TO:
Honorable Mayor and Members of the City Council
THROUGH:
Talyn Mirzakhanian, City Manager
FROM:
Masa Alkire, AICP, Community Development Department Director
Erik Zandvliet, T.E., City Traffic Engineer
Libby Betthauer, Finance Director
Emy-Rose Hanna, Financial Services Manager
SUBJECT:Title
Consideration of a Seven-Month Extension to an Agreement with Circuit Transit Inc. to Provide an On-Demand Local Microtransit Service Pilot Program and Adoption of a Resolution to Appropriate Proposition A Local Return Funds and Fare Revenue (Unbudgeted) (Community Development Department Director Alkire)
(Estimated Time: 1 hr.)
A) DISCUSS AND PROVIDE DIRECTION
B) ADOPT RESOLUTION NO. 26-0103
C) APPROPRIATE FUNDS
Body
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RECOMMENDATION:
Staff recommends that the City Council: 1) provide direction to staff regarding whether to extend the City’s agreement with Circuit Transit Inc. to operate the MB Wave Rider microtransit service for an additional seven months, and if so, provide direction on the recommended service levels and funding plan to extend the service; 2) if the City Council elects to proceed, adopt a Resolution authorizing the City Manager to extend the agreement with Circuit Transit Inc. to continue operating a microtransit pilot program for an additional seven months based on Option 2 or 3; and, 3) appropriate expenditures totaling $242,851 for Option 2 or $214,438 for Option 3 in Proposition A Local Return Funds, plus other supplemental revenue that may be obtained from fare revenue, advertising, sponsorships, grants and other sources for the Wave Rider pilot program.
FISCAL IMPLICATIONS:
The original pilot program for the MB Wave Rider that was approved by the City Council on April 7, 2026, has a current operating cost of $87,216 per month based on the current service level of five vehicles, seven days/week, totaling seventy hours/week. Fare revenue has been increasing from $3,234 in June to $8,053 in August. In August, the City began receiving an additional $1,000 in monthly vehicle wrap advertising revenue. The net operating cost to provide the service is currently $78,162 per month. The six-month pilot program was funded with a one-time appropriation of Proposition A Local Return funds in the amount of $540,626. The current pilot program period is authorized to operate through November 30, 2026. A seven-month extension of the pilot program would extend the pilot program period from December 2026 through the end of this Fiscal Year on June 30, 2027.
To facilitate a seven-month extension to the Circuit Transit Inc. agreement, three options are presented in the Discussion section of this report. Adjustments to the service levels, hours, days and seasons would proportionately affect operating costs. Similarly, an increase in fare revenue would directly reduce net operating costs. Additional funding from a variety of sources, including local, regional or State transportation funds, ad revenue (vehicle wraps, in-vehicle media, and in-app advertisements), City provided EV charging, organizational contributions and corporate sponsorships, or special district funds could be considered to reduce the amount Prop A Funds used to operate the service or continue it beyond the pilot program period. Extending the microtransit service will not incur additional upfront costs, because the vehicles are already wrapped and dedicated to the City’s program. However, if there was a desire to suspend the service and then restart the service next summer, the City would incur vehicle branding re-wrap costs of between $7,500 and $17,500 for three to five vehicles, plus potential remobilization costs to rehire drivers.
Possible funding sources are explained in greater detail in the report. Staff closely examined the City’s Proposition A Local Return Fund and determined that up to a $243,000 one-time appropriation in unallocated fund balance could be appropriated for a seven-month extension to the Wave Rider service without affecting the Dial-a-Ride program or its long-term viability. (See attachment). If Option 2 is selected, the $242,851 in expenditure appropriation in FY 2027 would require a corresponding revenue appropriation of $41,344 into the Proposition A Fund to properly appropriate the fare revenues that would be collected during the seven-month extension period (December 2026 through June 2027). An additional revenue appropriation of $32,738 is needed to capture the estimated fare revenues during the original pilot phase within FY 2027, covering July 2026 through November 2026.
Program costs could be further reduced by potential advertising revenue, outside contributions and/or other funding sources over the seven-month pilot program extension period. A more detailed analysis of funding options is discussed later in this staff report.
