Staff Report #1
September 25, 2023
To All Commissioners
Re: Fare Strategy
Recommendation
That the Commission:
i) CONFIRM the fare structure and rates as set out in the table below, effective January 1, 2024.
London Transit Commission Fares – Effective January 1, 2024
| Category | Fare |
| Cash(1) | |
| Adult, Senior, Student | $3.50 |
| Child(3) | $1.75 |
| Tickets(1,2) | |
| Adult | 5 for $13.25 ($2.65/trip) |
| Youth (age 13-17) | 5 for $10.60 ($2.12/trip) |
| Child(3) | 5 for $7.65 ($1.53/trip) |
| Passes (Monthly)(4) | |
| Citipass (unlimited & transferable) | $112.00 |
| Weekday (Mon-Fri only) | $95.00 |
| Park and Ride | $83.00 |
Notes:
- Cash and ticket fares include a 90-minute unrestricted transfer
- All ticket options also available on smart cards as stored value
- Child fares included in this table represent those that would be reverted to in the event the current subsidy provided by the City of London is revoked
- All monthly pass options are available only on smart cards
ii) DIRECT administration to advise the City of London of the new fares, and required adjustments to pricing for the various subsidized fare programs, which, based on current subsidy levels would be as follows:
| Category | Subsidized Fare |
| Cash | |
| Child | Free |
| Tickets | |
| Senior (65 and over) | 5 for $10.00 ($2.00/trip) |
| Child | Free |
| Passes (Monthly) | |
| Income-Related | $72.00 |
| Youth (age 13-17) | $72.00 |
| Visually Impaired | Free |
iii) DIRECT administration to prepare and implement a communication strategy relating to the fare increase.
Background
At the August 30, 2023 meeting, the Commission approved the 2024-2027 status quo operating budgets for the Conventional and Specialized Transit Services. The 2024 budget included the requirement for a fare increase that would generate approximately $3.3 million in fares in 2024. Subsequent to Commission approval of the 2024 operating budget, administration completed the assessment of multiple scenarios for a fare increase that would generate the revenue requirements while at the same time, meet the remaining objectives of the Commission’s Fare Pricing and Media Strategy, an excerpt of which is set out below.
Fare pricing and media strategy objectives:
- meet established transportation revenue requirements;
- maintain and build ridership, mitigating the traditional ridership loss associated with fare increases; and
- ensure that fare administration is both effective and efficient, balancing fare administration cost, fare validation requirements and customer convenience.
The general rule of thumb with respect to transit fare increases is that for every 3% increase in fares, there is a 1% loss of ridership; however other mitigating factors can impact the level to which ridership is impacted by a fare increase. The last fare increase took effect on January 1, 2020, and impacted all fare categories by increases ranging between 9% and 18%, with the exception of the tuition pass program in which annual price increases are governed by contract particulars. Application of the rule of thumb to this increase would indicate a potential loss of ridership of approximately 6%; however, ridership levels in the first two months of 2020 were approximately 2.5% higher than the same two months in 2019. Unfortunately, the impacts of the global pandemic began in March of 2020, and as such, any further ridership comparisons pre and post fare adjustment are not possible.
The other principles included in the Commission’s Fare Strategy offer insight into why there was no discernable impact on ridership from the fare increase implemented in January 2020, including but not limited to the following:
- customers want a service that provides direct travel that is convenient, reliable, safe, and affordable
- customers are sensitive to savings
- fare pricing and media options can influence service use
- customers will pay for service quality
Significant investment had been made in the years prior to the 2020 fare increase, including the following:
- the addition of 90,000 service hours over the previous five-year period
- the introduction of five new express routes
- introduction of Sunday service beginning at 7am versus 9am on nine routes
- introduction of extended service day to 1am Monday through Saturday on nine routes
- route realignments to improve directness of travel
These improvements resulted in a significantly improved transit service for riders system wide, and this coupled with the fact that it had been 12 years since the previous fare increase, played a significant role in mitigating the negative impact on ridership generally associated with a fare increase.
