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Multiagency Electronic Fare Payment Systems (2017)

Chapter: Chapter Three - Overview of Business and Governance Models

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Suggested Citation:"Chapter Three - Overview of Business and Governance Models ." National Academies of Sciences, Engineering, and Medicine. 2017. Multiagency Electronic Fare Payment Systems. Washington, DC: The National Academies Press. doi: 10.17226/24733.
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Suggested Citation:"Chapter Three - Overview of Business and Governance Models ." National Academies of Sciences, Engineering, and Medicine. 2017. Multiagency Electronic Fare Payment Systems. Washington, DC: The National Academies Press. doi: 10.17226/24733.
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Suggested Citation:"Chapter Three - Overview of Business and Governance Models ." National Academies of Sciences, Engineering, and Medicine. 2017. Multiagency Electronic Fare Payment Systems. Washington, DC: The National Academies Press. doi: 10.17226/24733.
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Suggested Citation:"Chapter Three - Overview of Business and Governance Models ." National Academies of Sciences, Engineering, and Medicine. 2017. Multiagency Electronic Fare Payment Systems. Washington, DC: The National Academies Press. doi: 10.17226/24733.
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Suggested Citation:"Chapter Three - Overview of Business and Governance Models ." National Academies of Sciences, Engineering, and Medicine. 2017. Multiagency Electronic Fare Payment Systems. Washington, DC: The National Academies Press. doi: 10.17226/24733.
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Suggested Citation:"Chapter Three - Overview of Business and Governance Models ." National Academies of Sciences, Engineering, and Medicine. 2017. Multiagency Electronic Fare Payment Systems. Washington, DC: The National Academies Press. doi: 10.17226/24733.
×
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Suggested Citation:"Chapter Three - Overview of Business and Governance Models ." National Academies of Sciences, Engineering, and Medicine. 2017. Multiagency Electronic Fare Payment Systems. Washington, DC: The National Academies Press. doi: 10.17226/24733.
×
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Suggested Citation:"Chapter Three - Overview of Business and Governance Models ." National Academies of Sciences, Engineering, and Medicine. 2017. Multiagency Electronic Fare Payment Systems. Washington, DC: The National Academies Press. doi: 10.17226/24733.
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16 A multiagency EFPS is by definition composed of multiple agencies. These agencies must establish policies and rules for making decisions, leadership, organizational structure, procurement approach, financial management, operations and maintenance of the system. TCRP Report 94 lists some of the business and governance issues that need to be defined by a multiagency EFPS: Among the issues that need to be resolved are those related to governance (e.g., how will the regional program be controlled and managed), cost allocation details (e.g., the nature of the participant fee structure), revenue allocation and settlement procedures, operator reporting requirements, and operator customer service respon- sibilities (Multisystem Inc. et al. 2003). The literature does not go into detail about specific governance rules, although some agencies publish their rules, including the roles and responsibilities of the organizations involved. For example, the ORCA program published its “Amended and Restated Interlocal Cooperation Agreement for Design, Implementation, Operation and Maintenance of the Regional Fare Coordination System” in March 2009. This chapter describes organizational structures, governance decision-making, and leadership, as well as benefits, challenges, strengths, and weakness of different models from the literature and survey responses. BENEFITS OF MULTIAGENCY ELECTRONIC FARE PAYMENT SYSTEMS Agencies integrate their fare payment systems for a variety of reasons that go beyond the benefits of a single agency’s adoption of a smart card and registering farebox. Benefits for any smart card adoption include reducing fraud, reducing cash collection costs, improving data collection and reporting, more payment options, faster boarding, improved customer convenience and security (Multisystems Inc. et al. 2003; Bazilio Cobb Associates 2013). Multiagency systems provide economies of scale for all participants, including shared customer services. For example, transit users can buy fare products through a variety of sales channels, use common media on services offered by multiple providers, and leverage transit benefits throughout the geographic region in which they work, live, and play. “The common ‘electronic’ ORCA smart card can be used by passengers on seven public transit opera- tors in four counties. Passengers can load a stored cash value and a single monthly pass for unlimited rides and seamless transfers on any provider” (Murray 2015). The other major advantage of the multiagency EFPS is that partner stakeholders share the cost of operating and maintaining the system. Cost savings are realized through economies of scale, operational efficiencies, shared sales channels, shared infrastructure, and increased ridership (Murray 2015). WHO SHOULD LEAD: ORGANIZATIONAL STRUCTURE, ROLES, AND RESPONSIBILITIES One of the primary roles of the governance structure is to specify the decision-making process. Among the potential areas are: • business processes, such as financial management, customer relations, clearinghouse, and settlement processes; • policy issues, such as fare integration, cost allocation, procurement, and deployment approaches including rollout and transition; chapter three OVERVIEW OF BUSINESS AND GOVERNANCE MODELS

