To All Commissioners
Re: Impacts of New Fare Programs – Ridership Analysis
That the report be NOTED and FILED.
The Mayor’s Advisory Panel on Poverty was convened on September 16, 2015 and given a six-month mandate to develop recommendations on what the community could do to address poverty in London, Ontario. The 2016 London For All – A Roadmap to End Poverty report set out a number of recommendations relating specifically to Transportation which are set out below.
Transportation Recommendations – First 12 Months
- Reduce transit-related costs for people with low income through consideration of pricing and subsidy models
- Engage all stakeholders, including businesses and London Transit Commission, regarding timing, routes and accessibility to help connect people to service, supports, and employment opportunities
- Allow children under 12 to ride public transit free to help families with transit costs and encourage ridership
Transportation Recommendations – Beyond 12 Months
- Increase accessibility of transit for persons with disabilities
- Increase safe, affordable transportation options, such as improved cycling lanes and cycling infrastructure, that serve people who live, work, or seek services in London
- Explore innovative approaches to transportation, such as rideshare programs
- Introduce discounted bus pass for youth (13 to 18 years old)
The Commission’s fare policy, and related funding model reflect the following principles relating to the establishment of transit fares:
- customers want a service that provides direct travel that is convenient, reliable, safe, and affordable;
- customers are sensitive to savings;
- fare pricing and media options can influence service use;
- customers will pay for service quality;
- that it is beyond the mandate and expertise of London Transit to effectively resolve broader social and community issues related to income distribution; and
- that new or reduced concession fares, intended to resolve broader social and community issues relating to income distribution be considered if arrangements are made to subsidize London Transit for the associated loss of revenue – noting such subsidy is not a public transit subsidy but a subsidy supporting a defined group’s use of the service.
Given this policy, and consistent with past practice relating to subsidized fares for seniors and blind customers, LTC administration worked with civic administration to develop subsidy models for the two fare programs implemented to-date, the details of each are set out below.
Free Transit for Children 12 and Under
The first of the fare programs to be approved by Municipal Council was the removal of fares for children aged 12 and under. Funding for this program was approved on December 6, 2016, as part of the 2017 Operating Budget approval, noting the program was to take effect in January 2017. Prior to this program, children under 5 were not required to pay a fare, and children between the ages of 5 and 12 had the option of paying a cash fare ($1.35) or a ticket fare ($1.10).
The underlying intent of the subsidy agreement was to provide a subsidy that would cover the associated loss of revenue that LTC would experience given the existence of the new program, as well as to track the costs associated with the program. Given the limited time period between approval of the program and program launch which resulted in the inability to have a ridership tracking mechanism in place when the program launched, the subsidy formula for this program was broken into two parts. For the year 2017, the subsidy amount was calculated based on 2015 child ridership, with a 10% increase applied given the historic nature of the base and the expectation that ridership in this category would increase given the fare was being waived. The rate per ride used to calculate the subsidy was based on the average fare received from child fare revenues in 2015, which equated to $1.15 given the mix of cash and ticket fares for this demographic.
Beginning in May of 2017, fobs were distributed to LTC customers for use for any child 12 and under wishing to ride the bus. The fobs are tapped on the smart card readers at the time of boarding, and each fob tap is recorded as a ride. Given the time required to ensure that all child riders were provided with a fob, coupled with the required assessment and confirmation of the accuracy of the data from the smart card system, it was determined that actual ridership as tracked by the fobs would not be utilized for the subsidy calculation until 2018. The table below sets out the ridership for children 12 and under for the first quarter of 2018 with comparisons to the ridership reported for the same period in 2017.
Child Ridership Comparison – First Quarter 2018 vs 2017
|Impacts of Free Child Fares||January||February||March||Total|
|Child Ridership 2017||8,525||7,576||11,120||27,221|
|Child Ridership 2018||29,667||26,980||34,350||90,997|
As the table indicates, child ridership has increased significantly with the introduction of free transit for children 12 and under. The ridership experience in the first quarter of 2018 is anticipated to continue throughout the year and has been reflected in the recosted 2018 operating budget, approved by the Commission at the March 28, 2018 meeting.
