TO:
Honorable Mayor and Members of the City Council
THROUGH:
Talyn Mirzakhanian, City Manager
FROM:
Masa Alkire, Community Development Department Director
Erik Zandvliet, T.E., City Traffic Engineer
Libby Bretthauer, Finance Director
Emy-Rose Hanna, Financial Services Manager
SUBJECT:Title
Consideration of a Resolution Authorizing the City Manager to Execute an Agreement with Circuit Transit Inc. for a Six-Month On-Demand Point-to-Point Local Microtransit Service Pilot Project and Appropriation of up to $540,626 in Proposition A Local Return Funds (Unbudgeted) (Community Development Department Director Alkire).
(Estimated Time: 1 Hr. and 30 Mins.)
A) DISCUSS AND PROVIDE DIRECTION
B) ADOPT RESOLUTION NO. 26-0031
C) APPROPRIATE FUNDS
Body
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RECOMMENDATION:
Staff recommends that the City Council: 1) provide direction to staff regarding whether the City would like pursue a six-month pilot project for on-demand Citywide microtransit services and, if so, provide direction on the recommended service levels and funding plan to implement the service; 2) if the City Council elects to proceed, adopt a Resolution authorizing the City Manager to execute an agreement with Circuit Transit Inc. to operate a six-month local microtransit service pilot project; and, 3) appropriate up to $540,626 in Proposition A Local Return Funds.
FISCAL IMPLICATIONS:
A microtransit pilot project providing three to five vehicles for six to ten hours a day would cost approximately $69,700 to $90,100 per month to operate. Adjustments to the service levels, hours, days and seasons would proportionately affect operating costs. A per rider fare cost of $2.50 to $5.00 would reduce the overall monthly operating cost to the City. Additional funding from a variety of sources, including ad revenue (vehicle wraps, in-vehicle media, and in-app advertisements), City provided EV charging, organizational contributions and corporate sponsorships, would be needed to cover the remaining balance of between $53,300 and $81,000 per month.
Possible funding sources are explained in greater detail in the report. Although the City has available restricted Proposition A Funds for a six-month pilot project, it should be emphasized that funding the program into the future would require further analysis on the pilot program outcomes (e.g. actual fare/advertising/sponsorship revenues, ridership levels of Circuit versus the Dial A Ride buses, etc.) and a potential reprioritization of funds accordingly.
BACKGROUND:
On June 21, 2016, the City Council authorized the City Manager to enter into a partnership with the Downtown Business and Professionals Association (DBPA) to operate a free point-to-point microtransit shuttle service called the Downtowner. The Downtowner served the Downtown and North Manhattan Beach business districts as well as the area west of Pacific Avenue from February 2017 through October 2017. The service operated three six-person neighborhood electric vehicles between 11AM and 11PM daily with revenue from tips and vehicle-wrap advertising only. Vehicles were charged at City-installed charging stations in the Metlox (Lot M) parking structure. On July 18, 2017, the City Council approved a one-year extension of the Downtowner agreement. Ridership reached 3,000 riders per month in August 2017, but the company ceased operations in October 2017 after it was unable to sustain the free-ride business model and asked the City for a large financial contribution.
On November 3, 2025, the City Council discussed and gave staff direction to evaluate the feasibility of an on-demand microtransit pilot project as one of the City Parking Management Strategies and Toolkit included in the City Parking Management Study Report. An on-demand, point-to-point local transit service would enable citizens to take short trips without a car, thus reducing parking demand and connecting the public to other transportation modes and destinations. This staff report is a summary of the features, logistics, service level options, costs, and potential funding sources needed to initiate a six-month pilot project to test the feasibility a citywide microtransit service.
DISCUSSION:
Microtransit is a specialty mobility-as-a-service (MAAS) transportation option where a municipality or private entity provides either fixed route or on-demand ride services. Microtransit utilizes dynamic routing based on real-time passenger demand, picking up passengers heading in the same direction. It features number of benefits:
• It improves accessibility to larger transit systems by connecting passengers from mass transit hubs or bus stops to their final destinations.
• It is an affordable alternative for both riders and municipalities that can be implemented at a fraction of the cost of traditional public transit systems.
• It offers a high-quality high-value experience for both riders and the city with consistent, dedicated, reliable service.
• It provides reliable connections to grocery stores, pharmacies, medical appointments, workplaces, and many other essential destinations and services.