17 • technical processes, including system architecture, communications, media, and equipment; and • operations and maintenance resources and facilities. Most of the literature defines three types of governance models. TCRP Report 173: Improving Transit Integration Among Multiple Providers, TCRP Report 115 and TCRP Report 177 describe similar business and governance models for common multimodal, multiagency systems. As described by several TCRP reports, common models include a lead transit agency, a lead planning organization, and a regional management (peer to peer) arrangement (Acumen Building Enterprise 2006; Wallischeck et al. 2015). According to TCRP Report 177 (Wallischeck et al. 2015), the categories are defined as follows: • Lead transit agency with regional partners. In this scenario, a single transit agency (often a large urban transit system) has primary responsibility for transit fare payment system design and implementation, but shares the transit fare payment system design and specifications with participating transit agencies in the region. Transit agencies in this scheme use the lead transit agency fare card and send transaction data to the lead transit agency central computer system to settle revenues among the partner transit agencies. The lead transit agency applies the business rules and manages transactions. Participating transit agencies typically adopt the same system technology and vendor for their transit fare payment system as the lead transit agency. In planning for regional systems, the participating transit agencies can even piggyback on the procurements of the lead transit agency. This is by far the most common approach to achieving seamless regional transit fare payment systems. [Examples include WMATA, BiState, Port Authority (Pittsburg), Minneapolis/St. Paul Metro, and TriMet.] • Regional transit authority. In this arrangement, a regional transit authority or metropolitan planning organization (i.e., a central transit agency that does not operate its own transit vehicles) replaces the lead transit agency in the previous scenario. The regional transit authority issues and manages the regional fare media, promulgates the institutional rules of the system and clears and settles the transactions that are processed by the individual transit agencies. An example of this approach is the Metropolitan Transportation Commission’s role in the San Francisco Bay Area Clipper Card System. [One example is Metrolinx.] • Peer-to-peer. In this arrangement, usually found in an open payments environment, two or more transit agencies share the same transit fare payment system. A joint coordinating inter- agency committee develops the transit fare payment system design, as well as business rules for managing travel between multiple transit systems. (The only example in this country is ORCA.) The literature and survey results suggest that no matter the organizational structure: Trust, Trans- parency, Communication (Bazilio Cobb Associates 2013). No governance structure will work without trust. Survey respondents offered similar advice when asked about their challenges, strengths, and weaknesses (see detailed sections later in this chapter), The governance policy is typically composed of operating and oversight rules, a list of how deci- sions are made, who participates, system operational rules and responsibilities about how revenues and costs are allocated, common and shared fare policies, and integration strategies and security issues. The PRESTO governance structure is shown in Figure 4. Metrolinx, the regional planning orga- nization for the Greater Toronto and Hamilton area and Ottawa in Ontario, leads the PRESTO board; however, the organizational chart shows that client committees composed of operating organizations make policy decisions (although financial decisions are confirmed by the board). Agreements are made by consensus. The ORCA organization formed an intergovernmental operating body through the adoption of an inter-local cooperative agreement. Roles and responsibilities for individual agencies and the joint board, as well as financial issues, business rules, operating procedures, legal representation, and changes to the board (termination, addition, removal), are also included in the agreement (ORCA 2009). This is one of the few joint intergovernmental common fare governing bodies in the United States.

