Fare Free Future, a Vision for a Simpler and More Equitable

Fare Free Future

Humphrey School Capstone Report

The Hubert H. Humphrey School of Public Affairs The University of Minnesota

Dillon Cummins Caroline Ketcham Erika Shepard Jed Hanson

PA 8081 Capstone Workshop Transportation Planning and Policy Instructor: Lyssa Leitner, Adjunct Faculty

Spring 2021

Partner Organization: Metro Transit Fare Free Future A VISION FOR A SIMPLER AND MORE EQUITABLE REGIONAL FARE SYSTEM

A CAPSTONE PROJECT IN PARTNERSHIP WITH METRO TRANSIT DILLON CUMMINS, CAROLINE KETCHAM, ERIKA SHEPARD, AND JED HANSON MAY 5, 2021 Table of Contents

Acknowledgements...... 4 1. Executive Summary...... 5 2. Introduction...... 6 2.1 Planning a Simpler Fare System...... 6 2.2 Who Rides Transit?...... 6 2.3 Permanent Reduction in Commuters...... 7 2.4 Focus on All-Purpose Riders...... 8 2.5 Report Overview...... 8 3. Vision...... 10 3.1 Near-Term Vision...... 10 3.2 Medium-Term Vision...... 12 3.3 Long-Term Vision...... 12 4. Existing Conditions...... 14 4.1 Metro Transit Fares...... 14 4.2 Metro Mobility...... 17 4.3 Demographics...... 17 4.4 Budget...... 18

2 Table of Contents 5. Peer Examples...... 19 5.1 Indianapolis...... 19 5.2 Portland...... 19 5.3 Washington, D.C...... 20 5.4 Kansas City...... 21 5.5 Los Angeles...... 22 6. Recommendations...... 24 6.1 Near-Term Recommendations...... 24 6.2 Medium-Term Recommendations...... 28 6.3 Long-Term Recommendations...... 30 7. Conclusion...... 36 7.1 A Roadmap for the Future...... 36 7.2 What to Explore Further...... 37 7.3 Parting Thoughts ...... 37 Appendices...... 38 Appendix A: Literature Review...... 38 Appendix B: Civil Rights and Accessibility Compliance...... 42 Appendix C: Cost Estimates...... 43 References...... 45

Table of Contents 3 Acknowledgements

This report was made possible thanks to the knowledge and assistance of transit professionals, researchers, and stakeholders in the Twin Cities and across the nation. The authors are thankful for the contributions of the following agencies, organizations, and their employees or members.

• IndyGo • Maple Grove Transit • Metro Transit • Metropolitan Council • Minnesota Department of Transportation • Move Minneapolis • TriMet • Twin Cities Transit Riders Union • University of Minnesota • Washington Metropolitan Area Transit Authority

The range of contributions include sharing through interviews, providing data, establishing key stakeholders, and identifying literature and reference material.

This report is shared and adaptable under a Creative Commons Attribution-ShareAlike 4.0 license.

An empty light rail vehicle with advisory COVID-19 signage. Image source: Metro Transit.

4 Acknowledgements 1. Executive Summary

The COVID-19 pandemic radically altered Metro Transit’s revenue system, likely with lasting change to transit ridership. This disruption is an opportunity to evaluate Metro Transit’s fare system.

This report provides recommendations to reach a vision for a simplified and more equitable fare system. These recommendations are developed from background information on Metro Transit and its riders, documentation of existing conditions, review of relevant literature, and interviews with stakeholders and subject matter experts. Recommendations focus on the conceptual level and center all-purpose riders.

Recommendations vary in their complexity and impact. Metro Transit can effectively simplify the current system just by paring down its sheer number of fare offerings. Beyond simplification, Metro Transit may improve ridership and mobility through simplified pass and needs- based programs combined with heightened enrollment efforts. In the medium-term, a fare capping policy may achieve much of these recommendations across rider groups.

Finally, this report recommends eliminating fares. A fare-free transit system best achieves the stated goals of this report: a simpler rider experience, revenue stability and growth, and improved mobility for all-purpose riders.

Metro Transit continues Transit Assistance Program outreach events during the COVID-19 pandemic. Image Source: Metro Transit.

1. Executive Summary 5 2. Introduction

2.1 Planning a Simpler Fare it also presents an opportunity to rethink fare structure to make Metro Transit services more System financially accessible. Barriers to accessing transportation and other needs have expanded under the COVID-19 2.2 Who Rides Transit? pandemic. The pandemic prompts evaluation of Metro Transit’s fare system. Peer transit agen- Transit professionals often default to catego- cies are experimenting with their fare systems, rizing riders as: ranging from fare simplification to free fares. • “dependent” riders, who rely on the transit system for fundamental mobility The pandemic created immediate impacts in needs, and lost revenue, both from dramatic decreases in • “choice” riders, with multiple mobility ridership and loss of other funding. It may lead options, which transit agencies must to long-term changes in travel behavior. The competitively capture from other trans- pandemic has exacerbated existing income and portation modes. racial disparities, which intersect with transit ridership. The confluence of factors opens This is not an accurate way to frame who is on an opportunity for creative strategies for fare board and why they are riding. This report will changes. discuss transit ridership in three groups defined by TransitCenter, a New York City based transit Evaluation of Metro Transit’s existing fare system think-tank. will identify successes and areas of improvement, so Metro Transit may better respond to 2.2.1 All-Purpose Riders the travel behavior and income changes brought on by the pandemic. This report provides anal- All-purpose riders regularly use transit beyond ysis and recommendations related to: work trips. They ride to all types of destinations, ranging from groceries to movies. Within all-pur- • fare simplification, pose riders there are two groups: contented and • low-income and needs-based fares, and discontented riders. Contented riders prefer • exploration of free fare systems. transit to driving or do not plan to buy a vehicle. Discontented riders would drive if they had The recommendations from this project will access to a car. All-purpose riders are generally help Metro Transit build back lost revenue and the largest group of transit riders.1 mitigate some of the challenges disproportionately felt by transit riders. 2.2.2 Commuters Commuters use transit for work trips. One of Metro Transit’s guiding principles is inno- Commuters ride for reasons ranging from vation, which encourages employees to think affordability to avoiding traffic. Commuters creatively and challenge the status quo. The pandemic has led to immense challenges, but 1. Higashide and Accuardi, “Who’s On Board 2016,” 28–29.

6 2. Introduction rarely or never take transit to other destinations. Metropass creates a set-and-forget experience This is generally the second largest group of for commuters, since many pay for Metropass transit riders.2 through automatic payroll deductions. This in-turn creates a stable source of fare revenue 2.2.3 Occasional Riders for Metro Transit. Occasional riders take transit for situational reasons. They may ride when a vehicle is being The COVID-19 pandemic introduced new repaired, to attend a sports event or a concert, virtual ways of working to many employers and or any number of infrequent situations. This is workers. Some travel to job centers will return generally the smallest group of transit riders.3 as the pandemic subsides, but Metro Transit should expect a reduction in commuters. The Metropolitan Council’s Metropolitan Trans- 2.3 Permanent Reduction in portation Services (MTS) conducted surveys Commuters in 2020 finding roughly half of workers in the region were teleworking between two and five Prior to the COVID-19 pandemic, Metro Transit days per week. Figure 1 is from a MTS presen- enjoyed an operating subsidy from commuters. tation, which demonstrates significant worker Commuters may purchase monthly passes interest in continued telework. Eighty-one like Metropass but not use the full value of the percent of teleworking employees prefer to tele- pass. This previously benefited Metro Transit’s work between two and five days per week in the revenue system, shifting some fare burden from future.4 all-purpose and occasional riders to commuters.

2. Higashide and Accuardi, 27. 4. Asmus, “Travel Behavior Inventory and COVID-19 Panel Survey,” 3. Higashide and Accuardi, 26. 14–15.

Figure 1. Summary of Telework Frequency by COVID-10 Panel Survey Respondents. Source: Metropolitan Council Transportation Services.

2. Introduction 7 Workers perceive their employers will support Metro Transit’s operating revenue system on continued telework, with 69% of teleworkers user fees. indicating likely or somewhat likely support from their employers.5 This shifting attitude is supported by changes in commercial leasing. 2.4 Focus on All-Purpose Top Metropass customers have announced Riders significant changes to their office leases and Combined with uncertainty about the future of telework policies. commuter travel, the pandemic prompts a focus on all-purpose riders. Figure 3 on the following page shows Metro Transit retained more rider- Target Corportation ship outside of peak hours during the pandemic. Perhaps a harbinger of the changes to come, This suggests all-purpose riders are a stable Target Corporation is ending the lease on offices customer base who continue to use transit that accommodate 3,500 of its 8,500 down- despite public health advisories. Metro Transit town Minneapolis employees.6 Target was the will rely on all-purpose riders to grow ridership second-largest Metropass customer in 2018, in the absence of commuters. accounting for more than 3,000 enrollees.7 In the worst-case scenario for Metro Transit, a 2.5 Report Overview proportional loss in Target’s Metropass enrollments would amount to a $1.2 million reduction This report establishes a vision for ridership in fare revenue. Metro Transit should expect growth through a renewed focus on all-purpose employers to evaluate their lease obligations, ridership. This vision is supported through docu- recruitment incentives, and telework policies. mentation of existing fare system conditions, review of peer agency activities, and a series of simplification and equity-based recommenda- Employers with fewer staff coming to the tions. workplace may see less value in Metropass. Employees at firms without a full Metropass This report’s vision and associated recommen- subsidy may question the value of the pass if dations are presented in near, medium, and they no longer work in a job center five days a long terms. Some of these elements are readily week. This product is priced based on approx- achievable, while others will require concerted imately 18 round-trip commutes per month, or effort and time. With these elements, this report 4.25 round-trips per week. A permanent decline provides a roadmap for achieving a simpler and in Metropass enrollment is imminent absent more equitable fare system. pricing changes.

While COVID-19 has significantly shocked ridership, ridership was on a slight decline prior to the pandemic, as shown in Figure 2 on the following page. The present circumstance underscores the urgency of reducing the dependence of

5. Asmus, 16. 6. Gilyard, “Target Ending Operations at City Center.” 7. Eull, “Regional Fare Policy Overview,” 8.

8 2. Introduction Figure 2. Monthly Ridership Trends, 2019-Present. Data Source: Metro Transit Strategic Initiatives.

Figure 3. Time of Day Patterns. Source: Metro Transit, 2020 Ridership Report.

2. Introduction 9 3. Vision

In the year 2041, transit in the Twin Cities will look different than it does today. Today, transit service quality and ridership levels suffer from competition with other modes, sprawling land uses and destinations, and inequitable access to transit—physically, socially, and financially.

With growing focus on climate change and racial and income inequalities, improving access and removing barriers to transit will be a key component of ensuring better quality of life for future generations. This vision lays out three stages of improvements to create a clear and inclusive fare system, ranging from near-term tweaks in the next 1-2 years to medium-term improvements in the next 5-10 years to long- term changes 20 years out from today.

3.1 Near-Term Vision 3.1.1 Setting the Stage: 1-2 Years The near-term vision highlights the effects of changes made in the next few years—2021, 2022, and 2023. Metro Transit and Metropolitan Council have several near-term opportunities to improve the fare system. This near-term vision includes low-cost and rider-friendly changes Metro Transit can implement on its own or with limited assistance from its partners.

The economic outcomes of the pandemic are uncertain. It is likely families hit hard by the negative economic and health outcomes of the pandemic will have tighter budgets. They may also have greater skepticism about traveling in the midst of many other passengers. This is a key opportunity for Metro Transit to ease previous and existing riders back into more regular transit service. Further, it is an oppor- A crowd fills a Green Line platform. Image Source: Metro Transit.

