41

Evaluating the Costs and Benefits of the U-Pass Program: An Analysis

Graduate Students Association of the University of Ottawa Carleton University Graduate Students Association Students Federation of the University of Ottawa Carleton University Students Association

94 78

Prepared for the City of Ottawa Transit Commission Fall 2011

Table of Contents
Introduction Projected Direct Revenue from the U-Pass Actual vs. projected revenue for the 2010-2011 Pilot Year Effect of enrollment increases on U-Pass Revenue Projected revenue from annual increase of 2.5% Projected revenue increases from combined annual 2.5% increase applied to projected enrollment increases Ontarios Gas Tax Program Review of the Cost of the U-Pass Program Probable error in calculation of lost revenue from the U-Pass Students use of transfers Additional Cost Savings and Revenue Gains from the U-Pass Reduced strain on OC Transpo Sales and Information Counters Reduced sales commissions paid to vendors for pass and ticket sales Fare enforcement/Unpaid Fares Environmental Benefits and Reduced strain on the City of Ottawas Infrastructure Sustained Ridership Conclusion: Summary of Revenue Increases and Cost Savings Resources 2 2 2 2 3 3 3 3 3 4 5 5 5 6 6 6 8 10

Students for a U-Pass

Student Action for Public Transit

14

Notes
u

Introduction
For the last year, students have enjoyed the success of the Universal Transit Pass Pilot Program (the U-Pass). With a flat rate for access to transit across the City of Ottawa, students have changed their travel patterns and given up their cars in favour of public transit. The U-Pass has increased ridership and provided OC Transpo with a reliable revenue stream. In its 2011 budget documents presented to City Council, OC Transpo forecast a $3 million expense per year for the U-Pass program. This figure was estimated at the mid-point of the pilot program and largely derived from OC Transpos analysis of two student ridership surveys conducted in March and November of 2010. The students unions at Carleton University and the University of Ottawa have since conducted additional research into the program. This research, in combination with the benefit of having completed a full academic year of the program, provides additional insight into the financial viability of the U-Pass. Most significantly, the analysis conducted by the students unions strongly indicates that the U-Pass program valued at the base rate of $145 per semester, with annual maximum increases of 2.5%, is revenue positive for OC Transpo and the City of Ottawa. This analysis is explained in detail throughout this document. Students at both the University of Ottawa and Carleton University look forward to discussions with the Transit Commission, City Council and OC Transpo on the costs and benefits of the program with the goal of moving forward with a program that benefits all parties.

u u u

Projected Direct Revenue from the U-Pass

Actual vs. projected revenue for the 2010-11 pilot year
Documents prepared for the 2011 budget deliberations were prepared midway through the U-Pass pilot program and understandably relied on a number of estimations. At this time, OC Transpo forecast revenue from the U-Pass to be $14,514,500. The actual revenue received from the U-Pass was $14,648,281, an increase of $133,781 over projected revenue.

Effect of enrollment increases on U-Pass revenue

Both Carleton University and the University of Ottawa have seen significant increases in student enrolment over many years and have forecast similar increases for the years to come. These increases need to be incorporated into any calculation of revenue from the U-Pass. The additional revenue from projected enrollment figures for both universities combined over actual revenue from the 2010 pilot year are as follows*: 2011: $322,141 2012: $633,732 2013: $903,428 2014: $1,104,102 13
*Note: Projected enrollment numbers for graduate and undergraduate students have been combined for both universities. Specific breakdowns of enrollments are available upon request.

Projected revenue from annual increase of 2.5%

The students unions at both universities have agreed in writing to include in future referenda questions an escalator clause that will enable OC Transpo to raise the price of the U-Pass to a maximum of 2.5% per year beginning in 2012. Applied to the actual revenue from the 2010-2011 year, annual revenue from the program will increase as follows: 2012: $366,207 2013: $741,569 2014: $1,126,315 u

Notes
u

Projected revenue increases from combined annual 2.5% increase applied to projected enrollment increases

When 2.5% annual increase is applied to the increased enrollment figures, the total increase in revenue is as follows: 2011: $322,141 2012: $1,015,782 2013: $1,683,821 2014: $2,297,814 u

Ontarios Gas Tax Program

u According to the Ontario government, the City of Ottawa received $32,564,077 in gas tax revenue for the 2010-2011 fiscal year. Of this transfer, 70% is based on ridership numbers. According to the figures the students unions received from OC Transpo, u the U-Pass program has had a very positive impact on ridership numbers. The citywide ridership increase was 5.7% for the first four months of the U-Pass and 5.8% for the subsequent three months. The U-Pass has been cited by many city officials as one of the primary reasons for the increase in ridership and is a critical component of OC u Transpos forecast of reaching 100 million transit trips for the first time in 2011. The table below sets out possible scenarios of the U-Pass impact on the ridership increase using the 2010/11 ridership-based transfer of $22,794,853.
Percentage Ridership Increase Attributable to the U-Pass 1% of the 5.7% increase 2% of the 5.7% increase 3% of the 5.7% increase 3.5% of the 5.7% increase* 4% of the 5.7% increase 5% of the 5.7% increase Total 5.7% increase Increase in Gas Tax Revenue $227,949 $455,897 $683,846 $797,820 $909,994 $1,139,743 $1,296,742

