An Assessment of Performance Measures in the Transportation Development Act

"This report examines the performance measures requirements in California’s Transportation Development Act (TDA) of 1971. The TDA is an important source of funding for the state’s public transit agencies, representing approximately 18 percent of their total (2018) revenue between the TDA’s two funds (LTF and STA). Since the TDA’s passage in 1971, the transit operating environment in California has changed, in some cases dramatically. The state has nearly doubled in population (20.4 million in 1971 to 39.8 million in 2019), traffic has worsened considerably, climate change is now a central public policy focus, and many places around the state are investing heavily in making public transit a viable alternative to driving. Our research examined the TDA’s performance requirements and their effects on the state’s transit operators. We also considered alternative approaches to both transit finance and performance requirements, by studying transit funding programs in 13 other states that invest significant amounts of funding in transit. In brief, we find that the TDA’s use of performance measurements to allocate funding is unusual. The states we studied do not for the most part make funding contingent on performance, thereby avoiding the unproductive and difficult-to-implement “death penalty” (Taylor, 1995) of withholding subsidies for a much-needed public service. In several of the cases analyzed, by contrast, states guarantee specific levels or amounts of funding for transit service.To examine how the TDA’s performance measures are working, we conducted a survey of California transit professionals at agencies and at Regional Transportation Planning Agencies (RTPAs). That California’s aspirations for transit have evolved over the years is reflected in the frequent loopholes and exemptions the legislature has added to the TDA to give struggling operators more latitude to receive funding in order to meet multiple goals and objectives while staying in compliance with a single cost-effectiveness goal. The extent and frequency with which these exemptions have occurred suggests that the larger aims for public transit, and indeed the goals for the TDA program itself, have evolved, and need to be re-thought holistically, rather than incrementally.Accordingly we offer six recommendations concerning transit performance assessment in the TDA.

Steering California's Transportation Future: A Report on Possible Scenarios and Recommendations

UC-ITS-RIMI-4BTo investigate possible future transportation and land use scenarios for California as well as their likely precipitating policies and potential consequences, we convened a panel of 18 experts and used a novel variation of the Delphi method to systematically explore four specific scenarios and probe the desirability and likelihood of each. The scenario that panel members collectively thought most desirable for California (one with diverse transportation options and higher-density development) was also the one they thought least likely to materialize by 2050. This report describes the findings of the three surveys and two meetings that our method entailed and summarizes some of the discussion among panelists. We include reflections on the salient but unexpected finding that panelists viewed trust in government as both critical to effecting the scenario they considered most desirable and also lacking to such an extent that pursuing that desirable outcome could cause unintended consequences or outright failure. Accordingly, we discuss possible implications and outline policy recommendations for improving both processes and conditions that can instill in California\u2019s government more trust, without which a future of multimodal transportation and higher-density, mixed land uses is unlikely to succeed

Financing the Future: Examining the Fiscal Landscape of California Public Transit in the Wake of the Pandemic

UC-ITS-2022-15California and its regional and local governments have invested heavily in public transit over the past half-century to provide an alternative to driving, ease traffic congestion, reduce emissions, slow climate change, steer new development, and provide mobility for those without. As a result, bus service has improved and expanded, and many parts of the state\u2019s metropolitan areas are now served by rail transit. Yet today, many of the state\u2019s transit systems are struggling operationally and financially. Ridership began eroding in the half-decade leading up to 2020 and plummeted at the start of the COVID-19 pandemic. Three federal pandemic relief bills provided a critical lifeline to keep struggling transit systems afloat early on, but these funds are running out. Meanwhile, operating costs have risen, ridership and fare revenues have only partially returned, and some transit systems face \u201cfiscal cliffs,\u201d where they will need substantial new infusions of funding, substantial cuts in costs and service, or some combination of the two. Against this backdrop, this report examines the current state of California transit finance: why ridership and fare revenues are down and their prospects for recovery; what lessons the successful federal relief bills provide; why commuter-oriented systems are struggling financially much more than those that primarily service transit-reliant riders; and what the financial managers at transit systems have done to cope with this turbulent time and how they see their future financial prospects

Does Transit Mean Business? Reconciling academic, organizational, and political perspectives on Reforming Transit Fare Policies