The third and fourth key principles considered in this report’s recommendation is that customers are sensitive to savings and fare pricing and media options can influence service use, both deal with the mix of options included in the fare structure and the pricing differential between them. At a high level, the current fare structure includes four categories; cash, ticket, monthly pass and tuition pass. The following table sets out the ridership and revenue make-up in each of the categories for the first seven months of 2023.
Ridership and Revenue Make-up by Fare Category January – July 2023
| Fare Category | Rides | Revenue |
| Cash | 5.9% | 9.5% |
| Ticket | 25.4% | 28.8% |
| Pass | 13.9% | 16.2% |
| Tuition Pass | 54.8% | 45.5% |
Cash revenue represents the smallest portion of ridership at approximately 5.9%, but given it is the highest of the fares, represents almost double that in terms of percentage of revenue at 9.5%. Monthly pass riders are the next lowest in terms of both ridership and revenue make-up which represents a significant shift from pre-pandemic make-up, where the monthly pass category represented approximate 23% of ridership and 30% of revenue. This shift is likely due to the shift in travel patterns related to the work from home option that many employers have maintained post pandemic. The ticket category, at 25.4% of ridership and 28.8% of revenue is slightly overstated given all of the trips taken by children 12 and under are classified as ticket riders. Finally, the tuition pass category makes up 54.8% of ridership and 45.5% of revenue. The unique feature of the tuition pass program is that it is universal in nature, meaning that all students pay for the transit pass whether they use transit or not. This provides for a cross-subsidization within the program, with infrequent or non-transit users subsidizing the pass cost for frequent users.
The final two principles of the LTC Fare Pricing and Media Strategy relate to the provision of reduced transit fares in an effort to address broader social issues in the community. The specific principles are set out below:
- it is beyond the mandate and expertise of London Transit to effectively resolve broader social and community issues related to income distribution; and
- that new or reduced concession fares intended to resolve broader social and community issues relating to income distribution be considered if arrangements are made to subsidize London Transit for the associated loss of revenue – noting such subsidy is not a public transit subsidy but a subsidy supporting a defined group’s use of the service.
The City of London currently has five specific subsidy programs in place relating to the provision of a reduced transit fare for a specific group; free transit for children 12 and under, free transit for customers with visual impairment, senior tickets priced at 25% off of the adult ticket price, an income-related pass offered at a 36% discount from the Citipass, and a youth pass (ages 13-17) offered at a 36% discount from the Citipass. Each of these programs were established to address a social issue in the community, with three specifically identified in the London For All – A Roadmap to End Poverty Report.
The second part of the report recommendation sets out the pricing for each of the subsidized programs that will take effect January 1, 2024 should the City of London continue with the subsidies currently in place. Should any or all of the subsidy programs be eliminated, the associated fare option would also be eliminated, and customers would revert to the LTC fare structure set out in part one of the report recommendation. This report does not assess nor recommend changes to the subsidy levels associated with these programs given the decision to maintain, alter or remove these subsidies rests exclusively with Municipal Council.
Proposed Fare Increases
The report recommendation calls for increases to be applied to all fare categories for a number of reasons, the key ones being:
- the amount of revenue required from the fare increase is substantial, and it would be difficult for one or two categories to withstand the impact of the required increase without significant loss of ridership;
- the current balance of ridership and revenue between the fare categories is considered appropriate, and as such, there is no need to utilize pricing as a strategy to shift rider categories; and
- the last fare increase took effect January 1, 2020, and as such, it is appropriate for all categories to absorb part of the required increase.
Careful consideration was given to each of the fare categories when determining the recommended rates included in the report recommendations. Details with respect to each category is set out below.
Cash Fares
Cash ridership provides the highest revenue per ride (average fare in the cash category for 2023 is $3.00), it is also the most costly to process, and as such, many transit agencies utilize pricing strategies to discourage the use of cash to pay for transit. Cash is also the method of payment for those who utilize transit infrequently, whether that be by choice or due to available financial resources. The establishment of cash fares also considers the ease of which the fare can be paid, noting that change is not offered on the bus. In order to continue the effort to discourage use of the cash fare, there needs to be a discernable difference between the cash fare and ticket fare. The current fare structure provides an approximate 25% discount for a rider to utilize an adult ticket versus paying cash. All of these factors need to be balanced when assessing the appropriate cash fare going forward.
