Vanpooling Unplugged: A New Direction for the Future

by Byron York of 2 Plus, Inc. Reprinted from the 1996 Summer/Fall issue of TMA Clearinghouse Quarterly published by CUTR for the Florida Department of Transportation.

Vanpooling has to get unplugged. The shrill-voiced child of the ‘70s, the 1980s undisciplined offspring of corporate largesse and government mandates, has to face maturity.

With its original life support systems failing, vanpooling has to reinvent itself to survive the ‘90s. It needs to reach out to a larger audience with a new look and a new message. It needs to convince rather than confront. Like any successful consumer product, vanpooling and its associated commuter services have to be responsive to the significant economic and lifestyle changes which make up the ‘90s marketplace. If vanpooling expects to continue to make a difference, it has to cut the cord and get in tune.

Overview of Vanpooling in the U.S.

Vanpools of the 1970s and early 1980s were born of concerns about the environment, scarce oil resources, and highway congestion. They were primarily corporate based and sponsored, or owned and organized by individual commuters. Vanpooling was a cause to be promoted, looking for converts not consumers.

By the mid-’80s with the easing of the energy crisis, vanpooling faced a shrinking market. "The lesson of the 1980s is that making it intolerably expensive and unbearably inconvenient to commute alone doesn’t work. Guilt-tripping commuters is also doomed to fail. Whether it be through legislation or environmentalism, you can’t force people into vanpools and on to buses," says Alan Pisarski, author of Commuting in America. U.S. Census figures bear out Pisarski’s statement. During the 1980s, while billions of dollars were spent promoting alternative transportation, solo commuting increased 8.8 percentage points, from 64.2 percent of the workforce to 73 percent.

By the mid-’90s, we faced a critical juncture. With the national trend in corporate downsizing, workplaces were increasingly dispersed. We also had to deal with a looming, but long disregarded, geographic factor we refer to as "85/85." This means that 85 percent of commuters don’t work for large employers, and 85 percent do not commute into downtown areas. Conventional transit and rail service do not adequately respond to this new demographic reality. However, the Rideshare Company (Hartford) realized the necessity for a transportation system that could service this growing need. The congestion and parking problems associated with downtown job concentration became less of a factor for creating vanpools. While the public was concerned about the environment, they were not willing to complicate busy, longer workdays to "make a difference." Government environmental regulations were eased. Cost and availability of gasoline were not major factors in workers’ commuting decisions.

The Rideshare Company – A Case Study

The Rideshare Company of Hartford, Connecticut, is an appropriate case study of the national experience in vanpooling trends. As a private, non-profit, The Rideshare Company differs in its charter from most of the more than 300 other transportation organizations nationwide, many of which are part of a government agency. This has provided us with an unusual degree of flexibility from the outset.

But in its original approach to vanpooling, The Rideshare Company was similar to its peers. Founded in 1980, it began as an advocacy organization and information provider. Supported with state and private funding, its primary role was as a liaison to the large corporations located in downtown Hartford. Many had already formed their own corporate vanpool fleets in response to government incentives and downtown employee parking shortages. The Rideshare Company lobbied those who hadn’t and offered information and vanpooling matching services to others. From the outset we also offered a third-party vanpool lease program to commuter groups and smaller employers. When interest rates became prohibitive in 1983, we organized one of the first zero percent vanpool loan programs available to commuters and companies.

Despite these efforts, overall ridesharing numbers were declining by 1984, parallel to national trends. In response, The Rideshare Company created a new product for commuter rideshare matching – The Commuters’ Register. The Register, which continues to be published monthly, is a free, matching tabloid that lists over 1,500 commuters each month who wish to join or form a carpool or vanpool. In 1985, The Register was expanded statewide to include the service areas of Connecticut’s 3 ridesharing non-profit organizations The Rideshare Company, serving Greater Hartford; Rideworks, serving Greater New Haven; and Metropool, serving Greater Stamford. By increasing the visibility of ridesharing through print media, and providing a convenient, easy-to-use matching service. The Register was able to help stem rideshare attrition, successfully matching 25-35 percent of the commuters who listed in it – more than twice the national average.

