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Fare Capping: Balancing Revenue and Equity Impacts (2022)

Chapter: Chapter 5 - Conclusions and Further Research

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Suggested Citation:"Chapter 5 - Conclusions and Further Research." National Academies of Sciences, Engineering, and Medicine. 2022. Fare Capping: Balancing Revenue and Equity Impacts. Washington, DC: The National Academies Press. doi: 10.17226/26510.
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Suggested Citation:"Chapter 5 - Conclusions and Further Research." National Academies of Sciences, Engineering, and Medicine. 2022. Fare Capping: Balancing Revenue and Equity Impacts. Washington, DC: The National Academies Press. doi: 10.17226/26510.
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Suggested Citation:"Chapter 5 - Conclusions and Further Research." National Academies of Sciences, Engineering, and Medicine. 2022. Fare Capping: Balancing Revenue and Equity Impacts. Washington, DC: The National Academies Press. doi: 10.17226/26510.
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Suggested Citation:"Chapter 5 - Conclusions and Further Research." National Academies of Sciences, Engineering, and Medicine. 2022. Fare Capping: Balancing Revenue and Equity Impacts. Washington, DC: The National Academies Press. doi: 10.17226/26510.
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41   Conclusions and Further Research This final chapter summarizes the conclusions of the synthesis effort and discusses potential topics for future research. Motivations for, and Objectives of, Fare Capping Many agencies across North America are considering, actively implementing, or have successfully begun offering some form of fare capping to their customers. Fare capping presents a consumer-friendly pricing structure that until recently, due to the technological require- ments to implement, has been out of reach for many North American transit agencies. As many agencies rethink their fare collection practices, they are mindful of the lessons learned from the COVID-19 pandemic, including public health and safety in the form of contactless fare payment, as well as concerns around social equity and recognizing the frequency of transit trips made by more vulnerable populations. Similarly, fare-free transit also has garnered more attention as agencies consider the role of fares in both costs and revenue, and the role of fares in relation to transit’s larger mission of promoting ridership, improving service, and enhancing equity. Fare capping, whether leading or following other fare-related investments, creates opportu- nities for agencies to expand access, increase the use of technology, and offer a better customer experience. It also requires cross-departmental coordination, careful consideration of related investments, and extensive public education and outreach to targeted populations. To achieve broader adoption, and to take advantage of operational benefits such as reduced onboard transactions and less cash handling, a clearer transition from old to new fare programs may be required. Transit agencies also must not underestimate increased demand for ongoing customer service, and ancillary costs related to transaction fees from retail, mobile, and credit card transactions. Key Findings Through survey responses from 35 transit agencies across North America, a literature review, and case examples, this synthesis finds that, like major service redesigns, a major fare system redesign can have a significant impact on a transit system’s success. Transit systems across the country have seen ridership plummet due to the COVID-19 pandemic. Fare capping offers an opportunity to incentivize ridership and make transit use more convenient for riders of all incomes. As agencies work to attract customers back to transit service, fare capping is a timely consideration that can offer increased ridership, fare equity, operational efficiency, and agency flexibility. C H A P T E R   5

42 Fare Capping: Balancing Revenue and Equity Impacts The synthesis team found that most agencies expect that fare capping will lead to • More equitable fare policy and pricing; • Reduced reliance on, and handling of, cash—with fewer onboard fare transactions but more overall fare access; and • A more seamless, user-friendly transit experience. Due to the improvements in fare technology that are required for fare capping, agencies also anticipate opportunities to expand partnerships with schools, employers, social service agencies, and tourism partners. Investment in fare technology presents more opportunities to integrate with trip planning tools, other transit providers, and other mobility options such as transportation network companies, microtransit, bikeshare, and so forth. The transit agency survey highlighted equity as a top motivation for agencies pursuing a fare cap program. However, few agencies (seven) had developed any performance measures related to ensuring equitable outcomes. Equity can be difficult to measure, but financial metrics may not fully capture the impact of fare capping programs. Day passes were often the only product that offered a cap, which may be due to either concerns of monthly pass revenue loss or the ease of explaining and promoting daily caps. The case examples illustrated a range of experiences; however, a recurring theme was a desire to modernize fare policies to provide attractive, easy-to-use transit service, often as part of an agency’s broader strategic goals. Although investment and staff resources vary, fare programs span multiple departments, and there is a benefit to involving a cross-section of departments and dedicated staff to oversee changes. The synthesis team identified the following key issues to consider: • More equitable fare policy and pricing can be achieved through capping, but only if it is available to all riders. Underbanked populations must have the ability to load value onto a smartphone or smart card, which may require a more enhanced sales network. Most agencies did a Title VI analysis, but few performed additional analysis beyond that. However, most fare cap programs have considered points of purchase, the needs of cash riders, and paratransit implementation. • Fare capping requires changes to an agency’s fare revenue collection and financial systems, and often requires a major upgrade to modernize technology. Costs vary by agency size but may include new fare media, enhancements for mobile apps, web purchases, new software, fare box upgrades/validators, facility investments including TVMs at transit centers, and costs of working with, and expanding, third-party retail outlets. The level of investment may affect adoption rates and realization of larger agency benefits, including elimination of onboard purchases, less cash handling, faster boarding, and so forth. • While most systems cited a desire to increase ridership, no one has seen this yet. Due to rider- ship fluctuations during the COVID-19 pandemic, it is difficult to isolate the impact of fare capping on passenger trips. Transit agencies—through surveys and case examples—also identified the following key challenges: • Introducing more mobile and online transactions can greatly increase credit card transactions, and fees from credit card companies—as well as mobile and retail vendors—can have a major impact on fare revenue and must be considered when calculating costs. Incentives to minimize transactions may help mitigate these fees; however, riders with low incomes may not be able to make large upfront payments to take advantage of these incentives. • There are trade-offs to consider when pursuing a customized solution versus an off-the-shelf product. Agencies must consider the time and cost for the initial investment and also how it will be maintained and updated in the long term.

