INITIATIVE: FARES AND PARTNERSHIPS SUMMARY Transit agencies would like to have more funding to improve service for their customers. A critical challenge in transit funding is that transit agencies have only limited ability to influence their largest funders - federal and state programs. However, there are a variety of potential strategies that could help transit agencies raise funds to maintain existing services as well as expand operations and invest in capital equipment. While all options pose challenges, they also present opportunities to raise revenues as well as strengthen their relationship with riders and partner organizations. Fares Some Ohio transit agencies collect average fares that are lower than the state or national average. Raising fares is not easy, in part because constituent groups nearly always advocate for low fares, citing equity and affordability concerns. Higher fares also often lead to lower Additional Revenue Sources Raise Fares - Transit fares vary considerably by agency, and fares are low overall. There is potential to raise on fixed route, ADA and demand response services. Transit Development Credits - Several transit agencies are already using TDCs to support capital projects. There is potential to expand use of TDCs. Partnerships - Many transit agencies in Ohio have partnerships with universities, school districts and employers Local Taxes - Although difficult, local tax support can very effective at stabilizing agency revenues. How can the state support transit agencies in developing these funding sources? ridership. However, raising fares periodically and keeping the price of the fare consistent with other similarly sized and positioned Ohio services is a prudent policy to help stabilize revenue streams. Evaluating the potential for raising fares among transit riders is important to voters who may be asked to support public transit even though they don t use it. Transportation Development Credits - TDCs represent a new opportunity for transit agencies needing matching fund credit to support larger investment projects. While TDCs do not increase the overall amount of available funds, they do make it easier to spend federal funds. Partnerships - Several Ohio transit agencies have successful partnerships with universities, public school districts, and employers. These partnerships contribute significant revenue to agency operating budgets. This strategy is widely used in urban areas but may be expanded to smaller communities. Local Taxes Nearly all transit agencies in Ohio are partially funded by local revenue, with many transit agencies supported by local taxes. Developing dedicated funding sources is one of the most effective strategies for stabilizing local transit funding. Nelson\Nygaard Consulting Associates Inc. 1
OVERVIEW In 2012, Ohio s transit agencies spent nearly $900 million operating transit services and investing in capital equipment (see Figure 1). The resources to support these services and investments come from a variety of sources, including Federal Transit Administration (FTA) grants, state funds, and local contributions. Transit agencies also raise revenue through other sources, such as fare collection, contracted service provision, and miscellaneous sources, such as advertisements. This initiative paper explores potential revenue sources for transit agencies in Ohio, and provides examples of how Ohio transit agencies have already worked to enhance traditional funding sources. Figure 1: Single Year (2012) Expenditures on Transit Operations and Capital Projects by Agency Type (in millions) Urban Rural Total Expenditures FTA Funds (all programs) $212.5 $14.7 $227.2 State Funds (GRF) - $3.6 $3.6 State Funds FHWA Flex Funds $17.5 - $17.5 Taxes and Municipal/County Contributions $480.2 $6.8 $487.0 Local Revenues (all sources) $145.5 $12.3 $157.8 Total all resources $855.7 $37.4 $893.1 Source: ODOT Status of Transit Database Note: Data shown is compiled from agency submissions to ODOT and may not match exactly with FTA estimates of funding provided. FUNDING OPPORTUNITIES Transit agencies have limited opportunities to directly raise revenue, but one way they do have is through fares. Some transit agencies have been assertive about maximizing fare revenues by consistently reviewing their fares, targeting farebox recovery rates, and conducting periodic fare increases. Related to fares, many transit agencies have successfully negotiated pass agreements with colleges and universities, or UPass programs, as well as bulk pass programs with large employers. UPass programs are among the most common types of partnerships, and involve universities paying transit agencies for universal access to transit services for students, faculty, and staff. There are many colleges and universities in Ohio, several of which already have successfully implemented UPass and other partnership agreements. Several of the larger transit agencies in Ohio also have pass sale programs with employers. Another revenue source used by transit agencies, especially those serving rural and small urban areas is service contracts with health and human service agencies to transport clients to appointments. The six largest human and health service agencies in Ohio spent $228 million combined in FY 2014 on transportation; currently Ohio s transit agencies earn roughly $25 million annually through these types of contracts. (Note: this issue is explored more fully in Initiative 2: Human Service Transportation). Transit agencies have also worked with their local and regional communities to develop local option taxing mechanisms to help raise funds to support public transportation. These allow Nelson\Nygaard Consulting Associates Inc. 2