*Based on the ridership figures provided to the students unions by OC Transpo and the results of the two student ridership surveys, it is reasonable to infer that the city-wide ridership increase attributable to the U-Pass is approximately 3.5%.

u u

Review of the Cost of the U-Pass Program

Probable error in the calculation of lost revenue from the U-Pass

The students unions at the University of Ottawa and Carleton University commissioned two senior doctoral candidates who specialize in statistical analysis to u review the data collection, methodology and results of OC Transpos U-Pass surveys conducted in March and November of 2010. They identified what they strongly 3

12

believe are errors in the analysis conducted on behalf of OC Transpo.

Resources
2003 The Costs of Travel In Ottawa: Final Report. Delphi-MRC. 2009 U-Pass Pilot Program Evaluation. Transportation and Public Works Committee, City of Edmonton. www.edmonton.ca/transportation/Report_on_U-Pass_Performance_during_the_3_year_Pilot_ Program.pdf 2009 Cooper, Caitlin Elizabeth. Creating a Transit Generation: The Effect of the U-Pass on Lifelong Transit Use. ir.lib.sfu.ca/bitstream/1892/10772/1/etd4436.pdf 2010 2009 Fall Usage & Attitude Survey. OC Transpo/Core Strategies. 2011 U-Pass Survey: Ottawa & Carleton University Student Trip Patterns. OCTranspo/Core Strategies. 2011 U-Pass: Survey Results and Financial Analysis. OC Transpo. 2011 Ontario Supports Municipal Transit. Ministry of Transportation, Government of Ontario. www.mto. gov.on.ca/english/about/transit/municipal-transit.shtml 2011 2011 Marketing Plan. OC Transpo. www.octranspo1.com/images/files/about_oc/transit_planning/ marketing_plan2011.pdf 2011 Quarterly Report to Council Q1. City of Ottawa. www.ottawa.ca/calendar/ottawa/citycouncil/ occ/2011/07-13/fedco/01 - ACS2011-COS-ODP - Document 1 ENG.pdf u

The most significant errors appear in the analysis of the use of cash, tickets, and O-Train fares. The statisticians commissioned by the students unions could not ascertain or replicate the figures presented by OC Transpo regarding the frequency of trips made by students using these paid fares as OC Transpo did not indicate how they arrived at these numbers. Using the available data, the statisticians obtained differences in the number of student trips made by each fare type. This is presented below.
Fare Type Cash Tickets O-Train Total OC Transpo Calculation 3.61% 13.05% 1.33% 17.99% Statisticians Calculation 4.11% 10.42% 0.76% 15.29% Difference (+/-) +0.50% -2.63% -0.57% -2.70%

The difference between 17.99% versus 15.29% of students using these fare types is significant, particularly when applied to OC Transpos calculation of $3,159,461 in lost revenue per term ($6,318,922 per academic year) from these fare types. The difference between OC Transpos figure and the figure produced by the statisticians amounts to a decrease of approximately $947,838 in lost revenue per academic year. A lack of data precluded the statisticians commissioned by the students unions from analyzing OC Transpos calculation of lost revenue based on the sale of transit passes. Despite multiple requests by the students unions, the data required for such an analysis has not been provided.

Students use of transfers

When determining the overall amount of lost revenue from the U-Pass, OC Transpos survey does not take into account the use of transfers when making multiple trips in a day. OC Transpo transfers are good for an hour and a half after the first transit ride, and are widely used amongst riders for a second transit trip. These were not taken into consideration when students were asked how many trips they took the day before, and each trip was treated as a separate cash or ticket fare in OC Transpos calculation of lost revenue from the U-Pass. Over 10% of students demonstrated that they could have used a transfer when answering the survey, and 23.8% of all transit trips taken by students demonstrate conditions where transfers could have been used. While we cannot know how many of those students actually used transfers, it has a major impact on the amount of lost revenue. The table on the following page sets out a few possible examples of the economic impact of transfers.

