TO: AC Transit Board of Directors
FROM: Michael A. Hursh, General Manager
SUBJECT: Public Hearing for FY21-FY29 EasyPass Pricing Adjustments
ACTION ITEM
RECOMMENDED ACTION(S):
Title
Hold Public Hearing to receive public comment regarding adjustments to the AC Transit EasyPass program pricing matrices for FY 2021-2029
Body
BUDGETARY/FISCAL IMPACT:
There would be a gross revenue increase for current and future EasyPass clients, if current clients remain in the program and there is continued growth from new clients. Revenue projections for current EasyPass clients show an estimated $500,000 annual increase compared to current EasyPass pricing matrices.
BACKGROUND/RATIONALE:
EasyPass staff began developing the infrastructure to update the current EasyPass pricing matrices in April 2019. After formulating new pricing considerations and factors, EasyPass staff met with interdepartmental stakeholders from the Planning & Development, Title VI, Revenue Management, Budget & Finance, Legal and Data Analysis teams to solicit feedback and input on revising program objectives, pricing methodologies and other potential pricing factors. The EasyPass program objectives were expanded and refined, and guideline principles upon which to build an updated EasyPass pricing methodology were crafted. This groundwork, including peer analysis and review of Clipper data, forms the recommended EasyPass pricing and program methodologies moving forward.
AC Transit EasyPass Revised Program Goals and Objectives:
The original program goals and objectives were first developed in 2007. The goals and objectives have been revised to the following:
1. Increase ridership
2. Encourage a modal shift from single-occupancy vehicles to public transit, with the optimal outcome of EasyPass participants becoming life-long public transportation users and advocates
3. Extend AC Transit’s visibility by promotion of the EasyPass program and varying engagements with the AC Transit brand
4. Grow the number of EasyPass clients in all client groups
5. Maintain fiscal responsibility by ensuring the overall EasyPass revenue-per-boarding does not fall below the District’s average fare.
EasyPass Pricing Methodology Options: Taking into consideration the EasyPass program goals & objectives, guiding principles and internal stakeholder feedback, two proposed pricing models are being presented for consideration at the Public Hearing. In both models, matrices would include a base price, an increase based on an average CPI-U range, and a card management fee.
Pricing Scenario 1
Base Price: The base price is derived from the current FY19-FY20 pricing matrices. The current matrices were selected as the base price for consistency, as pricing for most of the 31 EasyPass clients are derived from these matrices. As such, it provides a transparent springboard from which to establish the base price. Additionally, since the volume discount and level of transit service pricing adjustments are already incorporated into the FY19 matrices, using these matrices as the base eliminates the need to create an additional pricing adjustment for the volume and transit service considerations.
Price Adjustment: The percentage increase for the FY21-FY23 matrices would be based on the average CPI-U from FY10-FY19 (2.73%) and applied to the valid years of the FY19 matrices (FY19 and compounded for FY20). Percentage increases based on the average CPI-U from FY10-FY19 would be applied for the three years the previous matrices (effective July 1, 2020 and July 1, 2023) have been in effect to each cell of the previous matrices to create the effective July 1, 2023 and July 1, 2026 matrices.
Using the FY10-FY19 CPI-U average incorporates a broad range of index percentages, including the years that saw the residual negative effects of the CPI-U from the 2007-2009 Great Recession, as well as the effect of economic expansion following Great Recession. Given the inability to predict the fluctuations to the CPI-U over the next nine years, using the average from the same timespan as the proposed matrices (nine years) likely provides a more accurate estimate of the percentage changes of the CPI-U over the valid years of the proposed matrices.
Card Management: A $1 card management fee would be applied to each price point to recoup a portion of the card production expenses. To address one difference between EasyPass clients and other riders who must pay for their Clipper cards themselves, the card management fee provides payment for Clipper card and other related card production costs.
Pricing Scenario 2
Base Price: The base price is the same as outlined in Scenario 1-the current FY19-FY20 pricing matrices.
Price Adjustment: The percentage increase for FY21-FY23 matrices would be based on the average CPI-U from FY17-FY19 (3.53%) and applied to the valid years of the FY19 matrices (FY19 and compounded for FY20). Percentage increases based on the average CPI-U from FY17-FY19 would be applied for the three years the previous matrices (effective July 1, 2020 and July 1, 2023) have been in effect to each cell of the previous matrices to create the effective July 1, 2023 and effective July 1, 2026 matrices.
