(Part 2)
Background
The 2016 Business Plan and Budget identifies a transit fare increase to help offset baseline budget
increases due to inflationary pressures and operational requirements resulting from the Transitway
operation and continued transit service improvements to meet customer needs.
Comments
Transit ridership growth depends significantly on attracting new, choice riders to the system. To
do so, continued investment in transit is needed to expand service levels and frequency, introduce
transit priority initiatives, operate and maintain rapid transit services, encourage Presto fare card
uptake, and educate the community about the value and benefits of MiWay for Mississauga.
Continuing to grow ridership results in additional revenues from fares. However, if transit services
and frequencies are not attractive to new riders, encouraging them to try the system becomes
very challenging, particularly with competition from privately-owned automobiles.
MiWay strives to recover just under half the cost of operating transit through user fees (fares) and
a minor amount through advertising revenues. The remaining costs are funded through municipal
taxes and provincial gas tax receipts. The 2014 the revenue to cost ratio (R/C ratio) for
Mississauga was 49%. The 2015 planned R/C ratio is 47% and the forecast for 2016 is also 47%.
The proposed 2016 gross operating budget increase for the Transit Division totals $6.9 million.
Over the past few years the expected revenue growth from fare increases and ridership has not
met the budget projections which has created a growing revenue shortfall. In 2014 the projected
budget was $75.7 million in transit revenue from the farebox but MiWay achieved an actual of
$74.1 million; a shortfall of $1.6 million. It is projected that this gap between budget and actual
revenue will grow to $2.8 million in 2015.
Budget Committee I July 13. 2015 3
MiWay introduced the Presto smartcard into the fare system in 2011 as an alternative to paper
tickets and passes. Customers transitioned slowly to Presto and therefore MiWay experienced a
gradual shift from approximately 11% Presto use in 2012 to 44% today. Adding in this type of new
fare media has had an impact on other fare categories including cash. In 2011, 25% of customers
used cash as fare payment however currently only 21% pay using cash. Cash is a premium fare for
customers at $3.50 per ride whereas Presto fares are equal to the ticket value and as a result less
total revenue is realized as customers shift from cash to Presto.
New revenue realized from a fare increase has followed a predictable pattern until the introduction
of Presto. The transition from paper fare media to Presto has disrupted the fare model and
therefore has hindered the ability to predict net new revenue due to a fare increase. As a result
staff have required several years with Presto as part of the system to begin to forecast a realistic
fare model. It is expected that the customer fare usage pattern will settle over the next few years
after a full transition to Presto.
2016 Annual Fare Increase
MiWay is recommending a fare change effective May 2, 2016 to reduce the revenue shortfall
between the budget and actual revenue. Consequently, although this fare increase will generate
revenue, no increase to budgeted revenue will be recognized. Fares were last increased April 27,
2015.
The recommended fare change is based on a detailed analysis that considered ridership impacts,
GTHA fare averages and other GTHA transit system R/C ratios.
Ridership Impacts
Transit is a key strategic priority and the upward trend in riders in 2014 and 2015 is a positive
direction for Mississauga that needs to be fostered and supported. Transit ridership demand like
many products and services is sensitive to price. Price sensitivity is measured using elasticity,
defined as the percentage change in use as a result of a percentage change in price, with all else
held constant. A frequently used fare elasticity measurement called the Simpson-Curtin rule sets
fare elasticity at -0.3, which means that for every 1% fare increase, ridership is reduced by 0.3%.
When applying this elasticity factor with the recommended fare change, it reduces ridership by
approximately 219,000 rides per year.
Fare Pricing
MiWay fare pricing must be considered in relation to other GTHA transit fare prices, current fare
category usage trends, ridership impacts and current and future cost pressures. Each of these
factors will have an impact on the overall revenue MiWay will realize from customer fares. The
growth in use of the new Presto electronic fare card among MiWay customers is another key
consideration. MiWay's 2016 fare pricing strategy is designed to encourage Presto use as paper
fare products (tickets and passes) continue to decline in popularity and are gradually eliminated.