communities, at their local option, to generate additional revenue for the expansion of transit services. TRANSIT FARES Current Practice in Ohio Fares are a critical revenue source for transit agencies in Ohio, raising an estimated $120 million in FY 2012 and contributing approximately 13.5% to the overall cost of transit service on a statewide basis. The proportion of revenues attributed to fares, however, varies widely by individual transit agencies some of the larger, urban transit agencies collect as much as 25% of revenues from fares (Cincinnati) while other smaller agencies collect as little as 2-3%. Variations reflect differences in the types and levels of service offered as well as variations in fare levels and fare structures. As part of the discussion on transit fares, it is important to recognize that no transit agency likes to raise fares, nor is raising fares appropriate for all transit agencies. Fares may reflect local policy decisions on the role of the transit service in the community. For example, communities that subsidize transit service through local sales tax, property tax, earnings tax, or general revenue contribution, may have made a commitment of the community to offer the service for individuals in need and that includes keeping fares low. National experience also demonstrates that higher fares almost always result in lower ridership, thus the financial impact of higher fares is muted by fewer riders. Raising fares can also be complicated internally for a variety of reasons. Rural transit agencies receive operating assistance from the Federal Transit Administration (FTA) that amounts to 50% of the operating cost net of fares. This means in effect that higher fare revenues can lead to less revenue from the FTA. In addition, there is considerable administrative work associated with a fare change; transit agencies must hold public meetings, update online and printed materials, change information posted on the vehicles, and train customer service staff. Fare increases are nearly always met with public disapproval, with advocates citing that transit often serves those least able to pay. As a result, even though the cost of providing the service rises every year with inflation, transit fares typically are only raised periodically. Recognizing these challenges, the purpose of the fare analysis is to determine if there are opportunities for Ohio transit agencies to raise revenues through higher fares. Ohio s Fare Reimbursement Program Transit agency fare policy can also be influenced by the E&D (Elderly and Disabled) Fare Assistance Program managed by the ODOT Office of Transit. Under federal law, transit agencies that receive FTA funding through the Section 5307 (Urban Transit Formula) program must offer a reduced fare to older adults and people with disabilities using fixed route service during nonpeak times. Even though Urban Demand Response and Rural (5311) funded agencies are not required to offer a reduced fare program, ODOT encourages participation in reduced fare programming by reimbursing all transit agencies for up to half of the lowest full price fare when at least a ½ fare discount is offered to people over 65 years of age and/or persons with disabilities. All but five of the rural transit systems participate in the program. All but three of the small urban systems participate in the program. In the last several years, the largest eight urban transit systems have not been reimbursed, requiring them to absorb the cost of providing reduced fares. Nelson\Nygaard Consulting Associates Inc. 3
Although they submit data for the program, because it is funded with State General Revenue, there are not adequate resources to reimburse these transit systems. Fixed Route Fares Nearly all transit agencies operating fixed route transit service in Ohio charge passengers a fare to use their services. Most transit agencies charge the same fare on all their services; however, some transit agencies have different fares to account for longer distance trips or premium modes, such as commuter bus service. A transit agency base fare refers to the full adult cash fare for the minimum distance traveled on fixed route services. In Ohio, most of the transit agencies operating fixed route services have base fares between $1 and $2. A handful of agencies have cash fares of less than $1.oo. Some transit agencies have higher fares for commute oriented, longer distance trips, and the Greater Cleveland RTA (GCRTA) has a base fare of $2.25. Most transit agencies offer fare discounts for bulk purchases, such as monthly passes, all day passes, and weekly passes. As discussed previously, many Ohio transit agencies offer reduced fares to older adults and persons with disabilities. In many cases, transit agencies will also extend their half-fare program to students. As a result, the average fare paid is typically lower than the base fare. To understand potential opportunities to raise fares, the study team evaluated the average fare, which is estimated by dividing an agency s fare revenue by the number of trips. Because many riders will qualify for a half-fare trip, or pay for their ride with a pass, the average fare is almost always lower than the base fare. The relationship between base fares and average fares is shown in Figure 2, with agencies ordered according to the ratio of their fare price to average fare per passenger. The difference between the base fare and the average fare reflects internal agency decisions about how to structure their fares and how to market and promote their service, rather than an agency s willingness to aggressively price fares. Communities that have pass agreements with large employers and institutions, like universities, for example, will have a lot of riders paying for their trip with a pass, driving down the average fare. Nelson\Nygaard Consulting Associates Inc. 4
Figure 2: Ohio Fixed Route Services Adult One-Way Cash Fares and Average Fare Revenue $4.00 $3.50 $3.00 $2.50 Adult One-Way Cash Average Fare $2.00 $1.50 $1.00 $0.50 $- Nelson\Nygaard Consulting Associates Inc. 5
ADA Complementary Paratransit Fares Nearly all transit agencies operating fixed route transit service are required by federal law to operate complementary paratransit service for persons unable to use fixed route bus service because of a disability. According to the federal Americans with Disabilities Act (ADA), complementary paratransit service must be provided within three-quarters (3/4) of a mile, on either side of fixed route. The federal government also regulates fares charged for ADA complementary paratransit service at no more than twice the rate of the corresponding fixed route service. This means that while agencies may charge less than twice the fixed route fare, they cannot charge more. Setting equitable and reasonable fares for ADA service is a challenge. ADA service, like all demand response services, are more expensive to provide on a per-ride basis. Vehicles almost always carry fewer passengers, and demand-response service offers a higher level of service that is more closely oriented around a single individual s needs. Generally speaking, fixed route transit operators want to encourage passengers to use fixed route service whenever