• It reduces vehicle miles traveled and traffic congestion by focusing on sharing rides going in the same direction.
• It is eco-friendly and sustainable by its use of smaller electric vehicles (EVs) which reduces greenhouse gas emissions without reliance on fossil fuels.
Circuit Transit Inc. is an on-demand, app-based, point-to-point private microtransit provider that offers electric microtransit services to customers within a fixed geographic area. Circuit’s services facilitate first and last-mile connections to mass transit, commercial areas and points-of-interest. The service reduces parking demand and offers alternative transportation modes within the service area. Circuit can also offer an alternative to paratransit services by using accessible EV vehicles. Circuit was formerly known as The Free Ride, a competitor to the Downtowner. It was founded in 2011 and is based in Fort Lauderdale, Florida. Circuit uses all-electric vehicles and hires local employees for its fleet, which is dedicated to the City. Circuit is the only known provider that offers this specific type of on-demand, point-to-point service using dedicated vehicles and drivers in Southern California. It provides similar microtransit services in the Cities of Long Beach, Los Alamitos, Pacific Beach, Santa Monica, Whittier, and Los Angeles (Warner Center), among others.
The service area would include the entire City as well as a link to the Metro K line Douglas Station in El Segundo, which can be subdivided into zones with different fare rates if desired. Commercial areas can be “geo-fenced” to require drop-off and/or pick-up of customers at specific locations. During high demand times, the driver may pick up multiple customers enroute to destinations in a particular area to minimize customer delay and maximize vehicle occupancy.
Customers use a phone or internet app to schedule a ride from their location to a destination within the City limits. The user experience is similar to other ridesharing transportation apps, including payment and ride tracking features. If a customer does not have the app, they can also call a service center to arrange the ride over the phone. Different fares and discounts can be programmed for certain users or during special events, such as free rides to the commercial districts during the holiday, discounts for older adults or employee parking vouchers to park in remote parking lots. Circuit can provide paratransit services in place of or supplement the City’s dial-a-ride service, which can be funded by Proposition A funds.
A variety of vehicles would be utilized based on the length of the trip and fluctuations in demand. Staff anticipates that smaller neighborhood electric vehicles (NEV’s) would serve the commercial districts west of Sepulveda Boulevard, while one or more EV sedans and an accessible EV passenger van could serve the remainder of the City.
Service Levels
Circuit’s business model is straightforward: it charges a monthly fee to the municipality to operate a specific number of vehicles for a fixed number of hours on certain days of the week. Service levels can be adjusted seasonally or by day of the week, such as the number of vehicles or operating hours per day, as stipulated in the service plan included in the professional services agreement. Generally, the number of vehicles to be used is determined by the anticipated peak hour passenger wait time. Wait times between five and fifteen minutes are typical for microtransit service. Most cities operate their microtransit service when businesses are open and parking demand is highest. Early morning and late-night service is generally not cost-effective and raises the average passenger operating cost.
Operating Costs
Operating costs include vehicles, driver salaries, maintenance, insurance, parking fees, electric vehicle charging, app service, customer service and other incidentals. Invoices are billed monthly with adjustments made for fare revenue and advertising revenue collected by Circuit. The gap between the invoice amount and revenue must be covered by City or outside funding sources explained in the next section.
Funding Options
There are a number of methods to fund the costs of an on-demand microtransit service. They include rider fares, advertising revenue, City provided charging and parking, State and Regional transportation funding sources, as well as stakeholder contributions and private company sponsorships. A summary of the funding options is provided below:
State and Regional Transportation Funds
Regional transportation funds and grants are often a source of microtransit funding. The City receives annual allocations from various restricted transportation funds that could be used for microtransit services. City staff has identified that there is the potential to fund a six-month pilot program using existing Los Angeles County Proposition A funds that the City has on hand. Currently, the City has approximately $1.1 million in its Proposition A Fund balance, and the City anticipates to receive an additional $891,671 in Proposition A funds next fiscal year. The total annual cost (projected for FY 2026-2027) of the City’s current Dial a Ride and medical ride transport programs, which are paid for out of Proposition A funds, is approximately $940,500. Additionally, the City also pays its annual contribution of approximately $30,000 towards Beach Cities Transit Line 109 out of Proposition A funds. Therefore, there would be enough Proposition A funds available to cover the anticipated $540,626 maximum cost of a pilot program over a six-month period. Fare revenue is anticipated to reduce this maximum City cost. It should be noted that the cost of the pilot program will substantially reduce the City’s Proposition A excess balance. Attached is a table identifying the City’s Proposition A fund balance since 2022 as well as the Dial a Ride costs that have used that funding source over that time.