Conclusions and Further Research 43   • Creating a more equitable fare structure, enhancing the rider experience, and simplifying the fare system were the highest rated motivations. However, the case for fare capping is also a business one: attract more riders and improve the rider experience in addition to designing a more equitable system. Although revenues or fare box recovery will never cover the total cost of service, they are an important revenue stream for many transit systems. Support for fare capping may come from alignment with agency mission but also may require a shift in how fares are measured with respect to fare box recovery and revenue. • The transition of existing customers to mobile and reloadable smart cards requires thoughtful branding, promotion, and lots of public education. This is particularly important for older riders who are less likely to transition to electronic forms of payment. Upfront investment in educational videos, travel training, and increased customer service support can help riders adapt to fare capping. Future Research Because most fare capping programs in North America are relatively new, future research could evaluate the costs and benefits, including impacts to ridership, revenue, and equity. It is challenging to isolate the impacts of fare capping with respect to other factors ranging from service changes to fare structure. The COVID-19 pandemic also has impacted transit so signifi- cantly that it may be some time until there is a return to more normal operations. For agencies that have implemented fare capping and are measuring its success, the outcomes of these efforts will be helpful to agencies that are not as far along. Some specific research opportunities include the following: • Comparative analysis of fare capping in relation to fare relief programs and fare-free policies. Fare capping is one of several strategies to not only provide equitable fares among riders, but also to expand access to, and the affordability of, transit. Other strategies include fare relief programs, and many agencies offer discounts beyond the FTA regulations that require reduced fares to seniors and riders with disabilities during off-peak hours. Fare relief programs include discounts to seniors, low-income individuals, students, and veterans. The relationship between fare relief programs and fare capping is unclear. Additionally, other agencies are pursuing fare-free policies. Further research may provide guidance to agencies on how to consider the range of fare policy programs targeted toward expanding access to transit-dependent riders and measuring the trade-offs of foregoing revenue through fare cap- ping versus investment in more targeted equity programs. • Approaches to fare technology. Many agencies want to move away from proprietary fare hardware and software, along with associated maintenance costs. More recent fare capping deployments have utilized platform-based solutions that require less capital investment while still offering an integrated fare program. As technology continues to evolve, agencies also are interested in the eventual transition to open payment systems and MaaS. Further research could consider how agencies can take advantage of new approaches to fare technology, and integrate fare policies across providers and mobility choices, while maintaining a focus on equity in both pricing and adoption. • Impacts to underbanked or cash riders. Although fare capping is focused on providing more equitable fare policies, it requires those that stand to benefit most—cash riders—find alterna- tive locations or methods to add value in order to take advantage of fare capping. Beyond rider benefits, transit agencies also have an interest in eliminating cash transactions aboard vehicles and reducing cash handling overall. Further research could assess the impacts of eliminat- ing cash from transit services, including the disproportionate impacts to low-income riders, mitigation strategies, and ways to measure costs and benefits for transit systems.

44 Fare Capping: Balancing Revenue and Equity Impacts • Modeling of fare revenue and ridership impacts. Although most agencies did some level of analysis to predict revenue and ridership impacts of fare capping prior to implementation, further research could document real-world impacts, including factors such as pricing struc- ture (daily or monthly caps), phasing between old and new systems, and impacts related to usage by period pass users and cash riders. A review of procurement also may yield insight with respect to mitigating credit card, retail, and mobile transaction fees. • Relationship between fare policies and service planning. Transit agencies often are prompted to modernize fare policies when seeking input during service or network redesigns. These designs can impact how riders use the system, and fare policies such as transfers may need to be adjusted based on service changes. Research could look at how to align service structure changes—such as moving toward multiple hubs, bus and rail connections, more frequency, and new bus rapid transit–style services—to the appropriate fare policies based on providing a better customer experience. • Use of data to improve agency operations. The data collected through a smarter fare pro- gram can help service planners better understand individual trip patterns and modify service to better meet rider needs. Further research could explore how to best take advantage of the data generated from new fare technology and how fare capping influences rider behavior. Fare capping also may present additional opportunities for agencies to engage with riders, through loyalty programs or communication to encourage the use of public transportation.

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Transit agencies in the United States are beginning to experiment with fare caps to ensure that passengers who pay for single rides do not pay more than multiple-ride passes included in their fare structure.

The TRB Transit Cooperative Research Program's TCRP Synthesis 160: Fare Capping: Balancing Revenue and Equity Impacts includes a review of the literature; a survey of 35 North American transit agencies that have recently considered implementing, are in the planning stages of implementing, or have implemented fare capping; and detailed case examples for five transit agencies that provide greater insight into the motivations, program designs, implementations, and lessons learned.

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