Impact Analysis of a Potential MBTA Fare Increase in 2009

Impact Analysis of a Potential MBTA Fare Increase in 2009

2009 Pre–Fare Increase Impacts Analysis

Impact Analysis of a Potential MBTA Fare Increase in 2009

Prepared for

Jonathan Davis,

MBTA Chief Financial Officer

Project Manager

Elizabeth M. Moore

Authors

Robert Guptill

Annette Demchur

Contributing Staff

Ian Harrington

Scott Peterson

Nand Sharma

Cover Design

Kim Noonan

Central Transportation Planning Staff

Directed by the Boston Region Metropolitan Planning Organization. The MPO is composed of state and regional agencies and authorities, and local governments.

Draft – July 2009

2009 Pre–Fare Increase Impacts Analysis

2009 Pre–Fare Increase Impacts Analysis

TABLE OF CONTENTS

LIST OF TABLES AND FIGURES

EXECUTIVE SUMMARY

INTRODUCTION

DESCRIPTION OF THE PROPOSED FARE INCREASE

METHODS USED TO ESTIMATE RIDERSHIP AND REVENUE

CTPS Spreadsheet Model Approach

Apportionment of Existing Ridership

Estimation of Ridership Changes

Boston Region MPO Travel Demand Model

RIDERSHIP AND REVENUE IMPACTS

AIR QUALITY IMPACTS

Background

Results of the Travel Demand Model Application

ENVIRONMENTAL JUSTICE IMPACTS

Definition of Environmental Justice Neighborhoods

Equity Determination of Proposed Fares

APPENDIX: SPREADSHEET MODEL METHODOLOGY

Apportionment of Existing Ridership

Price Elasticity Estimation

Price Elasticity

Diversion Factors

Examples of Ridership and Revenue Calculations

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2009 Pre–Fare Increase Impacts Analysis

LIST OF TABLES AND FIGURES

TABLES

E-1 / Range of Revenue and Ridership Projections for the Proposed Fare Increase……. / 1
1 / Range of Ridership Projections for Proposed Fare Increase………………………. / 11
2 / Range of Revenue Projections for Proposed Fare Increase………………………... / 11
3 / Range of Revenue and Ridership Projections for the Proposed Fare Increase: Summary…………………………………………………………………………… / 12
4 / Projected Average Weekday Changes in Selected Pollutants (Regionwide)……… / 14
5 / Existing and Proposed Average Fares for Environmental Justice TAZs………….. / 16
A-1 / Single-Ride and Pass Elasticities by Mode………………………………………... / 17
A-2 / Simplified Price Comparison Summary…………………………………………… / 17
A-3 / Detailed Price Comparison Summary……………………………………………... / 18

FIGURES

1 / AFC Fare Categories………………………………………………………………. / 5
2 / AFC Modal Categories…………………………………………………………….. / 6

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2009 Pre–Fare Increase Impacts Analysis

EXECUTIVE SUMMARY

The Massachusetts Bay Transportation Authority (MBTA) was facing a major budget deficit for fiscal year (FY) 2010 (July 1, 2009–June 30, 2010). The state legislature recently passed a budget that will close most of this gap; however, the Authority still faces the prospect of significant budget deficits in future years given the current and expected balances of its revenue and expenses. The MBTA has limited means by which to raise revenue sufficiently to close future budget deficits. These means are raising fares, reducing service, or a combination of both. The MBTA has proposed a fare increase of approximately 19.5 percent, which is projected to raise revenue between $52.3 million and $69.0 million annually. The purpose of this report is to project the impact of this potential fare increase on ridership, revenue, air quality, and environmental justice.

CTPS, using a spreadsheet model, assisted the MBTA in determining the fare levels for each mode and fare category that would be needed to reach the revenue targets the MBTA had established. It then used several analysis techniques in estimating and evaluating the impacts of the proposed fare increase. Both the spreadsheet model and the Boston Region Metropolitan Planning Organization (MPO) regional travel demand model were used to estimate the projected ridership loss associated with any fare increase and the net revenue change that would result from the lower ridership. By employing both techniques, a range of potential impacts on ridership and revenue were produced. The travel demand model was also used to predict the effects of the fare increase on regional air quality and environmental justice.

A summary of the total ridership and revenue projections for the proposed fare increase for each estimation methodology is presented in the following table. As the table indicates, CTPS estimated a smaller increase in revenue and smaller decrease in ridership when using the travel demand model than when using the spreadsheet approach. The difference in revenue gain is primarily due to the two models’ differing estimates of the loss in commuter rail and commuter boat ridership. Specifically, when using the travel demand model, CTPS projected a loss in commuter rail and commuter boat ridership from the fare increase almost double that projected when using the spreadsheet approach. Because commuter rail and commuter boat represent two of the MBTA’s highest-priced modes, the travel demand model’s estimate of a greater ridership loss for these services also results in a smaller estimated systemwide revenue gain.

