Staff Report #1 – Tuition-Based Pass Contract

Staff Report #1

October 25, 2023

To All Commissioners

Re: Tuition-Based Pass Contract

Recommendations

That the Commission APPROVE Tuition-Based Pass Contracts with University Student’s Council at Western University, Society of Graduate Students at Western University, and Fanshawe Student Union at Fanshawe College covering the period of September 1, 2024 through August 31, 2027 noting the remainder of the contract terms are set out in Enclosure I.

Background

The Tuition-Based 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. This program was established during a period of ridership recovery for London Transit (and transit systems across the Province). The ridership decline began in the early 1990’s as the result of Provincial funding cuts that resulted in the need for transit systems to reduce service levels and increase fares in order to balance budgets, which in turn resulted in a downward spiral of ridership losses over a number of years. In London, ridership dropped from a high of 15 million in 1992 to 12.2 million in 1996 as the result of the ongoing service reductions and fare increases. In the first full year of the Tuition-Based Pass program being in place (1999), ridership levels returned to the 15 million mark.

The basis of the original Tuition-Based Pass program was that it would be universal in nature, meaning all students would have to pay the agreed-upon fee, and that the overall program would be revenue neutral to London Transit, meaning that the fee charged to the entire student group would offset the lost revenue from those students currently utilizing transit and purchasing a monthly pass, and there would be limited administrative work for London Transit associated with the management of the program. At the time the program was implemented, there was limited concern with respect to accommodating the anticipated additional riders as overall ridership remained at levels low enough that capacity was available on all routes currently being operated. The initial program was limited to Western undergraduate students, and provided unlimited access to public transit for an eight month period matching the academic year (September through April). In 2002, the Society of Graduate Students at Western and the Fanshawe College Student Union entered into tuition pass agreements covering a 12-month period (September through August). In 2007, the Western undergraduate students voted to move their tuition pass program to a 12-month period as well.

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. While these addendums resulted in a decrease in participants at both Western and Fanshawe, the approach protected the universality concept of the program in that opting in or out was not allowed.

At the April 13, 2023 meeting, the Commission directed administration to establish a one-year extension for the 2023/24 academic year to the Tuition-Based Pass Contracts with University Student’s Council at Western University, Society of Graduate Students at Western University, and Fanshawe Student Union at Fanshawe College providing for a 0% increase in the annual cost and utilizing the remaining terms and conditions that are currently in place. Additionally, administration was directed 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.

The details of the review of the Tuition-Based Pass program were set out in Staff Report #1 dated September 27, 2023, a summary recap of the findings is provided in the bullets below.

• 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.
• 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-Based Pass program for the academic year.
• As the table below indicates, transit usage is spread over multiple categories, with a higher percentage of students in the lower usage categories.

2022/23 Academic Year Student Rides

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.

This analysis was utilized as the starting point for discussions with the parties regarding future Tuition-Based Pass contracts with administration’s position being that any future contracts must ensure:

• that Tuition-Based 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.

The parties met to discuss the details of a future contract, noting there was consensus that a return to a multi-year contract was a priority for all involved. The multi-year contract provides a mechanism to include projected fee increases in the annual budget update process which is critical for accurate revenue forecasting. The methodology in the previous multi-year contracts utilized to adjust the program fees annually included a 1% increase over the previous year to help cover the costs of annual service expansion, plus an adjustment equal to the change in the Ontario Transportation Index over the previous year. The annual increases were capped at 5% in each year due to a requirement of the participating schools that an increase above 5% requires a referendum to be held to determine whether students want to continue to participate in the program. With pass rates held fixed at 2% and 0% during two years in which the contract was extended via addendum, 2022-2023 and 2023-2024 respectively, a return at this point to the mechanism would essentially omit significant inflationary pressures that had occurred during that period. As a result, it is recommended that a 5% fixed increase occur in year one of the contract, with a return to the mechanism in subsequent years.

The remainder of the previous contract terms will be updated to reflect the use of white lists (list of all valid student cards which is uploaded to the LTC smart card system). One additional clause will be incorporated into the new agreements which will outline the expectations with respect to the provision of smart card tap data to each of the participating student unions on a monthly basis. Administration has provided this data for the previous academic year to each of the parties, and will continue to do so on a monthly basis going forward.

A summary of the contract provisions is set out in Enclosure I, with the proposed changes from the previous multi-year contract highlighted for reference. Subsequent to the Commission’s concurrence with this approach, administration will finalize the new multi-year contracts with each of the participating student unions.

Enclosure

I – Summary of Contract Provisions for Tuition-Based Pass Contracts

Recommended by:

Mike Gregor, Director of Finance

Concurred in by:

Kelly S. Paleczny, General Manager