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Estimated Benchmarks

Number of Trips

Percent of Total Transit Trips

OC Transpo Estimated Loss for Cash and Tickets per Term $6,318,922 $5,942,946 $5,566,970 $5,190,994 $4,815,018

Total Estimated Decrease in Lost Revenue per Term $0 $375,976 $751,952 $1,127,928 $1,503,904

0% Transfer Use 25% Transfer Use 50% Transfer Use 75% Transfer Use

0 78 157 235

0% 6% 11.9% 17.9% 23.8%

Carleton University Students Association Students Federation of the University of Ottawa Carleton University Graduate Students Association Graduate Students Association of the University of Ottawa
Chantle Beeso Vice President Student Issues vpsi@cusaonline.com 613-520-2600 x.1607

100% Transfer Use 313

OC Transpos financial analysis shows an annual loss in revenue of $6,318,922 in tickets and cash fares because of the U-Pass. However, if even a quarter of subsequent trips used a transfer, this loss is decreased by $375,976. If half of students used a transfer, the loss is decreased by more than $750,000 per year. u

Additional Cost Savings and Revenue Gains from the U-Pass

Decreased strain on OC Transpo Sales and Information Counters
With more than 50,000 U-Passes being printed at Carleton University and the University of Ottawa, there are tens of thousands of OC Transpo users that no longer purchase their fare media from OC Transpo. As a result, OC Transpo is seeing savings on printing and material costs as well as staffing hours. The students unions do not have the necessary information to put a clear dollar figure on the amount of savings, but believe it to be tens or hundreds of thousands of dollars per year.

Amalia Savva President president@sfuo.ca

Kelly Black Vice President Operations vpo@gsacarleton.ca 613-520-2600 x.3879

Reduced sales commissions paid to vendors for pass and ticket sales

OC Transpo is saving a significant amount of money in commissions to outside retail outlets. OC Transpo pays a 1% commission on all fare media sold outside of its own retail outlets. The U-Pass is the only fare media sold from an outside outlet that does not require the payment of a commission. At the Carleton University Students Associations convenience store alone, more than $10,000 was eliminated in OC Transpo commissions for pass and ticket sales when the U-Pass was implemented. By eliminating the need for commissions to be paid on each and every one of the over 50,000 U-Passes in circulation, OC Transpo is saving tens of thousands of dollars per year1.
For example, according to the spring 2010 OC Transpo survey 43% of full-time students had a transit pass of some type. This amounts to roughly 22,000 students. If 50% of these students previously used a non-OC Transpo outlet for a regular student monthly pass, the savings over 8 months would be $66,000.
1

Taiva Tegler External Comm. lexterne external@gsaed.ca externe@gsaed.ca 613-562-5800 x.6671

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Conclusion Contd
The City must take into consideration the savings and additional revenue that have not been identified by OC Transpo in their cost-benefit analysis of the U-Pass program. According to these calculations, the estimated net gain for the City of Ottawa and OC Transpo after five years of the program will be between $9.68 million and $21.85 million. It is acknowledged that these calculations involve the use of estimates, although the estimates applied are generally conservative and several significant cost saving areas have been omitted entirely from the calculation. While discussion on the use of estimates is warranted, alterations to the estimates are unlikely to negate the considerable financial benefit of the program for the City of Ottawa. For instance, even if sustained ridership is removed entirely from the calculation, the City of Ottawa and OC Transpo still have a net gain after five years. The students unions have already agreed to include annual increases of up to 2.5% in the membership referenda questions that are required to continue the program in subsequent years. However, there is concern that significant and immediate increases to the initial price of $145 per term will lead to a substantial decrease in support amongst students. We look forward to working with OC Transpo representatives, the Transit Committee, and City Councillors to find the true value of the U-Pass for future years in an effort to create a program that is both financially sustainable for the City of Ottawa and offers an attractive rate for students.

Fare enforcement/Unpaid Fares

With the creation of the U-Pass program, almost all full-time university students are paying for the use of Ottawas transit system and the need for fare enforcement on routes heavily used by students, including the O-Train, is reduced. Similarly, the likelihood that students are using transit services without payment is significantly decreased. u

Environmental Benefits and Decreased strain on the City of Ottawas Infrastructure

In February 2010, the Citys Transportation Committee reviewed the actual costs and the societal costs of car, transit, cyclist and pedestrian usage on the Citys roads. It found that a single car trip cost the city $2.50 on average as compared to $1.76 for a trip utilizing public transit. According to the U-Pass surveys conducted on behalf of OC Transpo, students car usage has decreased significantly since the implementation of the U-Pass. Previous to the U-Pass, approximately 29% of students took a trip using a private vehicle every day. After the U-Pass was implemented, that number was reduced to just over 24%. With more than 50,000 participating students, the U-Pass could be credited with eliminating 2,500 car trips per day. As these students move to transit, every day the city saves roughly $1,900 in actual and societal costs. This amounts to over $450,000 in savings per year on road infrastructure and repair and societal costs such as health and air quality. This estimate is conservative compared to the findings in the City of Edmonton U-Pass Pilot Program Evaluation. In 2009, this study was conducted by the Transportation and Public Works Committee of the City of Edmonton in order to review the true cost of their U-Pass Pilot Program. It reviewed the immediate and long term financial implications of the U-Pass to the City. The program was of similar size to the City of Ottawa pilot program with two universities participating. The survey asked Without the U-Pass, how many of your transit trips per week would you have taken by car? The average response was 4 trips per week. Using a transit report showing that 30 automobile drivers shifting to transit can provide savings worth between $0.15 and $1.73 per kilometer, and extrapolating this to the student population switching from cars to transit, the study estimated the savings on roadway costs to be $1,293,440. In the City of Edmonton U-Pass Pilot Program Evaluation, it was estimated that the City also saved $49,536 per year in environmental costs. This figure was reached by looking at how many car trips were avoided because of the U-Pass program. It was estimated that riders annually helped eliminate over 1,981 tonnes of carbon dioxide from the environment. Using the value of this level of tonnage on the carbon trade market, it is valued at almost $50,000 per year. By reducing congestion and the citys overall carbon footprint, the U-Pass program also increased the health and wellbeing of residents. u