Table E-1
Range of Revenue and Ridership Projections for the Proposed Fare Increase
Annual Revenue and Ridership*
Spreadsheet Approach / Travel Demand Model
Existing / Projected / Change / % Chg. / Projected / Change / % Chg.
Revenue / $459.5M / $528.5M / $69.0M / +15.0% / $507.1M / $52.3 / +11.4%
Ridership / 373.2M / 354.5M / -18.7M / -5.0% / 363.6M / -9.6M / -2.6%

*Ridership figures are based on daily boardings or unlinked transit trips.

Both the spreadsheet model and the travel demand model had been used to predict the changes in ridership and revenue that would result from the 2007 MBTA fare increase. Subsequent to that increase, CTPS conducted an analysis that shows the projections from the spreadsheet model to be closer to the actual changes in ridership and revenue that occurred after that fare increase was implemented than are the projections from the travel demand model. This suggests that the spreadsheet model is the more accurate tool for predicting the ridership and revenue impacts of the currently proposed fare increase. However, using both models in combination helps to define a range of probable outcomes of the increase.

Very little impact on air pollution is expected as a result of the proposed fare increase. The predicted increase in the levels of carbon monoxide, nitrogen oxides, volatile organic compounds, carbon dioxide, and fine and coarse particulates is, in each case, at or below 0.13 percent. The low estimated magnitude of the air quality impacts is due in part to projections that approximately a quarter of those who leave the transit system owing to the fare increase will choose to walk and the other three quarters, although shifting to auto, will have higher-than-average occupancy rates, overall, on their trips.

The findings indicate that the proposed fare increase does not place a disproportionate burden on environmental justice communities. Low-income and minority communities are currently (pre–fare increase) paying lower average fares than the systemwide average fare, and they will continue to do so after the fare increase.

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2009 Pre–Fare Increase Impacts Analysis

INTRODUCTION

The Massachusetts Bay Transportation Authority (MBTA) currently faces serious financial problems. The state legislature recently passed a budget that will provide an additional $160 million in funding to the MBTA through an increase in the state sales tax. This will help to close the MBTA’s fiscal year (FY) 2010 (July 1, 2009–June 30, 2010) budget deficit; however, given continued increases in operating expenses, projected decreases in revenue, and growing debt service costs for capital investments, the Authority will continue to face deficits in future years.

The primary methods that the MBTA has at its disposal for addressing future deficits are raising fares to increase revenue and reducing service to decrease operating expenses. The MBTA recently explored various combinations of fare-increase and service-reduction levels to close the future budget deficits. It decided that a fare increase alone would be the most cost-effective option and the one least disruptive for MBTA customers. The amount of the fare increase proposed by the MBTA is directly related to the additional revenue that is needed to maintain existing levels of service through FY 2012.

The first step in the analysis process was for CTPS, in consultation with the MBTA, to determine the fare levels for each mode and fare category that would be needed to reach the MBTA’s revenue targets. This was accomplished through an iterative process in which CTPS utilized a spreadsheet model that was specifically developed to analyze the degree to which ridership and revenue would change if fares were raised by varying amounts. CTPS also produced alternative estimates of the increase’s impact on both revenue and ridership using the Boston Region Metropolitan Planning Organization (MPO) regional travel demand model. A comparison of the projections of each model provides a range of estimated impacts on ridership and revenue. The impacts on air quality and environmental justice were projected using the travel demand model.

In the following sections, this report presents detailed discussions of the proposed fare increase, the estimation methods used by CTPS in its analysis, and the projected impacts on ridership, revenue, air quality, and environmental justice.

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2009 Pre–Fare Increase Impacts Analysis

DESCRIPTION OF THE PROPOSED FARE INCREASE

CTPS modeled the impacts of a proposed fare increase that is projected to increase annual revenues by approximately $69.0 million. During development of the proposed fare levels, the MBTA decided not to make any changes to the fare structure. Significant time and effort were expended before the last fare increase, implemented in 2007, to simplify the fare structure and to provide riders with incentives to use the CharlieCard fare media that facilitate transfers between modes. While the proposed fare increase raises prices for various fare-type categories at varying levels, the suggested changes do not conflict with or alter the goals of the previous restructuring.

Figure 1 summarizes existing and proposed fares. Figure 2 is a detailed list of existing and proposed fares for each fare category, along with the percentage change in price from the existing to the proposed price. The overall price increase across all modes and fare categories is approximately 19.5 percent. This weighted average was estimated by multiplying the percentage change in fare for each fare category by the existing ridership in that category.

The largest proposed percentage increases in price are for local bus, express bus, and rapid transit CharlieTicket and onboard cash fares. These increases are higher than the more modest increases in the CharlieCard fares, due to increases in the surcharge percentages assessed to CharlieTicket and onboard cash fares for the local bus, express bus, and rapid transit modes. As a result, while the CharlieCard fares for local bus and rapid transit service increase by 20.0 percent and 17.6 percent, respectively, CharlieTicket and onboard cash fares increase by 33.3 percent for local bus and 25.0 percent for rapid transit.

