This article has been broken off from the February 2012 Metrolinx Meeting report given its size and the fact that much information here does not actually come from that meeting. Comments related to Presto have been shifted to this thread.
In the original article, I reported a series of questions posed to Metrolinx about its Presto card and fare structure. I have now received responses, and these have been interpolated into the text.
On January 9, 2012, following the last Metrolinx Board meeting, I posed a number of questions to clarify some of the statements and discussions. These were answered during the week of February 13. In the text below, the Metrolinx response is given “as is” as a quoted block.
Question: How will the fare increase be administered for passholders? Will they pay for February at the old rate including the current, higher discount?
Monthly pass holders will still have the opportunity to buy their February monthly passes at the old discount rate. Starting February 18, however, monthly pass holders will continue to receive a discount, but at a lower rate –15% off the cost of 40 single-ride adult tickets and 30% off the cost of 40 single-ride student tickets.
Question: If someone prepaid for a pass, they would get the entire month at the “old” rate. However, the way Presto works is that it deducts full fares from your account balance until you get to the maximum for the month. Will a Presto rider will pay fares at the old rate up to the cutover date, then at the new rate until they hit the maximum fares for the month where the free loyalty bonus trips cut in? Will the cost for February will be a blended value of the old and new rates.
Yes. PRESTO customers will pay their fares at the old rate until February 17. Starting February 18, PRESTO customers will pay their fares at the new rate for each ride.
Question: How long will old multi-ride tickets will continue to be accepted? This was answered in a report on the February agenda — July 31, 2012.
Question: The entire discussion of the rationale for or against a tiered fare increase and, if so, how it should be structured, was, at the very least, confusing and at times almost evasive. Some of the statements made during the Board meeting and information in the presentation/report simply did not line up. For example, it was clear that the question of true fare by distance uncovered a lack of full understanding of your cost base and how it would vary depending on service level and/or ridership.
In reply to a question, Bruce McCuaig stated that the majority of costs are fixed in nature and not related to the distance travelled. From the presentation, we know that diesel fuel is a high area of cost pressure and from the financial statements, we know that it’s about 1/3 of total costs.
Some of our costs, such as the cost of diesel fuel, do vary based on the distance travelled. As a result, we have implemented a three-tiered fare increase starting February 18.
Comment: The increases are proportionally lower for long trips than for short ones, although not quite as blatantly as in some previous increases. This continues a pattern whereby “equity” in fares based on distance travelled declines, and GO is favouring the long-haul commuter over those closer to the 416. This has implications for a future world in which GO becomes a regional rapid transit system, but may not be appropriately priced as an alternative to local systems.
Question: The fact that a train is there at all is as much a policy decision as it is one driven by ridership. The Kitchener-Waterloo trains are not full when they leave Guelph, and the KW passengers could be served by a shorter train.
GO Transit determines the train length for train trips on a corridor by the maximum load along that corridor, rather than ridership numbers at a particular station.
Question: The problem then becomes how much of the cost of running 12-car trains all the way to KW should really be borne by riders coming from that far out?
This fare increase is about ensuring a fair and balanced payment system. Introducing three different increments of increase means that passengers who travel shorter distances will pay less of an increase than passengers who travel longer distances. These rates support the fare-by-distance system that GO’s fares are based on.
Comment: But fares are not entirely based on distance travelled, and as GO itself acknowledges, many of its costs are not a function of trip length. “Distance” is one measure that can be used to apportion fares, but it is not the only one, and no method will produce a “fair” result especially when service exists to support a policy (minimum frequency of trains, availability of service as an incentive not to drive, etc.)
If we regard the existence of a train in the schedule as a fixed cost, then there is little difference in carrying a passenger from KW or from Weston because you have to operate the capacity for the Weston passenger all the way to KW, at least on the trains that travel that far.
I will be the first to admit that this is a rather nasty line of questioning because it delves into the whole underpinning of GO’s fare and cost structure. Fare-by-distance is a superficially “fair” way of charging for service, but the cost of providing that service on either a marginal or fully-allocated basis does not necessarily translate to a uniform value for each unit of “service” consumed. A simple example is that the cost of a train is shared by fewer and fewer riders the further out one goes, and therefore the cost per rider goes up quite steeply as the occupancy of the train declines.
Question: If for policy/political reasons, GO starts running all-day service to, say, Georgetown, should the marginal losses of this be borne by riders on that line, by the GO riders in general through fares, or by increased subsidy? In particular, should the government/agency get kudos for service improvements that have lower cost recovery only to tell riders that they must pay for these through higher fares?
GO Transit sets fares based on the distance travelled by a customer and to cover the cost of operations across the system, rather than for a particular service. These costs include bus and rail operations, corridor operations, and peak/off-peak service.
Comment: Running trains all day both ways will inevitably result in lower utilization of capacity and an increased cost per trip. There is a cost to the policy of running better service (as we have seen on the TTC). Will riders face increased fares to maintain GO’s farebox recovery ratio when less-productive services are introduced?
Another issue in cost allocation is that since GO contracts out a lot of work, the cost drivers at the contract level may be different from those one might see if the functions were in house. These factors may not be linked to variables directly affected by passenger volumes or distances travelled, but rather to equipment usage. These values are almost certainly confidential and dis-aggregating them in a public report could prove troublesome.
Question: In the meeting, it was claimed that the cost per passenger is $10, with a $2 (20%) subsidy per passenger. However, the fare presentation pegs the average fare at roughly $6.50 (two different numbers are cited, one in the report, another in the presentation foils). Where does the other $1.50 come from? That’s a lot of “other revenue”.
