TO: AC Transit Board of Directors
FROM: Michael A. Hursh, General Manager/Chief Executive Officer
SUBJECT: Free or Reduced Cost Regional Transfers Pilot
ACTION ITEM
AGENDA PLANNING REQUEST: ☐
RECOMMENDED ACTION(S):
Title
Consider authorizing the General Manager to enter into a program participation Memorandum of Understanding (MOU) with the Metropolitan Transportation Commission (MTC) for AC Transit’s participation in the Free or Reduced Cost Regional Transfers Pilot (Regional Transfers Pilot) program in substantially similar form to the draft MOU.
Staff Contact:
Chris Andrichak, Chief Financial Officer
Body
STRATEGIC IMPORTANCE:
Goal - Convenient and Reliable Service
Initiative - Financial Efficiency and Revenue Maximization
The Regional Transfers Pilot program is designed to improve the rider experience and grow transit ridership by reducing the cost and complication of regional trips.
BUDGETARY/FISCAL IMPACT:
The MTC has identified $22 million in funding to support the Regional Transfers Pilot, which is expected to allow for an 18-24 month pilot. The District (and all other participating public transit agencies) will be reimbursed for the fare subject to the transfer discount minus the first 50 cents of that fare. The vast majority of transfers to/from AC Transit are with BART, and there is already a 50-cent discount given for transfers from BART to AC Transit, so there should be no cost impact for those trips. The District has varying agreements with other neighboring bus agencies for transfers. Staff is working to determine what the cost impact will be for transfers to/from each such agency. The volume of non-BART transfers is minimal and is not expected to have a substantial impact on overall fare revenue.
BACKGROUND/RATIONALE:
The Regional Transfers Pilot is the second pilot program (after the Institutional Pass Program Pilot) to come out of the Regional Fare Integration Task Force. The Regional Transfers Pilot is designed to roll out with the Next Generation Clipper® System, also known informally as Clipper 2 (C2). While the exact timeline for the rollout of C2 is not yet known, the Fare Integration project managers are requesting that all Clipper agencies sign an MOU in advance to enable their participation in the pilot. The MOU has had been subject to significant discussion and feedback from staff of the regional public transit operators.
MTC has identified $22 million of Transit Transformation Action Plan funding available for use to backfill fare revenue lost as a result of the Regional Transit Pilot program, which amount is estimated cover revenue losses for an 18-24 month pilot program. The original Fare Coordination and Integration Study (FCIS) Business Case gross revenue impact estimate of a Regional Transit Pilot program was $28.5 million, which would be offset by an estimated $6 million in revenue from new trips generated, for a net impact of $22.5 million (2021 dollars). All regional operators who use Clipper are expected to participate in the pilot.
The Regional Transfers Pilot program can be summed up by this explanation:
When you make a trip that requires transferring between transit agencies, pay the full fare on just the first agency you use. Any transfer to another agency within two hours of the first boarding is discounted up to a limit of $2.75 per transfer.
The $2.75 discount is for adult full fares and is based on the highest regional local fare on Clipper. For transfers to a local bus, the discount will be no higher than the local fare for that bus, with discounts for other fare categories applied on a proportional basis. For example, senior fares are discounted 50% and so the transfer discount will also be discounted by 50%. Riders that have a pass for one of the agencies in a transfer pair will receive the discount on their non-pass fare.
The pilot use a basic “settlement model” to distribute fare revenue, whereby the second agency that the discount is applied against will be reimbursed up to $2.75 minus $0.50. The goal if the program is continued is to develop a more nuanced settlement model that would take into account use of passes and other factors in distributing revenue.
Fare Equity Analysis
The Regional Transfers Pilot is a regional program by nature, but involves a possible discount on AC Transit fares. Accordingly, staff is working on a fare equity analysis to satisfy Title VI regulations. Because this is a regional program, the analysis is complicated. MTC formed a working group of agency staff in consultation with Federal Transit Administration staff to help work through the methodology. MTC also recently brought on a consultant to perform a “regional” analysis in an effort to assist the overall program and possibly bolster individual agencies’ analyses.
Due to this ongoing work, AC Transit staff has not yet completed the fare equity analysis. MTC has requested agencies sign the MOU by the end of August so that they can get everyone on board for the implementation planning, which depends on the rollout of C2. MTC has not yet provided an updated schedule for C2 rollout but it conceivably could be as early as January 2025. Under Board Policy 518, the District can implement temporary fare reductions for six months without requiring a fare equity analysis. Between the delayed rollout of C2 and the allowance for temporary fare reductions, staff is confident that a fare equity analysis can be completed within the required timeframe.
In the unlikely event that staff does find disparate impacts or disproportionate burdens that require significant mitigation, District participation in the program can be suspended until mitigations can be developed and approved by the Board, if necessary. Staff does not anticipate that the equity analysis will show any significant issues, although as with other Clipper-based programs, the impact on cash-paying customers (from not enjoying the program benefits) must be considered.
ADVANTAGES/DISADVANTAGES:
The main advantage to participating in the Regional Transfers Pilot is the increased ridership that could result from the discounts given for regional trips. Regional trips are a small fraction of overall trips taken and could be an area for ridership growth among existing riders and new riders.
The main disadvantage of the Regional Transfers Pilot is that the District could possibly forgo a small amount of revenue if enough new trips are not generated. That disadvantage is much more of a factor if the program moves into a more permanent phase, without the same level of funding identified for backfill lost fare revenues during the pilot.
ALTERNATIVES ANALYSIS:
The Regional Transfers Pilot was originally conceived of as part of the FCIS and has been developed by a regional working group since then, with project management by MTC and BART staff. AC Transit staff has been involved all along, helping to shape the pilot program. The only alternative at this point is to not approve District participation, which is not recommended.
PRIOR RELEVANT BOARD ACTION/POLICIES:
SR 21-145 - MTC Fare Integration Task Force Update
SR 21-145a - MTC Fare Integration Task Force Update
ATTACHMENTS:
1. Draft MOU
Prepared by:
Chris Andrichak, Chief Financial Officer
Approved/Reviewed by:
Sue Lee, Director of Revenue Management
Nichele Laynes, Director of Marketing & Communications
Shayna van Hoften, Interim General Counsel/Chief Legal Officer
Chris Andrichak, Chief Financial Officer