The current and recommended Mississauga fare pricing listed in Appendix 1 is similar in most
categories when compared with other GTHA transit systems.
Budget Committee
A comparison of GTHA transit fares is provided at Appendix 2.
Recommended Fare Changes
Presto
July 13, 2015 4
MiWay introduced the Presto smartcard in 2011 and has slowly been transitioning customers to
Presto instead of paper tickets and passes. All transit systems in the GTHA are also transitioning
to Presto and both Brampton and Oakville customers now have Presto and cash as their only
method of payment. TTC is planning to expand the availability of the Presto fare card across their
full system by the end of 2016.
Over 44% of MiWay customers currently use the Presto card as their choice for transit fare
payment, up from 20% in 2013. As a part of the fare strategy each year MiWay has discontinued
paper fare products and reduced fare sales agents as more customers switch to Presto. To date
MiWay has discontinued the student and adult weekly pass, the high school student monthly pass
and the senior annual pass (January 2016).
The next phase of the fare strategy is to introduce the monthly pass option for adults on the
Presto card. Beginning February 2016, customers will be able to load an adult monthly pass onto
their Presto card. The value will match that of the paper pass and work in the same manner where
customer have unlimited trips during that month. As a result of the availability of the monthly
pass on Presto, MiWay will discontinue the adult and senior paper passes effective May 1, 2016.
The adult paper passes will run parallel with the monthly Presto pass between February and May
2016 to allow ease in transition for customers. After May 1, 2016 customers will have the option to
pay by cash, purchase tickets, or use the Presto card.
In partnership with GO Transit, MiWay has been in a long-standing fare integration agreement
which allows customers to travel on MiWay at a discounted cash rate of $0.80 per trip (co-fare)
when travelling to/from GO rail or GO bus. Subsequently, GO Transit pays MiWay the balance
equivalent to the current adult ticket price. Since the implementation of Presto, 98% of co-fare
customers use Presto resulting in a substantial decrease in the cash co-fare usage. MiWay
recommends that the cash co-fare be eliminated effective January 1, 2016 and that co-fare
eligibility be only available with Presto.
Presto Card Value Loading
At this time there are still limited locations throughout Mississauga for customers to load a Presto
card. The City Centre Transit Terminal, Islington Subway, GO Transit stations and online are the
available card loading options. In 2014 Mississauga community centres partnered with MiWay to
provide additional loading location options for customers.
Metrolinx has advised that by 2017 customer self-serve card loading machines will be available to
transit providers. When available MiWay will purchase and install self-service Presto card loading
machines at key locations in Mississauga such as city facilities, shopping malls and main transit
terminals. This will expand the card loading locations for customers and allow MiWay to eliminate
paper tickets and move exclusively to cash and Presto.
Budget Committee July 13, 2015 5
MiWay Cash
MiWay does not recommend increasing the cash fare as a part of the 2016 fare change to avoid
discouraging new customers from trying the system. Whenever the cash fare is increased some
migration to other media occurs reducing the revenue benefit of the increase.
Adult Fares
In the adult category MiWay recommends an increase in tickets at $0.10 per trip to $3.00 or $1.00
for 10 tickets to $30.00 and a monthly pass increase of $5 to $130 per month. When travelling
using the Presto card the fare is the same at the adult ticket at $3.00 per trip.
As noted, MiWay will introduce the availability of a pass on the Presto card beginning February
2016. The adult paper pass will be discontinued as of May 1, 2016.
High School Student/Child Fares
MiWay's current child fare category consists of elementary school being ages of 6-12, and high
school category ages of 13-19 years.
MiWay has frozen high school student and child fares since 2009 as approved by Council in order
to encourage transit travel and provide youth with an affordable travel option as part of the Youth
Plan in keeping with the City's Strategic Plan.
Staff recommend that these fare categories (high school student and child) remain frozen for
2016.