10 3. Vision tunity to lessen the economic burden of riding impacted those riders. Metro Transit has consid- transit in order to attract and maintain riders. ered their strategic goals and the anticipated post-pandemic transit demands, which have Metro Transit can take some relatively simple exacerbated disparities and made equitable steps to facilitate a ridership comeback from transit service even more urgent. Metro Transit pandemic levels and mitigate some of the has made strategic decisions around fare policy disparities along income and employment to better serve those core riders and create a industry lines, exacerbated by the hardships of fare structure that works for everyone. COVID-19. Metro Transit has looked to peer agencies 3.1.2 Predicted Outcomes and adopted the approaches that have proven Metro Transit staff and leadership realized that successful. Additionally, Metro Transit sought bringing ridership back would be essential, but to push the boundaries of their ingenuity. returning to pre-pandemic ridership patterns Thoughtfully designed and well-documented may prove impossible. The agency has taken a pilot programs have been identified as an effec- hard look at where ridership has dropped and tive tool to test out bold programming changes such as fare capping and fare-free transit. where it would be unlikely to return as compa- nies move their offices out of the urban cores of the Twin Cities and as many workers continue Metro Transit leaders have gotten creative with to telecommute even after workplaces reopen. their funding tools, recognizing that previous funding sources were unpredictable and inad- Agency staff have examined data on who kept equate for the high-quality transit service they riding transit during the pandemic and how were providing. Identifying new funding sources the temporary suspension of fare collection

Riders, staff, and elected officials celebrate the C Line opening. Image Source: Metro Transit.

3. Vision 11 and assessing how best to implement new poli- strengthening ridership, service quality, and reli- cies has set the stage for bigger changes. ability.

3.2 Medium-Term Vision 3.2.2 Predicted Outcomes As the year 2031 approaches, the success of 3.2.1 Setting the Stage: 5-10 Years fare-capping and fare-free pilot programs and By the year 2031, due in part to Metro Transit’s the identification of alternative revenue sources efforts to simplify and improve fare system gave Metro Transit the green light to implement equity, ridership levels and the regional economy a fully fare-free system. will have significantly recovered from the economic and racial disparities that worsened Ridership, which had already been improving during the COVID-19 pandemic. While dispari- over pandemic levels, surged as people real- ties likely will remain, Metro Transit can continue ized that barriers to riding like finding a place to work on making service more accessible and to purchase fares, learning about fare products, reliable for riders through prioritizing equitable qualifying for special programs, and keeping fare changes. different price structures in mind were gone, and riding transit was as easy as getting on Part of this vision entails solidifying transit as a board. Metro Transit was prepared for this rider- viable transportation mode for riders of all back- ship increase and sustained it while maintaining grounds, making it more convenient through service quality. streamlined higher education pass programs, and capping fares to mitigate riders’ financial concerns. 3.3 Long-Term Vision 3.3.1 Setting the Stage: 20 Years If it is easier for riders to think less about the The long-term vision encompasses what the fare they are using to ride transit, riders will be Twin Cities region could look like within 20 years more inclined to choose transit over modes like with various improvements. In the year 2041, personal vehicles, carshare, or transportation transit will be seen as a permanent, essential network company services. In this way, students service and viable alternative to driving. may not think twice about taking the bus to an internship interview downtown and low income Because issues relating to climate change riders may not have to worry about making will worsen as time goes on, environmentally transit trips at the end of the week or month responsible policy will have to be implemented when their incomes may be more constrained. to mitigate environmental harms. Of course, environmental justice is strongly interlinked with By reducing the up-front sticker price of each trip, racial justice, and agencies like Metropolitan transit becomes more comparable to vehicular Council will have to take issues of racial ineq- modes of transportation, where the decision to uity seriously in order to curb today’s widening make the trip is rarely confined by the amount disparities. of money an individual has at that exact time. Changes like these would hopefully improve Strong, bold policy initiatives will help to the public perception of Metro Transit and strengthen Metro Transit’s commitment to a allow transit to become more of a mainstream more equitable and environmentally sustain- transportation mode for more riders, effectively able future. Because business as usual and

12 3. Vision incremental changes will not be enough to After the pandemic, discussions of fare-free bolster equitable and sustainable transporta- transit became increasingly popular around the tion policy in the long term, it will be imperative country, with agencies from Los Angeles Metro that Metro Transit take action on bold strategies to WMATA seriously considering the idea. Metro that initiate a widespread mode shift away from Transit was ahead of the curve on this trend, personal vehicles and toward transit. and its forward thinking and success led many to consider it a national leader on fare policy. Dedicating the necessary funding for transit and shifting the burden of paying for transit away from cash-strapped riders would provide a sense of freedom among both riders and the agency. If riders do not have to worry about the cost of transit, and more importantly the conse- quences of not being able to pay for a trip, riders would perceive Metro Transit as a trustworthy, essential agency.

From the agency’s perspective, a dedicated source of funding that is not tied to ridership trends allows for better financial planning, leading to more reliable and efficient transit. In turn, bold improvements like these would help transit to become more attractive and equitable overall.

3.3.2 Predicted Outcomes As the year 2041 approaches, through community engagement efforts conducted during the pilot programs and implementation of a fully fare-free system, Metro Transit learned that the fare-free system was attracting new riders and increasing mobility for pre-existing riders.

People who had limited their transit rides to essential trips were now able to travel more for leisure, work, and shopping; they were able to meet their mobility needs through transit. People who had been priced out or who were intimidated by the labyrinthine fare system now Chalk drawings at a Metro Transit and We Push for Peace event. felt free to take transit without the barrier of fare Image Source: Metro Transit. payment. First-time riders and visitors to the Twin Cities were able to hop on transit and get where they needed to go without the hassle of researching fare products.

3. Vision 13 4. Existing Conditions

This section provides context to this report, 4.1.2 Discounted Fares describing the region Metro Transit serves and Some customers are eligible for reduced fares. the current fare system. The fare system is Reduced fares are offered to youth aged 6-12, complex, with more than 100 possible rates. seniors aged 65 and up, and Medicare card holders. Mobility fares are offered to persons 4.1 Metro Transit Fares with disabilities. Transit Assistance Program (TAP) fares are offered to qualifying low-income Metro Transit offers four general types of fares: riders.3 These fares are shown in the last four • pay-per-ride fares, columns of Table 1. • discounted fares, • passes, and Transit Assistance Program • special and non-paying fares. Riders must prove eligibility for TAP by showing receipt of other public benefits. Some eligible Some fare types charge different rates during programs include Supplemental Nutrition rush hours. Morning rush hours are 6am to 9am. Assistance, Minnesota Care, unemployment Evening rush hours are 3pm to 6:30pm. Fares insurance, and various housing assistance include free transfers up to 2½ hours after the programs. TAP eligible riders may enroll online, first swipe, except for Downtown Zone fares.1 at one of five enrollment sites, at special enrollment events, or through partner organizations. Enrollment is valid for one year and renewable.4 4.1.1 Pay-Per-Ride Fares Riders can pay for each individual ride. These 4.1.3 Passes rates apply to fares paid by cash or Go-To cards.2 These fares are shown in the first three columns Metro Transit offers several passes. Most of Table 1. passes offer unlimited rides on fares up to

1. Metro Transit, “Fares.” 3. Metro Transit, “Fares”; Steffen et al., “Fare Products Offered/ 2. Metro Transit; Steffen et al., “Fare Products Offered/Accepted on Accepted on What Device.” What Device.” 4. Metro Transit, “Transit Assistance Program.”

Table 1. Pay-Per-Ride One-Way Fares Downtown Reduced Reduced Service Off-Peak Peak Mobility TAP Zone Off-Peak Peak Local Bus or $2 $2.50 $0.50 $1 $2.50 $1 $1 Metro

Express Bus $2.50 $3.25 $0.50 $1 $3.25 $1 $1

Northstar Not $3.25-$6.25 $3.25-$6.25 $3.25-$6.25 $3.25-$6.25 $1-$2 $1-$4 Weekday Applicable Northstar Not $2.75-$5.50 $2.75-$5.50 $1-$2 $1-$2 $1-$2 $1-$3.25 Weekend Applicable

14 4. Existing Conditions Pay your fare faster with a Go-To Card VISITOR PASS • Rechargeable. Check your balance or add value by phone or online. $5.00 Unlimited rides until 2 a.m. after first use. Visitor Passes are valid for a $2.50 (cannot be used on • Holds multi-use passes and/or stored value Northstar, express buses or Metro Mobility). • Valid on buses and trains SPECIALTY CARDS Reduced Fare Store up to TWO PASSES of the same type and up to $400 in stored value. • Youth (6-12) • Seniors (65+) • Medicare cardholders STORED VALUE 7-DAY PASS 31-DAY PASSES Deducts a reduced fare during non-rush hours. $5 $24 Valid up to $2.50 fare $65 $2.00 fare Must be shown with proper ID. $10 Seven consecutive days of rides. $90 $2.50 fare (There is a surcharge for Mobility Fare $20 Add rush-hour express buses.) $120 $3.25 fare Deducts a reduced fare on all rides when shown $30 ONE or $36 $1.00 Mobility fare with proper ID. BOTH Valid only with proper ID. $40 10 RIDES Transit Assistance Program $50 $20 Valid up to $2.25 fare The Transit Assistance Program makes public transit $60 more affordable ($1 for any ride) for residents who $15 Only available with Reduced Fare Card. meet the income requirements. $80 Valid up to $3.25 fare. $100 $180 If you need to pay a higher fare than your pass allows, metrotransit.org add Stored Value to cover the remaining fare. 612-373-3333

06-042-07-17 Metro Transit displays this menu board in Service Centers to explain a selection of its fares to riders. Image Source: Metro Transit.

$3.25, requiring stored value for fares exceeding and Augsburg University offer special pass that amount. programs for their students.

Metropass U-Pass is offered for UMN students. Students The largest pass program is Metropass, an pay UMN Parking & Transportation Services employer-sponsored unlimited ride pass. In $114 per semester for the pass. Eligibility is 2019, Metro Transit sold approximately 38,000 restricted to students paying UMN’s student Metropasses per month.5 Employers pay $83 transportation fee. Like Metropass, U-Pass per month to Metro Transit for each enrolled provides unlimited rides up to $3.25 in value, employee. Employers must enroll at least five with stored value required for more expensive 8 employees. Employers may offer the pass fares. free to their employees, or they may charge employees for all or part through pre-tax payroll UMN also offers students, faculty, and staff deductions.6 the free Campus Zone Pass, valid for unlimited travel on the Green Line between West Bank and 9 Colleges and Universities Stadium Village stations. Metro Transit offers four pass products specif- Augsburg University provides Auggie Pass free ically for college students. Students at most of charge for all undergraduate students who colleges and universities can purchase College pay the student green fee. Auggie Pass covers Pass through their school. College Pass costs unlimited rides up to $3.25 in value on Metro $165 for fall and spring semesters or $85 for Transit and select suburban transit systems. the summer.7 University of Minnesota (UMN) 8. University of Minnesota Parking & Transportation Services, “U-Pass 5. Metro Transit, “Metro Transit Facts 2019,” 1. - Discounted Student Unlimited Transit Pass.” 6. Metro Transit, “Metropass for Employers.” 9. University of Minnesota Parking & Transportation Services, 7. Metro Transit, “College Pass.” “Campus Zone Pass.”

4. Existing Conditions 15 Auggie Pass is only valid for the school year Metro Transit offers Go-To Lite, a dispos- and is not available for the summer term. Inel- able 10-ride pass available for seniors or K-12 igible students and summer term students may students. Go-To Lite is available through spon- purchase the regular College Pass.10 soring organizations or Metro Transit Service Centers for $15. Go-To Lite covers rides up to High School Students $3.25 in value, but this disposable card cannot 14 Student Pass is offered for students at partic- carry stored value for higher Northstar fares. ipating high schools. Schools administer the program and collect any related charges. The Northstar Roundtrip Family Pass offers Metro Transit charges schools $91 per quarter round-trip travel for two adults and three kids or per student for the pass.11 Metro Transit also seniors. This pass is targeted at special events, directly offers a summer Student Pass for $29.12 like concerts and sports. The price of this pass varies by distance, ranging from $13 to $25 for Retail Passes one group’s round-trip. This pass is not available for sale at Target Field Station.15 Metro Transit offers retail pass products for customers not covered by an employer or school sponsored pass program.13 Metro Transit offered 4.1.4 Special and Non-Paying Fares an all-day pass, which is currently suspended Metro Transit offers three geography-based due to the COVID-19 pandemic. The 7-day pass reduced fare zones. offers unlimited rides for $24 on fares $2.50 or less. The 31-day pass is offered for multiple fare The Nicollet Mall Zone waives fares on south- levels: bound route 10 and northbound route 18 buses • $120 for fares $3.25 or less, between Washington Avenue and the Minneap- olis Convention Center.16 This is a popular fare • $90 for fares $2.50 or less, product for such a small area, counting for one • $65 for fares $2 or less, and percent of Metro Transit bus rides in 2019.17 • $36 for persons with disabilities travelling during non-rush periods. Metro Transit also offers the Downtown Fare Zone, where bus or light rail fares cost $0.50 within the downtown Minneapolis or St. Paul Regressive Pricing zones. Riders can get the Downtown Zone discount by purchasing from a Ticket Vending The existing state of retail passes creates a Machine or asking their bus driver before paying. regressive pass pricing scheme. Metropass, This fare does not offer transfers.18 which likely serves some of the most advantaged transit riders, is available at a steep Metro Transit does not assess fares on the Blue discount over retail passes. Riders without a Line between Minneapolis-St. Paul International sponsoring employer pay 30% more for a pass Airport terminals.19 with similar benefits.

