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Caltrain Fare Study Draft Research and Peer Comparison Report

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Caltrain Fare Study Draft Research and Peer Comparison Report Caltrain Fare Study Draft Research and Peer Comparison Report Public Review Draft October 2017 Caltrain Fare Study Draft Research and Peer Comparison October 2017 Research and Peer Review Research and Peer Review .................................................................................................... 1 Introduction ......................................................................................................................... 2 A Note on TCRP Sources ........................................................................................................................................... 2 Elasticity of Demand for Commuter Rail ............................................................................... 3 Definition ........................................................................................................................................................................ 3 Commuter Rail Elasticity ......................................................................................................................................... 3 Comparison with Peer Systems ............................................................................................ 4 Fares ................................................................................................................................................................................. 5 Employer Programs ................................................................................................................................................... 9 Means‐Tested Discounts and Subsidies ......................................................................................................... 10 Agency Profiles ................................................................................................................... 11 Metra ............................................................................................................................................................................. 12 Metro‐North Railroad ............................................................................................................................................. 12 Utah Transit Authority (UTA) FrontRunner ................................................................................................. 13 Metrolink ..................................................................................................................................................................... 13 NJ Transit Rail ............................................................................................................................................................ 14 Coaster Commuter Rail (NCTD) ......................................................................................................................... 14 Lessons for Caltrain ............................................................................................................ 15 Appendix A ……………………………………………………………………………………………………………………...16 1 Caltrain Fare Study Draft Research and Peer Comparison October 2017 Introduction This Research and Peer Review serves to provide a broader context for fare policy at Caltrain. It presents key research findings from primary and secondary sources on fare structures and policies at other transit agencies and culminates in key lessons learned for Caltrain. In the first section of this report, a basic review of existing research into fare policy, with an emphasis on demand elasticities, is presented. Two major reports from the Transit Cooperative Research Program (TCRP) provided a mix of primary and secondary research for this purpose. The second section of this report presents basic information about fares at peer transit agencies. The fare information for 19 transit providers was compiled using publicly available sources. The transit systems studied include Altamont Corridor Express (ACE), Bay Area Rapid Transit (BART), Amtrak’s Capital Corridor, and North County Transit District (NCTD) Coaster, as well as the fifteen highest‐ridership commuter railroads in the United States (of which Caltrain is number seven). The fares charged by these operators provide a sense for how Caltrain’s fares compare to other, similar agencies. An analysis of the cost of monthly and multi‐trip passes compared to base fares is also presented. Finally, key findings from a study of off‐peak discounts are summarized, from several commuter railroads that employ peak period pricing, including four U.S. and three international systems. Perhaps the most reliable and compelling information about how commuter rail agencies set fares came directly from representatives of the agencies themselves. The third section of this report summarizes interviews that were conducted with some of the individuals responsible for fare policy at six railroads. The final section of this report presents some of the key lessons learned for Caltrain as it relates to fare policy, products, and structure. A Note on TCRP Sources In 2003, TCRP released TCRP Report 94: Fare Policies, Structures, and Technologies: Update. The next year, TCRP published Traveler Response to Transportation System Changes Handbook, Third Edition. Chapter 12, titled Transit Pricing and Fares, focused entirely on fare policy, including the relationship between fares and ridership. TCRP Report 94 describes the full range of options for fare policy, including fare‐setting, discount programs, and fare‐related technologies. While it is somewhat out of date, it contains a wealth of information on how many different agencies were operating at that time. Since the TCRP handbook was published, very little new scholarly research has been conducted on fare elasticities (and evidently none on commuter rail). Despite having been published in 2004, this makes the handbook the best available synthesis on the topic of fare elasticities. The book provides some very valuable insights into what agencies can expect when modifying their fare structure. 2 Caltrain Fare Study Draft Research and Peer Comparison October 2017 Elasticity of Demand for Commuter Rail Definition The economic concept of demand elasticity simply describes the relationship between the price of a good and the quantity of that good that is consumed. In simple mathematical terms: % % Goods with an elasticity value that is greater than the absolute value of 1.0 are said to be elastic, since consumption changes by a greater percentage than the price. An example of an elastic value is 1.2, where a 10 percent change in the price results in a 12 percent change in consumption. A good that is highly elastic is a price‐sensitive good, because a small change in price results in large changes in consumption. Goods with an elasticity value that is less than the absolute value of 1.0 are said to be inelastic. An example of an inelastic value is 0.8, where a 10 percent change in price results in an 8 percent change in consumption. A good that is inelastic or has low elasticity means that prices have little effect on consumption of the good, so it is not price sensitive. Perfectly inelastic demand (0) would mean that regardless of the price, people will consume the same amount. The degree of price sensitivity refers to the absolute value of elasticity and whether it is greater than or less than the absolute value of 1.0, regardless of whether or not the value is positive or negative. The positive or negative sign indicates the direction of the change in demand and whether it increases or decreases. Generally, values for elasticity are negative, meaning that as the price goes up, people consume less of the good. A positive elasticity, in which the demand for a good goes up as its price goes up, is feasible but rare for obvious reasons. Of course, price is not the only determinant of demand. In the case of Caltrain, ridership has continued to grow despite increasing fares, but this could not be reasonably interpreted as a positive elasticity, since the increase in ridership is probably due to external factors, such as growth in population and employment. It is unlikely that ridership increased as a result of fares going up. A realistic elasticity for a public transportation system, based on the studies compiled for TCRP 94, might be ‐0.2, in which case a 10 percent increase in fares would correspond to a 2 percent decrease in ridership. For simplicity in this document, all elasticities are assumed to be linear for the range of fare prices in question. In other words, the same elasticity is applied whether raising or lowering the fare, and whether the fare is changed a small or a large amount. Commuter Rail Elasticity Practically all estimates of fare elasticities on transit are inelastic, between 0 and ‐1.0. Most transit systems are in the elasticity range of 0 to ‐0.3, meaning that most riders are not very price sensitive and significant fare increases could be made that would generate additional revenue for transit agencies. In other words, it is broadly understood that an increase in fares will lead to an 3 Caltrain Fare Study Draft Research and Peer Comparison October 2017 increase in revenue, notwithstanding considerations about economic development and social equity. With respect to commuter rail in particular, the TCRP Traveler Response to Transportation System Changes Handbook mentions four commuter rail elasticity studies between 1977 and 1997 in Australia, Boston, and New York. Elasticity calculations range from ‐0.09 to ‐0.22. Original research for this project
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