possible. While setting ADA fares at the maximum level can help accomplish this, operators also recognize that ADA services often transport the most vulnerable (and often least able to pay) members of the community, and as a result, there is considerable pressure to keep fares low. In Ohio, 24 transit agencies operate ADA service as part of their fixed route service with ADA fares published separately. Of these 24 agencies, 13 set their ADA paratransit fares at twice the fixed route rate (see Figure 3). The remaining 11 charge less or the same fare for fixed route as for ADA complementary paratransit. Figure 3: Ratio of Minimum Fixed Route* Base Fare to Minimum ADA Complementary Base Fare 200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% ADA Fare as Percentage of Fixed Route Fare Source: ODOT data adapted by Nelson\Nygaard. *Note: Deviated Fixed Route agencies were not included in this table because they do not operate ADA services. Instead, their ADA requirement is met by providing deviations up to ¾ mile from fixed route service. Nelson\Nygaard Consulting Associates Inc. 6
Demand Response Service Fares Demand response, or dial-a-ride, transit service is very similar to ADA Complementary Paratransit service, with the main difference being that demand response service is designed as such, rather than as a complement to fixed route service. Demand response service is largely used in low density environments, where the number of potential riders is not large enough to support fixed route service. Like paratransit, demand response service responds to individual passenger requests for service and consequently, tends to carry fewer passengers per hour than fixed route service, often at a higher cost for each individual passenger. In addition, there is often more variation in the cost of each trip; costs vary considerably based on distance traveled or the amount of time required to make the trip. Demand response services may charge different rates for in town, in county, and out of county trips. In Ohio, all transit agencies providing demand response service charge a fare to use the service. Unlike fixed route service, understanding the base fare for demand response services is challenging, largely because many agencies will charge different fares depending on the distance traveled. This makes it difficult to identify a base fare or easily compare fares across agencies. Instead of looking at base fares and average fares, therefore, the study team considered average fare revenue as a portion of the average cost of a trip, or the farebox recovery ratio (see Figure 4). The data shows that some agencies are able to cover a fairly large portion of their operating costs with fare revenue, such as Wilmington and Seneca County, which each recover 21% of operating costs with fare revenues. Other agencies, like Pike County and Pickaway County, recover 3% of their operating costs from fare revenues. In total, more than half of demand response services recover less than 10% of operating cost from fares, and all but two recover less than 20% of costs from fares. The study team also considered the demand response farebox recovery ratio for transit agencies that operate demand response services as well as ADA complementary paratransit (see Figure 5). These agencies were considered separately because ADA paratransit service do not report revenues, expenses, or passenger trips separately from general public demand response service since these trips are often provided using the same vehicles. Thus it is difficult to know the costs and revenues associated with demand response services only. However, these agencies show a similar range of cost and revenue per trip as agencies that do not operate ADA service. All agencies operating ADA and general public demand response recover 13% or less of the cost per passenger trip from fare revenue. There are 13 agencies in Ohio that operate fixed route, ADA complementary paratransit, and general public demand response. In order to structure fares so that agencies may participate in the State E&D Fare Assistance Program and charge the maximum allowable fare on ADA services, the general public demand response fare should be at least four times the fixed route fare. Portage Area Transit Authority (PARTA) has the following fare structure: Adult fixed route fare: $1 Elderly and disabled fixed route fare: $0.50 Adult dial-a-ride fare: $4 Elderly and Disabled dial-a-ride fare: $2 PARTA fulfills all FTA and State E&D Fare Assistance Program requirements while still charging the maximum ADA fare (the Elderly and disabled dial-a-ride fare serves passengers that are eligible for ADA paratransit). Through the State reimbursement program PARTA is eligible for reimbursement of elderly and disabled rides on both their fixed route and demand response services. Nelson\Nygaard Consulting Associates Inc. 7
Figure 4: Ohio Demand Response Services Average Fare Revenue and Operating Cost per Trip $50.00 Operating Cost per Trip $45.00 Average Fare per Trip $40.00 $35.00 $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Source: ODOT Status of Transit Database. *Note: For the purpose of this analysis operating cost per trip was calculated by subtracting the contract revenue from the demand response operating cost and dividing by the total number of demand response fare-paying passengers (excluding contract passengers). Average fare per trip was calculated by dividing the demand response farebox revenue by the number of demand response fare-paying passengers. Nelson\Nygaard Consulting Associates Inc. 8
Figure 5: Ohio Demand Response Services Operated with ADA Service - Average Fare Revenue and Operating Cost per Trip $100.00 $90.00 $80.00 Operating Cost per Trip Average Fare per Trip $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 Source: ODOT Status of Transit Database. *Note: For the purpose of this analysis operating cost per trip was calculated by subtracting the contract revenue from the demand response operating cost and dividing by the total number of demand response fare-paying passengers (excluding contract passengers). Average fare per trip was calculated by dividing the demand response farebox revenue by the number of demand response fare-paying passengers. Lawrence County was excluded from this analysis due to inconsistent data regarding contract passengers and contract revenues. Nelson\Nygaard Consulting Associates Inc. 9