14. Metro Transit, “10 Rides.” 15. Metro Transit, “Northstar Family Pass.” 16. Metro Transit, “Free Ride Buses.” 10. Augsburg University, “Auggie Pass – Transportation.” 17. Metro Transit, Revenue Operations, “2019 Monthly Bus Rail Rider- 11. Metro Transit, “Pass Options for Schools.” ship.” 12. Metro Transit, “Summer Student Pass.” 18. Metro Transit, “Downtown Zone.” 13. Metro Transit, “Go-To Card.” 19. Metro Transit, “Airport.”

16 4. Existing Conditions Special Minnesota State Fair service offered by 4.3 Demographics Metro Transit and other providers are subject to non-standard fares. Go-To and pass products Metro Transit serves riders from many back- are not accepted on State Fair service. Round- grounds with varying trip purposes. trip fares on State Fair services are $6 cash or $5 for prepaid tickets. Prepaid tickets are avail- 4.3.1 Trip Purpose & Employment able on the Metro Transit app, online, or certain Just over half of trips on Metro Transit are for 20 transit service centers and stations. work. The remaining half are for a variety of purposes including 19% for social or recreational Metro Transit offers its fare partner organiza- purposes, 13% for school, and 12% for errands. tions, such as Metropass participants or social Sixty-percent of riders are employed full-time, service agencies, the option to purchase single- 23% are employed part-time, and the remainder 21 ride passes or tokens. are not in the labor force.24 Despite the variety of transit users and needs, Metro Transit’s fare 4.2 Metro Mobility system is designed around commuting. Its largest pass program, Metropass, is employ- Metropolitan Transportation Services (MTS) er-based. Pricing across products are designed operates the region’s paratransit service, Metro for rush hour commutes. Mobility. MTS is separate from Metro Transit within Metropolitan Council; however, fare 4.3.2 Race & Language policy must be coordinated across the services. Federal regulations place limits on Metro Mobil- Persons of color use transit at higher rates than ity’s paratransit fares relative to fares on the white persons relative to their population in the fixed-route system operated by Metro Transit. region. In 2016, white persons accounted for 25 Paratransit fares cannot be more than double 57% of transit ridership, compared to white 26 the fare of a similar trip on Metro Transit.22 persons being 78% of the region’s population. Additionally, nearly 16% of riders use a language 27 Metro Mobility fares are $3.50 regularly or $4.50 other than English in their homes, compared during rush hours. In the Downtown Fare Zone, to 15% of the region’s population speaking a 28 fares are $1. Metro Mobility assesses a $0.75 language other than English in their homes. premium on trips outside the required service area that exceed 15 miles. Metro Mobility 4.3.3 Income fares can be paid by cash or Go-To card. Metro In 2016, 44% of Metro Transit riders reported Transit’s pass products are not valid on Metro annual household incomes below $35,000, Mobility services.23 compared to 14.5% of the region’s house- holds.29 The high representation of low-income riders underscores the importance of expanding access to needs-based fare programs.

24. Metro Transit, “Metro Transit Facts 2019,” 1. 25. Metro Transit, 1. 26. U.S. Census Bureau, “2016 American Community Survey Demo- 20. Metro Transit, “State Fair.” graphic and Housing Estimates, 5-Year File.” 21. Metro Transit, “Non Profit.” 27. Metro Transit, “Metro Transit Facts 2019,” 1. 22. Federal Transit Administration, “Metropolitan Council Paratransit 28. U.S. Census Bureau, “2016 American Community Survey Demo- Compliance Review Final Report,” 27–28. graphic and Housing Estimates, 5-Year File.” 23. Metropolitan Council, “Paying for Trips.” 29. U.S. Census Bureau.

4. Existing Conditions 17 Figures 4-5. Metropolitan Council Budgeted Transportation Operating Revenue by Source, 2020 and 2021 4.3.4 Ability One tenth of Metro Transit riders have a disability,30 which matches the 9.5% of regional population with a disability.31

4.3.5 Students Metro Transit offers many pass programs for student populations, a significant rider group. Over a quarter of riders are K-12, technical, or college students.32

4.3.6 Vehicle Ownership Low rates of vehicle ownership relative to the region underscore the importance of serving all-purpose riders. In 2016, 38% of Metro Transit riders did not own a vehicle, compared to 8% of the region’s population.33 Without an alternative way to travel, the fare system can limit the mobility of riders, particularly price sensitive riders.

4.4 Budget Prior to the COVID-19 pandemic, Metropolitan Council budgeted $113 million in fare revenues for 2020. This comprises 20% of the $562 million budgeted operating revenue for Metro Transit and Metropolitan Transportation Services.34 Actual revenues for 2020 certainly shifted due to the COVID-19 pandemic. Budgeted revenues in 2021 are significantly less reliant on fares, shifting the burden to temporary federal sources.35 Figures 4-5 to the left show fares relative to Metropolitan Council’s transportation operating revenues.

30. Metro Transit, “Metro Transit Facts 2019,” 1. 31. U.S. Census Bureau, “2016 American Community Survey Demo- graphic and Housing Estimates, 5-Year File.” 32. Metro Transit, “Metro Transit Facts 2019,” 1. 33. U.S. Census Bureau, “2016 American Community Survey Demo- graphic and Housing Estimates, 5-Year File.” 34. Metropolitan Council, “2020 Unified Budget,” C–2. 35. Metropolitan Council, “2021 Unified Budget,” C–2.

18 4. Existing Conditions 5. Peer Examples

5.1 Indianapolis of December 1, 2020, fares are now charged throughout the system. Staff noted that rider- IndyGo, which operates transit service in India- ship increased dramatically during fare-free napolis, has implemented fare capping through periods. the introduction of MyKey, its new account- based fare system. The MyKey system replaces single-use passes with a ticket that allows 5.2 Portland unlimited rides within a two-hour window, avail- Portland, Oregon area transit riders are served by able via mobile app, ticket vending machines, TriMet. An interview with TriMet staff provided and reloadable cards. background on the agency’s fare policy initiatives. TriMet introduced fare capping several For MyKey users, fares are capped daily at years ago as a way to ease the transition to an $4.00 and weekly at $15.75. The weekly cap is electronic fare card system and stop financially equivalent to about nine trips at the full fare rate penalizing riders for transfers. Fare capping and, over four weeks, approximately the price allowed customers switching from paper to of a monthly pass. According to an interview electronic fares to avoid transfer charges. with IndyGo staff, the agency was motivated to pursue fare capping for equity reasons, so Fares are capped at $5 daily and $100 monthly that riders can access the savings benefits of on electronic fare cards and contactless phone monthly passes without the prohibitive initial payments. TriMet eliminated weekly, biweekly, cost, and as a precursor to a fare-free system. and monthly passes after introducing fare While the agency has no immediate plans to go capping. Cash is still accepted on buses and fare-free, it was researched extensively as part at fare vending machines. Paper fares were of fare policy restructuring, and fare capping is phased out entirely by January 2020. seen as a stepping stone.

Transit has been free during several periods of the MyKey rollout, due in part to the COVID-19 pandemic. No fares were charged on the entire system during the initial pre-pandemic rollout. Like Metro Transit, IndyGo tempo- rarily suspended fares and implemented rear- door boarding for operator safety during the pandemic, but has since returned to regular boarding.

When the rest of the system transitioned back to fares, the Red Line bus rapid transit service A TriMet rider validates their HOP fare with Google Pay. Image Source: remained fare-free due to technical challenges TriMet, used under CC-BY-SA 2.0. with the off-board fare payment system. As

5. Peer Examples 19 TriMet also offers low-income daily and monthly paying in view of the driver. METRO riders must passes. Low-income daily passes represent a present a validated paper, mobile, or Go To card 50% discount from regular pricing, and monthly fare upon inspection. Removing cash handling passes are discounted by 72%. Customers and farebox interaction from the vehicle may can reload low-income passes at an extensive allow Metro Transit to offer speedier and more network of over 500 retailers, at ticket offices, or reliable service. Expansion of the Arterial Bus online. While the program is means-tested, its Rapid Transit (ABRT) program will increase criteria are fairly broad; the income threshold is the number of routes on a proof-of-payment 200% of the federal poverty line. The program system. It will also expand Metro Transit’s is paid for through a statewide 0.1% income inventory of curbside fare validators and ticket tax on transportation for every employer and vending machines. employee, implemented in 2017. This tax is described further in Section 6.3.3: New Revenue Staff at the Washington Metropolitan Area Sources. Transit Authority (WMATA) were interviewed to gain a comparative perspective on the effect of TriMet has multiple universal pass programs. off-board and cashless fare payment. WMATA Most notably, Portland Public Schools replaced operates MetroExtra, a system of limited-stop its high school bus service with TriMet. The bus lines with features that resemble ABRT. school district pays TriMet a flat fee for student Unlike ABRT in the Twin Cities, MetroExtra fares. Students can ride TriMet for free at any services do not have off-board payment or high- time of day over the ten months they are in amenity stations. Riders must pay with cash or school. Other school districts receive state SmarTrip, their electronic fare card. SmarTrip funding to purchase student fares, which is allo- is reloadable online, at Metrorail ticket vending cated based on the percentage of students who machines, at commuter stores, or through retail receive free or reduced lunch. partners like Giant grocery stores and CVS Phar- macy. While this program has been successful, TriMet is hesitant to pursue other fareless programs WMATA piloted cashless fare collection on without identifying alternative funding sources. MetroExtra Route 79. The cash-free pilot The agency has considered implementing free informed planning activities around all-door fares for youth, but TriMet estimates it would boarding on premium services, like MetroExtra need to find $4-6 million to cover lost revenue and Metroway. A transit service with all-door and costs of increased ridership. TriMet would boarding either needs ticket vending machines save approximately $6-8 million in fare collec- at the curb to issue paper tickets—like Metro tion costs if fares were eliminated for all riders, Transit does with ABRT—or cash payment must which is eclipsed by $110 million in lost fare be eliminated. Otherwise, riders who pay cash revenue. have no way to prove payment when inspectors board.

