[Archived] Question # 40: What would be the fiscal impact of a full elimination of fare collection for DASH bus service?

Question:

What would be the fiscal impact of a full elimination of fare collection for DASH bus service? What would be the fiscal impact of elimination of fares on individual routes? What would be the estimated ridership impact of such a change? What intergovernmental revenues may be available from the proposed “Transit Incentive Program” currently proposed for funding in the Commonwealth’s budget? (Mayor Wilson)

Response:

• 1.What would be the fiscal impact of a full elimination of fare collection for DASH bus service?
• 2.What would be the fiscal impact of elimination of fares on individual routes?
• 3.What would be the estimated ridership impact of such a change?
• 4.What intergovernmental revenues may be available from the proposed “Transit Incentive Program” currently proposed for funding in the Commonwealth’s budget?
• 5.Are there any other fare reduction options that may be viable?

1. What would be the fiscal impact of a full elimination of fare collection for DASH bus service?

3. What would be the estimated ridership impact of such a change?

Full Fare Elimination Scenario

Most simply, the impact would be a loss of the $4,024,000 in passenger revenue budgeted in FY 2021, offset by $256,000 in operating cost savings, for a net fiscal impact of $3,768,000.

The ridership impact of such a change is difficult to determine accurately as there have been few precedents. DC Circulator’s experiment running fare-free in 2019 needs to be studied in greater detail (data is not presently available to staff). A conservative estimate of 10% ridership growth would result in a ridership increase of approximately 277,000 from projected FY 2021 revenue boardings of 2.77 million.

Potential Operating and Capital Cost Savings

There are at least two factors that could mitigate this revenue loss and corresponding subsidy increase. The first is indirect and uncertain, which is that the assumed increase in ridership from fare-free service would lead to an increase in operating grant support from the Commonwealth. The ridership impact, however, is very difficult to model or predict, as is how this would precisely impact state operating support. This operating grant is also paid directly to the City’s trust account with the Northern Virginia Transportation Commission (NVTC) and is used to offset the City’s operating and capital contributions to WMATA. The actual impact to the City’s ability to fund DASH is therefore indirect.

The second mitigating factor, the savings of operating and capital costs of fare collection, is both direct and quantifiable. Staff estimate annual operating cost savings of roughly $256,000 (included above).

For reference, recent capital investments in fare collection include the following (to be clear, these are not anticipated future savings):

Future capital investments in fare collection could potentially include electronic validation equipment for a future DASH, WMATA, or regional mobile app and/or new fareboxes. WMATA is currently in the development process for its next generation farebox. Most likely, DASH would not be required to upgrade its entire fleet at once when that farebox is introduced. Rather, new fareboxes would be introduced with each new replacement or expansion bus.

Impact of DASH Fare-Free vs. Metrobus Maintaining Fares

Finally, it should be noted that operating DASH as a fare-free system introduces a disconnect between DASH service and other regional transit service, most notably Metrobus. The DASH and Metrobus networks are designed to be complementary rather than competitive. This will be even more the case in the new Alexandria Transit Vision Plan network which assigns different corridors to the two providers. For one route to be free while the other is not, when these routes serve different communities, neighborhoods, and activity centers, could introduce equity concerns. Depending on the outcome of WMATA’s FY 2021 budget process, Metrobus riders connecting to Metrorail would essentially have a free trip with the increase in transfer discount rising to the full $2 bus fare, however this would not be the case for riders only utilizing Metrobus.

2. What would be the fiscal impact of elimination of fares on individual routes?

3. What would be the estimated ridership impact of such a change?

As noted above regarding DASH vs. Metrobus routes, staff likewise do not recommend the elimination of fares on some DASH routes and not others, primarily due to equity concerns. At the same time, this has the potential to increase the complexity of the system for customers. It is easy to imagine customers being confused about which buses charge fares and which do not, especially when multiple routes serve the same stops and when customers are transferring between routes. Forecasting the fiscal impact on an individual route basis is also challenging to do accurately since the impact on each route will depend on whether other adjacent routes are free.

Off-Peak Fare-Free Scenario

If an option with a more limited fiscal impact than full fare elimination is desired, staff propose the elimination of fares during off-peak periods. The peak period is 6:00-9:00am and 3:00-6:00pm on weekdays. This proposal would therefore eliminate fares at all other times.

In an off-peak fare-free scenario, staff estimate a $2.0 million decline in passenger revenue, from $4.0 million budgeted for FY 2021 in a no-change scenario. This is based on an increase in revenue boardings of about 138,000 trips (5%). Including current fare-free ridership (students, King Street Trolley), this would represent a 3.6% total ridership increase over the baseline FY21 scenario.

In calculating the fiscal impact, staff made the following assumptions:

1. FY21 baseline revenue boardings will increase 4.6% from FY 2020 to roughly 2.77 million. The increase is due to ridership losses in FY 2020 during WMATA’s Platform Improvement Project and the full-year effect of service enhancements on the AT-1 Plus and AT-9.

2. With free off-peak fares, 15% of current peak riders will move their trips to the off-peak periods. Many riders must travel during the peak to commute to work, however customers running errands may be able to change their schedules to take advantage of free fares.

3. Free off-peak fares will lead to a 5% overall ridership increase. Ridership gains will not be limited to the off-peak period. Many customers will be able to take advantage of off-peak free trips even if the other half of their commute is during the peak period. Ridership gains, peak and off-peak, may be much more significant. However, staff believe this is a conservative estimate. Staff will continue to research potential benchmarks such as the DC Circulator’s period of free service in 2019.

There would be no significant fare collection cost savings in eliminating fares during off-peak periods. Every bus would still need to have its farebox serviced every night and cash would still need to be securely collected, counted, and deposited. It is possible that DASH’s contribution to the SmarTrip budget may be slightly lower due to reduced usage-based fees in this scenario.

4. What intergovernmental revenues may be available from the proposed “Transit Incentive Program” currently proposed for funding in the Commonwealth’s budget?

The recently passed transportation bill by the Virginia General Assembly (HB 1414) directs the Commonwealth Transportation Board to “establish a Transit Incentive Program to promote improved transit service in urbanized areas of the Commonwealth with a population in excess of 100,000 and to reduce barriers to transit use for low-income individuals” (§ 33.2-1526.1:2).

Materials available from the General Assembly estimate that roughly $1.9 million will be available statewide in FY21, rising to $4.7 million by FY24. The bill provides that a maximum of 25% of this funding shall be used “to support the establishment of programs to reduce the impact of fares on low-income individuals, including reduced-fare programs and elimination of fares.” Presumably the remaining funding in this Program will be used to further its other goals, including the “establishment of routes of regional significance, the development and implementation of a regional subsidy allocation model, implementation of integrated fare collection, [and] establishment of bus-only lanes on routes of regional significance.”

Over the coming months, staff expect the Board will establish funding guidelines and opportunities for grant applications. Given the funding expectations set by the legislation, it is reasonable to assume funding will be available to help support the design and development of reduced-fare or no-fare programs. Full funding of such programs appears to be beyond the scope of this legislation.

5. Are there any other fare reduction options that may be viable?

Yes, a discount or free DASH pass to low-income household would target a fare revenue reduction to the persons who need it most.

Printable Version