Other local allocations could potentially be used to fund microtransit. However, all of these local allocations currently fund existing capital projects and programs, which would need to be re-programmed to fund a local microtransit service.
• The City receives approximately $739,618 annually in LA Metro Proposition C funds, which are used for a variety of capital projects that improve and maintain the roadways, bikeways and pedestrian infrastructure.
• The City receives approximately $554,713 annually in Los Angeles County Measure R funds, which is used to fund local transportation projects and improvements. Additional Measure R discretionary funds are allocated by sub-region through the South Bay Cities Council of Governments (SBCCOG) for transportation infrastructure projects, but not for transit operations.
• The City receives approximately $628,675 annually in Los Angeles County Measure M funds, which is also used to fund local transportation projects and improvements. Additional Measure R discretionary funds are allocated by sub-region through the South Bay Cities Council of Governments (SBCCOG) for transportation infrastructure projects but not transit operations.
Metro staff estimates the revenue projections and allocates the funds to local jurisdictions on a "per capita" basis for local transit. As sales tax measures, these local return resources are subject to economic fluctuations and Metro is estimating local return funds to be flat with the prior year similar to the City’s sales tax projections.
Possible Fare Amounts
The fare amount is determined by the municipality, which can fund a large percentage of operating costs. The key is setting the price point where overall revenue is maximized without sacrificing ridership levels. Typical fares range from $2.00 to $9.00 and can be adjusted depending on trip length, day of week or season. For example, the equivalent of one or two-hours of metered parking ($2.50 to $6.00) would be a reasonable charge for shoppers and diners. These fares are much less expensive than an Uber or Lyft ride of the same distance.
Circuit can set up discount codes in the app for older adults, employees of certain businesses, special holiday rates, and other iterations to suit the City’s needs.
Advertising Revenue Opportunities
Circuit can build a package of marketing and advertising options to help fund the microtransit operating costs. Circuit would reach out to advertisers and local companies on behalf of the city to solicit sales for vehicle wraps, on-board video displays and in-app advertising. Circuit would retain 50% in sales for these marketing services.
City-Provided Charging and Parking
The City could reduce operating costs by providing overnight parking and charging stations to power the electric vehicle fleet. This would result in approximately $900-1,200 per month in savings per vehicle, however, the City would then be responsible for the electrical utility costs.
Parking District Funds
Since microtransit services reduce parking demand in commercial districts, parking funds and parking assessment districts can be used to pay for operating expenses. Similarly, transportation impact fees can be used to address deficiencies that are relieved by microtransit.
Stakeholder Contributions
Microtransit supports local economies by making it easier to circulate between hotels, shopping centers, shops, restaurants and event spaces, which benefits those businesses and residents alike. Business Improvement Districts (BID) and large land developments have a vested interest in providing connections to fuel economic growth. These stakeholders include the following:
• Chamber of Commerce
• Downtown Business and Professionals Association (DBPA)
• North Manhattan Beach Business and Professionals Association (NMBBPA)
• Manhattan Village Shopping Center
Corporate Sponsors
Large companies may be interested in sponsoring one or more vehicles or in contributing towards a community service as part of their philanthropy program.
Parking Meter Revenue
Several cities have used a portion of their parking meter and/or violation revenue to help fund microtransit operating expenses. These funds can be an effective way to reduce parking demand so additional parking facilities do not have to be built. The City’s parking meter rates vary from $2.50 to $3.50 per hour, which was approved by the City Council in April 2025. The City’s Parking Management Study has identified that an increase up to $4.00 would be consistent with similar beach city parking meter rates.
Transportation and Climate-Related Grants
While most State and Regional grants are restricted to infrastructure improvements and not eligible to fund operating expenses, some can be used to reimburse the cost to establish a local transit service. This can be useful to fund a pilot project, as some cities have done, but the grant application process and allocation of funding may take several years to complete. Grants are often highly competitive and sometimes require local match funding. Timelines are significantly longer for Federal grant and program funding.
Other Funding Sources
Climate and clean-air funding grants may be an option to help fund microtransit because the all-electric vehicles reduce emissions and are more sustainable than personal vehicles. However, these grants are often highly competitive and funding allocations may not be available right away.
