Grapevine Doubles Down on More Money Losing Buses

“Here’s how I think of my money, as soldiers. I send them out to war every day. I want them to take prisoners and come home, so there’s more of them.”

That’s a quote from Kevin O’Leary of the hit ABC television show Shark Tank. Unfortunately, sometimes the City of Grapevine does not think about its money the same way. In the case of two new Visitor Shuttle Buses, Grapevine thinks of its money more like sheep headed for slaughter.

In last week’s City Council meeting, a request for two additional shuttle buses for the City of Grapevine was on the consent agenda. For the many of you who are not regular attenders of the council meetings, the consent agenda is a group of items that get approved with no discussion.

One brave soul attending the meeting asked the City Council to remove the over $300,000 shuttle bus item off the consent agenda. Basically, the brave man wanted to hear why we needed two more buses. The item was moved off the consent agenda and a roughly three minute discussion ensued.

Grapevine Texas

The reasoning for the new buses went something like this:  City employees have heard that people staying in Irving hotels were taking hotel shuttles to DFW Airport to catch Grapevine Visitors Shuttle Buses to ride into Grapevine. No figures were given on the amount of riders. No numbers were given at all really. The new buses would go to Irving to help pick up these people and eliminate their need to ride to DFW Airport.

Now in the real world, investments like this need more than a quick anecdote for approval. Even in the made for television real world of Shark Tank, this investment rationale would be laughed out of the room. In the City Council meeting last Tuesday night, this $300,000+ investment was quickly approved on no more than an anecdotal story.

We at Grapevine Texas Online have the luxury of working for a very successful, very efficient real world business. When this business wants to make an investment of any significance, a business case for the investment is required. This business case provides real numbers and support and leads to a conclusion of economic value added (which is just a fancy way of saying profit).

The reason investments require a business case is to achieve accountability. Someone has to present the figures and sign their name to them claiming that there will be a benefit or profit to the company.

Since no figures were provided on the two new buses, we thought it would be nice to do some quick math on the economic viability of the investment. Please follow along with our assumptions:

Currently, there are four Visitors Shuttle Bus routes that run 361 days per year. Our assumption is that those four routes require a minimum of four buses. In the last reported year of actual results, the shuttle buses earned roughly $100,000 in revenue. Their expenses were roughly $700,000 for a loss of $600,000 in a single year. Simple math would tell you that in addition to the $300,000+ up front cost of the new buses, the City of Grapevine can expect to lose an additional $300,000 per year on operations.

Let’s make a few more assumptions to come up with the number of riders the current buses actually service. If revenue is $100,000 per year and the average ticket price per rider is $5, you would have roughly 20,000 shuttle bus riders a year. That works out to just 13.85 riders per bus each day.

If our assumptions are reasonable and the current buses lose $600,000 per year to drive 20,000 vistors in and around the city, Grapevine is actually paying $30 per person to bring in and carry these visitors around.  Here’s a free tip:  that is not a good business.  That is an extremely high cost to aquire customers who might have just come here on their own.

Estimates we have seen suggest Grapevine Mills Mall has 15 to 20 million visitors per year. Great Wolf Lodge has around 500,000 visitors per year. Lake Grapevine and Downtown Grapevine have over 1 million visitors a year each.  And to support these huge attractions, four Grapevine Shuttle Buses carry around 20,000 passengers a year at a loss of $600,000 per year.  And the City Council just approved two more.

So as we head into election season and two City Council seats are up for grabs, we ask those running for elected office to consider adding a business case requirement on city expenditures of a certain size.  These business cases would add transparency and accountability which we desperately need.

16 Comments

  1. You do understand that an investment takes more than a year to pay off right? And its not a loss just cause it’s not paid off the first year…

    • rb will probably be the next new council member.

    • Absolutely. If the buses actually made money, I could easily give you an estimated payback period.

      Obviously I wasn’t clear when I pointed out the current buses lose $600,000 a year. If an investment is unprofitable, the investment can’t be paid back in a year, 10 years, or 1,000 years.

  2. Were the expenses on the bus 700k including the cost of the bus or expenses after the cost of the bus? Sounds like the original 4 buses cost us 700k. Is that correct?

    original 4 buses = 700k
    profit per year from 4 buses currently 100k(you claim)
    you have no clue what the maintenance was on the 4 buses so your yearly cost is irrelevant nor do you know what the gas cost was.

    two new buses for 300k
    means another 50k a year in profit (if your 100k was accurate.)

    That would mean in the next 5-7 years (6.6years) they would all be paid off. That is an investment. They will not continue to lose 600k per year.

    You do also understand that they will sell the buses after a few years and recoupe a condiderable amount? just like they do with your million dollar fire trucks and 20-30 police vehicles they buy every year?

    • Rb – ignore the cost to buy the buses for a second. The current buses bring in about $100,000 per year in revenue through bus ticket sales. Meanwhile, the cost to operate the current buses (bus drivers, gasoline, maintenance, etc.) costs about $700,000 a year.

      That’s an annual loss of $600,000. How could they repay anything when operational costs exceed the revenue brought in?