Analysis of Ohio Transit Fares There are three main opportunities for Ohio s transit agencies to raise additional revenues through fares: - Increase the average fare charged on fixed route services - Raise ADA fares to be twice the fare charged to ride fixed route service - Set demand response fares to reach a desired farebox recovery ratio As stated previously, the study team recognizes that raising fares, especially for ADA and demand response service is a challenging undertaking that would almost certainly be met with resistance from members of the public. The study team also recognizes that raising fares is not beneficial in many contexts. Experience suggests, for example, that raising fares will almost always result in fewer riders. Finally, for agencies receiving federal funding through the Section 5311 Program (Non Urbanized Formula), federal funds can be used to support up to half of the operation costs, net of deficit, or net of fares. This means higher fare revenue can reduce the amount of federal funds that can be used for operation. At the same time, however, although the federal reimbursement amount for operations may be reduced, any remaining federal funds may be used to fund capital projects. It is also important to note that for some agencies, raising ADA fares would potentially influence the farebox recovery ratio for demand response because these revenues and costs are reported together for agencies that operate ADA paratransit and general public demand response. There is some overlap between potential revenues calculated as a result of these two strategies. Increasing the Average Fare (Fixed Route Service Only) The average fare for a fixed route rider among all transit agencies in Ohio operating fixed route service in FY12 was $1.04 (see Figure 6); slightly higher than the national average. However, average fare in Ohio is influenced by higher fares charged at the five largest systems (Cleveland, Cincinnati, Columbus, Dayton, Akron), and consequently account for a large portion of the statewide fare revenue. Without the five largest transit systems, the average fixed route fare in Ohio drops to $0.71. In this case, the average fare for medium and small fixed route transit fares is lower than the national average. To broadly estimate the potential to raise fares, the Nelson\Nygaard study team estimated how much revenue could be raised if Ohio s small and medium sized transit agencies raised fares to be consistent with 1) the national average; and 2) the state average for small and medium transit agencies (see Figure 10 in Appendix A). The results showed potential for up to $1.4 million (to the Ohio average for medium and small agencies) or up to $5.8 million (to the national average). Figure 6: Average Fare and Farebox Recovery Rate for Fixed Route Services Medium and Small Transit National* All Ohio Transit Agencies Agencies in Ohio** Average Fare $1.01 $1.04 $0.71 Farebox Recovery Ratio 28% 21% 11% Source: Nelson\Nygaard adapted from NTD data. Nelson\Nygaard Consulting Associates Inc. 10
*Based on 2012 NTD data: All agencies operating NTD mode classification MB (bus) were averaged for fixed route, and all agencies operating NTD mode classification DR (demand response) were averaged for demand response, in both cases excluding agencies that reported zero fare revenue (fare free) and/or agencies that reported zero passenger trips. **Excludes GCRTA (Cleveland) SORTA (Cincinnati); COTA (Columbus); GDRTA (Dayton) and METRO (Akron). Raising ADA fares to be Twice the Fixed Route Fare There are 24 transit agencies in Ohio that operate ADA Complementary Paratransit service as part of their fixed route service with no additional demand response services. Of these 24 agencies, 13 set their ADA fares at twice the fixed route fare, and 11 charge lower fares. If these 11 agencies raised ADA fares to the federal limit, this strategy could raise an estimated $2.5 million (see Figure 11 in Appendix A). Note that Cleveland currently charges the same fare for ADA service as it does for fixed route service. Due to the relatively large opportunity to increase fares and the large volume of ADA trips that Cleveland provides, $1.4 million of the statewide total would be raised by Cleveland alone. Increase the Farebox Recovery Ratio for Demand Response Services As discussed, both the cost of providing an individual trip on demand response service and the fares charged vary considerably across Ohio. Some transit agencies set fares based on a flat rate, while others base fares on distance traveled or the size of the service area. As a result, it is difficult to compare and contrast average fares. Instead, the analysis focused on fare revenue as a proportion of the cost of the trip, or farebox recovery ratio. Nationally, the farebox recovery ratio for demand response trips is 8%; in Ohio it is also 8% (see also Figure 7). All transit agencies operating general public demand response were evaluated in order to determine on a statewide basis, how much additional revenue could be generated by raising farebox recovery ratios of individual systems up to the state and national average of 8%. If farebox recovery ratios were increased to 8%, this strategy could raise an estimated $932,000 annually. A more aggressive scenario in which farebox recovery ratios were raised to 10% could raise $1.7 million annually (See Figure 12 in Appendix A). Figure 7: Farebox Recovery Ratio for Demand Response Services National* Ohio Demand Response Transit Agencies Farebox Recovery Ratio 8% 8% Source: Nelson\Nygaard adapted from NTD data. *Based on 2012 NTD data: All agencies operating NTD mode classification MB (bus) were averaged for fixed route, and all agencies operating NTD mode classification DR (demand response) were averaged for demand response, in both cases excluding agencies that reported zero fare revenue (fare free) and/or agencies that reported zero passenger trips. TRANSPORTATION DEVELOPMENT CREDITS (TOLL REVENUE CREDITS) Twenty-eight states in the U.S. have toll roads, and many of these states use revenues earned on toll roads to fund major transportation projects, such as bridges, highway improvements, and in some cases, transit projects. If a state uses toll revenue to fund a major project, instead of federal funds, the state may use these transportation development credits (TDCs) - formerly referred to as toll credits - as matching funds for other federal projects. In other words, if toll revenues are used to invest in a state s infrastructure in lieu of federal dollars, these revenues earn credits that can be applied to other projects. The State of Ohio has one toll road, the Ohio Turnpike (I-80) which includes 241 miles of roadway along the northern tier of the state. In 2013, the Ohio Turnpike earned nearly $49.6 million in Nelson\Nygaard Consulting Associates Inc. 11
