In parts 1 through 4 of this series on fare integration for transit riders in the Greater Toronto and Hamilton Area (GTHA), we first presented the options, and then analyzed the Modified Status Quo before studying Zone & Hybrid models and how Fare by Distance works. In part 5 we take a look at the financial balancing act that Metrolinx is attempting when it comes to fare integration.

Metrolinx's ideal fare model needs to be as close to revenue neutral as possible, be an equitable model for as many riders as possible, and at the same time provide a solid platform for ridership growth. Indeed, it's unlikely that the model will be accepted by Metrolinx's local partners if these objectives aren't met.

The 9 local transit agencies in the GTHA (GO being the 10th), image courtesy of Metrolinx

Here's where the balancing act comes in. There are nine local transit agencies and GO Transit operating in the GTHA. What may be a net gain from a fare integration model for one agency might be a net loss for another. For more on this, see the section about co-fares with the TTC in the Modified Status Quo article. Similarly, not every rider will see a net benefit with the new model, so how do you minimize the negative impacts on select groups of riders while still providing a better system for the majority of riders? Oh, and at the same time, how do you encourage more people to ride?

Cross-border fares for transferring to/from the TTC, image courtesy the TTC

This is the dilemma that Metrolinx is trying to tackle. Right now, most transit in the GTHA is working with two basic variables to determine revenue: ridership, and fare (specifically, a flat fare). Yes, there are a whole bunch of other factors in play to determine the actual bottom line for a transit agency, but let's focus on just those two variables for now. The relationship between them is pretty straight forward—if the fare goes up, ridership will go down, and vice versa.

Let's look at distance, and how if could become a third variable into the revenue equation.

Under the current model of most local transit agencies, distance doesn't factor into the fare equation. Whether you're travelling 3 stops or 30, you're paying the same fare. Currently, the TTC has a pretty good balance of short, medium, and long distance trips.

Short distance trips are generally those that are under 3 km in length. For a PM peak trip originating at Queen station, it would be anything going northbound up to Rosedale station. Medium distance trips are generally 3 to 10 km in length, which would be from Queen to between Summerhill and York Mills stations. Long distance trips are longer than 10 km, which would be from Queen to Sheppard station and beyond. According to the Transportation Tomorrow Survey, the median trip length made on local transit is 7.3 km, in the relative middle of the medium trip range.

Short (Green), Medium (Blue), Long (Red) trip distances from Queen station

Under a flat fare model, the medium trips more or less pay for themselves, and the short distance trips subsidize the long distance trips. Supposing Metrolinx opted to go with a zone fare or fare by distance model, it's a reasonable assumption that the base fare would drop, and that there would be a moderate per-zone charge (or per km) attached to each trip that exceeds one zone. However, under whichever model is chosen, the fare for medium length trips should be maintained at roughly the current rate, so that the bulk of ridership will experience minimal to no change as a result of the switch.

That means that short distance trips would likely see a decrease compared to the current fare, medium distance trips would stay about the same, and long distance trips would see an increase. The key to determining if the switch in model is going to have a positive or negative impact on the balance sheet depends on how each 'category' of trip length will respond to their change in cost. Will the number of short trips increase as a result of the lower fare? Will the number of long trips decrease as a result of the higher fare? If so, how many new short trips do you need to offset the revenue lost from the fewer longer trips?

There's also the intra-category adjustments to consider. If the fare for short trips drops, how many new short trips do you need to offset the lost revenue? Does the number of short trips need to increase to the point where it offsets both the lost revenue from the lower short trip fare and the lost revenue from fewer long trips? So much to consider, and we haven't even actually introduced any numbers.

For 905-area agencies, this is about as far as this line of analysis goes, as any new rider is better for the balance sheet than an empty seat. However, for the TTC there's an extra wrinkle to be added: The TTC frequently runs trips that are packed to the rafters (see: King Streetcar as just one example). This is an issue that most 905-area agencies don't have. If the system doesn't have any spare capacity to absorb those new short distance trips that are enticed by lower fares, then you lose a potentially significant source of new revenue, and it's likely to negatively affect the balance sheet.

This brings us to the third item on the wish list: growing ridership. It's no secret to anyone who has taken many TTC or GO routes during rush hour that there isn't much space left to grow into, and the infrastructure projects meant to provide this space are still at least several years away from coming to fruition. So where does the growth come from? The answer is, in part, the off-peak times.

A fourth variable which could be introduced into the equation is a difference in peak vs off-peak fares.

This fare differentiation is common in many cities around the world, including London, Sydney, and Washington, D.C. The idea is that there would be a small increase in peak fares, and a slightly larger decrease in off-peak fares, the purpose of which is to increase off-peak transit ridership by offering a financial incentive to do so. Not only could this lead to more riders opting to shift their work hours to take advantage of the lower fares, it would also increase transit usage for midday, evening, and nighttime discretionary trips, such as shopping or going to dinner. This would hopefully lead to better utilization of transit services during the off-peak hours, increasing the overall profitability of the system.

Transport for NSW fare tables showing off-peak fares, source images courtesy of Transport for NSW

Once again though, the viability is in the relationship amongst the variables. Would increasing peak fares shift ridership to off-peak (a slight reduction in revenue), shift that ridership to another mode such as driving (complete loss in revenue), or would it have no impact on peak ridership at all? Would the amount of revenue lost from existing riders by decreasing off-peak fares be offset by the new riders the lower off-peak fares would generate?

None of the questions that have been asked in this article can really be thoroughly answered without detailed economic analysis and trip modelling. Any answers conjured up would be based on little more than informed speculation. However, by asking these questions it helps the general public understand the types of factors that go into such complex models in order to generate a seemingly simple answer.

If you would like to join the discussion on fare integration, you can do so in our Forum thread, or in the comments section below.