5.3 Washington, D.C. WMATA did not find significant operational An increasing number of Metro Transit routes benefits to justify eliminating cash on the route. are moving from pay-while-boarding to proof- However, Route 79 already had low rates of of-payment fare collection systems. Riders on cash payment. Only 3% of Route 79 passengers the Twin Cities METRO system pay off-board at were paying with a cash fare, and a further 6% fare validators or vending machines, instead of were reloading their SmarTrip cards with cash

20 5. Peer Examples on-board. During WMATA’s Route 79 cashless of operator assault. Operators did not report pilot period, cash fares were still collected on notable challenges with the cashless pilot. overlapping local routes. WMATA resumed accepting cash on Route 79 after the pilot. 5.4 Kansas City As of 2019, Kansas City was poised to become the first major American city to implement fare- free transit. After considering the move for four years, Kansas City Area Transit Authority (KCATA) got the go-ahead in late 2019 when the Kansas City Council voted to approve an ordi- nance to explore fare-free transit.1

Free bus service was not a radical departure from Kansas City’s approach to transit: the streetcar and new bus rapid transit service are free, and KCATA has made bus service fare- free for certain groups, including high school

MetroExtra buses. Image Source: MJW15, CC BY-SA 4.0 via Wikimedia students and veterans. Transit officials said Commons the move will increase ridership and enhance overall community well-being by providing better WMATA handles proportionally fewer cash access to jobs and services. Additionally, fare- fares than Metro Transit. Higher rates of cash free transit would enhance driver safety, since payment make related changes more chal- most disputes between passengers and drivers lenging for Metro Transit, though the opera- occur over fares, and improves the efficiency of tional benefits may be more pronounced than bus service when the bus no longer needs to WMATA experienced. Transit agencies with wait for riders to pay the fare before departing.2 long-term goals of reducing or eliminating cash need robust planning analysis and alternatives While loss of fare revenue constituted an 8% development first. cut to KCATA’s $100 million budget, the agency would no longer have to spend money to collect WMATA conducted outreach before and fares and maintain fareboxes.3 Moving to free during the cashless pilot. The agency distrib- fares was also projected to provide a significant uted brochures and conducted pop-up events boost to the local economy and tax revenues. in English and Spanish. Destination signs on A study from the Center for Economic Informa- Route 79 buses displayed “SmarTrip Only,” as tion at the University of Missouri Kansas City the agency found the terms “cash free” and predicted that lost fare revenues will recirculate “cashless” could imply the routes were fare free. in the local economy, raising regional GDP by anywhere from $1-1.7 million, and that local The cashless pilot did not change WMATA’s and state tax revenue will increase by almost approach to driver-rider fare interactions. $60,000.4 WMATA policy allows drivers to state the fare, and it instructs drivers not to engage in fare 1. Musulin, “Who Will Pay for Kansas City, MO’s Free Transit?” 2. Descant, “Kansas City to Make Riding the Bus Free for Everyone.” disputes. Fare collection is not worth the risk 3. Descant. 4. Center for Economic Information, “Analysis of Free Bussing in Kansas City.”

5. Peer Examples 21 It is unclear how much progress has been made formed to study fare-free transit will present its towards this goal. A review of news articles and findings in April 2021.7 agency statements uncovered little information after early 2020. It is possible that the COVID-19 The task force’s preliminary recommendation pandemic forced KCATA to redirect its efforts is to create a fare-free pilot for K-12 students from fare-free transit to emergent issues asso- and low-income riders. This pilot would begin ciated with transit operation during a pandemic, in January 2022 for low-income riders and or that funding gaps became wider and more expand to K-12 students in August 2022. As difficult to fill due to the kinds of pandemic-as- of March 2021, the task force was conducting sociated ridership decreases and budget short- public outreach, working with stakeholders falls that other agencies have seen. However, like labor unions and social service agencies, if successfully implemented as the pandemic and researching funding sources for the pilot. subsides, Kansas City’s fare policy changes Funding sources under consideration include would be a more relevant example for transit in new federal funds, repurposing of existing the Twin Cities than any other extant fare-free funding, and partnerships with other agencies policy. Regardless, Metro Transit should keep a or private entities.8 Metro does not intend to close eye on fare policy in Kansas City. pursue new taxes to fund pilot programs.9

Metro also implemented emergency fare relief 5.5 Los Angeles in May 2020 by cutting the price of regular In response to declining ridership and economic pass products in half while directing staff to hardships faced by core riders—challenges study fare capping. The resulting fare capping similar to those faced by Metro Transit—Los reports set fare capping thresholds at the price Angeles Metro announced its intention to study of existing pass products—$7 per day, $25 fare-free transit in August 2020. Compared to per week, or $100 per month—so that riders other agencies, who approached fare policy using Metro’s stored value card, TAP, would shifts primarily from an economic and opera- receive the financial benefits of daily, weekly, tional effectiveness perspective, Metro used a and monthly passes without paying for them values-based framing. upfront.10 The reports recommended a phased approach beginning with a pilot program of day According to Metro CEO Phil Washington, “LA pass capping for selected riders, a subsequent Metro has a moral obligation to pursue a fare- expansion into weekly and monthly capping for less system and help our region recover from all Metro riders, and an eventual expansion to both a once-in-a-lifetime pandemic and the all regional transit providers. Software develop- devastating effects of the lack of affordability ment and testing are needed to facilitate fare in the region.”5 Washington also believes that capping, a process which will take six to nine “fareless transit should be considered no months. The estimated cost to implement the different than other public programs funded by pilot program is $6-8 million.11 the public purse such as firefighting, policing and other public infrastructure that serves as a public right and common good.”6 The task force 7. Los Angeles Metro, “2021-0074 - Fareless System Initiative Update.” 8. Los Angeles Metro. 9. Hymon, “Metro to Study and Consider Eliminating Bus and Rail Fares.” 5. Hymon, “Metro to Study and Consider Eliminating Bus and Rail 10. Los Angeles Metro, “2020-0565 - Fare Capping.” Fares.” 11. Los Angeles Metro, “2020-0704 - Report on Fare Capping in 6. Hymon. Response to Motion 31.1.”

22 5. Peer Examples Metro is unique in pursuing both fare capping and free fare pilot programs in tandem. As one of the largest systems in the country within the second-most populous American city, Metro has the potential to create seismic shifts in fare policy, and the success or failure of these pilots will likely set the terms of the national conversa- tion around free and capped fares.

5. Peer Examples 23 6. Recommendations

These recommendations draw on practitioners’ 6.1 Near-Term experience, literature review, and stakeholder perspectives. Recommendations are presented Recommendations in chronological order. Policies with low barriers 6.1.1 Eliminate Peak Hour Premiums to implementation are recommended for the near-term. More innovative, technical, and polit- Metro Transit should eliminate peak hour fare ically challenging policies are recommended for premiums. Metro Transit currently charges peak the medium- and long-term. hour premiums for full fare paying riders and select discounted rides. For most riders, a $0.50 Study and implementation of fare-free transit is rush-hour premium is charged on local fares strongly recommended for this region. However, and a $0.75 rush-hour premium is charged on this comes with financial and political hurdles. express fares. These recommendations offer a range of tools to simplify the overall fare system and align fare Issue policy with Metro Transit’s service quality and These premiums control demand for service equity goals. The recommendations described by excluding price-sensitive riders from the in this section include: system during peak hours. This prioritizes commuters, many of whom are enrolled in Near-Term Recommendations prepaid pass programs like Metropass, over a • Eliminate peak hour premiums subset of all-purpose riders who have limited ability to pay. Transit Assistance Program users • Unify retail and wholesale passes are not charged peak hour premiums, but not • Expand need-based fares all low-income riders are enrolled in or quali- • Set all discounted fares to $1 fied for the program. These premium charges • Eliminate fares in downtown zones are most visible to cash and Go-To pay-per-ride customers, likely those with limited access to Medium-Term Recommendations discounted passes like Metropass or U-Pass. • Fare capping Benefits • Unify higher education passes Eliminating peak hour premiums would increase the mobility of all-purpose riders, particu- Long-Term Recommendations larly low-income riders. Eliminating peak hour • A fare-free Metro Transit premiums would also make the fare system • Grow existing revenue sources simpler for riders to use. An all-day, flat-rate fare • New revenue sources gives riders certainty about the cost of their ride.

Challenges However, eliminating peak hour premiums may act as a subsidy to commuters. These

24 6. Recommendations commuters likely have higher incomes and more This scheme particularly disadvantages riders stable employment, implying a higher ability to working in hospitality, retail, and service indus- pay. Removing this premium may reduce the tries. The prevalence of low-wage, part-time, and efficiency of generating revenue from higher unbenefitted work in these industries suggests income riders. To minimize this impact, Metro employers are less likely to offer Metropass. Transit may consider a moderate increase in This is paradoxical, since workers in these all-day express fares. Implementing this change industries are more likely to be regular transit will require identifying alternative revenue commuters.1 sources to maintain existing service, a topic discussed further in Sections 6.3.2 and 6.3.3. Benefits Riders likely want to figure out what pass and 6.1.2 Unify Retail and Wholesale Passes term they need, then learn its cost and who is Metro Transit should unify its passes under the responsible for paying. Combining these offer- Metropass brand. This rebranding should be ings under one brand with universal pricing and paired with clear information on getting a pass benefits simplifies the decision-making process through employers, schools, or retailers. Metro for riders. Unification would reduce affordability Transit currently offers many pass products barriers for retail pass customers. for different rider groups, such as School Pass, College Pass, U-Pass, Metropass, and 31-Day Further, unifying pass programs may improve Passes. efficiency of pass program administration. Surplus staffing and promotional resources Issue could support expansion of other programs and The onion-layers of passes make it difficult to could reduce pass costs. The Transit Assistance find the best deal. Riders without sponsoring Program would greatly benefit from resource employers or schools are left to navigate to the transfers, which maintains talent while simpli- 31-Day Pass products on their own. These prod- fying the fare system and progressing Metro ucts are buried on Metro Transit’s website and in Transit’s long-term equity goals. sub-menus on ticket vending machines. Mean- while, sponsored programs like Metropass and U-Pass are marketed front-and-center, despite being sold and administered by partner organizations. Metro Transit needs to reprioritize how pass information is distributed.

Employers purchase Metropass for $83, a significant 30% or $444 annual discount on its equivalent retail pass, the $120 31-Day Pass Express. Similarly, college sponsored passes represent significant discounts over retail passes. Discounts like these mean riders with pass A Metropass Go To farecard. Image Source: Metro Transit. sponsors—likely more affluent commuters—get advantaged pricing on monthly passes over riders without institutional sponsors.

1. TransitCenter, “Transit Is Essential.”

6. Recommendations 25 Challenges creates a barrier to participation, as TAP partic- A unified Metropass would require new pricing. ipants already bear the burden of proving qual- Metropass and other wholesale passes bring ification for other assistance programs. Enroll- administrative benefits that lower marginal ment is also limited by the few permanent TAP costs like transaction fees and cash handling. enrollment sites, which include partner social Limiting the wholesale pass discount to a small service organizations and sporadic communi- percentage equivalent to transaction costs ty-based enrollment events. will improve fare system equity. This could be achieved by raising wholesale pass prices, Benefits lowering retail pass prices, or meeting some- Streamlining enrollment verification will reduce where in between. Metro Transit’s administrative costs and reduce barriers to participation. Expansion of accept- The cost of this recommendation is presently able documentation would reduce barriers to unknown. Anticipated increases in full-time TAP enrollment, such as allowing direct income and occasional teleworking, combined with verification by paycheck stubs or tax forms. health-related apprehension to riding transit, will cause riders and employers to reconsider Including TAP in the Minnesota Combined their transit choices. The present pricing model Application Form (CAF) is the most direct way is based on riders taking 18 monthly round trips to expand TAP enrollment. The CAF is a Minne- at the $3.25 peak express fare. Metro Transit sota Department of Human Services form that should approach this recommendation not with allows people to apply for multiple assistance concern about fare recovery, but rather with programs on one form. This would ensure concern about how to retain and grow ridership all people who apply for other social service following pandemic-related travel changes. programs through the CAF would automatically receive a TAP card unless they choose to 6.1.3 Expand Need-Based Fares opt-out. Metro Transit should expand eligibility and enrollment opportunities for the Transit Assis- Challenges tance Program (TAP), its needs-based fare Tying the verification process to photo - iden program. Effective needs-based policies can tification, other government documentation, attempt to reach the mobility of a fare-free and proof of income also carries downsides. system while still capturing revenue from riders Government identification can be costly, time with the ability to pay. TAP discounts most fares consuming, or difficult to acquire. For example, to $1. TAP is means-tested, so riders must prove citizenship-based restrictions on government they qualify for the program. identification can prevent undocumented immi- grants from accessing services. Collecting tax Issue and wage forms for direct income verification The TAP verification process is largely tied to would require Metro Transit to establish controls enrollment in other needs-based programs, for handling sensitive personally identifiable such as Supplemental Nutrition Assistance, information. Accepting a wider variety of iden- Medicaid, or Housing Choice Vouchers. Once tification and verification forms may increase riders are enrolled in another program, they successful enrollments into TAP over time. show proof of enrollment to Metro Transit to receive a TAP card. The verification process