revenue 1. These revenues were used to issue debt to support $930 million worth of capital transportation projects in Ohio 2, all of which are in areas surrounding the turnpike. These projects also earn TDCs for the State of Ohio, so that a portion of the $930 investment can be used to match other federal investment projects in Ohio. As a result, other transportation projects that are funded with federal funds can use the TDC generated by the Ohio Turnpike, instead of local resources, to match federal funds. For example, a $10 million project can be funded through: $8 million in federal funds OR $10 million federal funds $2 million state and local funds $2 million TDCs It is important to note however, that TDCs can only be used to match existing federal allocations and cannot be used to attract additional federal funds. The State of Ohio allows transit agencies to use the toll credits for transit projects as well as highway projects. Transit agencies that are otherwise challenged to spend their federal grants due to a lack of local match can use TDCs to match FTA funds. Current Practice in Ohio ODOT is already using and has been using TDCs to help fund transit projects and services. TDCs, for example, were used to help partially fund the Euclid Corridor (Health Line) Bus Rapid Transit in Cleveland. ODOT has also been using TDCs to support capital projects funded by the Federal Transit Administration Section 5311 Nonurbanized Area Formula program. By using TDCs together with Section 5311 funds, vehicle purchases and other capital projects are funded with 90% 3 federal funds and 10% local funds. In the past few years, ODOT has primarily used TDCs to fund programs (like the 5311 capital program) rather than individual projects. However, as additional TDCs come available, ODOT s use of the credits may expand to include specific projects for individual agencies. Analysis of TDC Revenue Potential As discussed, TDCs do not increase the amount of funds available to transit agencies, but they do allow federal funds to be used by local agencies with less or no match. ODOT estimates that there is about $7 million 4 in TDCs available to transit agencies in 2014. TDCs are most easily applied to capital projects, including vehicle purchases. LOCAL TAX REVENUE Local option taxes, especially sales taxes, are a common funding source for transit authorities throughout the country, especially among larger transit agencies. Agencies benefit from being able to budget local revenues without relying on governing bodies to allocate revenues to them. Most transit agencies that have dedicated, local revenue streams to fund their attest to the 1 Revenues less expenses, Ohio Turnpike Annual Report 2 Ibid. 3As discussed, TDCs do not increase the amount of federal money available, only reduce the local match. In the Ohio example, if there is $100 available in federal funds, that amount will not change. However, instead of requiring $20 to match the $100, local agencies are able to match it with $10, thus the total amount available to fund the project (in this case) would be $110. 4 This number will be confirmed shortly. Nelson\Nygaard Consulting Associates Inc. 12
positive effect this funding can have on their financial health, particularly with regard to long range planning. Sales taxes are the most common type of local option taxing mechanism used to support transit, and in most cases, an increment is added to the existing sales tax with the revenues dedicated to the transit agency. Other local option taxes are also used to support transit agencies, including property taxes, fuel taxes, income and payroll taxes, and in some case sin taxes on alcoholic beverages, cigarettes, gambling, etc. Some of these are not currently permitted in Ohio. Dedicated funding sources, especially local taxes, also strengthen the tie between local communities and transit providers, further encouraging agencies to be responsive to local needs. There are several challenges associated with local option taxes, the clearest of which being the many competing demands for tax revenues and tax payers limited ability to pay or willingness to enact these taxes. Another challenge reflects governance and the fact that transit agencies typically provide regional service. Ohio, unlike other parts of the country, is oriented around municipal governance rather than county systems. Therefore, depending on how the tax and transit agency is structured, it may need approval from several individual municipalities, a process that significantly complicates any potential initiative. However, nationally and in the State of Ohio, several transit agencies have had success increasing existing taxes or instituting new taxes to support transit service. Current Practice in Ohio Individual municipalities and counties in Ohio currently have authority to raise sales taxes, property taxes, and earnings taxes. In addition, agencies that are organized as transit authorities may levy sales taxes in 0.25% increments. One of the counties with the lowest overall sales tax rates, Stark County, has a 0.25% sales tax for transit. SORTA in Cincinnati uses a city earnings tax among those residing or employed in the city. Cuyahoga County has the highest transit tax rate, a 1% sales tax. Some sales tax levies are renewed regularly, every five or ten years, while others, such as in Portage County and Lake County, are permanent, providing a dependable revenue stream. Figure 8 summarizes existing local transit taxes in Ohio and the following three case studies describe in more detail the structure and success of local options tax in generating revenue. Figure 8: Local Transit Taxes in Ohio Tax Jurisdiction/Agency Tax Rate and Type Cuyahoga Co./GCRTA 1% Sales Tax Franklin Co./COTA Montgomery Co./GDRTA Summit/Akron METRO Lake Co./Laketran Mahoning Co./WRTA Portage Co./PARTA Stark Co./SARTA Cincinnati/SORTA Chillicothe/Chillicothe Transit System Toledo and member cities/tarta 0.5% Sales Tax 0.5% Sales Tax 0.5% Sales Tax 0.25% Sales Tax 0.25% Sales Tax 0.25% Sales Tax 0.25% Sales Tax 0.3% City Earnings Tax 0.1% Earnings Tax 0.25% Property Tax Nelson\Nygaard Consulting Associates Inc. 13