BACKGROUND:
On April 7, 2026, the City Council approved a six-month pilot program to provide an on-demand Citywide microtransit service operated by Circuit Transit, Inc. The pilot program is funded with Proposition A Local Return funds, fare revenue and ad revenue. The service has been named MB Wave Rider and began service on June 3, 2026. Unlike a traditional shuttle or bus, Wave Rider has no fixed routes, stops, or schedules. Rides are reserved through the Circuit mobile app (or website), similar to popular rideshare services. The Wave Rider driver will then pick you up at your requested location and take you directly to your destination anywhere within Manhattan Beach City limits, or all the way to the Metro K Line's Douglas Station in El Segundo.
KEY DETAILS
• Service Area: City limits plus Metro B Line Douglas Station
• Flat fare: $5.00 ($2.50 for older adults ages 55+) per person, per ride
• Fleet: Five electric vehicles (including a wheelchair-accessible van)
• Hours:
o Monday to Thursday: 11 AM to 9 PM
o Friday and Saturday: 11 AM to 10 PM
o Sunday: 12 PM to 8 PM
• Service Term: June 3, 2026, to November 30, 2026
This staff report includes a summary of the current performance metrics and a discussion of potential service level options, operating costs, and possible funding sources required to continue a citywide microtransit service for an additional six months.
DISCUSSION:
Current 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.
During its first three months, the MB Wave Rider microtransit service has increased ridership consistently from its soft launch on June 3, 2026 (See attachment). The number of passengers increased almost 250% from 1,310 in June to 3,125 in August. There are over 1,700 unique customers with RideCircuit accounts. Net fare revenue to the City also increased from $3,234 to $8,053 during the same period. Approximately 50% of the rides are requested by older adults, who are charged at the reduced $2.50 rate. Fare revenue is anticipated to continue to increase as the community becomes more aware of the service, but future revenue forecasts are being calculated at a reduced level due to the uncertainty of ridership levels during non-summer months. Average wait time is 8.5 minutes with an on-time performance of 8%. Approximately 12% of rides include more than one pick-up customer. User satisfaction rating is 4.94 out of 5. Over 50% of passengers are going to restaurants, followed by 28% going to residences. Peak demand is concentrated on Thursday through Sunday, during the afternoon and evening hours. The subsidized cost per passenger is approximately $35.23 per ride. By contrast, the Dial-a-Ride program has a subsidized cost-per-passenger of $101.00 per ride and operates 8 AM to 5:30 PM Monday-Friday, and 8:30 AM to 4:30 PM on weekends, and provides full paratransit-assisted transportation to locations both inside and outside the city limits.
The Wave Rider 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, as explained in the next section.
Reduced Service Level Analysis/Options
A variety of options have been analyzed to reduce operating costs if the City decides to extend the MB Wave Rider pilot program by an additional seven months. Staff evaluated the days and times of peak ridership as well as the number of vehicles during the first three months of service, with the goal of “right-sizing” the service to minimize “per passenger” operating costs. The service level options below compare how changes in the number of vehicles, days and/or hours affect the monthly operating cost, and are more fully detailed in the attached spreadsheet:
Current - Six-month Pilot Phase with five vehicles for 70-hours on Monday - Sunday
Vehicles: 5
Days: Monday - Sunday (7 Days)
Weekly Hours: 70
• Monday to Thursday: 11AM to 9PM
• Friday and Saturday: 11AM to 10PM
• Sunday: 12PM to 8PM
Per Passenger Subsidized Cost: $35.23
Six-Month Operating Cost for Pilot Phase: $540,626 (funded)
Anticipated Fare and Ad Revenue: $36,700
Option #1 - Seven-month extension with four vehicles for 40-hours on Thursday - Sunday
Vehicles: 4
Days: Thursday - Sunday (4 Days)
Weekly Hours: 40
• Thursday: 12PM-9PM
• Friday-Saturday: 11AM-10PM
• Sunday: 12PM-9PM
Per Passenger Subsidized Cost: $20.83
Seven-Month Operating Cost: $318,654
Anticipated Revenue: $45,938 (fares) + $7,000 (ads)
Projected Net Term Operating Cost: $265,716
Option #2 - Seven-month extension with three vehicles for 40-hours on Thursday - Sunday
Vehicles: 3
Days: Thursday - Sunday (4 Days)
Weekly Hours: 40
• Thursday: 12PM-9PM
• Friday-Saturday: 11AM-10PM
• Sunday: 12PM-9PM
Per Passenger Subsidized Cost: $18.04
Seven-Month Operating Cost: $242,851
Anticipated Revenue: $41,344 (fares) + $7,000 (ads)
Projected Net Term Operating Cost: $194,507
Option #3 - Seven-month extension with three vehicles for 30-hours on Friday - Sunday
Vehicles: 3
Days: Friday - Sunday (3 Days)
Weekly Hours: 30
• Friday: 12PM-10PM
• Saturday: 11AM-10PM
• Sunday: 12PM-9PM
Per Passenger Subsidized Cost: $17.94
Seven-Month Operating Cost: $214,438
Anticipated Revenue: $36,750 (fares) + $7,000 (ads)
Projected Net Term Operating Cost: $170,688
Option # 4 - Discontinue microtransit service following the initial Pilot Phase
Required Appropriation: $0
Note that if the City is interested in restarting the program Summer 2027, a new agreement with new pricing would have to be negotiated.