26 6. Recommendations Issue Challenge of Low Enrollment The current discounted fare structure creates Including TAP in the CAF would require signifi- complexity for riders and limits the mobility cant administrative coordination, but the effort of certain rider groups. A rider’s ability to pay would result in substantial enrollment increases. should not limit their access to work, education, In 2019, Metro Transit issued 15,060 TAP cards2 and other needs. Further, Metro Transit does compared to 585,000 persons who qualify for not substantially benefit financially from this TAP on income status alone.3 An enrollment complicated discounted fare structure. rate under 3% underscores the need to invest in expanding TAP enrollment efforts. Benefits Setting discounted fare programs to a flat $1 would simplify fare marketing materials and Furthermore, broadening TAP enrollment create fare certainty for participating riders. This requires partnering with more community hubs change would primarily benefit youth, seniors, that serve a high population of TAP-eligible and veterans, potentially improving mobility yet unenrolled riders. Advertising recurring and affordability for these groups. Disabled and TAP card sign-ups at public schools, places of low-income Northstar Commuter Rail riders worship, community health clinics, recreation would also benefit from this change. centers and parks, food banks, or temporary shelters could target a number of qualifying Challenges populations. Metro Transit may consider eval- Challenges to this change are limited, with uating the effectiveness of its brick-and-mortar discounted fares accounting for a small portion Service Centers. The location of these Service of Metro Transit’s existing fare revenue. Fully Centers is oriented towards commuters rather implementing this recommendation would than a broader cross-section of its users. require forgoing an estimated $532,132 in Reallocating Service Center resources to TAP revenue in total. and discounted fare program enrollment may help Metro Transit better meet qualifying TAP Setting all discounted Northstar Commuter Rail riders through community-based enrollment fares to $1 will have minimal revenue impact, programs. costing an estimated $10,322. Eliminating rush hour and express premiums for reduced fare 6.1.4 Set All Discounted Fares to $1 program participants will cost an estimated $521,810. These estimates are detailed in Metro Transit should set all discounted fare Appendix C: Cost Estimates. programs to a flat $1. Metro Transit currently charges discounted fare program participants between $1 and $6.25 per ride. Most discounted 6.1.5 Eliminate Fares in Downtown Zones rides cost $1, though fares vary on Northstar Metro Transit should eliminate fares on travel Commuter Rail and for some participants during within the Downtown Zones. Metro Transit rush hours. currently charges $0.50 for rides in the Down- town Zones. It does not charge fares on certain routes travelling on Nicollet Mall. 2. Metro Transit, “Metro Transit Facts 2019,” 1. 3. Kiepe, “Transit Assistance Program (TAP) Expansion 2020”; Metro- politan Council Community Development Research, “Community Profile for Twin Cities Region, Population Below the Federal Poverty Level.”

6. Recommendations 27 Issue 6.1.6 Summary of Fares in the Near Term The current Downtown Zone fare structure Upon implementation of the near-term recom- creates complexity for riders and may divert mendations, Metro Transit’s menu of fares is some ridership to other modes. It does not substantially simplified from Table 1 in Section generate a significant amount of revenue for 4.1: Metro Transit Fares. Table 2 to the right Metro Transit. summarizes pay-as-you-go fare options under these recommendations. Benefits Eliminating fares in the Downtown Zone will Table 2. One-Way Fares Under Near-Term simplify fares for a cross-section of riders, Recommendations including all-purpose, commuter, and occa- TAP, Downtown sional riders. A fareless zone also allows Metro Service Regular Reduced, or Zone Transit an opportunity to introduce itself to new Mobility customers and provide multimodal connections Local Bus $2 Free $1 (e.g. parking facilities, intercity rail). The fare- or Metro less Nicollet Mall zone is proof of demand for this service. The Nicollet Mall zone accounted Express Bus $3 Free $1 4 for 439,000 bus rides in 2019, which is three Not Northstar $2.75-$6.25 $1 times greater than rides across both Downtown Applicable Zones combined.

Challenges 6.2 Medium-Term This recommendation does not have signifi- Recommendations cant revenue challenges. There were just under 136,000 Downtown Zone fares paid in 2019, 6.2.1 Fare Capping less than a 0.25% of bus rides on Metro Transit’s Metro Transit should remove barriers to passes system.5 This fare raised just under $68,000 by implementing fare capping policy. Rides in revenue in 2019, likely valuing less than the should be free after a pay-as-you-go rider has mobility benefits a fareless Downtown Zone paid the value of a daily, weekly, or monthly would provide. pass. Metro Transit currently only offers pass products to riders who can pay the full price up-front.

Issue Purchasing a pass up-front is a cost barrier to some riders. Metropass currently costs $83 per month, making a weekday round-trip commute cost around $2 or less per ride. Meanwhile, cash and Go To pay-per-ride riders pay anywhere from $2 to $3.25 per ride. Discounting the fare system for users who can pre-pay a month of A Green Line train in St. Paul. Image Source: Metro Transit. fares advantages those with a higher ability to 4. Metro Transit, Revenue Operations, “2019 Monthly Bus Rail Rider- pay. ship.” 5. Metro Transit, Revenue Operations.

28 6. Recommendations Benefit 6.2.2 Unify Higher Education Passes Metro Transit can expand this benefit to pay-as- Metro Transit should seek to convert all higher you-go customers by instituting fare capping. education passes to the model used for Auggie Fare capping limits the maximum fare riders are Pass. Metro Transit and its college partners charged in a time period rather than pricing by currently offer passes students may purchase trip. Once riders spend up to the pass threshold on a semester-based fee. Auggie Pass is a using an account-based farecard system, they simple unlimited pass that automatically enrolls are no longer charged for additional rides. all students who pay a mandatory environmental fee. Fare capping is an equity-driven policy tool. Further, improving value and simplifying Issue purchase options for Metro Transit customers Metro Transit is missing out on an opportunity to will improve rider satisfaction and utility in the create habitual transit users. College students long run. Fare capping will disproportionately must intentionally enroll in College Pass or benefit all-purpose riders, who have a high- U-Pass, meaning Metro Transit is losing poten- volume of trips for a variety of purposes beyond tial customers through individual sales. Auggie commuting. Pass establishes a model for simplifying pass enrollment and coverage. Augsburg University Challenges pays Metro Transit a negotiated fee for the pass, Fare capping will require overcoming technical which covers all fares $3.25 and less. challenges identified by interviewees with information technology systems. There may be Benefits significant costs or time associated with imple- Establishing similar agreements with other menting fare capping due to the limited market colleges could encourage set-and-forget use of fare technology vendors in the United States. among college students like Metropass does for employees. Paired with the near-term recom- Metro Transit must also consider the budgetary mendation of unified pass brands, Metro Transit impact of fares lost via capping. The forgone could negotiate with colleges to extend this fares most likely originate from lower-income benefit to employees. riders currently unable to enroll in or pay for pass products. While replacing lost revenue A universal pass would incentivize students may prove challenging, the present condition and staff to take transit, improve mobility for inequitably distributes revenue raising capacity students without cars, and provide cost savings on riders with limited ability to pay. to the university when factoring in expenditures like traffic enforcement and future parking infra- Fare capping appears technical and confusing structure costs. Establishing a habit of transit at first glance, which contradicts this report’s ridership early could turn more students into life vision for fare simplification. Metro Transit long all-purpose riders. can overcome the complexity of fare capping with concerted marketing effort. The term Challenges “fare capping” should never face the rider. For example, weekly capping could be explained as This vision may come at significant cost to “after 8 trips, all rides are free this week.” partner colleges, and transit ridership competes with colleges’ parking revenues. Pursuing this vision will take time and input from institutional

6. Recommendations 29 stakeholders. Metro Transit may overcome Positive Externalities these challenges by emphasizing the role transit Motor vehicles are increasingly detrimental can contribute towards an institution’s sustain- to the environment, yet car purchases and ability goals. car-centric infrastructure are subsidized to a greater extent than other modes of transporta- 6.3 Long-Term tion. Personal vehicle user fees, like the motor vehicle sales tax and gas tax, are not sufficiently Recommendations capturing the negative externalities of vehicle These long-term recommendations call for emissions. Meanwhile, riding transit is one fare-free transit. This would need support from of the most environmentally friendly ways to 7 a revenue system stabilized through growth of move. existing revenue and creation of new revenue sources. Riding transit brings significant environmental benefits over driving, yet riders are expected to 6.3.1 A Fare-Free Metro Transit pay a daily, up-front fee for their green habits. A free-fare system would require substantial Metro Transit should transition to a fare-free change to the region’s transit revenue system, transit system in pursuit of its equity goals. but it would maximally internalize the societal Nearly all American transit systems charge their benefits of transit as an alternative to driving. riders fares. Creating a fare-free, non-exclu- Removing financial barriers to transit would sionary public transit system would be bold. This encourage more transit use, potentially encour- recommendation seeks a maximally simplified, aging modal shifts that would reduce harmful efficient, and equitable transit system by elimi- vehicle emissions. nating the access barrier of fares. It is important to consider the regressive nature Economics of Free Fares of fares. Fees and taxes on the consumption of Riding transit creates positive economic exter- any good or service discourage its consump- nalities that can exceed the benefit of receiving tion. While Metro Transit seeks to maximize revenue from fares. Pursuing policies with service quality and ridership, fares will prevent broader societal benefits is a challenge for those with an inability to pay from accessing operators like Metro Transit. Free fares make this service. It is paradoxical that a public transit economic sense in the aggregate, but these system pays a significant cost to operate a fare positive externalities do not appear on transit collection system that naturally discourages agencies’ balance sheets. The loss of fares ridership. creates a funding gap for Metro Transit. A Trial in Free Fares Fares relate to the user pays principle, an idea Temporary fare system changes in response that users of a government service should pay to the COVID-19 pandemic demonstrate how the costs of building and operating that infra- fares limit ridership. COVID-19 safety proto- structure. This principle has become less rele- cols created an unplanned fare-free experi- vant for other modes of transportation: for ment. Metro Transit suspended fare collection example, drivers pay an ever-decreasing share of highway infrastructure through the gas tax.6

7. Federal Transit Administration, “Public Transportation’s Role in 6. Federal Highway Administration, “Funding Federal-Aid Highways.” Responding to Climate Change.”

30 6. Recommendations on buses on March 25, 2020.8 This allowed Challenges with Free Fares riders to board through rear doors and minimize A fare-free transit system would open a large proximity to drivers. Metro Transit resumed hole in Metro Transit’s budget. Twenty-four 9 collecting fares on August 1, 2020. percent of Metro Transit’s $431.5 million in 2019 operating revenue came from fares.11 Metro Transit provided ridership daily rider- Changes to the fare system would also impact 10 ship data for the period during the pandemic. Metro Mobility and suburban transit providers. During the first week of resumed fare collection, Alternative revenue sources must be identified weekday local and express bus boardings each to fill this gap. declined fifteen percent over the previous week. Light rail boardings serve as a control. Light These sources must also scale up alongside rail fares remained in-effect throughout the any future growth of Metro Transit’s services, pandemic, and light rail boardings were mostly including the increase in service demand that unchanged after resumed bus fare collection. would likely result from free fares. Dedicated revenue sources that are untied to ridership will This sharp decline in bus boardings is clear avert future budget crises experienced during evidence that fares limit the mobility of Metro ridership declines, such as the ongoing situation Transit’s all-purpose ridership. COVID-19 restric- caused by the COVID-19 pandemic. Revenue tions and precautions have largely limited that is predictable year over year and does not commuter and occasional ridership, likely fluctuate according to ridership trends or polit- leaving most travel to all-purpose riders. ical activity gives Metro Transit the certainty it needs to invest in and plan high-quality service.

Additionally, the loss of fares could mean a loss in a key source of data for Metro Transit. Rider- ship is tracked through riders’ fare payments and proves incredibly useful in understanding travel behavior, planning for service improvements, and working to make the transit system more efficient. While several Metro Transit staff interviewed indicated concern for a potential loss in data, they stressed that data alone should not stand in the way of making the transit system more accessible to more riders.