Steubenville & Mingo Junction/SVRTA 0.15% Property Tax Western Reserve Regional Transit Authority (WRTA) - Mahoning County Since 2009 WRTA has been funded by a 0.25% county sales tax. Formerly a system that was funded by a city property tax and served primarily the city of Youngstown, WRTA expanded to countywide service funded by county property tax after revenues declined significantly in 2007 due to the recession. WRTA now provides county-wide dial-a-ride service to the general public and has expanded its fixed route service beyond Youngstown to serve other cities and townships. The former property tax was made up of two levies that totaled 5 mills (0.5% of the property value) and generated about $2.5 million in revenue annually. Sales tax revenues grew from $4.2 million in 2009 to $7.5 million in 2011, now accounting for 70% of WRTA s annual budget, and allowed WRTA to reinstate Saturday service which had been suspended due to insufficient funds in 2007. In 2012 the sales tax was renewed for five years. Central Ohio Transit Authority (COTA) - Franklin County and Surrounding Region COTA receives funding from a 0.25% permanent sales tax and an additional 0.25% sales tax instated in 2008, to be renewed after 10 years. The tax covers Franklin County as well as portions of the cities that it serves beyond the Franklin County border. Delaware's COTA rate covers the portions of the Cities of Columbus, Dublin, and Westerville located in Delaware County. Fairfield's COTA rate covers the portions of the Cities of Columbus and Reynoldsburg in Fairfield County. Licking County's COTA rate covers the portion of the City of Reynoldsburg located in Licking County, and Union s COTA rate covers the portion of the City of Dublin located in Union County. This tax raises almost $100 million annually and accounts for about 80% of COTA s operating budget. Portage Area Regional Transportation Authority (PARTA) Portage County While PARTA funds a large portion of its service through a contract with Kent State University, non-university services have been funded by a county-wide sales tax of 0.25% since 2001. Revenues from this tax support the county-wide dial-a-ride service and county fixed routes. In 2005 the levy was renewed permanently and accounts for about half of PARTA s operating budget. In 2013 PARTA earned $4.6 million in sales tax revenue. Practices in Other States California The State of California enables counties to raise sales taxes for defined periods to support transportation. In the past few decades, over 25 counties have instituted these local transportation sales taxes (LTST), and collectively they generate about $2.5 billion per year. The taxes are used to support both highways and transit systems and have been one of the fastest growing revenue sources for transportation in California. One of the reasons that the taxes are so popular is that they allow civic and political leaders to bypass the state transportation finance and decision-making. The popularity of the local transportation sales taxes is also attributable to the fact that: Taxes must be approved directly by the voters Nelson\Nygaard Consulting Associates Inc. 14
Funds are raised and spent within the counties that enact them Most LTSTs are temporary and typically last 15 or 20 years, unless voters specifically reauthorize them Voters approve a specific list of transportation projects to be financed by the tax A wide variety of counties have adopted LTSTs, including large urban counties (Los Angeles, San Diego, and Sacramento), several suburban counties (Contra Costa, Riverside, and San Mateo) as well as many rural counties (Fresno, Imperial, and San Joaquin). 5 Idaho Idaho is one of four states that does not provide any state funding for transit operations (together with Mississippi, Alaska and Hawaii), or allow local option taxes to be dedicated solely for public transportation. Under the Idaho State Sales Tax Act, however, certain resort cities that have a tourist-based economy and a population of less than 10,000 can use a local option tax to supplement the city budget. Several cities, including the city of Sun Valley, used this tax to generate funding for local public transit. Ponderay, Idaho, a community of just over 1,000 residents, located in the northern-most part of the state, also used this tax to fund local transit service. In 2010, voters approved an eight-year bed tax of 5% on short-term stays in hotels. The revenues generated from the tax will be dedicated to fund tourism programs, including a new bus system through four communities in the region: Dover, Sandpoint, Ponderay, and Konntenai. The bus system is under development and is planned as fare-free, multi-community system with a projected annual budget of about $500,000. Pennsylvania Allegheny County In December, 2007, Allegheny County instituted a 10% county tax on the retail sale of alcoholic beverages (the drink tax ), with all revenues dedicated to fund the Port Authority of Allegheny County, which is the county s transit operator. The tax was instituted in conjunction with a tax on rental cars in order to raise the local resources necessary for the Port Authority to match state and federal transit funds 6. The tax encountered significant resistance, and in 2009, was lowered to 7%. However, the past few years have highlighted an advantage of the drinks tax as it proved to be more recession-proof than most other local taxing mechanisms. UPASS PROGRAMS One revenue-generating strategy that has been particularly successful for transit agencies around the country and in Ohio is developing partnerships with universities and colleges. Universities and colleges typically have a strong interest and high demand for transit service because: Students do not always have access to private vehicles, but need and want to travel University and college campuses often have limited and/or restricted parking facilities, and offering transit programs is often equally or less expensive than developing parking structures 5 Local Transportation Sales Taxes, California s Experiment in Transportation Finance, University of California, Wachs, etc. 6 Allegheny County Oks Drink Tax, The Pittsburgh Challenge, 2007 Nelson\Nygaard Consulting Associates Inc. 15