Sustained Ridership

In the survey conducted as part of the City of Edmonton U-Pass Pilot Program Evaluation, 50% of surveyed graduating students from the two universities 9 6

participating in the U-Pass program stated that they intended to continue using public transit as their prime commuting option after graduation. U-Pass participation has been shown to build a culture of ridership amongst students that continues as students move into the citys workforce. The City of Edmonton estimated the value of building sustained ridership through the U-Pass program at $2,018,277 per year. Other studies, such as Elizabeth Caitlin Coopers 2010 study of former U-Pass holders at Simon Fraser University, found that 53% of former U-Pass holders became frequent transit users after graduation and an additional 23% became occasional users. Between 2006 and 2010, Carleton University and the University of Ottawa have graduated an average of 12,699 students per year. It has been estimated that at least 50%, or 6,350 graduates per year, stay within the Ottawa area2. If the survey results from the City of Edmonton study were applied to the City of Ottawas U-Pass, 3,175 graduates would carry their ridership habits post-graduation. Based on OC Transpos 2009 Fall Usage and Attitude Survey, which indicates 23% of Ottawa residents use transit as their primary mode of travel, the 3,175 graduating transit users would represent an increase of approximately 1,714 riders who otherwise would not choose transit as their primary mode of travel. If only 33% of graduates continued to use transit as their primary mode of travel, the increase would be 635 riders. If all of the graduates who converted to transit purchased a monthly transit pass at $94.00 per month, it would result in significant sustained fare revenue as displayed in the chart below.
Year of Graduation Estimate of Graduates Remaining in Ottawa Revenue change if 23% use transit as primary mode Cumulative Revenue change if 33% use transit as primary mode Cumulative Revenue change if 50% use transit as primary mode 2011 6,350 2012 12,700 2013 19,050 2014 25,400

Conclusion: Summary of Revenue Increases and Cost Savings: Difference from OC Transpo Projected Loss of $3 Million in 2010-11 Base Year
Item Actual Revenue Projected Enrolment with 2.5% annual increase Gas Tax Revenue* Probable error in the calculation of Lost Revenue Use of Transfers (25%) Reduced fare media costs Reduced sales commissions Fare Enforcement/ Unpaid fares Infrastructure Savings* Sustained ridership at 33% and 50% Total: 2010-11 $133,781 2011-12 $322,141 2012-13 $1,015,782 2013-14 $1,683,821 2014-15 $2,297,814

$947,838

$797,820 $947,838

$797,820 $947,838

$797,820 $947,838

$797,820 $947,838

$375,976

$375,976

$375,976

$375,976

$375,976

undetermined

undetermined

undetermined

undetermined

undetermined

undetermined

undetermined

undetermined

undetermined

undetermined

undetermined

undetermined

undetermined

undetermined

undetermined

$0

$0

$0

$0

$450,000

$450,000

$450,000

$450,000

$450,000

$716,280

$1,432,560

$2,148,840

$2,865,120

$716,280/ $1,933,392

$1,432,560/ $3,866,784

$2,148,840/ $5,800,176

$2,865,120/ $7,733,568

$1,933,392

$3,866,784

$5,800,176

$7,733,568

$1,907,595

Net loss/ LOSS OF gain to City $1,092,405 of Ottawa and OC Transpo using $145 per term base price

$3,610,055$4,827,167 GAIN OF $610,055$1,827,167

$4,831,988$7,266,212 GAIN OF $2,019,976$4,454,200

$6,216,307$9,867,643 GAIN OF $3,404,295$7,055,631

$7,546,580GAIN OF $4,734,568$9,603,016

The alumni departments estimate 53% (Carleton University) and 55% (University of Ottawa) of graduates stay within the greater Ottawa area.
2

*These estimates are based on the 2010-11 base year. Enrolment projections for future years have not been applied to these estimates but will further increase OC Transpos revenues.