A TTC Business Case for Smart Cards?

The TTC has published a lengthy report on the subject of Smart Cards.  I am not going to attempt to precis the material here, but the “bottom line” is that, yes, Smart Cards will work, but are we willing to pay the price for what they will give us?

The conclusion observes:

The business case demonstrates that a smartcard system will have definite benefits for customers (convenience), decision-makers (flexibility in policy and pricing), and employees (safety and security). The analysis estimates that the cost for a TTC owned and operated smartcard system is between $250M to $260M in capital, and $11M to $12M in additional operating expenses annually. The business case analysis further shows that while the current TTC fare system does have limitations, it is simple to understand and operate, and is relatively cost efficient and reliable. From a state-of-good repair perspective, the current fare system does not need to be replaced.

There is an interesting table in Appendix H showing the capital cost of various new Smart Card systems on large transit properties expressed per weekday boarding.  The cost cited for Toronto is cheap compared with Boston, Chicago or New York.  Whether this indicates we will do things better and at less cost, or that there is more headroom for overruns, only time will tell.  The time to implement a system on the TTC is projected at six years.

There are without question benefits that would come with Smart Cards.  However, we must decide whether they are worth the investment.  Recent comments at the TTC minimize costs with a shrug “it’s only about $40-million a year”.

As I have said so often, remember this the next time the TTC says that they cannot afford more bus service, or Council balks at the rising cost of transit subsidies.

Amazing, isn’t it, how we have money for the toys, but not for the things we really need.

8 thoughts on “A TTC Business Case for Smart Cards?

  1. Can you explain why implementing a Smart Card system would take 6 years?

    Steve: No. I am as mystified by that very long lead time as you are. By the way, that 6 years only gets us to the pilot stage, and the full rollout is another 4. Sounds like a retirement plan for a project team and/or a consultant.

    The technology will be obsolete before the implementation has completed.

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  2. Steve,

    Stores sell gift cards and profit from their sales because sometimes, people fail to redeem the full value of the card.

    The TTC report reflects that it would want to keep the existing fare structure of one fare flat rate regardless of distance travelled. A driving force should be that the SMART Card Operators have the opportunity to profit from the implementation of SMART Cards.

    Some transit agencies will therefore deduct the maximum fare when a card is presented (read) on entry and later credit the card when presented (read) on system exit. If the card is not presented (read) on exit the maximum fare would be charged.

    Opportunities to enhance revenue by reintroducing zoned fares and/or distance travelled fares as well as the opportunity to realize revenues from unused, or lost cards. Swipe in or you don’t get in and swipe out or you pay maximum fare.

    Not a part of their plan.

    Ray

    Steve: Given the way passengers flow on the transit system, and the long-established pay-as-you-enter fare scheme, I believe it would be next to impossible to have people swipe on the way out. An additional problem would be people swiping, but not actually getting off.

    Frankly, if we are going to make any new system successful, we shouldn’t do it by ripping off passengers for a fare from Oshawa to Hamilton when they only rode a few blocks along King Street.

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  3. I realize that the TTC’s one fare system is simple and accepted and cheap to run. However, I was in Sweden (Skane region) last month and was impressed with being able to get on a bus in Helsingborg, request a ticket to Lund (60 km away), and that covered my city bus – regional train – city bus travel. In addition, I was able to look up bus stop to bus stop schedules on their website. (Of course these wonders may be paid for by the taxes on their 10$ draft beers.)

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  4. My impression, is that IF smart cards were introduced, in the manner proposed, the TTC would not be obtaining their full benefit.

    Perhaps I missed it in that rather lenghty report, but it seems to me, that if smart cards are the way to go, you MUST eliminate any age-based fare media, and any other fare media that requires photo ID.

    In turn, you can completely automate every entrance to every TTC Station, and vehicle, with turnstiles and/or gates (for wheelchair/stroller passengers.

    That permits the elimination of anything more than one ‘collector’ position per shift in any TTC Station (my assumption being that the remaining position becomes security/customer service).