Public transit systems differ from many other government enterprises in that they charge a fee, or fare, in much the way that private businesses charge for their services. Transit fares are typically of two sorts: flat or differentiated. For decades transportation scholars have argued in favor of flexible, differentiated transit fares, which vary by mode, distance, and/or time-of-day to reflect differences in the marginal costs of service provision (Cervero and Wachs 1982; Cervero 1981; Hodge 1995). Such fare policies, researchers contend, could greatly increase the efficiency, efficacy, and equity of transit service. Research on transit costs suggests that short, off-peak trips tend to be relatively inexpensive to provide, while longer, peak-period trips are more expensive (Taylor, Garrett, and Iseki 2000). Accordingly, varying fares to reflect these differences in costs would encourage passengers to consume more inexpensive-to-serve trips, and be more judicious in consuming more expensive-to-serve trips, thereby increasing the cost-effectiveness of transit service. Recent technological advances, particularly smart cards, have greatly reduced the operational and administrative obstacles to charging differentiated time- or distance-based fares. However, despite an established body of research on the potential benefits of flexible fares, relatively few transit agencies employ them, and over the past two decades many have actually moved away from variable fare structures and toward simpler fares by dropping zonebased fares. And while many U.S. transit agencies that have adopted smart card technology, very few of these adopting agencies have moved toward variable fares. The increasingly widespread implementation of smart farecards makes implementing variable pricing far easier and more reliable than in years past. As smart cards become more ubiquitous, will transit systems gradually reverse course and begin implementing differentiated fares? Will political and institutional resistance to variable pricing hold firm, suggesting that implementation was never the principal obstacle? Or have flat fares become so thoroughly inculcated in transit practice that most transit managers are unaware of the now decades old research on the benefits of differentiated fares? This report explores these questions. To better understand motivations for fare changes and the potential for implementing marginal cost pricing, we reviewed the literature on transit fares and pricing, conducted indepth interviews with California transit officials, and administered a nationwide survey of transit agency CEOs, planners and analysts, and board members on the goals that shape fare policies.Collectively, these interviews and survey find that, with respect to fare policies, transit agencies tend to be reactive to budgetary pressures and reluctant to change fare structures when changing fare levels. Despite this observed lack of strategic thinking with respect to fares, we do see in our survey data some, albeit limited, interest in distance- and time-based fares, especially among agencies that have or soon will introduce smart cards. But any opportunities to move toward differentiated fares created by smartcard adoption are constrained by an industry where simple, flat fares are the norm and were transit managers are risk-averse and seek to minimize public scrutiny and criticism. Smart cards, in other words, are a necessary but not sufficient means of fare innovation in public transit. Beyond this general observation, our interview and survey results collectively suggest three specific findings with respect to transit fare setting: 1. With respect to fare policies, transit agencies tend to be reactive to budgetary pressures and reluctant to change fare structures when changing fare levels. Our survey results find that systematic evaluations of fare policies are subject to and often displaced by the immediate needs of an agency’s budget. Respondents indicated that the primary consideration for changing fares is budgetary need, implying a focus on near-term responses to fiscal shortfalls in setting fare policies. Changing fare policies to improve farebox recovery ratios, possibly through marginal cost pricing, which research suggests may improve a given agency’s fiscal health over the long term received considerably less consideration. Rational (i.e., cost- or criteria-based) fare setting policies are viewed as important, but in practice the setting of transit fares appears to be almost exclusively budget-driven and fare increases are more often than not induced by fiscal crises. Because transit systems depend so heavily on subsidies, large swings in tax revenues – especially during the current, prolonged economic downturn – can make transit budgets volatile. When rising costs and/or cuts in subsidies threaten service, fare increases are often put on the table in conjunction with service cuts – at what some would argue is precisely the wrong time. While economists have long asserted the superiority of cost-based pricing on economic efficiency grounds, agency policy setting driven by near-term budgetary volatility almost certainly limits reflection on and adoption of such strategies. This finding also suggests that the crisis-induced and budget-driven fare setting processes may not themselves be the problem, but rather are a manifestation of unclear or contradictory goals. Clearly defined and congruent agency goals and objectives allow staff to work toward given objectives, and board members to defend their decisions in light of these v objectives. But given the often competing and contradictory goals for public transit (reduce congestion and emissions, serve the needs of the poor and disabled, keep subsidies low, provide quality employment for workers, keep fares low, etc.), goal-driven pricing of transit services has proven elusive. 