PHASE II—SCENARIO DEVELOPMENT

Task 4. Development of Scenarios and Evaluation

Introduction

The objective of this task was to develop and evaluate scenarios for a transition to zero-fare transit, which will help explain the benefits/risks of zero-fare transit to a wider audience.

Approach

Scenario Development

The research team developed four detailed scenarios that serve as examples of a transition to zero-fare transit. The scenarios reflect commonly encountered contexts and agency characteristics as identified in the previous phase of the project, including:

• Agency Size: Rural/Tribal, Small Urban, Large Urban/Metro (Larger agencies appear to have a larger dependency on fares for ongoing operations and have very limited data available; based on FTA funding category population ranges.)
• Funding Sources: 5307, 5311, Sales Tax, State Funds, Local/County Funds, Development District (Some funding outside of FTA funds may be at risk due to decision-maker reprioritization impacted by fare-free operation.)
• Modes/Transit Services Operated Fare-Free: Demand Response, ADA/Paratransit, Micro-transit, Bus, Streetcar, Light Rail, Commuter Rail, Heavy Rail (Micro-transit has potential challenges associated with the cost of no-shows, and rail has been separated from bus/paratransit in some fare-free implementations.)
• Peak-Hour Capacity Demands: Heavy/Capacity loading in peak periods (Higher loads during peak hours bring the risk of overcrowding with fare-free operation.)
• Fare Recovery: Low, Medium, High (Higher fare recovery appears to reflect greater dependence on fares for ongoing operations.)
• Regional Services: Inconsistent fare-free policies (Fares collected in some modes/transit services or geographic areas and not in others may greatly impact cost savings for fare collection and intended fare-free policy outcomes.)
• Service Agreements/Fare Dependence: Intra-agency service coordination agreements or direct funding for university, major employer, or resort service (Direct funding for service may be at risk if there is no fare charged; in addition, some agencies are more dependent on fares than others.).

Deliverables

A technical memorandum was developed as a deliverable, including the findings of the scenario development and evaluation. Appendix C comprises the comprehensive draft of the conducted research to define the four scenarios for test analysis, describe the proposed method for calculating costs and benefits, and conduct an initial analysis of the four scenarios to further inform the next steps in this research. Additionally, a high-level summary of the findings and considerations is provided below for concise understanding.

Scenarios Development

Building on the previous discussion of the characteristics and context for fare-free implementation, the four scenarios were developed loosely modelled after real-world agencies and settings found while conducting the research.

• Rural/Tribal – This scenario is reflective of small rural transit districts that often have fairly low fare revenues and a high cost of fare collection. Capacity issues are generally not critical, and the sensitivity to outside funding is minimal. Ridership is often low, and the proportion of low-income riders may be higher than other types of systems.
• Small Urban/Rural with University Support – Transit agencies operating near large college/university campuses have a great opportunity for ridership and are often financial partners with the institutions in various forms. This scenario is reflective of the importance to an agency of preserving these financial partnerships (which could also be large employer agreements or municipal/county support) if fare-free service is implemented. Systems serving colleges and universities often have high concentrations of ridership on the routes linking student housing to the campus.
• Regional – This scenario is reflective of the risk of having a part of a regional system go fare-free while another part does not. In this case, the urban portion of the system has discussed not continuing fare-free operation. Many of the benefits of fare-free operation in one area can be fully or partially negated if an adjacent area does not continue fare-free operations. If any fares are collected, then the fare collection processes must all be in place. This also greatly impacts the intended policy goals. The differing needs of a system with both urban and rural elements can drive conflicting goals.
• Urban – Services may include bus, paratransit, and fixed guideway services. This scenario is reflective of the importance of fares in the overall finances of a larger urban area. These areas also have a greater potential for security issues and increased paratransit service costs (paratransit fare being double the fixed route fare). This alternative also includes participation by a development district and streetcar operation. In this specific example, the agency serves parts of two states, which carries the risk of different support for fare-free implementation and the subsequent loss of benefits. Vehicle overcrowding is also a consideration.

Potential Benefits and Costs

The research findings have revealed a broad range of positive and negative considerations in the implementation of a fare-free operation. It is important to note that these considerations are both quantitative and qualitative. The degree to which these different aspects are considered and weighted is a policy decision at the state and/or local level. The following lists the potential benefits and costs:

• Operations Efficiency and Ridership
• Cost Impacts/Savings
• Funding/Financing
• Transportation Equity
• Air Quality/Greenhouse Gases

Scenario Analysis and Evaluation

The primary purpose of the scenario analysis and the ultimate practitioners’ tool is to provide inputs needed for informed decision-making, rather than offer a definitive recommendation. The research team envisioned the development of the free-fare policy analysis and accompanying spreadsheet tool to be built on the following key areas, tailored to the specific context:

1. State DOT and agency goals with fare-free program – Define the desirable end state.
2. Cost and operations data inputs – This is dependent on local conditions and context.
3. Operations efficiency and ridership – Benefits and challenges with operations, including ridership. Note that fare elasticity for partial fare-free operation is not currently available in the literature.
4. Cost impacts and savings – Based on applicable costs incurred or that can be reduced/eliminated.
5. Funding/financing – Understanding of risk to existing funding and financing opportunities.
6. Transportation equity – Based on specific inputs for historic transportation investments, social capital outlays/underinvestment, regional demographics, community, and ridership profiles.
7. Possible second-order impacts – Identify risks of unintended consequences from fare-free implementation.
8. Mitigation – Identify steps to improve the likelihood of fare-free operation success.
9. Resulting analysis outputs that include: a reasonable ridership range; estimated cost per new rider; benefit-cost ratio; and summary of service-specific and other regional aspects (qualitative or quantitative) related to fare-free operation applicable to that specific agency.

