Understanding the Wider Value

of Honor Based Ticketing in

Light Rail

Professor Graham Currie

James Reynolds

PUBLIC TRANSPORT RESEARCH GROUP

Institute of Transport Studies

Monash University, Australia

Light Rail 2016 – Transforming the urban

transport landscape

Pullman Melbourne on the Park

25th February 2016

1 Introduction

2 Research Context

3 Model Development

4 Results

5 Discussion and Conclusions

Agenda

2

• Passengers must have valid ticket

• Random ticket inspections for enforcement

• Allows passengers to board and alight at any door

Melbourne, like most Light Rail systems, uses Honor

Based or Proof-of-Payment (POP) fare collection

3

All door boarding and alighting in Melbourne, Australia

This is often criticised in the media/community because

of high fare evasion rates

4

0%

5%

10%

15%

20%

25%

0% 20% 40% 60% 80%

Fa

re e

va

sio

n r

ide

rsh

ip s

ha

re -

wit

hin

m

od

e

Total lost revenue - share between modes

Lost Revenue

Tram

Train Bus

Source: ITS (Monash) analysis of the Fare Evasion and Valid Concession Percentage Survey - 2011

• Pay fare to driver on boarding, or show valid pass, transfer etc.

• Allows close monitoring of fare payment

• Requires all passengers to board by the front door

An alternative is Pay-on-Entry (POE) fare control such as

adopted in Toronto

5

Front Door Boarding on a Toronto Transit Commission Streetcar

The trade-offs between POE and POP on LRT have not

been fully explored

6

Pay-on-Entry (POE)

Pay driver

Longer boarding times

Lower fare evasion

Honor Based / Proof-of-Payment (POP)

Pre-purchase ticket

Shorter boarding times

Higher fare evasion versus

Fare Revenue Increases?

Operational Costs / Savings?

Capital Costs?

Fare Evasion Losses?

Operational Costs / Savings?

Capital Savings?

THIS RESEARCH:

• Develops a model of the Melbourne Tram Network to directly compare the overall financial impacts of

POE with POP, and

• Investigates how:

• Reduced fare evasion under POE fare control; compares to

• Costs due to slower boarding times compared to Honor Based/ POP system.

Currie G and Reynolds J (2016) ‘Evaluating Pay-on-Entry Versus Proof-of Payment Ticketing in Light Rail Transit’

Transportation Research Record - Transportation Research Board 95th Annual Meeting January 2016

1 Introduction

2 Research Context

3 Model Development

4 Results

5 Discussion and Conclusions

Agenda

7 7

Trams in Melbourne have open access, while trains and

buses have more control of fare payment

8

Melbourne Rail Network

• Barrier gates at central stations

• Roving ticket inspectors

Melbourne Bus Network

• Enter by front door only

• Validate smartcard in front of driver

• Some roving ticket inspectors

Melbourne Tram Network

• Enter by any door (open access)

• No interaction with driver

• Roving ticket inspectors

Melbourne’s trams use the “myki” smartcard system, with

passengers required to “touch on” after boarding

9

Touch On

myki Smartcard

Images source: www.ptv.vic.gov.au

Board

Ride

Touch Off

If travelling

wholly in Zone 2

Alight

*Except in the FREE TRAM ZONE in the city center

Fare Evasion Trends

10

14

% fa

re e

va

sio

n

20

% fa

re e

va

sio

n

“myki” smartcard

introduction period

Source: Public Transport Victoria

Victorian Official Fare Compliance

Series May 2015

Victorian Fare Compliance Rate

6%

The Age Newspaper:

October 3, 2011 The Age Newspaper: January 2, 2015

Would Melbourne Trams have been better off with POE

instead of the myki POP system?

11

The Age Newspaper: June 2010, October 2011 and June 2011

Melbourne trams vs Toronto streetcars

12

Melbourne Toronto

• Some of the largest streetcar systems in the world

Melbourne = 167 kms (104 miles) Toronto = 71 kms (44 miles)

• Different Fare Control Systems

Melbourne = POP Toronto = mostly POE

Melbourne vs Toronto

13

Melbourne

– Tickets pre-purchased – Validated during or after

entry – No interaction with driver

Toronto

– Pay-on-Entry (POE) fare paid to farebox in front of driver

– Pass or transfer must be shown to driver

– Front door boarding only – Some Proof of Payment (POP)

zones but on only a limited number of routes

• Melbourne and Toronto dwell time surveys

• Regression models developed including one with a factor for fare

control type

Previous Research - Currie, Delbosc and Reynolds (2012)

14

Dwell time = 3.7 + 0.9a + 0.7b + 13.4c – 6d + 3.4e + 9.8f

Where:

a = Number of boardings

b = Number of alightings

c = 1 if 4 doors, else 0

d = 1 if platform stop, else 0

e = 1 if steps, 0 otherwise,

f = 1 if pay-on-entry, 0 otherwise

Source: Currie, G., A. Delbosc, and J. Reynolds, Modeling Dwell Time for Streetcars in Melbourne, Australia, and

Toronto, Canada. Transportation Research Record: Journal of the Transportation Research Board, 2012. 2275: p. 22-29.