The average adult cash fare across the LTC peer group currently is $3.52, with the lowest cash fare at $3.25 and the highest at $4.50. The report recommendation calls for the following cash fares in each of the cash categories.
| Cash Category | Current Fare | Recommended Fare | % Increase |
| Adult | $3.00 | $3.50 | 17% |
| Child(1) | $1.50 | $1.75 | 17% |
- Child cash fare represents the fare that would be in place in the event the City of London subsidy which provides for children 12 and under to ride free was no longer provided.
The proposed fares result in the discount for riders choosing adult ticket versus cash are reduced to an approximate 24% discount, which is still deemed adequate to incentivize riders to switch to the ticket category.
Revenue projections have the increase in cash fares resulting in an additional $0.6 million in revenue in 2024, no ridership loss is assumed relating to the proposed increases.
Ticket Fares
The ticket category generates the second highest average fare, with an average for the entire category of ticket fare options for 2023 being $2.13 per ride. Based on the adult fare category, a transit rider would need to ride the bus 42 times in a calendar month (approximately 1.4 times per day) to make a monthly pass a more economic option than tickets. This category captures both riders who continue to utilize paper tickets as well as those that utilize the stored value option on smart cards.
The average adult ticket fare across the LTC peer group currently is $2.94, with $2.60 being the lowest adult ticket fare and $3.88 being the highest. The report recommendation calls for the following fares for each of the four ticket categories.
|
Ticket Category |
Current Fare | Recommended Fare | % Increase |
| Adult | 5 for $11.25 ($2.25/trip) | 5 for $13.25 ($2.65/trip) | 18% |
| Youth (age 13-17) | 5 for $9.00 ($1.80/trip) | 5 for $10.60 ($2.12/trip) | 18% |
| Child(1) | 5 for $6.50 ($1.30/trip) | 5 for $7.65 ($1.53/trip) | 18% |
Note 1 – Child ticket fare represents the fare that would be in place in the event the City of London subsidy which provides for children 12 and under to ride free was no longer provided.
It should be noted that the Youth (age 13-17) category has been renamed to be consistent with that of the Youth Monthly Pass. The previous category was referred to as “student (grades 7-12)”. While the change in name does not result in any variance in those eligible to utilize the ticket category, it alleviates customer confusion and applies consistency with respect to age being the determining factor.
In addition, as set out in the second part of the report recommendation, the senior ticket fares that would take effect January 1, 2024, based on the current 25% subsidy provided by the City of London would be as follows. Should this subsidy be revoked, senior ticket riders would pay the adult ticket fare.
| Ticket Category | Current Fare | Recommended Fare | % Increase |
| Senior | 5 for $8.50 ($1.70/trip) | 5 for $10.00 ($2.00/trip) | 18% |
The recommended pricing for the ticket categories (including stored value fares on smart cards) continues to offer a significant discount off of the comparable cash fare, as set out in the table below.
| Fare Category | Ticket Fare | Comparable Cash Fare | % Discount |
| Ticket – Adult | $2.65 | $3.50 | 24% |
| Ticket – Youth | $2.12 | $3.50 | 39% |
| Ticket – Senior | $2.00 | $3.50 | 43% |
| Ticket – Child | $1.53 | $1.75 | 13% |
Revenue projections have the increase in ticket fares resulting in an additional $1.8 million in revenue in 2024, no ridership loss is assumed relating to the proposed increases.
Monthly Pass Fares
The monthly pass category represents approximately 15% of both total rides and total revenue.
The average adult monthly pass price across the LTC peer group currently is $115, with the lowest monthly pass at $92 and the highest at $154. The report recommendation calls for the following fares for each of the monthly pass categories.
| Pass Type | Current Price | Recommended Price | Increase |
| Citipass | $95 | $112 | 18% |
| Weekday Pass | $81 | $95 | 18% |
| Post-Secondary | $82 | Eliminate | N/A |
| Student Summer | $95 | Eliminate | N/A |
| Park and Ride | $70 | $83 | 18% |
| Youth(1) | $61 | $72 | 18% |
| Income Related(1) | $61 | $72 | 18% |
- Youth and Income Related pricing is based on the current City of London subsidies in place which provides for a 36% discount off of the Citipass. These pass types would not be part of the LTC fare structure in the event the City of London subsidy was no longer in place.