The increase in CharlieTicket and onboard cash surcharges is most apparent in the difference in price for transfers between local bus and rapid transit service. Under the proposed fare increase, with a CharlieCard, a “step-up” transfer between the modes would make the total price for a linked trip $2.00. The “step-up” transfer benefit is not available on CharlieTickets, however, resulting in a total proposed linked-trip price of $4.50 using CharlieTickets or onboard cash.

Pass prices increase by less than the respective single-ride fares. They increase by various amounts in order to maintain or revise certain cash-fare equivalents (based on the lowest-priced respective single-ride fare), which are the number of single-ride trips equivalent to the total pass price. The cash-fare equivalent of commuter rail passes, for example, currently ranges from 31.05 to 33.60 trips per pass; under the proposed fare increase, the cash-fare equivalent would range from 31.17 to 32.97 trips per pass. The cash-fare equivalent would also decrease or remain virtually the same for local bus, express bus, and rapid transit passes.

The proposed fare increase sets local bus and rapid transit fares for seniors and for users of the Transportation Access Pass, or TAP (persons with disabilities), at, respectively, 33 percent and 35 percent of the corresponding CharlieCard adult single-ride fare. Student fares and student, senior, and TAP passes are set at 50 percent of the corresponding CharlieCard adult single-ride fare or pass price for each mode. In addition, the fare for THE RIDE is set to increase by 25 percent.

Figure 1
Simplified Price Comparison Summary

Figure 2
Detailed Price Comparison Summary

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2009 Pre–Fare Increase Impacts Analysis

METHODS USED TO ESTIMATE RIDERSHIP AND REVENUE

Two separate approaches were used in this analysis to project the impact of the proposed fare increase on MBTA ridership and revenue. One approach utilized a set of spreadsheets originally created by CTPS and the MBTA to compute ridership and revenue impacts for proposed fare increases. The second approach consisted of applying the Boston Region MPO’s regional travel demand model to estimate demand for each MBTA mode using the existing and proposed fare levels.

The regional travel demand model was first employed as a complement to the spreadsheet model in the 2007 Pre–Fare Increase Impacts Analysis, with the two models together providing some indication of the potential range of impacts. In addition, unlike the spreadsheet model, the regional travel demand model can be used to conduct the air quality and environmental justice impact analyses.

CTPS Spreadsheet Model Approach

The spreadsheet model used to estimate revenue and ridership impacts of the proposed 2009 fare increase reflects the many fare-payment categories of the MBTA pricing system and applies price elasticities to analyze various changes across these categories. The accuracy of this methodology was proven to be satisfactory through the 2007 Post–Fare Increase Impacts Analysis, which analyzed its use in predicting the impacts of the proposed 2007 fare increase.

Apportionment of Existing Ridership

Inputs to the spreadsheet model include ridership in the form of unlinked trips, by mode, by fare-payment method, and by fare-media type. An unlinked trip represents the individual trip on any one transit vehicle; any trip using multiple vehicles—so-called “linked” trips—would count as multiple unlinked trips.

Existing ridership (to which price elasticity figures are applied) for the local bus, express bus, and rapid transit networks is provided by automated fare-collection (AFC) data. Data are provided on a monthly basis, with subtotals of transactions (unlinked trips) by the various combinations of product type (single-ride fare or pass) and stock (smart card, magnetic-stripe ticket, etc.). Product types are then coded and summarized by fare type and fare mode, while stock types are coded and summarized by the type of fare media. AFC data are also provided at the modal level at which each transaction occurs. More detailed information on AFC fare types, modes, and media can be found in the appendix.

Because AFC equipment has not yet been deployed on commuter rail and commuter boat, the number of trips on these modes was estimated. Single-ride trips on commuter rail and commuter boat were set equal to the number of single-ride fares sold, while pass trips on these modes were estimated by dividing the number of pass sales by the estimated average number of trips made using the respective pass type, calculated as part of the 2007 Post–Fare Increase Impacts Analysis. Dividing the number of pass sales by the estimated number of trips per pass results in an estimate of the total number of pass trips by each modal category.

Other data used were estimates of the number of trips made using THE RIDE and the number of cars parked at transit stations. These data were provided to CTPS directly by the MBTA.

Estimation of Ridership Changes

Fares are one of many factors that influence the level of ridership on transit services. Price elasticity is the measure of either the expected or observed rate of change in ridership relative to a change in fares if all other factors remain constant. On a traditional demand curve that describes the relationship between price, on the y-axis, and demand, on the x-axis, elasticities are equivalent to the slope along that curve. As such, price elasticities are generally expected to be negative, meaning that a price increase will lead to a decrease in demand (with a price decrease having the opposite effect). As the absolute value of the price elasticity increases, the projected impact on demand also grows. Larger (or more negative) price elasticities are said to be relatively “elastic,” while smaller negative values, closer to zero, are said to be relatively “inelastic.” Thus, if the price elasticity of the demand for transit were relatively elastic, a given fare increase would cause a greater loss of ridership than if demand were relatively inelastic. An example of the application of price elasticities is demonstrated in the appendix.