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Let's Knock Off the Fare Box

Most BC transit authorities in the dark about the real costs of collecting fares.

Dave Olsen 12 Jul

Dave Olsen is a bicycle and public transit consultant, researcher and advocate who lives in Vancouver. This article is part of his series funded by readers and supporters who made tax-deductible donations to the Tyee Fellowship Fund for Solutions Reporting.

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[Editor's note: This is the fourth in a five-part series funded by you, the readers who donated to a Tyee Fellowship for Solutions-oriented Reporting. To find out more about Tyee Fellowships, click here. To learn more about the series' author, Dave Olsen, go here. Or listen to the audio interview with Olsen by Katherine Gretsinger.]

Of all the reasons to quit charging people to take the bus, one of the most important ones has to do with how inefficient and expensive it is to shake loonies loose from riders.

Simply put, collecting bus fares costs a lot of money. There can be no doubt about this, since it takes both machines and people to sell, make and distribute tickets and collect, count and deposit cash.

Granted, fares add up to a major chunk of change for transit operators -- TransLink for instance gets about one-third of its annual budget charging passengers, with the remaining two thirds coming from property taxes and fuel surcharges. (More on how we could replace this type of inefficient fare collection with larger, more consistent funding streams tomorrow.)

Regardless, just how much money it costs to collect and enforce fares is a matter of great debate, and surprisingly little fact.

No fare estimate

I tried to get the hard numbers in British Columbia by repeatedly contacting the eight largest transit systems in B.C., as well as the branch of B.C. Transit that supports the smaller transit systems. TransLink, with a transit-dedicated operating budget of $500 million in 2005, told me it spends an estimated $2.4 million each year on producing what are called "fare media" -- things like month and day passes, transfers, vending machine tickets and any of the range of other specialized transit products available to customers (U-Passes, FareCards, FareSavers, community passes and the like).

But that number leaves many other costs associated with fare collection completely out of the picture, including the expensive machines used; the collecting and counting of money; commissions to third-party vendors; lost productivity for bus trips due to having to explain prices and accept payment from riders; the staff time involved in figuring out when and how to raise fares; and so on.

And that's not even considering the costs of enforcement: TransLink has been bombarding riders with advertisements about fare-paid zones on buses and how they consider it illegal to give or sell valid transfers, as well as creating Canada's first transit police force two years ago, with an annual budget of over $12 million.

Funny numbers

In a similar fashion, Barry Miller, a spokesperson for B.C. Transit in Victoria, said that his organization estimates their fare collection costs at less than two per cent of the revenue collected. That estimate did not include the cost of prepaid media or the capital cost of the fare boxes, or even the costs of debating and deciding fare changes.

Steve New, senior vice president for the Municipal Systems Program of B.C. Transit, gave another low estimate.

His organization provides support to the 24 smaller systems around the province, and in an interview with The Tyee, New stated that the annual cost of fare collection is "not material" in the discussion on free fares in the transit systems under his watch, like the ones in Nanaimo and Kamloops.

When pressed, he offered the following guess: "Fare collection costs are not publicly reported. I'd estimate these costs at less than two per cent of the revenue collected."

None of the other transit system operators I e-mailed could even provide an estimate of any of their fare collection costs. Can you imagine a business, a co-op, or any type of organization choosing a method of collecting money for its services without knowing what it costs to do so?

The BC lowball

Looking south shows there's reason to question the low figures transit bigwigs put forward in B.C.

King County's Metro Transit System, which includes the city of Seattle and an estimated population of just under two million, conducted a comprehensive assessment of the cost of collecting fares in 1999.

Chuck Sawyer, supervisor of Metro's Research and Information Section, said when it comes to tallying up just how much it costs to charge riders, their numbers are much higher -- about $6 million, or 10 per cent of the revenue collected that year. (That's the equivalent of 14 new buses.)

While that figure is still an estimate, it better reflects the real costs involved, taking into account expenditures for fare media production, distribution, sales and promotion; cash collection and counting; accounting; and employee discount passes, not to mention the cost of staff time associated with fare analysis and policy.

They estimate that in 2006, the costs of fare collection are still 10 per cent of the revenue collected, now about $8 million or 18 new buses per year.

Big Apple bite

As noted earlier, TransLink estimates its costs of fare media production to be $2.4 million each year (about six new buses).

In an interview with The Tyee, Glen Leicester, TransLink's vice president of planning, said the other costs identified by King County above were not included because it's not possible to directly link the staff and overhead costs associated with the various processes.

A major analysis of U.S. public transit systems found that for larger systems, fare collection costs can be as high as 22 per cent of the revenue collected.

Another study showed that New York City's Metropolitan Transportation Authority spends roughly $200 million a year just to collect money from transit riders.

Them's the brakes

If you think newer, more efficient technology is the cure, bear in mind that TransLink's effort to stock each of its buses with new electronic fare-boxes cost $21,500 apiece, to the tune of $27 million to outfit the entire fleet. Just this one-time cost alone added up to 50 per cent of the cash collected by these fare boxes in 2006 -- the equivalent of 58 new buses. Every replacement bus since 2001 has had to have a fare box installed as well.

With those expensive new boxes came new headaches too. Take the U-Pass fiasco, for example.

For students at the University of British Columbia and at Simon Fraser, the annual discounted student passes include a mandatory fee tacked on to tuition. But during that program's first year, 13,000 faulty and damaged U-Passes were delivered to students, highlighting the kinds of kinks that often accompany adopting new technology.