The prospect of a fare-free system may raise public safety questions for Metro Transit, some riders, and other stakeholders. The basis of many of these public safety concerns is the

Figure 6. Change in boardings after bus fare reinstatement. Data Source: assertion that a fare-free system should not Metro Transit, Strategic Initiatives. include riders who are on transit for non-transportation purposes, such as seeking shelter, 8. Pan, “Amid Coronavirus Chaos, Metro Transit Allows Rear Door Boarding, Cuts Service, Neglects Operator Needs.” “loitering,” or engaging in illicit trade. 9. Kerr, “Safeguards Allow for Return of Front-Door Boarding on August 1.” 10. Lind, “Ridership Proportion Change.” 11. Metro Transit, “Metro Transit Facts 2019,” 1.

6. Recommendations 31 Informed by discussion with the Metro Transit transit operating funds, typically to support Police Department, this report finds that it is Metro Mobility and the state’s 50% share of tran- unrealistic to address these perceived or real sitway operations.12 However, the General Fund public safety challenges through the present by definition does not have a dedicated stream and future fare systems. METRO rapid transit of funding for transit, meaning the amount allo- services operate on a proof-of-payment basis; cated to transit can fluctuate by each biennial there are no physical barriers to boarding for budget cycle. Expanding existing dedicated non-paying riders. Station area right-of-way transit revenue streams, as discussed below, constraints prohibit future installation of phys- would allow Metro Transit, among other transit ical fare barriers. Any related public safety agencies across the state, to engage in more concerns may grow as the METRO network stable financial planning. expands, regardless of fare system changes. The assumption that perceived or real public State Motor Vehicle Sales Tax safety challenges arise from non-paying riders The Motor Vehicle Sales Tax (MVST) is the is flawed. largest single source of operating revenue for Metro Transit, accounting for 54.2% of its In the case of unsheltered riders, many are $431.5 million in operating revenue in 2019.13 riding with paid and valid fares. The fare system The MVST is a 6.5% tax on the sale or exchange is not the appropriate policy tool to address fail- of motor vehicles. The Minnesota Constitution ures in regional and state social services. Metro specifies no less than 40 percent of revenues Transit acts as a social service provider of last must be spent on transit.14 Legislative interven- resort, and its riders and vision for future service tion could increase the portion of MVST dedi- should not be penalized by broader policy fail- cated to transit. However, this leaves Metro ures. If anything, the present fare system may Transit in an unfortunate situation where it is represent a greater threat to public safety and funded by the success of a competing mode: equity by creating unnecessary interactions private vehicles. with law enforcement. Ideally, none of Metro Transit’s budget would rely 6.3.2 Grow Existing Revenue Sources on the success of competing modes of transportation. Identification of a stable, dedicated Metro Transit should advocate for growing its revenue source to MVST is key to funding a fare- existing non-fare revenue sources. The capacity free system, and should be a long term goal of of state, regional, and county transit revenue Metro Transit regardless of such a transition. In raising mechanisms would need to expand prior the interim, the legislature could lower the MVST to implementing a fare-free system. Growing highway allocation from the maximum 60% and revenue sources would also benefit the short- simultaneously raise the minimum 40% allo- term and medium-term recommendations of cated to transit. this report. Local Sales Tax General Fund Additionally, expansion of existing local sales Based on interviews with Metro Transit staff, tax could supplement other funding sources it can be difficult for the agency to do accu- to replace fare revenue. All seven metropolitan rate financial planning due to the reliance on General Fund revenues. The state’s General 12. Metropolitan Council, “Transportation Policy Plan 2020 Update.” Fund contributes a modest amount toward 13. Metro Transit, “Metro Transit Facts 2019.” 14. Burress, “Highway Finance.”

32 6. Recommendations counties have either a half-cent or quarter-cent Federal Funding sales tax dedicated to transportation, which is Federal funding for transit operations could 15 not limited to transit. Prior to its dissolution in increase under a surface transportation reautho- 2017, the Counties Transit Improvement Board rization bill. The Fixing America’s Surface Trans- (CTIB) funded the capital and operating funds portation (FAST) Act expired on September 30, for several transit expansion projects through a 2020 and was extended by one year, leaving the quarter-cent sales tax levied on five of the seven new Congress to lay the groundwork for a new counties in the metropolitan area. five-year surface transportation bill.

While CTIB no longer exists, it is important to An emphasis on transit funding has been a key note that much of the revenue went toward part of the Biden administration’s $1.9 trillion 16 building and operating new transitways. A American Rescue Plan, which designates $20 similar regional transit-dedicated sales tax billion for public transit agencies struggling due could be successful if reserved for operating the to the COVID-19 pandemic.20 If the momentum existing transit service either in place of fares for transit investment continues, there is an or simply as a sustainable source of operating opportunity for Metro Transit’s federal legisla- revenue. tive partners to advocate for dedicated operational support in the next surface transportation However, current state law caps county trans- authorization. portation sales tax at a half-cent, with any 17 increase requiring state legislative action. 6.3.3 New Revenue Sources Increasing the cap to a three-quarter cent tax could provide thousands of dollars in funding to Metro Transit should explore and advocate for individual counties. new revenue sources dedicated toward transit operations. There are many options for new In Hennepin and Ramsey counties, which revenue. A menu of new tax options could currently dedicate their sales tax to transit, include a new sales tax, land value tax, prop- increasing the funding from a half-cent to three- erty tax, or a local or state income tax. However, quarter cent tax would provide $69.1 million options are constrained by their equity, stability, additional transit dollars in Hennepin County and feasibility. Minnesota is rated as one of the 21 and $23.1 million additional transit dollars in least regressive-taxing states in the country. Ramsey County, based on 2019 actual revenue Maintaining that status is important for low-in- from this sales tax.18 In essence, a combined come Minnesotans. As such, there are limited $92.2 million would substantially close the gap options to raise revenue without placing net in fare revenue, which accounted for approxi- negative financial burden on low-income house- mately $104 million of Metro Transit’s operating holds. budget in 2019.19 State Sales Tax Sales taxes could increase revenue capacity for public transit. The Clean Land, Water, Legacy Amendment (CLWLA) increased the state sales 15. Dalton, “Local Taxes in Minnesota.” 16. CTIB, “Annual Report to the Legislature: 2015 Results.” tax by 0.375%, dedicated towards conservation 17. Minnesota Legislature, County Transportation Sales and Use Tax. 18. Hennepin County, “Comprehensive Annual Financial Report;” Ramsey County, “Comprehensive Annual Financial Report;” Minne- 20. Fjeld and Martin, “Transportation & Infrastructure: What to Expect sota Transportation Alliance, “Minnesota Transportation Funding.” from the Biden Administration & 117th Congress.” 19. Metro Transit, “Metro Transit Facts 2019.” 21. Institute on Taxation and Economic Policy, “Who Pays?”

6. Recommendations 33 and environmental programs. Since 2010, the Minnesota legislature has appropriated $3.3 billion to state agencies from CLWLA revenue.22 A similar amendment dedicated for public transit funding statewide could provide enough money to entirely replace fare revenue.

However, an across-the-board sales tax increase poses equity concerns, as the cost burden for low-income Minnesotans could simply shift from paying fares to paying sales tax. Luckily, in Minnesota, basic goods like groceries and clothing are not taxed, which lessens the disproportionate cost burden on low-income families.23 When looking at the existing local sales tax in Hennepin County, someone would have to spend $400 on taxable goods in order to raise enough from this half-cent sales tax to be equivalent to a $2.00 non-rush hour fare. While sales tax revenues are not immune to economic downturns, sales taxes are often more politically feasible than income or property taxes due to their straightforward nature.24

State or Local Income Tax Based on the interview with TriMet staff, it is clear that a state income tax dedicated to transportation could provide substantial revenue for transit agencies like Metro Transit. In Oregon, a statewide transportation tax bill (HB 2017) passed in 2017. HB 2017 encompasses a number of different taxes for various transportation purposes. Transit-specific revenue is generated from a 0.1% base income tax.25 This tax revenue goes to the transportation district where the employer is located. For example, the tax revenue from someone working in Port- land but living in Eugene would go to TriMet and other public works purposes in the Port- land area. The tax generates an estimated $55

22. Legislative Coordinating Commission, “Minnesota’s Legacy.” 23. Minnesota Department of Revenue, “Nontaxable Sales.” 24. Arizona PIRG Education Fund, “Why and How to Fund Public Trans- portation.” A view of the Minnesota State Capitol from a light rail platform. 25. Oregon Department of Transportation, “HB 2017 Semiannual Image source: Metro Transit. Revenue & Expenditure Report.”

34 6. Recommendations million each year for TriMet, funding every- associated with transit investments allow transit thing from fare subsidy to bus electrification to agencies to capture the value of their invest- service expansion. Additionally, in the Portland ments through land value taxes. Land value metro area, the base income tax rate incremen- taxes provide a self-sustaining transit revenue tally increases each year to provide additional source by ensuring capital improvements carry revenue to TriMet.26 revenue raising capacity along with them to fund operations. A state or local income tax modeled after HB 2017 could raise significant funding for Metro Parking Tax Transit. Advocating for such a tax would A parking tax or fee levied on non-residen- undoubtedly be politically challenging, yet the tial parking spaces, such as surface lots or benefits of an income tax may help to support parking ramps, could serve a dual purpose as the equity goals of the state and regional govern- a new revenue source for transit and a behav- ments. Income tax is inherently progressive, as ioral disincentive to drive. The general structure it is by definition based on an individual’s ability of a parking tax or fee entails charging drivers to pay. In other words, a low-income household either a percentage or flat fee on hourly, daily, or pays the same tax rate on their income as a monthly parking rates, which in turn would disin- high-income household, ensuring that low-incentivize the use of parking spaces and there- come taxpayers do not bear a disproportionate fore driving. tax burden. Income tax is relatively sustainable, as it has high revenue-raising capacity that While a parking tax has limited revenue-raising marginally increases with income levels. capacity, it may be a useful supplementary transit revenue source.28 The simple logic of a Land Value Tax parking tax helping to fund transit may make One of the most efficient ways to maximize the it more politically feasible, yet equity concerns return on public investment is through a land over where the taxes are implemented, in terms value tax. A land value tax differs from a prop- of urban or suburban locations, could arise. erty tax by levying tax on the value of land alone Additionally, similar to the motor vehicle sales rather than the value of land and improvements tax, parking tax would rely on a competing mode combined. As one report puts it, “[b]ecause the of transportation through personal vehicles. value of the land is determined by its accessibility, which is created by the community at large via transportation networks and the location of activities, a tax only on land value better captures the benefits of transportation than a tax on both land and structures.”27

Traditional property taxes can actually disin- centivize development and structure improvements—the more a structure is worth, the higher the tax. A land value tax encourages more productive land uses. Land value increases

26. TriMet, “Tri-County Public Transportation Improvement Plan.” 27. Levinson and Istrate, “Access for Value: Financing Transportation 28. Arizona PIRG Education Fund, “Why and How to Fund Public Trans- Through Land Value Capture.” portation.”

6. Recommendations 35 7. Conclusion

7.1 A Roadmap for the Future The COVID-19 pandemic has brought immense challenges to Minnesota, the United States, and the world. Transit ridership has and will continue to be impacted by the COVID-19 pandemic. Metro Transit will need to think creatively in order to meet riders’ needs in a post-pandemic world, and simplifying the fare system is one of the tools available to do this.

There are several fare structure changes Metro Transit could pursue to make significant strides in simplicity and equity in the next couple of years. Measures like eliminating peak hour premiums and fares in the downtown zones, expanding need-based fares, setting all discounted fares to $1, and unifying retail and wholesale passes would remove barriers to transit for all-purpose riders, commuters, and occasional riders alike in the near future. Taking these steps could help to curb pandemic-related ridership losses and reintroduce Metro Transit to riders in a post-pandemic landscape.

Once the COVID-19 pandemic has subsided and the new post-pandemic world is better understood, Metro Transit has an opportunity to refocus efforts on making transit more attractive as a viable alternative to driving. Metro Transit can further bolster its equity goals as well through policies like instituting fare capping and unifying higher education passes. Adjust- ments like these could help to knock down even more barriers to transit for existing riders and they will demonstrate the capacity for transit to compete with other modes for new riders.

