Mobility Pricing Conference: Perspectives on Transit, Equity, and Fare Policy / Setting Brendon Hemily, PhD <brendon.hemily@sympatico.ca>
Presentation Outline Reality Check Equity and Transit Subsidy Framework and Fare Setting Fare System Complex Reality of Fare Policy Setting Some Alternative Approaches to Governance Broader Institutional Framework for Sustainable Mobility 2
Context Reality Check Transit is one of the rare public services that already relies heavily on User Fees: 53% R/C ratio nationally Municipalities have local monopoly on transit Includes responsibility for budget/deficit, and for fare setting (goes hand in hand) Each has their own fare system Highly fiscally constrained transit operations The 2009 TTC R/C ratio (for operating) is 63% For comparison: NYCTA = 44%, LACMTA = 26% continental European cities = 30-70% Provincial subsidies represent 8.5% of operating expenses in Ontario Operating cost structures vary significantly by jurisdiction 3
Context Reality Check Service is more important than Fares in affecting behaviour Transit demand is generally inelastic and very inelastic wrt fares Transit Ridership is relatively insensitive to fare discounts Perceived out-of-pocket cost vs sunk cost : Auto users less sensitive to loans and insurance than to parking fees and tolls Transit users perceive pain of fare each trip encourage shift to monthly pass Transit is heavily labour-intensive Service (= Operational funding) is the major concern of transit management and current riders, but Capital investment is the major preoccupation of the political arena 4
Equity and Transit Transit as a social service vs. transit as a business Provision of basic mobility for transportation disadvantaged vs. serving other objectives: commuter option for congestion mitigation / improved air quality Support economic development Support livable communities / sustainable land use Mobility management and lifestyle changes More of a spectrum across communities: Smallest systems: social service Medium size cities: Basic mobility + several competitive niches (universities, BRT) Large cities: Basic mobility + range of competitive niches (cost of parking, congestion, competitive travel times by rapid transit, etc.) The problem of Unfunded Mandates : ADA 5
Subsidy Framework and Fare Setting Fare setting depends heavily on existing subsidy framework established by senior governments In 1980 s (to 1992), a stable programmatic approach was used to establish the subsidy framework in Ontario, Quebec, BC: For ex. in ON, operating subsidies were based on a fixed % of target (by size of city) R/C ratios : for TTC the target was 68%; ON Capital subsidies for replacement capital and most new investment were based on a 75% provincial / 25% local match Resulted in stable and predictable basis for budgeting / fare setting for years Ad-hoc approach has existed since (except Quebec and BC) Programs appear and disappear based on senior government objectives Focus is primarily on capital investment (especially expansion) Lack of focus on operational funding places added stress on fare setting process 6
Fare Policy Requires a Fare SYSTEM A Fare System includes: Fare Policy Fare Structure: Fare Categories, Fare Products (time, geography, and service) Fare Media Fare Sales and Distribution Fare Collection Technology and Procedures Fare Systems are complex, expensive, and therefore rarely changed therefore a major constraint on fare policy reflection New smart card technology (e.g. PRESTO, OPUS) offers opportunity for fare policy changes (sometimes) 7
Side Note TTC s Unique Fare System Unique design of TTC fare collection system: Fare paid zone for buses at 35 rapid transit stations ( open system) Improves customer experience and efficiency (allows loading at all doors) In place for decades But implies no control on fares at rail/bus transfer points, unlike most North American cities (e.g. Montreal) Any radical changes to fare policy (e.g. fare by distance / time of day) face major practical and costly barriers when fare system has been in place for a long time. 8
Complex Reality of Fare Policy Setting Multiple, and sometimes colliding objectives Factors: economic, social, technical institutional and political! Balancing act between: Ridership target affected by: Policy objectives and target levels of service / investment needs External economic context R/C Target affected by: Subsidy framework (or lack there of) Local policy objectives Public and political acceptability Likely behavioural response Implementation considerations 9
Tension in Fare Policy Reflect complexity of economic cost structure distance, peak/off-peak, infrastructure (parking decks) vs. simplicity / comprehension of fare policy for customers (existing and potential) and political stakeholders Also paralleled in perception of equity: Fare by distance: each km costs the same irrespective of distance All taxpayers in a jurisdiction are contributing to transit subsidies, irrespective of levels of service offered Flat fare Problem of extension of subways outside jurisdictional boundaries: Metro to Laval, Subway to Vaughan 10
Wouldn t it be nice To separate out social objectives trying to be served by the transit system, from the objective of operational efficiency Transit would be managed as a business The cost of pursuing social objectives (discounted fares or specialized services for any target market segments) would be assigned to the appropriate body (human services, health services, school boards, etc.) In fact, a related approach has existed for fare setting at the Paris RATP since the 1970s: Budgets were based on the calculation of a theoretical ticket that would cover the costs of operations Any pricing discounts desired by senior governments for workers, students, seniors were then subsidized by the government that desired them Note the problem was simplified since nobody provided specialized services at the time. 11
New Institutional Setting in Europe European Directive to clarify roles and separate responsibilities of Public Authorityand Operators through Public Service Contract Years of discussion and research Initially opposed by public operators: German cities, Paris, etc. Being implemented everywhere now Public Authority is provided revenue autonomy (e.g. taxing authority) Operator can be Public or Private Public Service Contract defines Performance objectives and measurement system (in particular those related to Service Quality) Compensation, Incentives and disincentives, etc. 12
3 Levels of Planning and Control Strategic level: responsibility of Authority Operational level: responsibility of Operator Tactical level: need to define respective responsibilities depending on type of contract regime The more revenue risk assigned to Operator, the more tactical responsibility should be delegated Depends on who initiates policy and tactical change 13
But we live in a world of 2 nd (or 3 rd ) Best Solutions Ad-hoc incentive grant programs: Focus on Equity Jobs Access Reverse Commute (JARC) New Freedom Medicaid Transportation Ad-hoc incentive grant programs: Focus on Environment Congestion Mitigation Air Quality (CMAQ) Livable Communities / TOD / Complete Streets Try and separate out, to the extent possible, pricing for social purposes to enable focus on transit as a business: Tsunami of specialized transit / non-emergency medical transportation Reduce unfunded mandates! 14
Institutional Challenges for Sustainability Mobility Single municipality (different departments): Most common context in Canada Under one roof but fewer opportunities to affect modal shift Large metropolitan areas: More opportunity to affect modal shift Some transit agencies broadening their mandates (especially in Quebec) to become family of services or mobility broker with expanded partnerships But other aspects spread over jurisdictions, agencies, levels of government Requires new structures or greatly enhanced coordination! Integrated multi-modal agency with policy mandate for (multimodal) mobility policies and options TransLink: Transit, TDM, Regional Roads, regard to Land Use Plan SFMTA (San Francisco) 15
Integrated Institutional Structures SFMTA Sustainable Mobility Strategies: Walk: Better Street Plan, Sunday Streets, Parklets Bicycle: Bike parking, Bike sharing, Green Safety Lanes, Green Bicycle Box, Cycle Track App Transit: Re-Design, BRT, Bicycle Integration Streets: Cyclovia, Market Street Re-design, Car Free Market Street, Pavement to Parks, Calm the Safety Zone Parking (Parking Demand Management) Ridesharing Taxi Vehicles: Green vehicles 16
Conclusions Need a stable, predictable operational funding framework! Move towards separating social and transportation objectives Alternatively: 2 nd Best Solutions Need more reflection on: Institutional structures to pursue Sustainable Mobility And/or mechanisms for coordination among concerned stakeholders Thank You! 17