Transit Fare PPolicy,olicy, Structure and Technology MIT – Trans iitt Mana g ement Course March 16, 2010 Dan Fleishman TranSystems Fare System Parameters Fare Policy Fare Collection Fare Structure & Technology Type of Collection/ Pricing Strategy Verification Payment Options Payment Media/Technology Pricing Levels Fare Policy, Structure and Technology 2 Fare System Parameters (cont.) Fare Policy Principles, goals and constraints that guide and restrict a transit agency in setting and collecting ffaresares Fare Structure Pricing Strateggyy: general approach (e.g., flat fare vs. fare differentials) Payment Options: forms of fare payment (e.g., cash, passes, multi-ride tickets, stored value) Transfer PPolicy:olicy: price and use parameters Pricing Levels: actual fare amounts for each payment option Fare Collection and Technology Type of Collection/Verification: how fares are paid and inspected (e.g., barrier, self-service/POP, pay on board) Payment Media/Technology: type of payment media and equipment (e.g., magnetic, smart card) Fare Policy, Structure and Technology 3 Importance of Fare Policy Fare policy affects all aspects of transit system Administration – fare changes tend to be publicly scrutinized & debated Finance – fares are important source of revenue Customer Service -- fare payment is first aspect of transit a customer encounters; complexity and ease of access to prepaid options important customer service factors Marketing – fares affectaffect perception ofof transittransit system in the ccommunity;ommunity; fare change or new technology need to be marketed effectively, and offer keyyg general marketing opppportunities Operations – fare structure affects ridership levels and thus amount of service needed; fare structure/technology also affect boarding/dwell times and thus service reliability Planning – fare structure/technology affect accuracy of fare data Fare Policy, Structure and Technology 4 Fare Policy Goals Customer-related (e.g., ridership, Figure 1: Rating of Fare-Related Goals ease ofof useuse, complexity , range of maintain/increase ridership options, equity) improv e conv enience/ease of access Financial ((e.g.,e.g., rrevenue,evenue, fare abuse, maintain/increase rev enue simplify the fare structure revenue control, collection costs) promote seamless regional trav el Management-related (e.g., data make it easier for operators to admin. collection, modal integration, max imize prepay ment/minimize cash flexibility, operations) insure that fares are equitable re key mkts. relate fare to distance trav eled Political (e.g., politi cal accepta bbilitilit y, relate fare to quality of serv ice cost recovery) relate fare to cost of serv ice 000.0 005.5 110.0 115.5 220.0 225.5 330.0 335.5 440.0 445.5 550.0 Fare Policy, Structure and Technology 5 Fare Structure Elements include: Table 1: Evaluation Criteria -- Decision Guidelines Base (single-ride) fare Evaluation Criteria Measures/Guidelines Comments Level(()s) of anydifferentials Maintain or increase -1= 0.5% -- 2% decrease from Fare Model revenue 0= 0.5% decrease -- 0.5% increase Transfer policy/pricing 1= 0.5% -- 2% increase Pass pricing and multi-ride discount/bonus Maintain or increase -1= 0.5% -- 2% decrease from Fare Model ridership 0= 0.5% decrease -- 0.5% increase Reduced fare levels (e. g., seniors/disabledseniors/disabled , 1 = 0 .5% -- 2% increase students) Provide seamless fare -1=no transfers (and no day pass) related to ease of transfer system 0=no change from current between local and Methodology for selecting fare 1= free transfers or day pass regional service levels/changes Simplify fare structure -1=retention of zones relates to ease of rider Establish criteria (i.e., related to goals) and reduce problems 0=reduced no. of zones use and operation/ Develop ridership/revenue model -- choice associated with fare 1=elimination of zones, no pk/off-pk administration; "0" if no coefficients , elasticities , use ooff eexistingxisting options structure zones but pk/off-pk Reduce fare collection -1=lower prepayment discounts i ncreased prepayment by submarkets) operating & admin. 