18 BUSINESS AND GOVERNANCE MODEL CHARACTERISTICS In asking how multiagency EFPS business models work, the survey requested specific information about sharing and control of services. Much has been written about EFPS enabling each agency to implement its own fare policies, collect and manage its own data, brand and manage smart cards and its distribution channels, etc. Respondents were asked two questions: which services were shared (common); and which services were under their own control (independent). The specific services that were reviewed included: • Media branding • Fare and transfer policies • Product/media sales channels [web, retail outlets, sales office, ticket vending machine (TVM)] • System monitoring (equipment, security) • Transaction data/reconciliation • Performance data/analytics • Customer mobile app • Cash collection services (revenue collection services at attended and unattended sales locations) • Other. The responses fell into four categories, characterized by the degree of common infrastructure, and services were shared as modeled in Figure 5. The list of EFPS programs that fall into each category are shown in Table 3. Common Infrastructure and Shared Service Model The common infrastructure and shared services model is characterized by the following: • Common back office infrastructure; • Centralized services, including branding, integrated fare/transfer policies, and sales venues; FIGURE 4 PRESTO governance structure (Source: PRESTO).

19 Independent Infrastructure/ Services Hybrid Infrastructure and Services Common Infrastructure/ Independent Services Common Infrastructure/ Shared Services Services In fr as tr uc tu re SharedIndependent Sh ar ed In de pe nd en t FIGURE 5 Common infrastructure and services models. Features/Category Common Infrastructure and Shared Services Common Infrastructure and Hybrid Services No Common Services But Shared Infrastructure Smart Card Interoperability But No Common Infrastructure or Shared Services Respondent î Clipper (MTC) î LA TAP (LA Metro) î ORCA (Sound Transit) (Minneapolis/St. Paul) County Transit î Bi State Development/Metro (St. Louis) î Dallas Area Rapid Transit (DART) î Metro Transit î Miami Dade î Port Authority of Allegheny County (Pittsburgh) î PRESTO (Ontario, Canada) î SmarTrip (WMATA and regional agencies) î Ventra (Chicago) îMassachusetts Department of Transportation (MassDOT) for private bus operators î SmarTrip (WMATA/DC) and CharmCard (Maryland MTA Features Shared or Independent Among Partners Shared Independent Shared Independent Shared Independent Shared Independent Media branding X [X]* X X Fare and transfer policies X [X]* X X Product/media sales X [X]* X [X] X System monitoring [X] [X] X X X Transaction/ reconciliation X [X] [X] X X Performance/analytics [X] X X X Customer mobile app [X] [X] X X Cash collection [X] [X] [X] [X] X X *At least two of these three choices are shared. [X] = these services are options; they may not be included to meet the criteria. Source: Data from survey responses, native Word table. TABLE 3 BUSINESS MODEL CATEGORIES BY SHARED AND PRIVATE FEATURES

