Day: June 30, 2016

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The High Cost of Presto Taps

One great irony of annual reports is that they are usually glossy packages meant to say “look how good we are”, but they are like coffee table books where more people look at the pictures, and few read the fine print.

Buried in the Metrolinx Annual Report for 2015-16 are the details of the revenues, costs and subsidies applicable to parts of Metrolinx’ operations. There are specific figures for the UPX and Presto divisions, but not for GO Transit or the administrative/planning side of Metrolinx.

In a previous article, I reviewed the subsidies paid for UPX, and now I will turn to the Presto fare card.

Figuring out just how well Presto is used takes a bit of work because the information appears irregularly in reports to the Metrolinx Board. Here are the relevant excerpts.

June 2016:

PRESTO card taps per month:
February 2016: 16.2 million
March 2016: 17.5 million
April 2016: 17.5 million
**Taps refers to the total number of boardings by month for balance transactions, Period Pass transactions, and Transfers.

February 2016:

PRESTO card taps per month:
November 2015: 17.3 million, up from 15.6 million in November 2014
December 2015: 14.7 million, up from 13.6 million in December 2014
* Decrease in monthly taps for December may be attributed to holilday season

December 2015:

PRESTO card taps per month:
August 2015: 14.0 million
September 2015: 16.6 million
October 2015: 17.4 million

September 2015:

No usage stats reported.

June 2015:

As of June 1, 2015:
More than 417 million taps and $1.3 billion in fare payments to date including period pass taps.

March 2015:

More than 287 million taps* and $1.1 billion in fare payments to date.
*Excludes period pass taps

December 2014:

More than 266 million taps* and $1,032 million in fare payments to date.
*Excludes period pass taps

In the delta from March to June 2015, the tap count changes by 140 million, but the caveat about exclusion of period pass taps disappears. This gives some indication of the proportion of taps that serve pass holders as opposed to single fares.

It is clear that the monthly tap count sits somewhere in the 17.5 million range.

From the Annual Report, we know the revenue (fees from client agencies plus card sales) as well as the cost of the Presto system.

Fee and Sales Revenue     $ 9.454 million
Expenses                  $71.2   million
Net Cost                  $61.746 million

Taps/month                 17.5   million
Taps/year                 210.0   million
Gross Cost/Tap            $0.339
Net Cost/Tap              $0.294

The report is silent about whether there is any inter-divisional payment by GO Transit to cover the cost of Presto transactions in a manner similar to the fees charged to other systems using this fare card. GO Transit’s fare revenue was $464 million, and a 2% charge would amount to $9.3 million, roughly equal to the total fees collected by Presto.

As a matter of comparison, the TTC estimates its fare collection costs at 5% of revenues, and that is the basis for the agreement on Presto fees that the TTC will pay. With an average fare of just over $2, the cost per ride of fare collection is about $0.10. Given that the average ride would involve two taps (on average, riders transfer once in their journey), the cost of fares “per tap” would be about $0.05 on the existing TTC system.

The way the numbers are presented prevents a clear understanding of Presto’s cost or the degree to which it is subsidized either by GO fare revenue or by general subsidy payments from Queen’s Park. A basic question all transit systems using Presto must ask is for a clear understanding of the relationship between the fees they are charged for fare handling and the actual cost of Presto operations.

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UPX Ridership Update (Updated)

Note: The figures showing revenues and costs for UPX have been corrected as of 12:35 pm, June 30.

A section on future ridership requirements vs operating costs has been added.

Updated 5:30 pm June 30, 2016: Due to conflicting information in the Metrolinx Annual Report, it is possible that the level of subsidy per rider has been overstated in the original article. Pending clarification from Metrolinx, I have added a separate version of the calculation taking into account both sets of figures.

Also, the three days in February 2016 cited originally as “missing” were actually free days and these were not included in Metrolinx counts to avoid skewing the averages. Similarly, reporting “zero” for these days would skew the averages. Therefore, the approach taken below of using the previous week’s data, during a period of little change in ridership, allows the moving average and overall trend to more accurately reflect what would have happened in the absence of the promotional weekend.

Updated 5:45 pm June 30, 2016: Metrolinx has confirmed that there is an error in their Annual Report.

Metrolinx has published the ridership for the Union Pearson Express up to the end of May, 2016. The daily counts rose dramatically once fares were reduced on March 9, 2016, and the values are running well above the original projections after a long period of poor performance.

Exact origin-destination counts are not available, but Metrolinx reports that about 80% of travel is to and from the airport while the remainder are trips between other stations on the line.

UPX_Ridership_20160531

Note: In the source data, values are zero for February 13-15, 2016 as this was a free weekend for promotional purposes. The values from February 6-8 have been substituted for continuity.

Total ridership to March 31, 2016 (the end of the fiscal year) was 751,500.

The revenue situation for operations up to March 31, 2016 is revealed in the annual report. Budgeted revenue for UPX was considerably higher than actual.

Source          Actual         Per Rider     Budget
 
Fares           $15,165,000    $20.18        $43,275,000
Other Revenue   $ 8,762,000    $11.66        $ 7,093,000
Total           $23,927,000    $31.84        $50,368,000

According to the report:

UP Express non-fare revenue of $8.8 million consists of sponsorship and partnership revenues earned in the year. [p 43]

Updated June 30, 2016 at 5:30 pm:

There are two separate sets of figures in the Annual Report related to the subsidy. One claims that the subsidy paid was $63.2m while other shows this value as the total operating cost of UPX. This leads to different calculations of  the per rider subsidy. For completeness, I have left both calculations below pending clarification from Metrolinx.

(As of 5:45 pm Metrolinx has confirmed that their original report was in error.)

Revised version:

Metrolinx has published both the total revenue and the total cost for UPX, and from this we can deduce the operating subsidy.

                               Per Rider
Total Cost     $63,200,000     $ 84.10
Revenue        $23,927,000     $ 31.84
Subsidy        $39,273,000     $ 52.26

With a total cost of $63.2m for 10 months’ operation, an annualized value would be about $76m. If the average fare falls to $10 (half the level with the original tariff), then 7.6m riders would be required to break even.

That is equivalent to about 20,800 riders per day, roughly 2.5 times the current level of demand. This would require an average load of about 144 per train on every trip, both ways, to and from the airport, close to a 2-car train’s capacity. (Calculation based on 4 trips/hour each way, 18 hours/day)

A break-even situation is not in the cards for UPX, and it will continue to drain subsidy dollars from other more widely-used parts of GO operations.

Original version (based on erroneous Metrolinx report):

Metrolinx received approximately $233.8 million in operating subsidies from the Province of Ontario, of which $71.2 million was allocated to the direct costs of PRESTO operations and $63.2 million to the direct costs of UP Express. [p 44]

Yes, just over 1/4 of the subsidy paid to Metrolinx went to support the UPX. This does not include any capital amortization which is provided for separately.

                               Per Rider
Subsidy        $63,200,000     $ 84.10
Revenue        $23,927,000     $ 31.84
Total Cost     $87,127,000     $115.94

With a total cost of $87m for 10 months’ operation, an annualized value would be about $104m. If the average fare falls to $10 (half the level with the original tariff), then 10.4m riders would be required to break even.

That is equivalent to about 28,500 riders per day, roughly 3.5 times the current level of demand. This would require an average load of about 200 per train on every trip, both ways, to and from the airport, greater than the train capacity. (Calculation based on 4 trips/hour each way, 18 hours/day)

A break-even situation is not in the cards for UPX, and it will continue to drain subsidy dollars from other more widely-used parts of GO operations.