    You also eliminate fare disputes as the machines do all the calculating of fares, and you permit backdoor boarding on every vehicle, at every stop.

    In such a scenario, given the other benefits of smart cards like rider/trip information, reduced use of cash etc., I can see the business case for them.

    But not if you’re going to keep senior/student/kids fares.

    It’s just too much of a hassle, and completely blows away the best benefits of a smart card system.

    Even in the best case scenario, I can’t say smart cards should be the TTC’s first or second priority, but done properly…they should make the top 10.

    Done poorly…they should be shelved before they ever see the light of day.

    ***

    One quick question Steve, is it at all clear how much money the TTC could save by going to a single fare class (no age discrimination), so tokens/passes only, without going the smart card route?

    Steve: Leaving aside the political issue of getting rid of discount fares (it took ages to divert adult students into a discounted Metropass rather than the full “student” discount), the revenue stream of the TTC is overwhelmingly made up of various forms of adult fares. For 2006, the TTC had a total of 444.5-million rides of which about 70-million were seniors, students or children. The total fare revenue was about $737-million. If we assume that the discount fares were paid at half of the full fare (a more generous discount than they actually get), then the revenue is made up of:

    409.5-million adult rides at $1.80 each totalling $674-million
    70-million discount rides at $0.90 each totalling $63-million

    If we eliminate the discount fares, we will gain less than $63-million gross, and considerably less net because riders are driven away. This would offset less than two years’ worth of inflationary increase in total TTC costs.

    If you want to stand up at a public meeting and propose raising fares for seniors, students and children, be my guest. If you can get any politicians other than the knuckle-draggers on Council to stand with you, I will really be impressed.

    Discount fares are deeply embedded in Toronto’s fare structure, and any attempt to get rid of them in the name of “progress”, let alone “new technology” will doom the proposal.

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  5. One major advantage of smart cards (or magnetic fare media) is the ability to install Proof-of-Payment on existing and new streetcar (and bus) lines, improving service quality. Because most streetcar and bus lines enter a fare-paid terminal at some point along their route, and it would be difficult to redesign stations to move buses and streetcars outside the fare-paid area, it would be difficult to install Proof-of-Payment on those lines. The only way that Proof-of-Payment could work with the existing fare system on lines that enter fare-paid terminals is if passengers were required to carry a paper transfer at all times while in the TTC. This would be confusing, unwieldly, and would create a massive litter problem. Smart or magnetic cards eliminate this problem. They would also allow fare inspections to be conducted inside the subway system to catch cheaters.

    Nevertheless, I think that the TTC’s smart card program is poorly managed. It should not take 10 years to fully implement a smart card program, and it should not cost $250 million dollars. Cost savings could be realized by cutting out bells and whistles. For example, the ability to register cards, order cards online, and use cards for non-transit applications could be cut to save money.

    Steve: One issue here is whether the system should be owned and developed by a public agency (the TTC or the GTTA), or if it should have some private component (a bank). There are advantages either way. The private sector, who always tout their abilities in such matters, could step up to the task of “doing it better” and recouping some of the cost through service charges for non-transit usage. That can also be seen as a disadvantage, but I don’t think that it is the TTC or GTTA’s business to go into competition with the banks for stored value cards. There are many layers of security involved in the banking industry that are way beyond the expertise of transit properties.

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  6. I’m a little confused. I thought that the pilot project was to start this summer with Mississauga Transit? Why would it take ten years? Or am I missing something?

    Steve: The TTC is working on its own project in parallel with the provincial pilot.

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  7. Steve

    the thing that attracts me to a validated technology of some form when boarding all street vehicles at all times is that it would make route counting much more accurate. You have observed yourself that TTC counters are often dispatched at times when it would appear to a cynical observer that killing routes was in prospect.

    A student smartcard could flash red on a validator, blue for seniors, green for adults which would alert the driver to a user (and other passengers – hopefully peer pressure still has some effect) who shouldn’t be using it, in conjunction with POP Inspectors on other routes.

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