20 • No or limited restrictions to review transaction/performance data; and • Possible common cash collection and remote monitoring of equipment. For the centralized services, the fare policies are fully integrated; for example, individual agencies do not implement unique transfer rules. An example of this model is ORCA. Hybrid Infrastructure and Services Model The common and hybrid services model is characterized by the following: • Common infrastructure; • Centralized services but delegated operations/policy control of branding, integrated fare/transfer policies, and sales venues; • Restrictions on reviewing transaction and/or performance data; and • Monitoring of equipment by each agency, typically remote. An example of this model is WMATA. Each agency uses the SmarTrip infrastructure, but can implement fare rules (e.g., transfers) that are independent of the collective. Common Infrastructure and Independent Services The third category may be described as a Payment as a Service (PaaS). In this model, multiple agencies may share the same infrastructure, but they act independently. This category is characterized by the following: • Common infrastructure; • Few or no centralized services (e.g., branding or product sales from the same venues); and • Most services reserved or restricted for each agency particularly transaction/performance data and fare policy. The multiagency EFPS programs that meet these criteria include Massachusetts Department of Transportation (MassDOT) for private bus operators (the BusPlus program). MassDOT contracted with a mobile ticketing app vendor to operate ticketing services for seven private intercity bus opera- tors in the Commonwealth. The platform they use is the same for each agency; however the services, app and ticket branding, products, transaction and performance data, and monitoring are all separate and private services. Independent Infrastructure and Services (Common/Interoperable Media) Although the survey did not ask about two systems which interoperate but do not have a common infrastructure or share services, there is one region that supports interoperability based on smart card and equipment technology. Because WMATA and Maryland Transit Administration (MTA) use the same smart card and equipment technology (G. Garback, WMATA, personal communication, 2012), their customers may use a SmarTrip stored value on MTA equipment, and MTA CharmCard stored value may be used on regional services that accept SmarTrip cards. Information on cross use is sent on a daily basis by means of a data exchange protocol. This category is characterized by the following: • Independent but similar infrastructure (transaction data exchange through a common data interface); and • Independent but identical smart card and equipment specifications. GOVERNANCE LEADERSHIP Agencies were asked to describe the governance structure based on who leads and makes decisions for the multiagency EFPS. Nineteen (19) of the 22 respondents indicated that a transit agency took the lead. Two regional planning organizations indicated that they led the multiagency EFPS; only one intergovernmental organization led the multiagency EFPS.

21 The 19 groups with a transit agency lead are WMATA (SmarTrip); Maryland Transit Authority (CharmCard); LA Metro (TAP); SEPTA, the Southeastern Pennsylvania Transportation Authority (SEPTA KEY); CTA (VENTRA); DART (GoPass); MBTA, the Massachusetts Bay Transportation Authority (Charlie Card); MDT (Easy Card); Metro Transit (Go-To); Port Authority of Allegheny County (Connect Card); Bi-State of St. Louis (Gateway Card); NYCT (Metro Card); Houston Metro (Q-Card); Jacksonville Transportation Authority (JTA), Jacksonville, Florida (Star); TriMet, UTA (FarePay); MARTA, Metropolitan Atlanta Regional Transit Authority (Breeze); and Milwaukee County Transit (M-Card). Those with a regional planning lead are MTC (Clipper) and Metrolinx (PRESTO). ORCA is the sole peer-to-peer system. Respondents who are developing second-generation multiagency fare systems, reported that the organizational structure did not change. This applies to WMATA (NEPP), Sound Transit (Next Gen- eration ORCA), and (Clipper2). In most cases, partner agencies influence the direction of the fare system through a set of agree- ments or rules. Following is a list of agencies, in order of the influence that partners have in setting their own policies and influencing operating decisions: 1. Transit agency is lead and makes decisions • Metro Transit, MDT 2. Transit agency has coordination responsibility pursuant to MOUs and participant governance • NYCT, MTA (MD), LA Metro, DART, Ventra (CTA), WMATA 3. Agencies independent within framework (platform as a service model) • MassDOT 4. Regional planning organization/Peer to peer—agencies are partners • Presto (Metrolinx), ORCA (interlocal agreement), Clipper (MTC). CHALLENGES, STRENGTHS AND WEAKNESSES Each multiagency EFPS was asked about governance approaches, addressing challenges, issues more easily addressed, strengths, and weaknesses. Responses to challenges and strengths/weaknesses overlapped, and in some cases responses to “challenging” and “easy to do” were contradictory, because the same activity was characterized as challenging to one organization and easy for another. The results are detailed here. Challenging Issues Respondents were asked about major challenges to building and operating the common fare system. The most frequent response was “Consensus takes time and patience.” Responses included: Relationships and Communications • Trust, transparency, communication • Prioritizing the implementation activities of one agency over another. Consensus Building • Process is lengthy to gain agreement across all the operators and multiple jurisdictions • Getting consensus on any contentious issues • Decisions can take longer than with a single entity. One entity can veto an issue regardless of the size of the agency. • Building consensus among providers on the best approach for fare policy • Finding time to meet and discuss payment system concepts and rules. Complexity • Lack of homogeneity in fare payment and structure when the system was launched • Fare integration (defining concession parameters, fare payment types, transfer/co-fare rules, etc.) • Complexity of business rules.

