Assuming the Sound Transit Board of Directors grasps that the proposal for updating fares on ST Express and implementing a low-income discount fare on all ST Express routes is very likely to increase ridership, increase revenue, reduce travel time, and reduce operating costs, and then proceed to pass the proposal, Sounder is next in line for consideration of adding a low-income fare category.
Some quick math shows that going after low-income riders with an ORCA LIFT (low-income) fare discount is more cost-effective than focusing on maintaining regular-fare ridership on Sounder.
The background material for the Sounder fare proposals projects $567,000 of additional annual fare revenue on Sounder if the fare increase proposal is implemented without ORCA LIFT. Projected ridership loss in that scenario is 188,000 annual boardings. That comes out to $3.02 of additional revenue for each boarding lost due to the fare increase.
If the fare increase is implemented with a new LIFT fare category, the increased revenue drops to $510,000, while the ridership loss drops to 160,000 boardings. In other words, for $57,000, Sounder gains 28,000 low-income boardings. Those boardings are gained at an average cost of $2.04 per rider.
A look at some ridership data from 2014 helps explain this counterintuitive math.
Sound Transit’s 2014 Fare Revenue Report has a breakdown of boardings by payment method for each mode. (See pages 14, 19, and 22.)
|Payment Method||ST Express||%||Link||%||Sounder||%|
|ORCA Business Passport||7,038,964||39.8||2,427,462||22.2||1,722,589||51.2|
|ORCA Puget Pass||3,248,449||18.4||1,572,964||14.4||595,691||17.7|
Bruce at ST also provided me a key datapoint: 10.0% of Sounder riders would qualify as low-income, based on the 2011/2012 origin/destinations survey. Assuming those 10% don’t have Business Passport ORCA, that would leave only 39% of riders on Sounder fully sensitive to regular/youth/RRFP fare increases.
A driving force behind the proposed fare increases is that Sounder is rapidly approaching falling below the red line set by ST policy for minimum farebox recovery, which is 23% for Sounder. Per the 2014 Fare Revenue Report (p.8) Farebox recovery was 26.9% in 2014. It is projected to be 26.0% in 2015, and then 24.1% in 2016.
As I calculated at the start of the post, the best way to value both ridership and revenue on Sounder is to adopt ORCA LIFT and attract low-income riders, who are much more price-sensitive than the typical regular-fare payer, especially one with a Business Passport ORCA paid for by her/his employer.
6 Replies to “ORCA LIFT a Cost-Effective Add on Sounder”
Why will farebox recovery fall so significantly in 2016 on Sounder? Will there be new runs added?
From page 8 of the 2014 Fare Revenue Report, fare revenue was projected to grow by ca. $850,000 this year, and only $250,000 next year. However, operating costs continue to grow by roughly $4.5M per year.
Staff projected that farebox recovery would fall below 23% in 2018 under the current fare structure.
Also, a new South Sounder round trip is proposed to be added in September 2016 under the draft Service Implementation Plan. The northbound trip would be late morning peak shoulder and the southbound trip early afternoon peak shoulder. That proposal becomes scheduled to happen when the board votes to finalize the SIP this Thursday.
You can blame inefficient, problematic Sounder North for the low farebox recovery…
A low income fare may be a good policy goal, but it should be funded by general tax revenues, not by a fare increase on other riders. It’s just plain wrong to discourage general ridership or make other riders pay for a social welfare goal.
Whether a fare increase is appropriate at this time should be a separate question, just as it should be for ST buses. It is a time of very low fuel prices, which is the principal cost experienced by someone who drives instead, especially if they get employer paid parking – and most retail, restaurant and service venues also provide free parking. At the same time we are experiencing increased road congestion. So perhaps it really isn’t the right time for a general fare increase, and our society would be better off accepting a lower fare box recovery in return for shifting some drivers off the roads.
Combining the effects of a fare increase on general riders with the ridership impact of the LIFT program is a tortured analysis. The cost per additional rider is lower by not having the general fare increase and retaining all those riders. You could still do LIFT since it doesn’t cost all that much.
“The cost per additional rider is lower by not having the general fare increase and retaining all those riders.”
Sorry, Carl, but that is simply not the case, according to staff’s numbers. How do arrive at that conclusion?
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