Funding Sources
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 seven-month extension of the pilot program's term will allow the City and Circuit to explore whether these funding sources can be further developed. A summary of the funding options is provided below:
State and Regional Transportation Funds
The City receives annual allocations from various restricted transportation funds that could be used for microtransit services. One eligible transportation fund is the Los Angeles County Proposition A (Prop A) Local Return Fund, which currently has an approximate $1.35 million fund balance. The City receives approximately $900,000 annually in this fund. Prop A currently pays for the City’s Dial-a-Ride and medical ride transport programs, which have a budget of approximately $968,295 for Fiscal Year 2026/27. Additionally, the City Council approved a one-time allocation of up to $540,626 in previously unallocated Prop A fund balance for the initial six-month microtransit pilot program. At the end of this Fiscal Year, the fund balance is anticipated to be approximately $700,000, which includes both the current Wave Rider budget appropriation and approximately $47,700 in anticipated fare revenue and miscellaneous savings from the current Wave Rider pilot program. Attached is a table identifying the fund balance forecast of the City’s Proposition A Fund, which has been the primary funding source for the Dial-a-Ride program. After reviewing the current budget’s line items, staff determined that up to $242,851 of unallocated Prop A funds could be appropriated towards a seven-month extension of the Wave Rider service. It should be noted that staff will return with a comprehensive financial plan during budget workshops and discussions before considering further continuation, expansion or cancellation of the Wave Rider program beyond June 30, 2027.
Other regional Metro transportation funds and grants are often a source of microtransit funding. A portion of the City’s local allocation for the following funds could potentially be used to fund microtransit service. However, these local allocations are currently earmarked for existing capital projects and programs, which would need to be re-programmed or reprioritized to fund a local microtransit service:
• The City receives approximately $796,718 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 $612,813 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 $656,575 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.
Possible Fare Amounts
The current fare amount is $5.00 per passenger trip with a discount rate of $2.50 for older adults who are 55+ years old. As noted earlier, approximately half of the fares are charged at the discounted rate. If the City were to charge a flat fare rate of $5.00 per ride for all passengers, then fare revenue would be anticipated to increase by about 35%. This equates to an additional $12,000 to $15,000 in additional revenue over seven months that could further offset the operating cost.
If desired, Circuit can also set up discount promotional codes in the app for employees of certain businesses, special holiday rates, and other iterations to suit the City’s needs.
Advertising Revenue Opportunities
As noted above, the City is receiving $1,000 in monthly revenue for vehicle wrap advertising on one vehicle as part of an agreement between Circuit and Manhattan Village Shopping Center in exchange for parking and charging of the MB Wave Rider shuttle vehicles. The City Communications team has provided Circuit’s marketing team contacts and leads for local, regional and national companies so that Circuit can offer these businesses a variety of marketing and advertising options such as vehicle wraps, on-board video displays and in-app advertising to help reduce the pilot program operating costs. To date, advertisers have been hesitant to commit to an advertising campaign because the ridership and a measurable benefit to the advertiser was unknown. If the MB Wave Rider service continues, there are opportunities for ad revenue, particularly with alcohol related ad wraps, if the City were to allow such advertising. Circuit has indicated that they have turned down over $50,000 in potential revenue because this type of ad has not been authorized by the City. Per the terms of the City’s agreement with Circuit, the company would retain 50% of the revenue from any marketing and advertising services.
