Smart Passes would reduce revenue loss in shutdown

Transit

Smart Passes would reduce revenue loss in shutdown

by Michael Perkins • April 7, 2011 10:07 am

It is looking like the federal government will shut down next week, and many employees will be staying home without pay. Politics aside, this is bad for Metro. The loss of riders will reduce WMATA's revenues, but if those workers instead were purchasing transit passes, Metro's bottom line wouldn't be hit so hard.

Photo by Nik_Doof on Flickr.

WMATA announced yesterday that they plan to maintain the current rush hour schedule, but in order to reduce costs will run shorter trains if demand is light. Their press release estimated about a 5-20% reduction in riders, or between 35,000 and 140,000 trips.

Reducing the train lengths will save electricity and maintenance, but the most expensive part of running a train is the operator, and that's not being reduced. Metro's costs will remain largely the same, and the reduction in riders will reduce fare revenue.

In my estimate, Metro will lose about a quarter million dollars per day during a shutdown ($2.50 per trip times 100,000 trips). This loss would be smaller if Metro had Smart Passes.

Most federal workers taking Metro get a subsidy to take transit. They can either receive the amount of money needed to commute from their home every work day, or monthly/weekly passes that cost the same amount or less.

With few and inflexible rail passes available today, most workers who ride Metrorail choose the first option for SmartBenefits. If they don't ride, they don't spend the money on Metro, and WMATA gets none of the money. The worker either hangs on to it for other rides later on, or it goes back to the federal government.

The Smart Pass concept is designed to be the same price as a daily commute, meaning many federal workers would opt for a pass instead of fare value. If the government shuts down, or there's a major snowstorm, or anything else, WMATA would still have collected the same amount that month.

22 comments

Tags: Metro, unlimited passes, WMATA

Metro's lost passes (Sep 8, 2010)
"Peak of the peak" makes flexible passes more crucial (Jun 16, 2010)
Rethinking Metro's passes, part 2: Benefits and principles (Dec 15, 2009)
Rethinking Metro's passes, part 3: A new pass proposal (Dec 16, 2009)
How could Metro share regional bus pass revenue? (Jun 28, 2010)

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.

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small difference. If there is snowstorm, and WMATA shuts down (or degrades service) the risk is being by SmartPass members, not WMATA.

by charlie on Apr 7, 2011 10:17 am • link • report

Its worth noting that, at least in some cases, the government precludes using smart benefits to simply purchase paper passes, because its too easy to turn around and sell them at a discount on the secondary market.

If Metro could ever get an electronic pass system off the ground, I'm sure plenty of feds would use it, although they might get caught up in the same trouble they're in now, with transit subsidy money technically precluded from non-commuting trips. I don't see how you could create a commute-only pass.

by Matt on Apr 7, 2011 10:18 am • link • report

Why can't you create a smartpass that would only work with certain station combinations? Same issue for DC public school students.

by charlie on Apr 7, 2011 10:23 am • link • report

If you buy a pass, the restriction to use it only for your commute goes away. The IRS doesn't care what you do with a pass, they do care if you're using transit benefit dollars to pay for rides outside of your commute.

by Michael Perkins on Apr 7, 2011 10:28 am • link • report

Unlimited passes count as "commute" passes - there's no need to have a separate "commute pass." It doesn't violate the federal rules because you are basically paying for your commute trips and just getting other trips for free.

Why would you WANT a pass that only works for certain station combinations? There would be no incentive to buy it - since it's not flexible there's little benefit to the customer over just loading money onto a SmarTrip and paying as you go.

by MLD on Apr 7, 2011 10:34 am • link • report

It hardly seems a reason to create monthly/weekly passes based on an event that may or may not happen for the first time in 15 years. The argument also fails to acknowledge that if there were weekly passes available, most gov't workers would not buy those either.

Bear in mind that WMATA already has the money for the April smartbenefits as gov't employees likely have loaded the benefits onto their smarttrip cards. What the shutdown would mean is that they won't then debit their account next week. The effect will be spread out over time as those employees will simply delay using those benefits and perhaps in future months be required to accept a reduced benefit to compensate (as they do for taking leave).

by ah on Apr 7, 2011 10:39 am • link • report

I suspect MARC/VRE/commuter buses will be far more hurt by a government shutdown than WMATA.

Although Mperkins dollar estimate is a bit low. Plenty of people have more than 2.5, and you're only including one way trips, no? Something like 100,000 get the federal benefit, I thought.

Ah's point is the same I raised earlier, and if the shutdown is less than 2 weeks, I suspect it will just be adjusted over time.

by charlie on Apr 7, 2011 10:43 am • link • report

There are weekly passes available, but they are inconvenient and do not offer what most riders would consider a "good deal". By improving the passes as recommended, more customers would use passes as opposed to pay-per-ride.

