Photo by ryancr on Flickr.

Last week, we discussed why regional bus providers are unhappy with the current regional bus pass arrangement, and why some sort of revenue sharing agreement is vital to maintaining bus pass flexibility for customers. Today, we’ll look into what some of the options are for a sharing proposal.

First, we’ll look at my recommended proposal. Under this proposal, it’s best to think of the revenue that comes in to WMATA when people buy bus passes as a regional pool of money to pay for bus service, and the local providers qualify for a share of that pool by providing trips for bus pass holders.

The formula for this is pretty simple: For a given time period, take all the bus pass trips taken on a local transit provider’s service, divide by the total bus trips taken using passes. That’s the local provider’s share. Then, total up the revenue that Metro gets from selling bus passes for a time period (say, a quarter or a month). Multiply the total revenue by the share, and that’s the amount of revenue a local government should get.

This proposal is relatively simple, the data is already collected or will be easy to collect using SmarTrip passes. This idea encourages local transit companies to get more people using passes (so that there’s a larger pool of revenue to share) and also to provide valuable transit service (so that the pass users choose their service, increasing their share).

Here are some other pass revenue sharing ideas:

There’s always the status quo option. Transit providers can agree to accept Metro’s pass but not demand any revenue, or they can opt out of the pass and sell their own passes. This would complicate our regional bus fare system. First, if other agencies issue their own passes, would they be available on SmarTrip? If so, would the pass be worth anything as a transfer to Metrorail or Metrobus? Conversely, if a Metrobus flash pass holder transfers to a local bus, would the rider have to pay full fare? Transfer fare? Or nothing? This is a bad option which would require a lot of new and complicated rules for passengers that should be avoided if possible.

Metro could agree to provide a full bus fare every time someone uses a pass on a regional provider. But this would give the local bus too much in the case of a transfer from rail or bus, and for heavy pass usage could result in Metro charging $15.00 to a rider for a pass, but paying out more than $15.00 to the local bus service, losing money on the deal. All the downside risk of overusage falls to Metro, so it’s unlikely Metro would agree to this.

Alternatively, Metro could share an average bus revenue per trip with the local provider, which before the current round of fare increases was about $0.80 per ride. This still puts the downside risk of high usage on Metro, but provides the local provider somewhat less revenue than “full” reimbursement.

Maybe a better solution would be for the local bus providers to earn revenue as if they were a Metrobus (including transfers from rail or other buses). That way, a rider who normally commutes by a local bus to a Metrobus in the morning, and the reverse in the evening, would pay one fare to each provider per day.

To handle the problem of the potential risk residing only with Metrobus or the local provider, the risk of frequent pass usage could be shared between the two. After a pass has been used a certain number of times (say, ten), no more revenue would change hands. That way, if a person rides daily on ART only, ART would get ten rides worth of revenue, but would have to provide free trips after that, just like Metro would. On the other hand, if a person rides Metrobus ten times but takes some extra trips at the end of the week on ART, those ART trips would not have a revenue transfer, just like Metro gets no additional revenue for extra trips late in the week. In other words, the local provider accepts passes and can “earn” as much as the pass value in revenues by providing trips, but cannot “earn” more than the actual value of the pass, and has to share the pass revenue with other service providers that accept the pass.

I think the first proposal, where providers earn a share of the total pass pool, is technologically feasible, understandable, not administratively burdensome, and fundamentally fair.

Michael Perkins blogs about Metro operations and fares, performance parking, and any other government and economics information he finds on the Web. He lives with his wife and two children in Arlington, Virginia.