0=no change from current results in less cash to Develop scenarios consisting of above costs 1= increased prepayment discounts handle; relates to pass and st. value/multi-ride discounts elements Maximize public -1=large cash increase reflects public opposition Use model and criteria to evaluate scenarios acceptability 0=small change in cash fare or acceptance; "1" if small cash 1=no change in cash fare change and deeper discount; Present recommendations to Board "-1" if fare > $1.35 Fare Policy, Structure and Technology 6 Pricing Strategy Flat vs. differentiated fares Flat fare (same base farefare throughoutthroughout system) Zone/distance-based fares Time -of-day differential Express or rail premium Most agencies (except commuter rail) have flat fares Zone/distance: 30% of bus systems, 20% heavy rail, 27% LRT, 90% CR Peak/off-peak: 4% of bus systems, 7% heavy rail, 14% LRT, 28% CR Express premium: 23% of bus systems Use of differentiation declining; agencies increasingly deciding that disadvantages outweigh advantages Fare Policy, Structure and Technology 7 Pricing Strategy (cont.) Trade-offs, flat vs. differentiated fares Differentiation advantages include more equitable (fare reflects cost of providing service), potential for higher revenue Flat fare advantages include simpler, easier to administer, potential for high er riidd ershhiip Type of fare collection and technology a factor Distance and time-based differentiation difficult to administer/enforce without electronic payment Zonal/distance -based works best iiff ffarecardarecard sswiped/taggedwiped/tagged on entry and exit (i.e., “tag on/tag off”) on bus and LRT; required on heavy rail Peak/off -peak differential not well -suited to POP system even with electronic payment Fare Policy, Structure and Technology 8 Fare Technology Paper tickets Tokens Magnetic farecards Read-only (to validate passes) Read-write (for stored-value and other options) Smart cards/other chip-based options Contactless payment most appropriate for transit Lowe r-cost “disposablble” contactl ess paper cards now avail able Other form factors available (e.g., key fobs, chip-based cell phones ) Fare Policy, Structure and Technology 9 Type of Fare Collection Basic types -- how fares paid/inspected Barrier Pay on boarding Proof -of -payment Conductor Considerations Mode of service Demand level Fare structure Space constraints CiCapital vs. operating costs Fare Policy, Structure and Technology 10 Role of Fare Policy in Decision-Making Some agencies have comprehensive fare policy statements; these may include: Long-term goals (e.g., maximize ridership, maximize revenue, maximize social equity) Short-term objectives (e.g., recovery ratio or ridership target) Guidelines for reviewing/changing fares (e.g., review annuallyy,,tie fares to inflation) More common impetus for fare structure/pricing change: response to particular issue or problem (e.g., revenue shortfall) Few agencies make fare changes on regularly-scheduled basis Fare Policy, Structure and Technology 11 Decision-Making Scenarios Policy-driven: agency makes fare structure changes to address sspecificpecific goals ((ee .g ., simplify , iinsurensure equity , increase ridership or revenue) Technology- driven: agency mmakesakes fare structure cchangeshanges to take advantage of new technology (e.g., smart card) Service -driven: agency mmakesakes fare structure cchangeshanges to accommodate new mode or service (e.g., LRT, express bus) Fare Policy, Structure and Technology 12 Emerging Fare-Related Factors and Issues Equity/environmental justice concerns Increased adoption of electronic fare media Focus on providing “seamless” travel in a region (i.e., multi-agency integration) New pprograms/partnershiprograms/partnership opportunities University programs Employer programs Other (non-transit) applications Fare Policy, Structure and Technology 13 Equity and Environmental Justice Issues Fare decision-making increasingly influenced by political or legal factors Concern re equal treatment of all groups Organized opposition oorr llegalegal action against pproposedroposed fare increases Can define/limit fare structure changes Consent Decree in LA Free transfers, weeklyweekly pass inin BBostonoston Very deep discount in Philadelphia Fare Policy, Structure and Technology 14 Fare Payment Technology Developments Fare Payment TTechnologyechnology Developments Electronic media influencing fare policy Increasing range of payment options facilitated by electronic media Expanding use of smart cards/other options Regional farecards Multiapplication opportunities Use of bankcards for transit Use of chip-based cell phones (Near Field Communications or NFC) Fare Policy, Structure and Technology 15 Electronic Payment Options Stored value -- various forms of bonus/discount Purchase bonus Add-value bonus Discounted single rrideide wwithith uusese of smart card Rolling passes 7-day, 14-day, 30/31-day – activate on first use 1-day or parttiial day -- sold on board buses Fare Policy, Structure and Technology 16 Electronic Media Pricing/Reload Options Fare policy/pricing options Guaranteed lowest fare (“best fare”) Guaranteed last ride/negative balance Frequency-based bonus/discount Autoload arrangements Individual account-based programs (e.g., CTA) Employer programs (e.g., MBTA, WMATA) Fare Policy, Structure and