Circuit Cooperative
Circuit recently initiated a new program to encourage local companies and community partners to invest in the current service to help it grow. That partner would enter into an agreement with Circuit to help fund a portion of a vehicle or additional service hours in exchange for providing extra service for that company or community organization. For example, a corporate campus located just outside the City limits could be added to the City’s service area to provide local transportation options to their employees. Another example would be to use the City’s vehicles to provide priority rides to a company during certain service hours. On-vehicle branding can also be offered that shows that the City’s public microtransit service is supported by their company. The partner could also be a business association or even a government department or agency that has a need for local transportation. This program will be pursued if the City decides to continue the Wave Rider service in an effort to increase the number of vehicles or hours without raising the overall operating cost.
Corporate Sponsors
Both the City and Circuit have been reaching out to large companies to encourage them to financially sponsor the City’s public transportation as part of their philanthropy programs. However, this effort requires long lead time due to the corporate financial structure and need to show tangible benefits to the company for their sponsorship. Having gathered actual ridership data and metrics during the last three months, we can now show how the Wave Rider contributes towards community service, which will help in our discussion with these potential sponsors.
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 invoice credit per vehicle (or equivalent to $25,000 to $34,000 in credit for seven months for three to five vehicles, respectively). However, the City would then be responsible for the electrical utility costs. Three or four vehicles could be charged at the Public Works yard or Metlox parking structure, as was done in June before the vehicles began parking at the Manhattan Village Shopping Center. It should be noted that access to the City’s Public Works yard by Circuit employees creates logistical and security challenges, and vehicle charging contributes to the crowding of the City’s facility. This is not a concern for vehicles charged at the Metlox parking structure.
Parking Funds and Meter Revenue
Several cities have used a portion of their parking meter and/or violation revenue to help fund microtransit operating expenses. Funding a transportation service with paid parking revenue can be an effective way to reduce parking demand, particularly during peak seasons and times, so additional parking facilities do not have to be built. The City’s parking meter rates currently vary from $2.00 to $4.00 per hour based on location and season, which was approved by the City Council in July 2026. The City’s Parking Management Study has identified that an increase up to $4.00 is consistent with parking meter rates in nearby beach cities. Although available for other uses at the City Council’s discretion, parking meter and citation revenues are currently allocated to parking operations and maintenance, and will be needed for the replacement of existing parking infrastructure in the future.
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
• Any other potential commercial business group that benefits from the MB Wave Rider program
Should any of the above-stated stakeholders wish to contribute to the MB Wave Rider program, the amount of subsidized funding and service level reduction presented in Options 1-3 could improve.
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 program, as some cities have done, but the grant application process and allocation of funding may take several months to 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 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 program 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.
CONCLUSION:
Based on actual ridership data and performance measures over the first three months of the pilot program, the Wave Rider microtransit service has proven to be popular and is experiencing continued significant growth in use. Staff believes that a seven-month extension to the pilot program would be useful for assessing the continuing viability of microtransit in the City, but a reduction in service levels would be appropriate and necessary to reduce operating costs and idle vehicle time. This reduction should be made in both days of service and time of service. Additionally, the number of vehicles can be reduced to increase vehicle occupancy rates and reduce per passenger costs. Additional Prop A funds are available to fund an additional seven months of reduced service, during which the City will pursue additional funding sources, particularly advertising, cooperative agreements, and corporate sponsors. Staff does not recommend a full suspension of service if the City Council wishes to have the option of providing microtransit service next summer.
If the City Council decides to continue the MB Wave Rider pilot program for an additional seven months, staff will prepare an update on the MB Wave Rider pilot program as well as a financial plan to continue the service for next summer for City Council’s consideration in conjunction with the City’s mid-year budget review in November.
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 reviewed this report and determined that no additional legal analysis is necessary.
ATTACHMENTS:
1. Resolution No. 26-0103
2. Existing Professional Services Agreement
3. Wave Rider Service Review June-August 2026
4. Wave Rider Service Options - 7 Month Extension
5. Proposition A Fund Balance with Wave Rider
6. PowerPoint Presentation