Of course, the long-term endorsement of Buses in Minneapolis Downtown East. pursuing fare-free transit is bold. Metro Transit Image source: Metro Transit.

36 7. Conclusion has the opportunity to be courageous, follow It will be crucial for Metro Transit to closely through on its equity goals, and set the tone for monitor ridership and financial trends as the other transit agencies by embracing fare-free COVID-19 pandemic unfolds and subsides, transit, the most direct way to ensure accessib- so that the agency can be responsive to rider lity for more riders. By pushing for more stable needs and identify financial and service-related transit-dedicated revenue sources—through concerns. growing existing revenue sources and advocating for new revenue sources—Metro Transit will gain the certainty it needs to plan for a 7.3 Parting Thoughts world-class transit system. Ultimately, there are numerous ways for Metro Transit to simplify its fare structure. It has been widely acknowledged that simplification is 7.2 What to Explore Further necessary, but the scale, who benefits, and how Metro Transit should explore each of these Metro Transit can make it work are still ques- recommendations further internally before their tions to be answered. The COVID-19 pandemic implementation. A detailed financial analysis of has exacerbated racial and economic dispari- the impacts of each would help to reveal some of ties, and civil unrest related to police brutality the logistical challenges and inform the timing, has shed light on racial justice not just in Minne- methods, and details of implementation. Specif- sota, but across the country. Metro Transit has ically, Metro Transit staff would benefit from made important strides in promoting equity, and exploring potential revenue sources beyond still has the opportunity to go much further in those included in this report. Metro Transit demonsrating its commitment to equity. Metro should plan to revisit potential revenue sources Transit should embrace simplicity and equity following the approval of the impending federal when considering and planning for fare struc- transportation reauthorization bill. ture simplification.

7. Conclusion 37 Appendices

Appendix A: Literature Review Additionally, the report found that all six peer agencies recently underwent some form of fare Previous Studies simplification, most involving either elimination Over the years, Metro Transit has led several of zone-based fares, or reducing the number studies to analyze various aspects of its fare of service levels that correspond to different system. Among the agency’s most recent fare fares. One peer agency’s fare simplification system studies is Metro Transit: Peer Fare Policy involved fare capping. Furthermore, compared Research and Analysis Report1 which provides to peer agencies’ reduced fare programs for a review of existing Metro Transit fare policies, low income riders, Metro Transit’s Transit Assis- long-term objectives, and best practices from tance Program (TAP) is the only program to peer transit agencies. The insights of this report have a reduced fare rate differ by peak period. are rooted in how Metro Transit’s fare policies stack up against peers, including Dallas Area Another recent study, Ride On: Strategies for Rapid Transit, Denver Regional Transit District, promoting transit ridership at the University of 2 King County Metro, Pittsburgh Port Authority, Minnesota–Twin Cities, highlights the impor- Portland TriMet, and San Diego Metropolitan tance of making transit accessible to students. Transit System. Students of all levels make up a sizable portion of Metro Transit ridership, and as such, college The study found that compared to peer transit students across the Twin Cities metropolitan agencies, Metro Transit’s existing fare structure area have a number of different transit pass is incredibly complex. Fares differ by level of options available to them. service, time of day, day of the week, payment medium, and sometimes a combination. Some Specifically, the U-Pass was established in key findings include differences in fare recovery 2000 as a partnership between the University rate, fare simplification approaches, and of Minnesota Twin Cities and Metro Transit with reduced fare program comparisons. the objective of promoting transit—and reducing parking constraints—through a discounted Over the 2012–2017 study period, even as oper- fare pass. This study found U-Pass sales ating costs increased, fare revenue remained declined over time, in part due to increased stagnant. In terms of specific fare pricing, Metro student housing options nearby campus and Transit’s off-peak fare price is lower than its the proliferation of other transportation modes peers. While Metro Transit is near the middle readily available to students. Because univer- of the pack for many of its operating statistics, sity campuses are notoriously walkable, more such as annual passenger trips, revenue hours housing availability within close proximity to and miles operated, and operating expenses, its campus reduces the need for long commutes to farebox recovery rate has declined while peers’ class. In turn, more students living near campus have stayed the same or increased. choose to walk or bike to class rather than take transit or drive. The emergence of convenient

1. Nelson Nygaard, “Metro Transit: Peer Fare Policy Research & Anal- 2. Moua, Haney, and Dan, “Ride On: Strategies for Promoting Transit ysis.” Ridership at the University of Minnesota-Twin Cities.”

38 Appendices on-demand mobility options, such as e-scooters in fares should lead to a 30% increase in rider- and ride-hailing, have also cut into the student ship. However, empirical observations are often transit mode share. much higher, with ridership increases as high as 43% in Corvallis, OR, 86% in Topeka, KS, and This study provides several recommenda- 200% in Hawaii. One hypothesis for substantial tions for Metro Transit to better serve college ridership growth beyond elasticity predictions is students, including the following: creation of a that removing fareboxes also removes a source U-Pass coordinator role, initiating a student advi- of shame and confusion for potential transit sory committee, implementing a data sharing riders, who no longer have to wonder how to initiative, and improving bus stop amenities. Ulti- use the farebox or if they can afford to ride mately, the study underscores the importance transit that day. Removing fareboxes also elim- of maintaining a strong relationship between inates equipment costs, administrative costs, Metro Transit and the University of Minnesota. and the cost of enforcing fares. In the case of Chapel Hill, administrators at the University of Principles of Free Fares North Carolina were incurring such high admin- In 2012, the Transit Cooperative Research istrative costs dealing with student passes that moving to universal pre-paid transit access for Program conducted a review of fare-free transit programs in the United States. While all students made financial sense. Eliminating this excludes several more recent examples, it fare collection speeds the boarding process, offers a useful set of case studies and princi- since customers no longer need to take time to ples for implementing fare-free transit. pay and can board through all doors, and this improves efficiency overall. In many cases, free fares also contribute to a community’s sense of The report found that university towns, resort 4 towns, and small to medium cities with rela- identity and pride. tively low ridership were most likely to have implemented fare-free transit. These kinds Increased ridership is a benefit but comes with of locations have unique traits that make free challenges. If transit agencies are not prepared fares more successful. Fares typically do not to provide higher levels of service, with their make up a significant portion of their revenue, associated costs, efficiency and customer and in some cases, the cost of collecting fares satisfaction will decrease. Some transit agen- can outstrip fare revenue. Additionally, college cies also reported issues with new riders they and resort towns often experience crush loads deemed disruptive or undesirable, such as teen- at certain stops, and no longer collecting fares agers or people experiencing homelessness. makes boarding and traveling more efficient. At However, operators and administrators gener- the time of writing, the largest fare-free transit ally felt that any issues with these populations provider in the United States was Chapel Hill were outweighed by no longer having to deal with fare collection and associated rider-oper- Transit, which serves the University of North 5 Carolina and the town of Chapel Hill.3 ator conflicts.

Fare-free transit universally leads to signif- While eliminating fare collection also eliminates icant ridership increases. According to the fare revenues, transit agencies have found Simpson-Curtin Rule, which estimates the creative ways to make up for the funding gap. price elasticity of ridership, a 100% decrease Corvallis, Oregon implemented a $2.75 monthly

3. National Academies of Sciences, Engineering, and Medicine, Imple- 4. National Academies of Sciences, Engineering, and Medicine. mentation and Outcomes of Fare-Free Transit Systems. 5. National Academies of Sciences, Engineering, and Medicine.

Appendices 39 transit fee per household to fund their free fare ride.8 While the authors of the study do not use program. This creates a designated funding the term fare capping, it is similar in practice source that is not in competition with general to this type of policy: when fares are capped, fund dollars and has received little to no opposi- riders can pay as they go rather than purchasing tion from residents. In New Hampshire’s Upper passes upfront, but still see the lowest cost for Valley, Advance Transit makes use of a diverse their rides because they will not be charged funding stream, including federal funds, state more than the price of the comparable pass. funding from New Hampshire and Vermont, municipal funding, institutional funding from Fare Evasion, Fare Enforcement, and the the college and hospital the system serves, and Cost of Fare Collection philanthropic funds.6 As noted in the 2012 TCRP study on free fares cited above, fare collection incurs significant All-Purpose Riders and Fare Capping costs. Fare collection equipment costs money Taylor and Jones’ 2012 study examines the to maintain, both in terms of physical equipment characteristics and needs of transit-dependent and software, and fare enforcement requires and low-income riders and which fare pricing additional personnel.9 When fares are collected strategies can best serve them. A review of the offboard, agencies may use fare enforcement literature on transit-dependent ridership reveals staff to conduct random checks for fare compli- that transit-dependent riders tend to take transit ance, which creates labor costs. When transit more often, take transit at off-peak hours, and operators are responsible for fare collection, transfer more frequently. Research also shows this creates the potential for conflict between that riders who prepay for fare passes use operators and customers, which threatens oper- transit more often. This indicates that transit-de- ator safety.10 pendent customers could benefit from a pass product that allows unlimited rides, but because Along with financial impacts and the psycho- purchasing these passes entails a high upfront logical toll of fare altercations on operators, cost in exchange for savings later on, these fare enforcement penalizes low-income riders riders, who are often low-income, may be reluc- and riders of color. Studies of fare enforcement tant or unable to take advantage of these kinds conducted in major cities demonstrate that fare of products. Low-income riders have a demon- enforcement disproportionately targets Black strated preference for purchasing passes on an riders; in Washington, D.C., 91% of fare evasion as-needed basis rather than prepaying.7 penalties were issued to Black people, who make up about 50% of the population. There is Smart fare cards that can be tied to an indi- no evidence that Black people or people of color vidual rider provide more flexible and targeted evade fares at higher rates than white people.11 options for equitable fares. Using a smart fare Advocates point out that low-income riders card rather than a paper fare takes the burden avoid paying fares because they cannot afford of finding the best fare product off of the rider, them, so criminalizing fare evasion is essentially because the smart card can be set up to auto- criminalizing poverty and levying fines against matically charge the lowest fare based on actual these riders is nonsensical 12. ridership patterns, without the rider having to 8. Taylor and Jones. know in advance when and how often they will 9. National Academies of Sciences, Engineering, and Medicine, Imple- mentation and Outcomes of Fare-Free Transit Systems. 10. Teale, “Transit Workers Face Growing Rate of Assaults.” 6. National Academies of Sciences, Engineering, and Medicine. 11. TransitCenter, “Why Decriminalize Fare Evasion?” 7. Taylor and Jones, “Fair Fare Policies.” 12. Vock, “Jailed for Not Paying for the Bus.”

40 Appendices Peer transit agencies have recognized the high cost of fare enforcement and are implementing new solutions. In the Seattle area, King County Auditor’s Office determined that fare enforcement was costing King County Metro at least $1.7 million per year, which could pay for over 500,000 fares.13 King County Metro now gives riders 90 days to resolve fare violations by adding money to their transit pass, enrolling in their low-income fare program, or performing community service.14 Portland, Oregon’s TriMet offers riders similar options.15 These programs provide alternatives to fines, criminalization, and incarceration by addressing the root of the problem of fare evasion: that riders cannot afford to pay their fare.

13. Deblieck, Garvey, and Thompson, “RapidRide Fare Enforcement: Efforts Needed to Ensure Efficiency and Address Equity Issues.” 14. King County Metro, “Fare Violation - Fares & ORCA Passes - King County Metro Transitsit - King County.” 15. TriMet, “Fares and Fare Enforcement on TriMet.”

