt to the changing conditions so that we can continue to do that.”