As noted in the table, the Post Secondary Monthly pass and the Student Summer pass are no longer included in the recommended fare structure moving forward. Over the past number of years, utilization of these monthly pass options has declined, and has continued to decline in 2023 as depicted in the table below. While the Post-Secondary monthly pass has seen steady decline over the past number of years, the Student Summer pass, which covers July and August, saw significant decline with the introduction of the Youth Pass, with only 100 passes sold in 2023 versus the approximate 500 that were sold prior to the introduction of the Youth Pass.
| Pass Type | 2023 Average Monthly Sales |
| Citipass | 2,900 |
| Weekday Pass | 500 |
| Income-Related Pass | 450 |
| Youth Pass | 850 |
| Post Secondary | 100 |
| Student/Summer Pass | 100 (summer of 2023) |
The table below sets out the comparison between the ticket fare and monthly pass fare (in terms of number of rides) pre and post the recommended increase, which has remained consistent.
| Equivalent Ticket Rides | ||
| Pass Type | Current Fare | Recommended Fare |
| Citipass | 42 | 42 |
| Weekday Pass | 36 | 36 |
| Youth | 34 | 34 |
| Income-Related | 27 | 27 |
Revenue projections have the increase in monthly pass fares resulting in an additional $1.0 million in revenue in 2024, no ridership loss is assumed relating to the proposed increases.
Tuition Pass Fares
The Commission currently holds three tuition-based pass program contracts with Fanshawe College, Western University undergrads and Western University Society of Graduate Students. The contracts were set to expire in August of 2021; however, given uncertainty relating to the declaration of the pandemic, a number of annual COVID-related addendums were established with each of the parties. The addendum particulars provided the flexibility to the parties to ensure that students who would be interacting with the campus in any manner would be required to purchase the tuition-based pass while excluding those students who would not be returning to London to undertake their studies given the move to fully online classes for their particular program.
The price of the annual tuition based pass for the 2023/24 academic year is $265.85 per full time student, noting the pass provides access to LTC service for a 12 month period ending August 31, 2024. This price represents a 0% increase over the previous contract year, as approved by the Commission at the April 13, 2023 meeting. In addition to approving a one-year contract extension with a 0% increase, the Commission directed administration to undertake a comprehensive review of the Tuition-Based Pass Program including but not limited to consideration of price, ridership and demand, overall usage rates, price escalation rates, administration of the program, contract terms and conditions, and the impact of the program on other fare categories and report back to the Commission with a recommended path forward.
While the historic contracts have set out annual escalation clauses which dictate the annual price of the tuition pass, when compared to the increases the other fare categories have been subjected to over the period, the increases have not kept pace. Since 2019, the cost of the annual tuition pass has increased by approximately 6%, while the remaining fare categories have seen increases of between 27% and 39% over the period.
The following table sets out the ridership for all students participating in the tuition pass program for the academic year September 2022 through August 2023.
| Month | Total Students Utilizing Transit | % of Tuition Pass Holders Utilizing Transit | Total Tuition Pass Rides | Avg Rides per Month |
| Sep 2022 | 40,213 | 73% | 1,106,832 | 28 |
| Oct 2022 | 38,540 | 70% | 1,070,541 | 28 |
| Nov 2022 | 38,508 | 70% | 1,077,478 | 28 |
| Dec 2022 | 36,085 | 65% | 751,396 | 21 |
| Jan 2023 | 41,615 | 75% | 1,141,806 | 27 |
| Feb 2023 | 40,169 | 73% | 1,021,628 | 25 |
| Mar 2023 | 41,657 | 75% | 1,330,189 | 32 |
| Apr 2023 | 39,515 | 71% | 963,388 | 24 |
| May 2023 | 23,674 | 43% | 853,798 | 36 |
| Jun 2023 | 21,514 | 39% | 767,978 | 36 |
| Jul 2023 | 19,769 | 36% | 734,832 | 37 |
| Aug 2023 | 21,816 | 39% | 709,042 | 33 |
| 11,528,908 |
The average rides per month set out in the table above represents only the students that utilized transit during that month. While the average rides per month increased May through August, this number is reflective of fewer students utilizing the service more often than average usage through the rest of the academic year.