Appendices 41 Appendix B: Civil Rights and Civil Rights and Title VI Accessibility Compliance Title VI of the Civil Rights Act of 1964 and implementing regulations and guidance require Metro Riders will experience differing benefits and Transit to assess equity of fare policy changes. challenges under these recommendations. Transit agencies are required to assess all fare Metro Transit has ethical and legal obligations changes for disparate impact on the basis of to ensure fare system changes do not have race, color, and national origin. The FTA extends disparately harmful impacts on low-income, this analysis beyond Civil Rights Act require- disabled, and BIPOC riders. ments to include analysis of disproportionate burden on low-income riders.18 This requirement Americans with Disabilities Act does not apply to short-term pilot activities. Requirements Upon completion of the analysis, a transit agency Future changes in the fixed-route fare system is required to pursue alternatives to avoid dispa- must be paired with changes to Metro Mobility rate impacts on the basis of race, color, and paratransit fares to maintain compliance with national origin. Transit agencies should pursue the Americans with Disabilities Act (ADA). alternatives to avoid disproportionate burden on Federal Transit Administration (FTA) ADA regu- low-income riders.19 lations limit paratransit fares to no more than double the fare for similar rides on the fixed- The recommendations in this report are intended route system.16 Changes to fixed-route fares will to avoid these impacts, though the extensive impact revenue for Metro Mobility. analysis required for Title VI equity determina- tions should occur as part of a planning process In 2014, the FTA imposed a corrective action to implement these recommendations. In docu- on Metro Mobility’s compliance with this regu- menting existing conditions, disparities in the lation. The FTA’s compliance review found current fare system were discovered. Go To Metropolitan Council was charging full-fares for cards are not reloadable at ABRT ticket vending paratransit in the fixed-route reduced or no-fare machines, limiting ABRT rider access to pass downtown and Nicollet Mall zones.17 With this products. Metro Transit’s limited fare retail corrective action example, elimination of fares network and sporadic ticket vending machine on the fixed-route system would likely require placement raise concern that recommendations elimination of fares on the paratransit system. related to Go To may have disparate impact on communities further from the light rail system. The following recommendations will have In pursuit of these recommendations, Metro impacts requiring paired Metro Mobility Transit must ensure broad spatial availability of changes: new or adjusted fare products to avoid dispa- • 6.1.1: Eliminate Peak Hour Premiums, rate impacts on protected groups. • 6.1.5: Eliminate Fares in Downtown Zones, • 6.2.1: Fare Capping, and • 6.3.1: A Fare-Free Metro Transit.

18. Federal Transit Administration, “Circular FTA C 4702.1B: Title VI 16. Federal Transit Administration, “Metropolitan Council Paratransit Requirements and Guidelines for Federal Transit Administration Compliance Review Final Report,” 27–28. Recipients,” chaps. I2-3, IV10-11. 17. Federal Transit Administration, 31–32. 19. Federal Transit Administration, IV19-21.

42 Appendices Appendix C: Cost Estimates • Lost Reduced Fare Revenue: $207,079.91 Existing - $82,831.96 This appendix details the method for estimating Proposed = $124,247.95 Lost costs related to Recommendation 6.1.4 Set All Discounted Fares to $1. These estimates are Express Bus illustrative for policy development but not meth- • Existing Reduced Fare Revenue: 423,433 odologically rigorous enough for budgeting. bus rides × 14.57% peak hour express travel × $3.25 = $200,469.15 Bus and Light Rail Assumptions • Proposed Reduced Fare Revenue: Bus fare data for 2019 provided by Metro Transit 423,433 bus rides × 14.57% peak hour aggregated TAP and reduced fares together. express travel × $1 = $61,682.82 The share of bus fares between these programs • Lost Fare Revenue: $200,469.15 Existing is assumed to be similar to light rail fares. In - $61,682.82 Proposed = $138,786.34 2019, 33.94% of TAP and reduced aggregate Lost fares were reduced fares. Applied to bus rides, approximately 423,433 were reduced fares. Local Bus Peak and non-peak travel across fare programs • Existing Reduced Fare Revenue: 423,433 is assumed to match system-wide time-of-day bus rides × 40.74% peak hour local patterns. Metro Transit provided data on typical travel × $2.5 = $431,292.86 weekday ridership by hour prior to COVID-19. • Proposed Reduced Fare Revenue: Travel during the 6pm hour is assumed to be 423,433 bus rides × 40.74% peak hour evenly divided between the peak and non-peak local travel × $1 = $172,517.15 periods. 55.31% of travel occurs during the peak • Lost Fare Revenue: $431,292.86 Existing periods, while 44.69% of travel occurs during - $172,517.15 Proposed = $258,775.72 the non-peak periods. Lost

Reduced fare bus ridership by service type Northstar Assumptions (local or express) is assumed to match overall bus ridership. 14.57% of bus rides were on the For Northstar fares, 2019 fare data disaggre- express system in 2019. To err on the conser- gated TAP (2,199 fares), Reduced (2,370 fares), vative—or larger—cost side, all express ridership and Mobility (1,401) programs. Participation in is assumed to occur under peak pricing. these discounted fare programs are assumed Peak local buses are then assumed to consist to be proportionally distributed across stations. 40.74% of reduced bus fares. Northstar uses distance-based fares, so each station’s weekday and weekend share of 2019 Bus and Light Rail Estimates fares was estimated based on their share of average daily boardings reported in the Transit Light Rail Stops Boardings and Alightings dataset. To err • Existing Reduced Fare Revenue: 149,760 on the side of higher costs, all Northstar trips LRT rides × 55.31% peak hour travel × were assumed to travel between a suburban $2.50 = $207,079.91 station and Target Field Station. All estimates • Proposed Reduced Fare Revenue: were rounded up to two significant digits. North- 149,760 LRT rides × 55.31% peak hour star estimates are detailed on the table on the travel × $1 = $82,831.96 following page.

Appendices 43 Table 3. Northstar Reduced Fare Cost Estimates

Station Fridley Coon Rapids Anoka Ramsey Elk River Big Lake Total Average Weekday Boardings 30 80 71 52 96 96 425

Share of Weekday Boardings 7% 19% 17% 12% 23% 23% 91%

Reduced Weekday

Estimated Taps 151.47 403.92 358.48 262.55 484.70 484.70 2,145.82

Existing Price 3.25 3.25 3.25 3.75 4.75 6.25

Existing Revenue 492.28 1,312.74 1,165.06 984.55 2,302.34 3,029.40 9,286.37

Proposed Price 1.00 1.00 1.00 1.00 1.00 1.00

Proposed Revenue 151.47 403.92 358.48 262.55 484.70 484.70 2,145.82

Difference (340.81) (908.82) (806.58) (722.01) (1,817.64) (2,544.70) (7,140.55)

TAP Weekday

Estimated Taps 140.54 374.78 332.61 243.60 449.73 449.73 1,991.00

Existing Price 1.00 1.00 1.00 1.50 2.50 4.00

Existing Revenue 140.54 374.78 332.61 365.41 1,124.33 1,798.93 4,136.59

Proposed Price 1.00 1.00 1.00 1.00 1.00 1.00

Proposed Revenue 140.54 374.78 332.61 243.60 449.73 449.73 1,991.00

Difference - - - (121.80) (674.60) (1,349.19) (2,145.59)

Mobility Weekday

Estimated Taps 89.54 238.77 211.91 155.20 286.53 286.53 1,268.48

Existing Price 1.00 1.25 1.25 1.25 1.50 2.00

Existing Revenue 89.54 298.47 264.89 194.00 429.79 573.05 1,849.74

Proposed Price 1.00 1.00 1.00 1.00 1.00 1.00

Proposed Revenue 89.54 238.77 211.91 155.20 286.53 286.53 1,268.48

Difference - (59.69) (52.98) (38.80) (143.26) (286.53) (581.26)

Difference, All Programs Weekday (340.81) (968.51) (859.56) (882.61) (2,635.50) (4,180.42) (9,867.40)

Average Weekend Boardings 10 15 12 6 21 47 111

Weekend Share of Boardings 9% 14% 11% 5% 19% 42% 9%

Reduced Weekend

Estimated Taps 20.20 30.29 24.24 12.12 42.41 94.92 224.18

Existing Price 1.00 1.25 1.25 1.25 1.50 2.00

Existing Revenue 20.20 37.87 30.29 15.15 63.62 189.84 356.96

Proposed Price 1.00 1.00 1.00 1.00 1.00 1.00

Proposed Revenue 20.20 30.29 24.24 12.12 42.41 94.92 224.18

Difference - (7.57) (6.06) (3.03) (21.21) (94.92) (132.79)

TAP Weekend

Estimated Taps 18.74 28.11 22.49 11.24 39.35 88.07 208.00

Existing Price 1.00 1.00 1.00 1.50 2.00 3.25

Existing Revenue 18.74 28.11 22.49 16.86 78.70 286.24 451.14

Proposed Price 1.00 1.00 1.00 1.00 1.00 1.00

Proposed Revenue 18.74 28.11 22.49 11.24 39.35 88.07 208.00

Difference - - - (5.62) (39.35) (198.16) (243.14)

Reduced Weekday

Estimated Taps 11.94 17.91 14.33 7.16 25.07 56.11 132.52

Existing Price 1.00 1.25 1.25 1.25 1.50 2.00

Existing Revenue 11.94 22.38 17.91 8.95 37.61 112.22 211.02

Proposed Price 1.00 1.00 1.00 1.00 1.00 1.00

Proposed Revenue 11.94 17.91 14.33 7.16 25.07 56.11 132.52

Difference - (4.48) (3.58) (1.79) (12.54) (56.11) (78.50)

Difference, All Programs Weekend - (12.05) (9.64) (10.44) (73.09) (349.20) (454.42)

Difference, All Programs (340.81) (980.56) (869.20) (893.05) (2,708.59) (4,529.61) (10,321.82)

44 Appendices References

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References 45 Kerr, Drew. “Safeguards Allow for Return of Front-Door Boarding on August 1.” Metro Transit. Rider’s Almanac Blog (blog), July 24, 2020. Kiepe, Andrea. “Transit Assistance Program (TAP) Expansion 2020.” Presented at the Metropolitan Council Transportation Committee, August 24, 2020. King County Metro. “Fare Violation - Fares & ORCA Passes - King County Metro Transitsit - King County,” 2021. Legislative Coordinating Commission. “Minnesota’s Legacy,” n.d. Levinson, David, and Emilia Istrate. “Access for Value: Financing Transportation Through Land Value Capture.” Metropolitan Infrastructure Initiative Series. Brookings Institution Metropolitan Policy Program, April 2011. Lind, Eric. “Ridership Proportion Change.” Metro Transit, March 1, 2021. Los Angeles Metro. “2020-0565 - Fare Capping.” Metro Board, September 17, 2020. ———. “2020-0704 - Report on Fare Capping in Response to Motion 31.1.” Metro Board. Accessed April 7, 2021. ———. “2021-0074 - Fareless System Initiative Update.” Metro Board, March 18, 2021. Metro Transit. “10 Rides.” Metro Transit. Accessed February 22, 2021. ———. “Airport.” Metro Transit. Accessed February 23, 2021. ———. “College Pass.” Metro Transit. Accessed February 22, 2021. ———. “Downtown Zone.” Metro Transit. Accessed February 22, 2021. ———. “Fares.” Metro Transit. Accessed February 22, 2021. ———. “Free Ride Buses.” Metro Transit. Accessed February 22, 2021. ———. “Go-To Card.” Metro Transit. Accessed February 22, 2021. ———. “Metro Transit Facts through Dec. 31, 2019,” 2020. ———. “Metropass for Employers.” Metro Transit. Accessed February 22, 2021. ———. “Non Profit.” Metro Transit. Accessed February 22, 2021. ———. “Northstar Family Pass.” Metro Transit. Accessed February 22, 2021. ———. “Pass Options for Schools.” Metro Transit. Accessed February 22, 2021. ———. “State Fair.” Metro Transit. Accessed February 22, 2021. ———. “Summer Student Pass.” Metro Transit. Accessed February 22, 2021. ———. “Transit Assistance Program.” Metro Transit. Accessed February 22, 2021. Metro Transit, Revenue Operations. “2019 Monthly Bus Rail Ridership,” n.d. Metropolitan Council. “2020 Unified Budget,” December 11, 2019. ———. “2021 Unified Budget,” December 9, 2020. ———. “Paying for Trips.” Metropolitan Council. Accessed February 22, 2021. ———. “Transportation Policy Plan 2020 Update,” 2020. Metropolitan Council Community Development Research. “Community Profile for Twin Cities Region, Population Below the Federal Poverty Level.” Metropolitan Council, 2019. Minnesota Department of Revenue. “Nontaxable Sales,” 2021.

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References 47