Income-Related Subsidized Pass
Also in response to recommendations from the London for All report, in November 2016, Municipal Council approved the establishment of a subsidy model for the provision of a reduced price monthly pass for adults 18 and over, the eligibility for which would be based on income level. The program would be funded in part by the re-allocation of subsidy dollars previously applied to reduced transit fares for seniors, which were scheduled to be eliminated at the same time the new pass was introduced.
LTC and civic administrations worked to create and implement the program for launch in January 2018, noting January passes were available for purchase in December 2017. The program provides a monthly transit pass to qualified Londoners for $52 versus the $81 fee for the monthly Citipass. The $29 differential between the two passes represents the portion subsidized by the City of London. All passes sold under this program are loaded on smart cards, enabling for the ability to analyze ridership specific to this program. Subsidized passes can be obtained at the two LTC locations as well as seven City of London locations spread across the city.
Analyzing the impacts of this program on LTC ridership and revenue is more difficult given the number of fare categories that are potentially impacted by the new pass. Additionally, the elimination of the discounted tickets and passes for seniors, which coincided with the launch of the new subsidized pass needs to be assessed as a contributing factor.
Transit riders generally migrate to the fare that offers the best value for them, based on their travel needs and patterns. Cash fares generally correlate to infrequent riders, and ticket fares to riders who ride two or three times per week. Riders make the transition to a monthly pass when it makes economic sense. For example, it would be more economical to purchase an $81 Citipass if the riders planned to use transit for more than 43 rides in the month. Historically, a monthly pass was non-transferable, and required photo identification matching the pass in order to be accepted. The introduction of smart cards included a change to the monthly pass, making it transferable, meaning it could be shared among multiple riders, providing they were not riding at the same time. This change resulted in a shift from ticket riders to pass riders noting now the economic measure of 43 rides per month could be split between multiple riders.
When assessing the impacts of the introduction of the new subsidized pass, there are a number of impacting factors including:
- potential decline in cash and ticket riders noting same may now have the ability to share a monthly pass with family members
- potential decline in ticket riders noting that a rider needs to ride only 28 times per month for the pass to make economic sense vs tickets
- decline in senior riders associated with the elimination of the discounted senior ticket and pass fares
- decline in monthly Citipass sales noting some customers will qualify for the new subsidized pass
- increase in overall ridership associated with the new pass being more affordable
Impacts with respect to pass categories can be measured by comparing monthly pass sales to the same periods the previous year. The table below sets out the comparison of total pass sales in the categories that are affected by the introduction of the new subsidized pass for the first quarter of 2018 vs the first quarter of 2017.
Impacts of New Income-Related Subsidized Pass
|Total Passes Jan-Mar 2017||15,407||1,917||–||17,324|
|Total Passes Jan-Mar 2018||14,800||–||2,754||17,554|
As the table indicates, in total, pass sales in the three categories being analyzed have increased by 230 passes, or 1.3% over the same period in 2017. The Income-Related subsidized pass sales have continued to climb each month with sales being 625, 999, and 1130 for the months January through March respectively.
As indicated earlier, given the multiple fare categories that can potentially be impacted by the introduction of this new pass, the analysis needs to be broader in nature than a simple comparison of passes sold. The table below sets out the first quarter comparisons of all fare categories that are likely to be impacted by the introduction of this new pass.
Ridership and Revenue Comparisons – First Quarter 2018 vs 2017
Impacts of New Income-Related Subsidized Pass
|Jan-Mar 2017||Jan-Mar 2018||Variance||Impact|
|New Income-Related Subsidized Pass||–||145,197||145,197||223,074|
While all categories with the potential to be impacted by the introduction of the new pass have been included in the table, it is also important to recognize that the impact on any individual category may not be entirely related to the new pass program. By way of example, the reduction in cash riders may be tied in part to the increase in adult ticket riders. Notwithstanding the inability to directly tie some of the shift, the table clearly indicates that should the first quarter trends continue, the introduction of the new pass which included the elimination of the senior discount programs will result, in whole or in part to a revenue shortfall of approximately $240,000 for the year.
Ridership and related revenue for each of these programs will continue to be monitored and will be shared with civic administration to be utilized in measuring the relative success vs cost of each program.
Recommended by: Mike Gregor – Director of Finance
Concurred in by: Kelly S. Paleczny – Director of Finance General Manager