Fare Capping: Balancing Revenue and Equity Impacts (2022)

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4 Introduction This chapter provides important background information about fare capping and sets forth the objectives of the study. Next, the distinctive aspects of fare capping are described in detail. Then, the technical approach used to carry out the study is described. The chapter concludes by summarizing the structure of the report that follows. Background and Synthesis Objectives Fare pricing can be confusing, and the burden is often left to riders to determine which fare product will meet their needs. The major benefits of fare capping are the economic fairness to the riders and the convenience of the media required to implement it, with user accounts being tied to a contactless smart card, mobile wallet, or even through the use of one’s own credit or debit card. In short, fare capping makes transit easier to use, rewards ridership, and addresses the inequity of current fare payment systems. While fare capping is an established practice globally, North American transit agencies have only begun offering this pricing structure to their customers in the last several years. While transit agencies and advocates are becoming more aware of the benefits, motivations can range from fare system replacement needs and concerns about equity and user experience to long- term strategic goals for the transit system, such as: • Fare box failures can be a common problem in old equipment; not only does this impact fare revenue, but it also can impact service quality, often necessitating maintenance road calls. When legacy fare systems necessitate change, many agencies are considering solutions that offer more flexibility in purchasing, collection, and pricing. Fare technology has undergone significant change in recent years, presenting more opportunities to reduce both capital and operating costs. Fare policy is inextricably tied to revenue collection systems: as those systems age or become cumbersome, opportunities to be more flexible and innovative are presented. • Another prompt to revisit fare policy relates to major service changes, or network redesigns. These processes often engage riders in a conversation about what would make service easier to use. As riders grow more accustomed to easier forms of payment for other services, they seek a similar user experience for riding transit. Service changes also may result in an increase in transfers, particularly as many systems move away from a central hub-and-spoke system. The necessity of multiple trips, or boardings, to reach a destination does not align well with single-fare purchases. Service changes that improve the network can further widen the disparity between period pass holders and cash riders. Fare capping policies align well with service goals related to improved transit access and seamless travel. • The strategic planning goals of many agencies acknowledge open payment systems in the future. Another long-term goal is to implement mobility as a service (MaaS). This is where C H A P T E R 1

Introduction 5   users can plan, book, and pay for trips across multiple providers. While not all trips are taken by transit, a movement toward seamless travel reduces reliance on single-occupancy vehicles and car ownership. More agencies view their role as a mobility manager, and investments in fare technology not only improve coordination among providers but also can yield rich insights into travel patterns to provide even better service. Fare capping is another way to provide a consumer-friendly product in an ever-growing mobility market. Fare capping can be implemented in a variety of ways—from using a smart card to a low-cost mobile app with little change, to a fare collection system, or to a complete overhaul of equip- ment, products, and sales locations. For agencies looking to replace existing fare collection systems, there are a lot of moving parts. Internal capacity is critical for ensuring coordination and timing of customer facing changes, transitioning between systems, replacing long-term vendor commitments, and addressing underbanked populations and other concerns related to Title VI of the Civil Rights Act of 1964. Once a system is live, there may still be ongoing operational support through enhanced customer service, ongoing public education, and careful monitoring of revenue and fees. This synthesis reflects agencies approaching fare capping in many phases and models. Regardless of approach, fare capping brings many benefits to both the transit agency and the customer. An expanding market of mobility choice has prompted many agencies to offer a convenient, affordable service to the widest possible audience. Fare capping aligns with current trends in transit, such as an increased focus on attracting riders back to transit, the need to integrate services within a region, and a focus on providing more equitable service. This synthesis report presents a snapshot of the current state of the practice of fare capping from early decision making through implementation, including insights into numerous aspects of the planning and implementation processes related to fare capping, including: • Motivations, opportunities, and costs; • Technology and systems required; • How agencies educate and market to customers; • How agencies transition from one fare structure to another; and • Other challenges encountered and lessons learned. Distinctive Aspects of Fare Capping For the purposes of this synthesis research, “fare capping” is defined as a practice in which users are charged according to rides taken over a period of time; a user’s combined fares over multiple rides cannot exceed the amount a rider would have paid if they had purchased the optimal period pass based on their usage. Fare capping can occur at a daily, weekly, or monthly cap. It can also be modified to various thresholds such as offering lower caps for reduced fares for older adults or persons with disabilities, or in conjunction with other fare relief programs. Fare capping requires the ability to count the number of rides taken by a customer within a given period of time, which requires a fare collection system that has the ability to track individual fare transactions. This often requires moving to electronic payment systems where riders have the ability to purchase and load fares onto a virtual account. For those without access to a smartphone, tablet, or personal computer, agencies must provide access through their transit centers, at bus stops, or through partners, retailers, and employers. Most transit systems also have fare partnerships with third-party purchasers—including schools, employers, and human services programs—so transitioning these partners to a new fare model, along with the introduction of new fare retail locations to discourage onboard cash sales, is another key consideration.

6 Fare Capping: Balancing Revenue and Equity Impacts Technical Approach and Report Organization The research for this synthesis has three main components: a review of existing literature and research, an industry survey of North American transit agencies, and in-depth case examples. The review of existing research and literature is broad, relying not only on published reports, but also on news articles, self-published agency materials, and other sources. This synthesis is by no means exhaustive, but it is comprehensive; there are other agencies that have considered, are in the planning phase of, or have implemented fare capping that have neither been captured in the literature review nor included in the survey results, either because they did not respond or because they were not identified. The transit agency survey was conducted online and sent to 50 agencies across the United States and Canada. Respondents from 35 agencies, representing a range of transit systems across 19 states and two Canadian provinces, responded to the survey. Topics addressed in the survey include the following: • Agency characteristics, including governance structure, • Motivations, • Decision-making framework, • Measuring impacts on ridership and revenue, • Impacts to pass structure and pricing, • Implementation, and • Technology and innovation. To supplement the survey and provide a richer discussion on the topic, this synthesis includes case examples of five transit agencies, focusing on their rationale and objectives, program design, customer engagement and education, implementation, and lessons learned from their fare capping programs. The five agencies are Greater Dayton Regional Transit Authority ([RTA] Dayton, Ohio), C-TRAN (Clark County, Washington), Miami-Dade Transit (Miami-Dade County, Florida), Niagara Frontier Transportation Authority ([NFTA] Buffalo, New York), and IndyGo (Indianapolis, Indiana). Dayton RTA represents a platform-based solution, driven by fare equity goals; C-TRAN represents a revenue sharing model between three regional systems; Miami-Dade Transit represents a multi-modal provider leading with open payment options; NFTA represents a major fare collection system overhaul; and IndyGo represents a fare modern- ization effort in tandem with service redesign and overall customer experience. In addition to this chapter, this synthesis report is organized into four other main chapters. • Chapter 2: Review of Existing Research, provides the results of the existing research review, including information from agency sources. • Chapter 3: Transit Agency Survey, describes the current state of the practice for transit agencies considering, planning, or having successfully implemented fare capping based on survey data and analysis. • Chapter 4: Case Examples, contains five case examples illustrating different ways that agencies have implemented, or are currently working to implement, fare capping. • Chapter 5: Conclusions and Further Research, summarizes the conclusions of the synthesis effort and discusses future research needs. After a list of references used in this report, appendices contain a copy of the transit agency survey questionnaire (Appendix A), complete survey responses (Appendix B), and the case example interview guide (Appendix C).