Many colleges are interested in being more green and look to transit programs as one of the ways they can reduce the environmental impact of their institution Partnerships between transit agencies and universities and colleges are typically referred to as UPass programs, which reflect both that such arrangements are with universities and often offer universal (i.e. fare-free) access to transit service. These programs have become an increasingly important way to generate revenue for improved services and also allow universities to provide a valuable benefit to their students. Participating institutions typically provide transportation services to students at a reduced cost by negotiating a bulk rate for transit passes. In some cases, transit agencies will provide student-focused transit services as a result of a UPass program. Transit agencies benefit from having a large sum of money that they can count on receiving from year to year, allowing for better planning than is possible with traditional fare revenues. Current Practice in Ohio UPass programs represent a large potential market in Ohio due to the high number of colleges and universities in the state. Ohio s State university system by itself consists of 14 universities, 24 branch campuses and 23 community colleges, with an estimated 600,000 students 7. In addition, there are on the order of 80-100 non-profit, private colleges and universities with main campuses in Ohio. The majority of Ohio s student population is enrolled at public universities; the ten largest colleges have a student enrollment of more than 375,000; however, many transit agencies do have a college or university in their service area. The following section profiles examples of how transit agencies in Ohio have partnered with colleges and universities in their service area. A broader inventory of transit agency university/college partnerships is shown in Figure 9. Both resources are intended to demonstrate the variety of agreement types and provide general information about the revenues raised. Student UPass Program - Greater Cleveland Regional Transportation Authority (GCRTA) The GCRTA successfully partners with several colleges and universities in Cleveland through its Student UPass program. The program involves partnerships with five independent institutions Case Western University, Cleveland Institute of Art, Cleveland Institute of Music, Cleveland State University, and Cleveland Community College, serving more than 40,000 students and accounting for approximately $2 million in revenue to GCRTA annually. The Student UPass program is a long standing RTA program. The program initially began as a partnership with Cleveland State University in 2003, with additional institutions participating in the following years. The most recent institution to get involved in the program is the Cuyahoga Community College. Each university or college negotiates their own program separately and in many cases, because the program involves student fees, the student body must vote to participate in the program. 7 Ohio Higher Ed website Nelson\Nygaard Consulting Associates Inc. 16
Students at CSU last voted in April 2104 and overwhelmingly (90% support) approved the program for the next six years, inclusive of rate increases every two years. In most cases, faculty and staff do not participate in the universal access UPass program. Instead, some faculty and staff members may purchase RTA passes through payroll deduction (GCRTA s Commuter Advantage program). For each student actively enrolled 8 in one of the participating institutions, students are automatically charged $25 per semester in return for an unlimited RTA pass. The RTA bus pass can be used on any of the RTA modes, including rail and the Health Line, and students can ride for any purpose. The RTA administers the UPass through a sticker that students put on their ID card which they present when boarding an RTA vehicle. Butler County Regional Transit Authority Butler County Regional Transit Authority (BCRTA) and Miami University in Oxford, Ohio recently consolidated services so that BCRTA will operate both general public transit services in the Oxford area as well as general public transit service provided under contract to Miami University. According to the 10-year agreement, Miami University will pay approximately $1.6 million annually to BCRTA s service development fund 9. The new service contract means BCRTA will operate nearly all of the same routes formerly operated by Miami University. These routes include service on Miami s Oxford campus during the academic year as well as the tri-town service between Middletown, Oxford, and Hamilton. Miami University students, faculty, and staff will continue to ride for free, but members of the general public will have access to these services for a fare. Metro Program - University of Cincinnati and Southwest Ohio Regional Transportation Authority (SORTA) The University of Cincinnati (UC) and SORTA partner on a Metro Program, which is an optional, rather than a universal access, program. The program started in 2007; with between 3,000 and 4,000 individuals participating in it each semester. According to the terms of the Metro Program, actively enrolled students and UC faculty and staff may enroll in the program one of two ways: UC Metro Card is a pay in advance option where students pay $53 per semester for unlimited transit rides on SORTA within the City of Cincinnati boundaries. Rides on transit routes outside of the Cincinnati or on the suburban connector services are discounted, but riders must pay some fare. Faculty and staff are also eligible for the UC Metro Card but pay a higher rate ($160). By comparison, an adult monthly transit pass costs $70. 8 The definition of actively enrolled varies by institution. 9 Miami University website Nelson\Nygaard Consulting Associates Inc. 17