GO Transit has two major sources of operating revenue – customer fares, which made up about 82 per cent of our operating costs for fiscal year 2010-2011, and a Provincial subsidy. Our cost-recovery ratio – one of the best in the world at 82 percent – helps us to minimize subsidy requirements from the Provincial government, something that benefits the Province and taxpayers as well.
It should be noted that the sundry revenues also helps us to keep down the average passenger fare, which is about $6.50. These sundry revenues include advertising, track fees on rights-of-way owned by Metrolinx, rental fees, and proceeds from the divestment of assets, such as the sale of old locomotives.
Comment: This answer perpetuates the same inconsistencies that we heard at the meeting. First off, if fares are 82% of operating costs, and the cost per passenger is $10, then the average fare must be $8.20. If sundry revenues contribute, then they would bridge the difference between the average fare and the average revenue per passenger (which are not the same thing).
For example, on the TTC, sundry revenues account for a few percent of total revenue, and this leads to ongoing confusion between their 70% cost recovery rate for the system and the fact that riders only pay about two-thirds of the cost of running the system. Moreover, sale of used equipment is cited as operating revenue, but it is a non-recurring item that should be booked against capital accounts, not operations.
In the covering report for the Metrolinx financial statements for 2009-2010, the non-fare revenues are described as 3.8% of total revenue, and they have a value of about $11.5-million. This has been declining since a high of about $13.5m in 2007-2008. It is worth noting that the chart correctly does not include gains or losses related to the sale of capital assets. It is still unclear how we get from a reported average fare of $6.50 to a cost per passenger of $10 and a farebox recovery rate of 82%.
Metrolinx reports its finances on a consolidated basis and it is not possible to see the contribution of each component (GO, etc) to the overall picture, nor the cross-subsidization, if any, between divisions. When GO was a separate agency, its financial statements did not break out sundry revenue as a separate item, and so there is no basis for historical comparison.
Any model of cost allocation and fares should not treat occasional revenues as part of the ongoing base. This is especially dangerous if the amounts involved are more than a few percent of total revenues because the disappearance of one-time revenue could have a significant effect on subsidy requirements, fares or the ability to operate service.
What is troubling is that an obvious inconsistency in revenue and cost reporting was not caught by staff or by the Board, or why it has taken a month (and counting) to get an answer to what should be a straightforward question.
The basic problem here, as we saw quite clearly during the January Board meeting, is that Metrolinx staff either do not understand how their costs and revenues work, and how these interact with the fare structure, or they are deliberately obtuse in answering questions. There is no perfect way to allocate costs and to set fares relative to service consumption, but Metrolinx clouds the issue with what appear to be policy-based fares (artificially low costs for long trips).
Question: In the original comment thread, the matter arose of how Presto discounts would apply for riders who do not travel between one set of stations on the system. On the GO website, the operation of discounts is described thus:
With the built-in loyalty program, adults will receive fare discounts similar to the discounts currently offered with GO adult 10-ride tickets and monthly passes.
If you take the same GO trip each time you travel within a calendar month, your GO fare* will be:
- Rides 1 – 35, 7.5%** off the single adult GO fare
- Rides 36 – 40, 87.5%** off the single adult GO fare
- Rides 41+, 100% off the single adult GO fare
If you do not take the exact same trip each time you travel on GO within a calendar month, your first 35 rides on GO will be 7.5% off the single adult GO fare. For rides 36 and onwards, your discount will be based on the value of the rides you’ve taken that month.
What is not clear is the way in which the discount is calculated for someone who has a primary trip pattern, but who also make occasional trips elsewhere. This would be roughly the equivalent of a monthly pass holder (primary trip) plus occasional riding on the rest of the system. How does the calculation work?
1. For Rides 1 to 35 in a month, a customer will always receive a 7.5% discount for each ride regardless of the origin and destination travelled.
2. For Rides 36 to 40 in a month, the discount will depend on the cumulative amount that the customer spent in the first 35 rides. If the customer spent more (as in travelled occasionally farther than his/her predominant origin and destination), he/she will receive a higher discount that will vary marginally from the posted 87.5% for each ride, depending on travel usage. If the customer spent less, he/she will receive a lower discount that will vary marginally from the posted 87.5% for each ride, depending on travel usage.
3. For Rides 41+ in a month, the same logic as #2 will apply but with a deeper discount, which is based on the cumulative amount the customer spent in Rides 1 to 40.
Comment: This does not clearly answer the question, but appears to say that the discount is calculated against the primary trip pair and then applied to all riding. A worked example would have been helpful.
As GO moves to serve more than just the weekday in-out commuter pattern, those extra trips will be important, and people need to know how they will be charged for them. No doubt GO is wrestling with this as part of figuring out how to get rid of monthly passes as we now know them. Once the need to sell a pass for a specific trip (say from Brampton to Union) disappears, and the network becomes an all-day system to enable trips between many points, the concept of counting trips between specific locations and linking discounts to this falls apart.
On the TTC it will be even more challenging because of the question of what constitutes one “trip” for the purpose of charging a fare and counting up to the threshold where the price falls off, eventually to zero. How will a heavy TTC user be charged for regular or occasional trips on GO or on one of the other 905 local systems?
Once GO figures out a tariff for cross-system fares and frequent usage between a variety of points on its network, it must then turn to how the revenue will be allocated to the participating systems.