2. There is some, albeit limited, interest in distance- and time-based fares, especially among agencies that have or soon will introduce smart cards. While scholars and researchers have long argued for transit pricing based on principles of economic efficiency, in practice, most agencies pursue fare policies that appear to favor administrative efficiency (e.g. keeping fare collection simple) and effectiveness (e.g. simple and low transit fares, unlimited use passes that reward frequent riders). Our survey results underscore that even with increasing technological ability to do so, a majority transit agencies are unlikely to implement distance-based or time-of-day pricing anytime in the near future. According to the American Public Transportation Association (APTA) (2012), 23 percent of transit operators nationwide currently employ some form of distance-based fare pricing and just 6 percent time of day pricing. While only 6 percent of the respondents to our survey who had recently adopted smart cards reported a move to time- or distance-based pricing as a result, nearly a quarter (24%) of those planning to adopt smart cards said that they expect to use them to implement some form of distance-based pricing, and fully 18 percent report the same for time-of-day pricing. This suggests that while resistance to variable pricing remains widespread, at least some of this resistance is likely due to the operational challenges of implementing differentiated pricing in the absence of smart cards. And as those operational vi challenges are reduced by smartcards, the longstanding trend away from differentiated fares may begin to reverse. 3. Transit agencies are risk-averse and seek to minimize public scrutiny of any fare changes. Our survey results emphasize that transit officials seek to ensure their actions avoid public scrutiny and negative publicity, which substantially inhibits implementing variable cost pricing for two reasons. First, implementing variable fare pricing in almost all cases would be a radical departure from the flat fare status quo, and would thus subject a transit agency to financial scrutiny, heightened media attention, and increased lawmaker inquiry – all of which transit officials report they seek to avoid. Secondly, the transit managers we surveyed report that any fare increases will subject their agency to public scrutiny. Concerns over the negative consequences of fare changes appear to be so embedded that transit managers report focusing far more on the riders they might lose from any fare changes than the riders they might gain by implementing, for example, variable fares. They are, in other words, highly loss averse. Finally, the transit agency representatives we interviewed collectively reported that they have generally not conducted market research on non-riders or on customer responses to alternative fare structures, and that they have little understanding of the likely ridership gains and losses that might accompany distance- or time-based pricing. But despite the many potential benefits of marginal cost-based transit pricing touted in the literature, our interviews found significant evidence of risk-aversion, goal obfuscation, and cost confusion among transit managers, as predicted by the literature on public administration. The interviews revealed, with sometimes surprising candor, how little some senior transit managers understand their costs of service provision and how they vary. This lack of cost comprehension may be the inevitable result of government agencies’ mandate to maintain service without regard to cost or vice versa (Flam, Persson, and Svensson 1982). We hypothesize that transit agencies’ mission ambiguity is a leading explanatory factor of the context in which a poor understanding of costs can persist. As has been argued in the literature, this lack of cost comprehension is manifest in the crude ways in which transit fares are set, despite advances in technology that can facilitate a movement away from costabstracted, flat, and uniform fares and toward the cost-specific fares that vary based that cost of service provided. Our findings also suggest that the crisis-induced and budget-driven fare setting processes may be not the cause, but the effect of unclear or altogether absent goals. Even when a de facto pursuit of transit fare pricing effectiveness is evident, the absence of explicit goals to which agency decision-makers can refer, can mean that necessary, routine incremental fare increases are deferred until a distracting and destructive budgetary crisis forces a much larger and more disruptive fare increase on riders. This research suggests that transit agencies could avoid the contentious, fraught, and high-stakes “crises” that currently is all but a sine qua non for raising fares, while offering “fairer” fares that could increase ridership and revenue. However, the transit agency officials we interviewed reported having little information about whether such practices actually affect transit’s mode share. Several interviewees reported that they would expect to lose riders with any form of marginal-cost fare pricing, but had no idea whether or how they might gain additional riders under such a schema. Distance-based pricing, for example, could attract passenger for new, inexpensively priced short-trip riders who might have previously found $1.50 for a four block ride to be too much. The extent to which ridership would change depends on the urban context, economic conditions, traveler demographics, and so on; with information on these factors the ridership effects of fare structure changes could be estimated. Absent such information, any move to distance- or time-based pricing is a decidedly risky policy pursuit. Our interviewees also speculated that the larger the sources of operating and capital subsidies, the less likely it is that an agency’s managers will focus on farebox recovery ratios. This argument, echoed in the literature (Vrooman 1978; Flam, Persson, and Svensson 1982; Pickrell 1989), suggests that public subsidies have the perverse effect of reducing costefficiency and promoting subsequent budgetary crises. Transit officials also report that in a world where driving is cheap and preferred, transit officials have little choice but to maintain low fares in order to encourage mode shift. Given this unlevel playing field, then, the non-pursuit of marginal cost pricing may be reasonable to expect. But it also suggests that transit officials should support pricing policies such as congestion tolling and parking pricing, which help to internalize the costs of driving. However, our survey results show that transit officials tend to oppose, or are at best lukewarm toward, efforts to pricing the externalities of automobile travel. Just four in 10 of those surveyed support market-rate pricing on on-street parking, and just 27 percent support high occupancy/ toll (HOT) lanes; this contrasts dramatically with seven in 10 who support increased carpooling