• Model implies that average dwell time for POE is 9.8 seconds higher

per stop than for POP

1 Introduction

2 Research Context

3 Model Development

4 Results

5 Discussion and Conclusions

Agenda

15 15

16

Model Structure - Outline

vs

Operational

Impacts

Ridership and

Fare Payment

Impacts

Annual

Revenue /

Cost Impacts

Capital Cost

Impacts

Discount Cash

Flow Analysis

Pay-On-Entry

(POE) fare

control

Proof-of-

Payment (POP)

fare control

• Compares POE fare control impacts with the

(existing) POP across 22 of the 26 tram

routes in Melbourne

• Determines operational, ridership and fare

payment impacts

• Calculates capital cost and

annual revenue / cost impacts

• Uses a Discount Cash Flow Analysis to

calculate a BCR of switching to POE

Overall model - Detail

Fewer Ticket

Validation

Machines

Longer Dwell

Times

Longer

Passenger

Journey Times

Decreased

Ridership

Longer

Vehicle

Journey Times

Increased

Vehicle

Requirements

Higher

Operational

hours & km

Increased

Operating

Costs

Increased

Capital Costs

Larger Vehicle

Fleet

Reduction in

Fare Evasion

Removal of

Inspection

Staff

Increased Fare

Payment

Decrease in

Fines Levied

Decreased

Revenue

Increased

Revenue

Decreased

Operating

Costs

Decreased

Capital Costs

Better

Financial

Performance

Worse

Financial

Performance

Less

Maintenance

vs

Pay-On-Entry

(POE) fare

control

Proof-of-

Payment (POP)

fare control

17

1 Introduction

2 Research Context

3 Model Development

4 Results

5 Discussion and Conclusions

Agenda

18 18

Impact of Conversion – Honor/POP vs POE

19

10%

Ridership

Decline

49

Additional

LRV’s

Needed

816

3

66

-280

-230

-180

-130

-80

-30

20

70

Reduced F

are

Evasio

n

Saved A

O

Costs

Saved

Valid

ato

r

Costs

Saved

Valid

ation

Machin

es

Savings Resulting from Pay the Driver Ticketing

Cost Savings

Ch

ang

e in

Co

sts

(M

)

Costs Resulting from Pay the Driver Ticketing

Cost Increases

-17 -9 -30 -276

-280

-230

-180

-130

-80

-30

20

70

Fare

Reduction L

ess R

iders

Low

er

FE

Fin

e R

evenue

Incre

ased T

ram

Opera

ting

Costs

Less T

ram

/LR

V V

ehic

les

Operating/ Annual Costs Capital Costs

Operating/ Annual Costs Capital Costs

Open access saves $29M p.a. operating costs & $210M

in Capital – increases ridership 10% and saves 49 LRVs

20

Melbourne – Open Access; Proof of

Payment Ticketing

Toronto – Pay the Driver Ticketing

Source: Currie, G and Reynolds J (2016) ‘Evaluating Pay-on-Entry vs Proof-of Payment Ticketing in Light Rail Transit’ Transportation Research Record

Journal of the Transportation Research Board - 95th Annual Meeting of the Transportation Research Board Washington DC January 2016

• +$29M p.a. in net Operating Costs

each year

• +$210M in net Capital Costs

• 10% less ridership due to delays

• 49 additional LRV’s needed (+14%

of fleet)

21

Aggregate Results Financial Analysis Annual Capital

POE Benefits ($AU)

• Reduced fare evasion losses

• Reduced staffing costs

• Reduced maintenance of validation machines

• Fewer ticket validation machines

8.1m

15.8m

3.1m

65.5m

POE Costs ($AU)

• Lower fare revenue

• Lower fine revenue

• Increase vehicle operation costs

• New vehicles

17.4m

9.2m

29.8m

276.0m

Total ($AU) Benefits – Costs -29.4m -210.5m

Discount Cash Flow Analysis BCR

• 30 years at 6% discount rate

0.44

22

Route Based Results

R² = 0.1851

0.3

0.35

0.4

0.45

0.5

0.55

0.6

0 5,000,000 10,000,000 15,000,000

BC

R

Annual Ridership

Benefit Cost Ratio vs Route Ridership

R² = 0.1202

0.3

0.35

0.4

0.45

0.5

0.55

0.6

5 6 7 8 9

BC

R

Stops per Route Kilometer

Benefit Cost Ratio vs Stops per Route Kilometer

• BCR of POE

goes down

as stops per

kilometre

goes up

• BCR of POE

goes up as

ridership

increases

• However R2 is < 0.2

23

Sensitivity Analysis

0.30

0.35

0.40

0.45

0.50

0.55

0.60

Dw

ell

tim

e

AO

an

nu

al cost

An

nu

al o

pe

rating

hou

rs

Cre

w c

ost p

er

ve

hic

le h

ou

r

Tic

ket

va

lida

tors

pe

r tr

am

Rid

ers

hip

ela

sticity

Cap

ita

l co

st

pe

r ve

hic

le

Fa

re e

va

sio

n r

ate

Ca

pita

l co

st

pe

r ticke

t va

lida

tor

Reve

nu

e f

rom

fin

es

Cost

per

veh

icle

km

An

nu

al o

pe

rating

km

s

Dis

co

un

t ra

te

Va

lida

tor

ma

inte

nan

ce s

taff

co

st

An

nu

al ri

ders

hip

Fa

re r

eve

nue

per

pa

ssen

ger

Benefit-

Cost

Raito

Most Sensitive to Dwell Time

1 Introduction

2 Research Context

3 Model Development

4 Results

5 Discussion and Conclusions

Agenda

24 24

25

Findings • Melbourne trams have worse financial performance under POE than

POP

• $AU27.0m annual benefits and $AU65.5m capital savings

• But $AU56.4 annual costs and $AU276.0m capital expense

• BCR of only 0.44

• Costs associated with longer stop dwell times far outweigh the

benefits of POE for reducing fare evasion and staffing costs

• Lower levels of ridership, increased fleet size and operating costs

are significant financial penalties of operating a POE fare system

Toronto – should stop using POE!...

26

Front Door Boarding on a Toronto Transit Commission Streetcar

... AND THEY HAVE

27

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29

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