UC EZ Ride offers a pay as you ride option, available to all enrolled students at no additional cost, which allows them to ride SORTA services for a fare of $1 per ride 10 for any ride on any SORTA service, including the suburban connector routes operated by partner agencies (i.e. Butler, Warren, Harrison, and Clermont counties). When an EZ Ride card holder boards the bus, they swipe their EZ Ride card in the farebox and then pay the $1 fare. The UC Metro Program is jointly managed by the University of Cincinnati and SORTA. UC maintains its websites, sells and distributes passes and transfers funds to SORTA. SORTA markets the card on campus through a number of outlets, including marketing materials but also participation in campus orientation activities. In addition to the pass sales and fare revenue, UC pays SORTA $450,000 annually to receive the EZ Ride discount. The terms and conditions of the program are stipulated in a contract; the most recent contract was renewed for three years beginning in August, 2014. UPass Program Ohio State University and Central Ohio Transportation Authority (COTA) Since 1997 OSU and COTA have had a UPass agreement which allows enrolled OSU undergraduate and graduate students to ride COTA buses for free. Students swipe their BuckID cards when boarding COTA buses, which have daily updated information about which students are currently enrolled and eligible for a free ride. Campus Area Bus Service (CABS) is provided separately by OSU for on-campus circulation, also free to students. COTA routes intersect with CAB routes so that students may easily transfer to make trips to destinations off campus. All students pay for the program through a required student fee of $13.50 each semester. This generates about $1.7 million annually for COTA, which provides about 1.5 million rides to students each year. About 57,000 students are enrolled each year, meaning that on average each student rides 26 times per year. 10 An adult one-way cash fare for SORTA services is $1.75. Nelson\Nygaard Consulting Associates Inc. 18
Figure 9: Existing Revenue Agreements between Ohio Transit Agencies and Colleges/Universities Transit Agency Participating College/University(s) Program description Akron Butler Co. University of Akron Miami University of Ohio Students, faculty, and staff ride free with ID Free rides students, faculty, and staff on inter-city routes between Oxford/Middletown and Hamilton/Middletown Annual Revenue $100,000 $1,600,000 Cincinnati University of Cincinnati Cincinnati State Technical and Community College All students receive EZ-Ride discounted ($1) fare card. UC students may opt to buy $53 pass each semester for unlimited rides in Zone 1 $720,000 Clermont Co. University of Cincinnati Clermont College Students ride Route 4x to Cincinnati for free with valid ID Data not Available Cleveland Cleveland State University Case Western Reserve University Cleveland Institute of Music Cleveland Institute of ART Cuyahoga Community College Students receive unlimited rides on GCRTA routes with a sticker on student ID $2,000,000 Columbus Ohio State University Columbus College of Art and Design Students ride free on all COTA routes with ID $1,700,000 Dayton Sinclair Community College Students may purchase 30% discounted monthly passes from the school with a valid student ID. Data not Available Laketran Lakeland Community College Students ride free on Routes 1-6 with a current student ID. Agreement allows Laketran to use the community college as a park-and-ride facility Data not Available Logan Hocking College Students ride Logan Transit for free on contracted shuttle route between Nelsonville Campus and Logan Campus $100,000 Portage Co. Kent State University PARTA operates 7 on campus routes; Students ride free on campus and other county routes; Reduced fare service to Cleveland/Akron $2,000,000 Richland Co. Toledo OSU-Mansfield North Central State College Owens Community College Two routes serve OSU-M and NCSC campuses; Students ride free on all routes with valid ID Students ride free on TARTA downtown loop with student ID Data not Available $187,000 Statewide Total $8,387,000 Source: Nelson\Nygaard Consulting Associates Nelson\Nygaard Consulting Associates Inc. 19
Analysis of UPass Revenue Potential Currently, 12 transit agencies in Ohio generate $8.4 million in revenue annually through agreements described in Figure 9; these agreements include partnerships with 19 colleges and universities, providing transit options to an estimated 363,000 students. In order to understand additional potential revenue that transit agencies stand to gain through UPass programs, the study team inventoried all public and private universities and colleges in Ohio, their enrollment, and their accessibility to existing transit services (see Appendix B). After accounting for institutions that already have agreements with their local transit agency, and institutions that are in counties where no transit operator currently exists, potential revenue gains were calculated for each transit agency among potential partner institutions. It was assumed that the total student population would participate and that UPass agreements would generate $50 per student, annually. On a statewide basis, if all transit agencies were to successfully implement UPass agreements with local colleges and universities, there is potential to raise an additional $17.8 million annually to support transit service. It is important to note that UPass agreements sometimes require a transit agency to operate additional services tailored to the college or university s population, requiring some of the additional revenue to be reinvested in new transit services. As need for transit in Ohio grows, the ability to provide additional services funded in part through a pass program, could reduce the subsidy required to operate new services, potentially making them more feasible. PARTNERSHIPS LARGE EMPLOYERS There are a variety of ways that transit agencies can partner with large employers. In some cases, transit agencies work with employers to create pass programs that are similar to UPass programs. In other cases, transit agencies contract directly with employers or groups of employers to expand service to a particular site. Employer pass programs build on opportunities created by the federal tax code 11 that allows employers to offer tax-free benefits for the purposes of taking transit, vanpooling, and paying for parking. These Qualified Transportation Fringe Benefits are deducted from corporate gross income for taxes paid by the employer. Both employers and employees save on taxes because neither pays federal income or payroll taxes on these benefits. Benefits include: Up to $230 is excludable from gross income per month for transit passes Up to $230 is excludable for parking The employer can provide parking benefits with transportation benefits, as long as total does not exceed $460 The program can be implemented in one of three ways: 1. Employer Paid - the employer pays the full benefit and gets the payroll tax reduction and business expense. 2. Employee Paid - the employer sets up the program and allows employees to put away pretax income for the vanpool or transit expense, saving them taxes. 11 Ibid Nelson\Nygaard Consulting Associates Inc. 20