Brainerd transit contractor fined for nonperformance as state consultant weighs options

City transit staff told the Brainerd Transit Advisory Committee that their contracted operator has been repeatedly flagged for service and maintenance shortfalls and that the city has been deducting nonperformance penalties from the contractor's invoices.

In a staff presentation, Mike (staff) said the city has levied deductions ‘‘ranging from probably, you know, 0 all the way up to 13’’ thousand dollars and that the average recent deduction has been about $8,000 per month against a normal contractor invoice of roughly $80,000–$100,000. He explained the city applies nonperformance amounts by subtracting them from the contractor’s monthly invoice rather than collecting separate payments.

The committee’s discussion focused on maintenance gaps identified in the division’s key performance indicators. Staff said preventative maintenance completion was at about 50 percent — a red flag in the KPI dashboard — and that transit staff (Crystal, Aaron and Amy) run daily, weekly and monthly spot checks and notify the contractor within about a week when items are missed. “As soon as we know, we let them know,” Crystal said, and staff documented nonperformance in weekly reports.

Staff said they meet weekly with the contractor’s general manager and have conducted larger, escalation meetings. The current contract runs to June 30 / July 1, 2027; staff noted an exit clause of roughly 60 days but said an operational transition would require internal capacity. “We could write a letter and indicate, hey, within 60 days, we’re gonna do a…,” staff said when outlining the contractual exit language.

Because of the ongoing issues, the state has hired an outside consultant to review the transit operation and recommend a path forward. Staff said the consultant will evaluate four scenarios: remain with a third-party contractor, bring operations in-house, have Crow Wing County take over, or pursue a hybrid arrangement. The consultant will provide recommendations and associated action steps and a financial analysis; staff plan to present the consultant’s findings to the Brainerd City Council (target date June 16) and to share a summary with the committee.

Committee members raised concerns about cost and service quality under each option. One member warned that bringing transit fully in-house could “double the cost and probably reduce the service,” while staff said municipal operation would eliminate contractor profit but could carry different overheads and wage structures. Staff emphasized they are documenting nonperformance carefully to preserve the city’s position should disputes escalate to arbitration.

Next steps: the committee will receive consultant findings after a biweekly engagement; staff said they could circulate a summary after the consultant meets with city staff on June 9 and convene a special TAC meeting if warranted. The committee did not take formal action to change the contract during the meeting.