22 Governance and Financial Decisions • Apportionment of costing • Establishing funding principles for shared capital investments and operating costs. Issues Easy to Address Respondents were asked about the easy issues that they encountered in building and operating their system. Not many issues were characterized as easy. Some survey respondents identified issues as easy that others viewed as challenging; integrated fare policies was one of those issues. The reason stemmed from what was considered hard—the decision-making structure that supported a consensus drive approach, or the time it took to come to a decision within the structure. One respondent summed up the comparison between easy and challenging issues: “Most issues are relatively easy to implement, but take time based on our structure [to make a decision].” Strengths Respondents were asked to describe the strengths of their governance approach. The common theme throughout, whether articulated by a lead agency or consensus-driven program, was that harmony and trust are important. There is recognition by the respondents that a single agent managing the contractual relationships is essential. Programs with a transit agency as lead made the following comments about their governance structure: • Puts control and general responsibility for fare payment system with the transit agency (program management business unit) having the contractual relationship with the vendor/supplier of the system. A singular coordinating agency acting pursuant to formal MOUs/agreements acts as a unifying force and simplifies/clarifies governance. • Inclusion—We tried to be as up front and as transparent as possible with our partners on what our goals were and ultimately what the direction chosen was. • Collaboration and working toward common goals. • Trusting partnership with a small agency. The smaller agency got to see the pitfalls of the lead agency’s design and pursued a separate design and strategy. • Open, transparent, informed, build trust, facilitate, listen, support, provide excellent customer/ agency service. • Simplicity to implement and oversee, limited reason for disputes. One of the programs with a collaborative approach made the following point: “When one agency experiences issues, we all pull together to help out. At the end of the day, most decisions, even if they took a while to reach, tend to be good decisions.” Weaknesses Respondents were asked to describe the weaknesses of their governance approach. The responses differed by governance structure. The responses confirmed the strengths described earlier: a con- sensus approach, though slower, results in better and more lasting relationships. This approach is explicitly addressed by the agencies with a lead transit agency. Not only did they identify the need to involve partners in the decision-making process, one of the agencies went so far as to state the need for an intergovernmental cooperation or “peer-to-peer” model in a future EFPS. Programs with a transit agency as lead made the following comments about their governance structure: • While we were good about communicating the process with our partners, we did not necessarily give them a voice in the decision-making process. It could have gone smoother and created more

23 investment [for our regional partners] if we had given them more of a voice . . . even a small one, in the decisions related to the selection and implementation of our smart card system. • Would look closer at a joint powers authority; state should get involved and administer one back office for all to keep costs low. • Little enforcement mechanisms, all decisions are voluntary and require total consensus to implement so change can be slow. One program with a collaborative approach made the following point: “Things take longer. Hav- ing said that, it’s a matter of picking your poison. We rarely have disputes because they ultimately get worked out.”

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TRB's Transit Cooperative Research Program (TCRP) Synthesis 125: Multiagency Electronic Fare Payment Systems describes the current practice, challenges, and benefits of utilizing electronic fare payment systems (EFPS), such as smart cards. This synthesis reviews current systems and identifies their major challenges and benefits; describes the use of electronic fare systems in multimodal, multiagency environments; and reviews next-generation approaches through existing implementation case examples.

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