The above is not an exhaustive list of potential funding sources for microtransit. Starting with a smaller pilot project can test the viability and sustainability of a microtransit service, and the service can grow or adjust as the ridership demand, system performance and revenue sources become more certain.
Pilot Project
Staff believes a six-month pilot project would provide sufficient time to determine many performance metrics, including:
• Ridership levels over several months;
• Peak ridership by time of day and day of week;
• Actual fare revenue and appropriateness of the fare amount;
• Service level performance vs. number of vehicles;
• Number of vehicle needed;
• Locations with highest origins/destinations;
• Identify the types of riders using the service (youth, customers, tourists, older adults)
• Number paratransit related rides and potential to supplement City Dial-a-ride services;
• Potential interest in advertising in/on the vehicles, and
• Potential interest in corporate sponsorships and organizational contributions
• Service provider performance.
The results of a six-month trial will help guide the City’s decision in continuing, modifying, expanding or ending microtransit service after the initial pilot project term.
ALTERNATIVES:
There are numerous iterations of service levels, operating hours/days and funding options that could be considered when developing an on-demand local microtransit service. Staff has worked with Circuit representatives to develop four alternatives for comparison purposes. The City Council can direct staff to pursue one of these alternatives or may choose different parameters if it decides to move forward with a pilot project. An operation and funding scenario has been prepared for each of these alternatives for comparison in an attachment to this report. Also, as identified in the attachment, the costs of all alternatives could be reduced if additional sources of funds, such as advertising, contributions, and sponsorship, are identified.
ALTERNATIVE #: 1
Six-Month Pilot Project with five vehicles at 10-hours per day and $2.50 per ride. $540,626 cost is projected to be reduced to $485,826 based on projected fare revenue.
PROS:
• Lower ridership fare
• Service during most of business day
CONS:
• No morning service
ALTERNATIVE #: 2
Six-Month Pilot Project with five vehicles at 10-hours per day and $5.00 per ride. $540,626 cost is projected to be reduced to $431,026 based on projected fare revenue.
PROS:
• Higher fare offset reduces cost for City, however rider cost is still well below commercial rideshare services
• Service during most of business day
CONS:
• No morning service
• Higher ridership fare
ALTERNATIVE #: 3
Six-Month Pilot Project with three vehicles at six hours per day and $5.00 per ride. $418,598 cost is projected to be reduced to $367,441 based on projected fare revenue.
PROS:
• Lowest cost alternative
CONS:
• Fewer operating hours - late afternoon/evening only
• Higher ridership fare
• Fewer vehicles may increase wait times during high demand
ALTERNATIVE #: 4
Twelve-Month Pilot Project with five vehicles at six to 10-hours per day seasonally and $5.00 per ride. $885,110 cost is projected to be reduced to $639,718 based on projected fare revenue.
PROS:
• Service level adjusts for peak/off-peak seasons
CONS:
• Fewer operating hours in off-peak season-late afternoon/evening only
• Longer financial commitment with unknown ridership
• Higher ridership fare
CONCLUSION:
Staff has identified sufficient funds in the City’s Proposition A Local Return account to operate a citywide local microtransit service for a six-month period using Alternative 2. There is an existing reserve balance of $1.1 million in the account from which the maximum City cost ($540,626) of Alternative 2 could be funded. Staff recommends that City Council approve Alternative 2 funded with reserve Proposition A local return funds and direct staff to return before the end of the contract term to discuss the feasibility of extending and funding the local microtransit service beyond the pilot project period. The pilot project can also determine the level of ridership for customers that would otherwise use Dial-a-Ride services.
PUBLIC OUTREACH:
The DBPA and NMBBPA, Chamber of Commerce and Manhattan Village Shopping Center have been invited to this City Council meeting and asked to notify their members/tenants. The public has been informed of this agenda item as part of the City’s standard meeting notice practices via public bulletin boards, website calendar, and social media.
ENVIRONMENTAL REVIEW:
The City has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because it is a fiscal activity of government to establish a service which will not result in a potentially significant impact on the environment. Therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA. Thus, no further environmental review is necessary.
LEGAL REVIEW:
The City Attorney has approved the Resolution as to form.
ATTACHMENTS:
1. Resolution No. 26-0031
2. Circuit Transit Draft Scope of Work
3. Microtransit Service Alternatives Table
4. Circuit Transit Summary of Features
5. Proposition A Fund History
6. PowerPoint Presentation