The scenario analysis tested the approach and allowed a thorough review of scenarios approximating actual agencies. In addition to this test, the analysis revealed the following:

• Replacing revenue from lost fares is critical to ongoing maintenance, vehicle replacement, and future service improvements.
• The potential impact of increased paratransit ridership (resulting from fare-free implementation) could be a critical part of the analysis. Understanding the latent demand for this service is essential. These trips cannot be denied and are often the most expensive part of the service to provide.
• A strictly quantitative (costs/cost savings) analysis only tells a part of the story. More often than not, it shows a negative picture of fare-free implementation.
• The ability to easily compare alternatives (side-by-side) with the tool will be important. For example, it would be very informative to show the impact of losing the university partnership with the system in the analysis.
• Articulating the agency goals is essential to success. Understanding reasonable expectations and risks related to these goals is the objective of the practitioners’ tool.

Task 5. Phase II Report and In-Person Meeting

Introduction

The objective of this task is to document the findings of the scenario development and scenario evaluation. The establishment of the scenarios for analysis and the evaluation methodology served as preparation for the in-person project panel meeting. The key objective of the in-person meeting was to review the Phase II findings and prepare for the completion of the practitioner-ready tool.

Approach

The research team developed the second interim report covering the methods and findings of the second phase of the project. The follow-up in-person panel meeting provided a great opportunity to have an interactive discussion with the NCHRP staff and project panel and gain feedback on the findings so far, gaps to be addressed in Phase II, and any initial guidance on the development of the practitioner-ready tool that will be developed in Phase III.

Deliverables

The research team submitted the Phase II report, minutes from the in-person project panel meeting, and an annotated outline of the Phase III plan.

The in-person panel meeting proved to be a valuable contribution to the research and the utility of the final products with an added focus on partial fare-free implementation, interim review of the Practitioners’ Tool, additional outreach to tribal agencies, and updates to the data table. In addition, the research team had the opportunity to coalesce around several themes for the final deliverables that bring focus to our effort and drive the presentation of the results.

Several overall elements in the implementation of fare-free service have risen to the top. Fare-free service has the potential to be an important part of achieving policy goals, including the improvement of equity, operations, passenger experience, and ridership. In most cases, net cost savings will not be realized, and some cost elements may increase (increased paratransit utilization and increased service needs).

• Overall. In general, research shows that fare-free transit can have success in addressing policy goals. Cost savings are possible, but there is also the potential for a net cost increase (particularly if the agency operates an ADA complementary paratransit service) and loss of revenue (beyond the loss of fare revenues). Additional funding will likely be needed to address the net cost increase and/or loss of revenue and its impact on operations and capital replacements. Fare-free transit can have a mix of positive and negative impacts on equity, operations, passenger comfort, security, and operator job satisfaction. Fare-free transit typically increases ridership, but ridership increases may be limited by factors such as the fare policies of other transit operators in or adjacent to the service area and impacts on service levels and capital investments resulting from reduced revenues.
• Improve equity. Fare-free service eliminates a financial barrier, especially for unbanked/low-income passengers. Generally, removing financial barriers to the use of transit systems will increase access to the service and, by extension, the ability for community members to access jobs and other destinations. However, if the loss of fare revenues ultimately results in service cuts and/or delayed capital investments, unbanked/low-income passengers might experience adverse impacts of a different kind.
• Improve operations. Elimination of fares can reduce passenger loading times and, therefore, dwell times. Reduced dwell times might lead to shorter travel times and more reliable service. However, if passenger loads increase to a point at which overcrowding occurs regularly, such overcrowding might increase the amount of time that passengers need to maneuver on board the transit vehicle. More time might be needed at transit stops to ensure that passengers who wish to alight have enough time to make their way to the door of the vehicle. In addition, overcrowding can have an adverse impact on passenger

comfort.

• Improve operator working conditions. Elimination of fares can simplify operator tasks and eliminate fare disputes, which can improve the working environment for operators. However, if fare-free transit increases passenger/passenger altercations and/or increases the number of disruptive passengers, operators may be tasked with managing a greater number of altercations and disruptions. Establishing sound policies regarding all-day riders and behavior supported by the presence of supervisors and other transit personnel as needed (particularly in early phases of implementation) can help ensure success.
• Improve passenger experience. Elimination of fares can simplify the use of the transit system and allow passengers to use it without financial cost. However, some agencies that have implemented fare-free transit have reported increased ridership of disruptive riders and increased passenger/passenger altercations; either situation can increase passenger discomfort and contribute to the perception that transit is less safe/secure.
• Increase ridership. Research shows that fare-free transit can increase ridership—particularly ridership among unbanked/low-income community members. Ridership increases are potentially limited by fare policies of other transit operators in or adjacent to the service area, service cuts resulting from reduced funding, and capital improvements delayed due to reduced funding (e.g., deferred vehicle replacement). Be aware that increased ridership of ADA complementary paratransit services resulting from fare-free implementation can have a significant adverse impact on operating costs.