When their new machines couldn't read the cards, some operators attempted to confiscate passes, which registered as invalid. Others prevented students from boarding, even though it was a fare-box error.

A student on the SkyTrain was fined for using a faded pass despite the fact that TransLink was well aware that the printing on some U-Pass passes wears within a few months of use, to the point that the student's name and photograph are no longer legible.

Although counterfeit U-Passes do exist, it still strikes as odd that in an age of global warming, riders are presumed guilty and required to prove themselves innocent for trying to take the bus. How would you choose to travel after being prevented from making your class, meeting, or work shift on time or at all?

Fare box 2.0

Despite the costs of the current fare boxes, Leicester said TransLink is already planning to replace them with so-called smart card technology, although he didn't know how much this would cost.

Metro Transit in Seattle has been converting to smart card technology since 2003 and expects to finally launch its new collection system in 2008. Sawyer said staff time for this project has been significant.

In Toronto, the city's Transit Commission is also considering smart cards, although expected costs of that switch -- $260 million for card readers, vending machines and retrofits and $11 million a year after that -- have some transit authorities there saying the money could be better used in improving service.

'Not enough buses'

Meanwhile, TransLink continues to promise to add more full-size buses to their system in Greater Vancouver. Similar promises were made the previous three times TransLink raised fares since June of 2000. But recent correspondence from TransLink shows that at the end of 2006, it had 1,190 full-size and articulated (extended) buses -- also known as conventional buses -- the same number it had in 2001, when the first promise of more buses was made.

In fact, TransLink doesn't even seem to know what it is promising. The company ran an ad in the May 24, 2007, edition of the Georgia Strait announcing 203 new buses in 2008. The finer print, however, stated 94 were new and 109 would be replacements. Another press release said there will only be 90 new buses. Whatever the number, if it actually happens this time, it will be the largest bus expansion in 31 years.

Transit advocates say it's high time. According to one news report, one-third of bus routes on the Lower Mainland were identified as overcrowded in 2005. Ridership has grown from 129 million in 2000 to a projected 164 million in 2006.

Jim Houlihan, a spokesman for the union representing bus drivers, has stated there just aren't enough buses on the road, a source of stress for drivers because bus service has not kept up with increased ridership.

"We are 300 to 400 buses short, ridership is through the roof and [there are] zero spares in our system, and [there are] not enough buses on the way," he told the CBC.

Invisible turnstiles

In 1996, the Maryland Mass Transit Administration (MTA) wanted to figure out how to stop transit riders from cheating. Its Central Light Rail Line was "barrier free" and operated in a way similar to the SkyTrain in Vancouver. MTA wanted to know whether it should start using barriers in order to force people to pay their fares.

The study found that any type of barrier system would create significant new costs and numerous operational difficulties. More people would pay, yes, but the cost of making them pay would be higher than the revenue from extra fares collected.

Their analysis showed that the least expensive alternative would cost the MTA $18.54 for each potential fare dollar recovered over a 10-year period. In other words, if $1 million is currently lost to fare evasion, it would cost at least $18.5 million to collect that money.

Pays not to pay

All of which brings us back to the logic of fare-free transit.

Whidbey Island's transit planners came to a similar conclusion when they did their own studies two decades ago.

During the year prior to the commencement of Island Transit's service in 1987, they did an extensive cost-benefit analysis of collecting fares and found that either no significant revenue would be generated for Island Transit, or that the costs of collecting fares would exceed the revenue generated.

Skagit Transit in Washington State recently calculated that it takes in $121,300 from fares but spends $133,385 to collect them. The irony here is that the system started out fare-free and changed to a user-pay system because taxpayers did not want people to have a "free ride." Now it costs taxpayers more than when it was fare-free.

In 1994, a report by the Washington State Department of Transportation came to the following conclusion:

"The cost of adopting a fare-free policy is minimal. Half of the transit systems in Washington return less than a 10 per cent fare box recovery rate. Our analysis demonstrates that once the costs of collecting fares are deducted (usually from 2 per cent to 7 per cent of operating costs) little, if any, net revenue is generated. We conclude that fare-free policy does make a difference and that smaller communities especially are better served by a fare-free transit policy."

All of the 24 transit systems supported by B.C. Transit's Municipal Systems Program are smaller or of a similar size to Island Transit's fare-free system's service population, and so it stands to reason they too could benefit from doing away with fares.

A TransLink tally

Back in 2001, when TransLink removed all of the old fare-boxes from our buses, if instead of installing the current ones, they simply converted our system to a fare-free system, we would have saved (em>at minimum $240 million (and counting). How? Let's add it up:

At roughly half a million dollars per new bus (regular diesel buses cost $465,000), TransLink could now be celebrating the fulfilment of their original promise of a fleet of 1,600 buses, made back in 2000.

(None of this, by the way, includes the huge costs involved in converting to smart card technology, as is being considered in Toronto. Making the switch, which many experts say is an inevitable move to improve efficiency, could easily add hundreds of millions more to the total spent gathering change from riders.)

Instead, TransLink recently forced a fourth fare increase upon us for a service that is overcrowded and literally breaking down.

But what about the money that wouldn't have been collected if TransLink had had the foresight and fortitude to go 'fare-fare' like the dozens of Hasselt and Island Transit inspired systems have done around the world? That is a question best answered tomorrow, in the final part of this five-part series.


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