The amended Clean Air Act of 1990 also helped bring vanpool numbers back up. It set targets for improved air quality and required larger employers to reduce the number of cars arriving in their parking lots each morning. The late ‘80s economic boom centered in Greater Hartford kept a high number of jobs centralized in the downtown area. The resulting confluence of travel patterns, traffic congestion and parking problems sustained The Rideshare Company’s programs.

Effects of the Dramatic Economic Downturn in Connecticut

Connecticut’s economic recession deepened dramatically as we entered the early ‘90s. The Rideshare Company was faced with the need to make fundamental changes in order to survive. As large corporations laid off thousands of employees, consolidated, sold out, or downsized, much of Hartford’s vanpooling base was rapidly eroding. Fewer people were going to work at increasingly dispersed locations.

The Rideshare Company response was to create a vanpool system – the nation’s first to function above the corporate or independent operator level. The plan was to acquire and consolidate the corporate vanpool fleets centered in the Greater Hartford area and to provide administrative, marketing, and customer service support through The Rideshare Company. Most area corporations were looking to get out of the costly and time-consuming business of owning and administering their own vanpool fleets, especially since the mandates, incentives and demographic factors that pushed them into fleet acquisition ten years before were no longer present.

Our proposal totally restructured the relationship between The Rideshare Company, its corporate clients, and its state government funding source. We would assume ownership, liability, and administration of their fleets. They would help finance the transfer, saving hundreds of thousands of dollars in the first five years of the new arrangement. Our plan, we argued, would provide us with a way to reverse the trend of declining ridership in the midst of an economic downturn. The corporations had administered the fleets exclusively for their own employees. Our plan broadened ridership to include other commuters with similar travel patterns.

In response, The Rideshare Company laid out a detailed plan that showed how new riders could be attracted. We could make vanpooling more accessible and more reliable. In the process, we could not only save money for the corporations, but also for the state. When our first proposed acquisition was reluctant to finance the entire purchase, we convinced the State to become and investor. The Rideshare Company would cease to operate as a cause-centered non-profit and function as a business. The market would test the validity of our assumptions. The new partnership would have to produce tangible results quickly, including a sizable return for our state and corporate "investors."

Even as we adopted this market approach and attitude, we continued to benefit from our private, non-profit status. We were able to justify our requests for below market-rate financing, factor in adequate maintenance and replacement costs, and more important, we were able to leverage our position to overcome a serious insurance obstacle. These factors added significantly to the return on investment that The Rideshare Company was able to offer.

Insurance rates were pivotal in the early vanpool fleet acquisitions. Reducing the insurance costs cut down the initial capital required from the state and also saved the insurance companies money. Insuring the vans conventionally would have cost approximately $1,300 per vehicle. Under the state policy it was $400 to $500 a van. By working closely with the State Insurance Purchasing Board, where we argued our common public service mission, we were able to insure the vans at the state rate. This saved $160,000 annually by 1994, when the total fleet was 200 vans.

What we created was a break-even business model that would generate well-serviced customers, rather than profits.

There were significant benefits to be derived by all of the partners. The State was not simply trying to bail out failing corporate van fleets, which would require endless subsidies; there were no subsidies involved in this deal. The State was an investor that would get a return on its investment paid back over 3-5 years. They would also get a much needed, high quality transportation system that could operate without the expenditure of public funds. The corporate fleet owner could maintain and improve service to its employees without the financial and administrative burdens. The Rideshare Company could secure its future in the commuter services business. We had successfully unplugged vanpools from its weaknesses and developed a strong market for the future.

For more information, contact Byron York of 2Plus, Inc. or call him at (919) 363-0021.