Using the FY17-FY19 CPI-U average leverages the economic expansion following the end of the Great Recession and results in a higher average increase to the per-participant price for the matrices over the nine-year timeframe. This increase assumes that a similar rate of economic expansion will continue through the duration of the proposed matrices.
Card Management: The fee would be the same as outlined in Scenario 1.
Additional Pricing Factors: Per Board Policy, promotional or temporary fare reductions of six months or less are not subject to a Public Hearing or Title VI analysis. As such, EasyPass staff may incorporate an adjustment of the EasyPass matrices pricing for all or selected clients, lasting no longer than six months.
Public Hearing Outreach and Engagement Strategy: As outlined in Board policies and the District’s Public Participation Plan, the public hearing outreach and engagement strategy was designed to ensure notification of proposed fare changes to members of the public including riders, community members, traditionally underrepresented groups, current and anticipated EasyPass clients, and key stakeholder groups. The plan implementation began August 12, 2019, ended September 11, 2019 and included the following outreach tactics:
• Posted public hearing notices within the requisite timeframes to identified newspapers and the AC Transit website
• Digital publishing of translated (Spanish and Chinese) proposed pricing on AC Transit’s webpages, eNews and social media channels
• Contacted current and prospective EasyPass clients, transportation advocate groups, city planning departments, stakeholders in communication with housing developments and other stakeholders as recommended by the Legislative Affairs and Community Relations team
• Held in-person or phone meetings with EasyPass college program clients for feedback
• Captured comments on the proposed changes by phone, email and mail
A copy of the public hearing outreach and engagement strategy is provided as an attachment to this report.
Title VI Analysis: The Board is required-under Federal Transit Administration (FTA) regulations and Board Policies 110 and 518-to consider and approve a fare equity analysis before the District can implement any changes to the fare to ensure proposed changes will not result in discriminatory impacts on populations protected by Tile VI of the Civil Rights Act. Staff will undertake the Title VI analysis as a part of the evaluation of the proposed changes proposals, and report back to the Board before they make a decision about the proposals.
Pricing Matrices Staff Recommendation: The proposed EasyPass pricing matrices span a nine-year period to encourage clients to sign-up for longer EasyPass programs and to allow staff to execute multi-year EasyPass agreements. While both scenarios use the San Francisco Bay Area CPI-U as the measure of increase, Scenario 1’s consideration of a broader range on economic indicators, including a possibility of an economic downshift, allows for a more conservative, accurate, and defensible pricing adjustment schedule. Therefore, staff recommends adoption of the EasyPass pricing methodology outlined in Scenario 1.
After this Public Hearing, staff will return to the Board on September 25, 2019 to ask that the Board adopt a resolution to approve the Title VI analysis and adopt either scenario.
ADVANTAGES/DISADVANTAGES:
The advantage of either pricing change scenario is that it would provide predictability, transparency for EasyPass clients and better enable the District to offer multi-year EasyPass agreements by confirming future EasyPass pricing changes. Both price increase methodology scenarios meet the EasyPass program goals and objectives as well as the District’s fare policy goals as outlined in Board Policy 333. Additionally, as all customer (both local and Transbay) see fare increases, EasyPass clients would also be expected to see increases in the EasyPass pricing matrices.
ALTERNATIVES ANALYSIS:
While an alternative to the proposed adjustments is to keep the current EasyPass pricing structure and matrices, with no increases, staff does not recommend this alternative.
PRIOR RELEVANT BOARD ACTION/POLICIES:
Staff Report 19-262 - Set Public Hearings for Proposed Adjustments to EasyPass Pricing
Board Policy 333 - Fare Policy - Staff Report 19-153
Staff Report 19-141 EasyPass Update
ATTACHMENTS:
1. Proposed EasyPass Pricing Matrices Scenarios 1 and 2
2. Public Hearing Notice
3. EasyPass Public Outreach Plan
Approved by:
Beverly Greene, Executive Director of External Affairs, Marketing & Communications
Reviewed by:
Claudia L. Allen, Chief Financial Officer
Sue Lee, Director of Revenue Management
Michele Joseph, Director of Marketing and Communications
Denise C. Standridge, General Counsel
Sally Goodman, Title VI Program Administrator
Prepared by:
Nichele Laynes, Marketing Manager
Eden Gerson, Marketing Administrator