The argument for reducing Metro revenue loss is also applicable to sick days, leave, travel, snow days and other times where a worker is given a transit subsidy but does not go to work.

by Michael Perkins on Apr 7, 2011 10:45 am • link • report

$2.50 is the estimate I use for peak trips based on discussion with Metro, and the ridership impact was based on the Metro estimate of 5-20% of total weekday trips, and a total number of trips of about 700,000 for a weekday. 100,000 trips is about 15% of 700,000.

by Michael Perkins on Apr 7, 2011 10:52 am • link • report

Well, that is interesting. Sort of confirms my model that a lot of federal transit benefit users don't use WMATA. 100K trips mean 50K users. Still it must be a bit higher when you throw in people coming in from suburban stations. Or maybe they are including rail and not bus users.

by charlie on Apr 7, 2011 10:55 am • link • report

So, basically the Metro should get money even if it's not being used? That doesn't make any sense at all. It doesn't matter if the costs don't drop much from the decreased use. The Metro doesn't deserve to get paid for trips that aren't taken.

by Nathan on Apr 7, 2011 10:57 am • link • report

@Nathan - I recall the MTA working like that, when I used to take Metro North from Westchester to Manhattan. You bought a monthly pass, and then it was up to you to use it. That seems fair to me, paying for an opportunity to ride as much as you can in that month. It was discounted from the regular fare, and I used it on weekends too, going in to the city, and it was valid for any stations in between as well. I realize there are complications with Federal $$ being involved, but there are plenty of systems where you pay, and if you don't use it, it's your fault. I bet your internet and phone bills are like that too.

by Shawn G on Apr 7, 2011 11:26 am • link • report

While we worry about WMATA deficits, Americans solders have been told by their boss that their salary might be late due to the government shut down. Quite frankly, that trumps every other complaint. And that is the reason Americans should be irate at their government if it shuts down.

http://www.nytimes.com/2011/04/08/world/middleeast/08military.html

Are there any vets around that wanna tell their reps that that is not acceptable under any circumstance?

by Jasper on Apr 7, 2011 11:28 am • link • report

@Charlie: I'm working rail only because the data I have is less good on bus. I'm sure there will be a bus revenue impact too.

Not all fed workers are going to stay home during a shutdown, some are deemed "essential".

@Nathan: Metro's planning on running the same frequency of service during the government shutdown. I'd love to see your proposal for how the local governments should increase their subsidy so that Metro is kept whole.

by Michael Perkins on Apr 7, 2011 11:33 am • link • report

@Nathan: Also, as others have pointed out, the phone company, internet, cable and other network services get paid even when you don't use them.

by Michael Perkins on Apr 7, 2011 11:35 am • link • report

@Michael Perkins, re IRS. Isn't the problem the same? Right now you're supposed to get benefits only in the amount of your actual commute, i.e. 42 rides times the price of a ride from your home to office. If you had a pass, you would get only the price of a weekly/monthly pass to your office from home (based on whatever zoning system is in place). In either case presumably you could buy additional rides by purchasing a more expensive pass or adding your own money to smarttrip.

But in the case of a pass it is priced to assume the unlimited use with the knowledge that some riders may use it more and some less. Unless the pass is priced at less than 42 times the one-way ride cost, then you're buying additional metro use with government funds for personal use.

by ah on Apr 7, 2011 11:53 am • link • report

@ ah; well, if the cost is less to the feds for a pass, turning a blind eye on personal use (and killing the black market) would be a win.

However, Mperkins has made the argument (don't know if he believes it*) that the federal subsidy is a bad idea. Locking it into passes just means it will be harder to change in the future.

* I do. With these numbers, back of the envelope says about 350K metro rail riders, maybe 50K are feds who aren't paying anything and so are completely price incentive. Bad for the other 300K.

by charlie on Apr 7, 2011 12:10 pm • link • report

@Jasper, it's not really just about American Soldiers, American citizens who work for the feds will possibly not receive pay.

by HogWash on Apr 7, 2011 12:20 pm • link • report

@ Hogwash: American citizens who work for the feds will possibly not receive pay.

Yeah, and contractors, grant holders and many more indirectly. You can make all kinds of arguments about that. But soldiers not getting paid shows the utter lack of responsibility here.

by Jasper on Apr 7, 2011 1:07 pm • link • report

@Jas, I wholeheartedly support the troops.

However, I don't think soldiers not getting paid is any less respectful than anyone else who has a job w/responsibilities but can't work due to the shutdown.

by HogWash on Apr 7, 2011 2:41 pm • link • report

@ Hogwash: soldiers not getting paid is any less respectful than anyone else who has a job w/responsibilities

I think it matters whether you're a pencil pusher who is sent on a unpaid vacation with a guaranteed back-pay, or a soldier with bullets coming at you.

by Jasper on Apr 7, 2011 4:44 pm • link • report

Jasper,

Point of correction. The pencil pusher most likely will not get back pay this time. And to really get picky, less that 10% of the military are actual front line troops.

by RJ on Apr 7, 2011 7:07 pm • link • report