  3. 2010-2011 grapevine operating budget (which you can see online here http://www.grapevinetexas.gov/DocumentCenter/View/55 ) says that they had 37,675 riders. @ $5 per rider they would of made $188,375. “In its first year the shuttle had a ridership of 37,675 passengers with an estimated economic impact of $2.3 million”

    I would only hope that number has went up since then.

    buses might not make the money in themselves but the money they bring to your city is probably more than a wash. So technically without the buses we would of lost 1.6mi

    all depends on what you are looking at I guess

  4. Hotel occupancy tax collections $10,724,986
    Convention Center rental income$435,800
    Palace Arts Center rental income$218,366
    Festivals income (estimated)$2,200,000
    Grapevine Vintage Railroad ticket sales, charters and special events income $1,494,156

    all things that the buses are bringing revenue to our city.

    I am not saying I am right, but you definitely are not looking at the whole picture.

  5. So the buses now get credit for hotel occupancy taxes?

    I think I know when it’s time to move on. Thanks for your perspective.

  6. Great information! Point very well made, Joe. These buses are an enormous money loser for the city.

    More troubling still is the utter lack of detail in the formal record (for this new purchase) and a total disregard for citizen inquiry on the subject. A $300,000 purchase based on casual anecdotal observation? Pure arrogance.

    For the expense the city is apparently willing to absorb with this boondoggle, they could actually pay the visitors to ride. Probably would add up to a lot more riders than they have now!

  7. The point is the city is wasting money on a shuttle buss service that’s not having the much of and effect on the over all city visitor numbers. Now based on a rumor and no real information they have chosen to expand a system that’s loosing over $500K / year.
    A system that has been in operation for quite some time and has never be a justifiable expenditure for the city of Grapevine or the Gaylord Texan who started the operation when they first opened.

    The city should shut down the buss system, sell the buses and use the money someplace else in the city where it might actually do the city some good.

  8. Keep up the good work Joe – Love your article.

    I can’t believe that ridership is that low and they want to buy 2 more.

  9. Thanks for all the information on this subject and the debate is appreciated. I would like to address the comment about the million dollar fire truck and 20-30 police cars that are bought each year. The million dollar fire truck that will be bought this year is replacing a 12 year old truck that is currently out of service due to significant maintenance problems that makes it unsafe for front line use. The fire truck and the 20-30 police cars are replaced on a rotation program set up by the city’s fleet services that insures your public servants have the tools necessary to protect our community.

  10. RB is right. You need to look at the entire picture. The shuttle buses are just one element of the package of things Grapevine does to attract convention and tourist business. Just because it doesn’t make profit doesn’t mean it’s not worthwhile. If the direct investment-return was the only factor, we’d replace all the city’s landscaping with concrete, sell the city’s parks and buy our firetrucks from Mexico.

    • Both RB and jmg are clueless.

      1. Why isn’t there discussion and/or input on this subject at the council meetings?
      2. There will always be expenditures for items that do not produce a profit, but this amount of $ is not chicken feed.
      3. I will be voting for anybody that runs against the current city council officials.
      4. Who is RB related to on the city council or does he sell the buses to the city.
      5. Tired of the continued secrecy and good old boy network in “our fair burb”

  11. i am not related to anybody nor do I sell buses…I probably make less than you and live in the City of Grapevine. Actually own two houses in Grapevine. So i probably pay more property tax than you. I also have 3 kids in GV schools.

    The city of grapevine actually has 5 buses. One is a backup that is not used normally.

    I just dont think it is all that much money. I know 700k is a lot to me or you… but to the city who takes in 10mil just from occupancy taxes from hotels it isnt…

    Do you know how much diesel and maintenance cost our city fleet uses alone(we have a huge fleet of city vehicles)? not to mention the fire and police vehicles? what about the many members of the city that get a city car to drive to and from work and while at work on our tax dime(gas included)? well… well over what these 4 buses are costing us.

    Atleast these buses give people one more reason to come stay in grapevine at one of our many hotels and come spend their money in our downtown area. Southlake, Irving, Trophy Club, etc… dont have anything like it.

    If you want to fight over what our money is being spent on… you should pick a subject that isnt a great amenity to the people who visit our city.

  12. RB:

    Re: The “one more reason” you mentioned on Feb. 20.

    The only stated reason offered by the city tourism official before council was that the more than $300,000.00 purchase of two, new buses was to serve Irving area hotels and pick up “some” people.

    The official further offered to council a flimsy rationale based on “inconvenience” that there are an unknown number of people who are staying in Irving area hotels and who are supposedly taking airport shuttles to DFW from their Irving area hotels in order to ride a Grapevine bus to Grapevine. No numbers or ridership estimates were stated by the tourism official. Neither were any numbers given in the published agenda or expanded agenda packet. Simply an ill-supported, vague, anecdotal opinion by a city staffer regarding “some” people.

    Based on the purchase price of the two new Irving buses, ridership from Irving must exceed 30 people per day for everyday of operation for three years before the purchase cost is returned. This does not include operational expenses like fuel and maintenance, or salaries and benefits of drivers.

    Bottom line: This does not pass the sniff test and the citizens of Grapevine deserve and are asking for more information. There are clearly a lot of questions about this planned spending of tax money.