Ridership data from the smart card system also indicates that over the 2022/23 academic year, a total of 59,986 students utilized transit at some point which represents the entire enrollment of the tuition pass program for the academic year. While virtually every student accessed transit at some point during the academic year, the number of times they utilized it is also an important factor to consider. The table below provides a further breakdown of the number of trips taken by the students participating in the tuition pass program in the 2022/23 academic year.
2022/23 Academic Year Student Rides
| Number of Rides | Number of Students | % of Students |
| Less than 50 | 20,093 | 33% |
| 51-200 | 19,217 | 32% |
| 201-350 | 9.970 | 17% |
| 351-500 | 4,873 | 8% |
| 500 plus | 5,833 | 10% |
As the table indicates, transit usage is spread over multiple categories, with a higher percentage of students in the lower usage categories. This table clearly demonstrates the concept of a universal pass program, with the infrequent riders cross-subsidizing the very frequent riders, noting the average number of rides per student during the 2022/23 academic year equates to 192.
While there is a discernable spread between frequent and infrequent riders, which provide for cross-subsidization, the overall price of the pass needs to be such that the group as a whole are paying a similar fare to the riders in the other fare categories. For the 2022/23 academic year, the average fare paid for all rides other than tuition pass holders is $2.27, as compared to the average fare paid for rides under the tuition pass program averages $1.34. In comparison to a monthly Citipass, the cost for 12 months of unlimited access to transit effective January 2024 will be $1,344 for a Citipass versus $265.85 for a tuition pass, representing an approximate 80% discount.
As has been discussed in previous reports relating to the tuition pass program, the tuition pass program was established in 1998 as a result of a request from the Western Student Union to create a program that would provide unlimited access to transit for students at a reduced rate with one of the intended benefits being increased ridership for London Transit. The program was subsequently extended to include Western Graduate students as well as Fanshawe College students. The basis of the tuition pass program is that it is universal in nature, meaning all students have to pay the agreed-upon fee, with those students who don’t utilize transit offsetting those who use it frequently. Ridership levels have grown significantly since the introduction of the tuition pass program, as has demand from students participating in the program for increased service levels to address crowding and schedule adherence issues on routes serving the campuses.
In light of the growing ridership and demand for increased service levels, the annual inflationary price calculation included in the previous contract included a portion directly related to consumer price index as well as an additional 1% increase intended to help support the annual growth in service levels required to address increased ridership demands.
Administration is beginning discussion with representatives from Western University and Fanshawe College student unions with respect to a multi-year contract beginning with the 2024/25 academic year. The aforementioned data relating to student usage and comparison to other fares will be the initial basis of the discussion noting that future contracts must ensure:
- that tuition pass program participants in aggregate contribute a representative share to revenue recognizing the universal nature of the program;
- that administration of the program continues to be consistent;
- that the universal nature of the program continue to be protected; and
- increased costs associated with operating the transit service must be supported by a balance of increased fares and increased City of London investment.
Communications Strategy
As indicated in part three of the report recommendations, subsequent to approval of the fare increase for 2024, administration will create and implement a communication strategy including, but not limited to traditional medium including onboard communication, social media and website. The campaign will include reference to the previous fare increase being in 2020.
Next Steps
Administration will closely monitor the response to the fare increase as well as any impacts resulting from potential changes to the subsidy programs over the course of 2024. A detailed analysis of the impacts will be included on the 2024 Work Program including a report and recommendations to the Commission considering adjustments to the fare structure that are intended to mitigate any negative repercussions resulting from the fare increase as well as to increase ridership going forward.
Updates will be provided to the Commission as appropriate as this program is rolled out.
Recommended by:
Mike Gregor, Director of Finance
Concurred in by:
Kelly S. Paleczny, General Manager