Rock Region Metro hasn't raised fares since 2009 and has no plans to increase them next year in large part because a fare increase would mean fewer people would ride a bus, meaning the agency wouldn't net additional revenue, its executive director said Monday.
The agency lost $50,000 when it raised the price of a single adult ticket from $1.25 to $1.35 six years ago, Jarod Varner said after a meeting of the finance committee to talk about next year's proposed budget.
That surprises no one in the industry. "The rule of thumb in our industry is typically that for every 10 percent increase in fares, I think there's a 3 percent decrease in ridership," he said.
Moreover, Varner said, if the agency raised fares and did receive additional revenue, it would likely be offset by a reduction in the amount of money its municipal and county partners contribute to the transit agency every year.
"I think that's one of the reasons our board hasn't been interested in raising fares since 2009 or hasn't gone through the process of reviewing them in great detail because, at the end of the day, what value does that add to the customer who rides transit every day," Varner said.
The majority of Rock Region's operating budget -- projected to be $17.5 million in 2017 -- comes from Pulaski County and four of its cities: Little Rock, North Little Rock, Sherwood and Maumelle.
Rock Region has requested a total of $12,864,370 from its partners for 2017, a 3.5 percent increase over what the agency asked for and received in 2016.
Under the proposed budget, the largest amount of partner funding requests, $8,862,975, is from Little Rock. Rock Region will ask for $2,674,190 from North Little Rock, $1,212,291 from Pulaski County, $77,004 from Sherwood and $37,910 from Maumelle.
The balance of the proposed budget is covered by fare revenue totaling an estimated $1.15 million, about $2 million in federal grants, state money and advertising.
The higher requests from the agency's budget partners have been driven by increases in health insurance, pay increases mandated under the agency's collective bargaining agreement, increases in paratransit costs and reduced passenger revenue.
Rock Region expects to take in $107,877 less in passenger fares than the $1,166,222 it budgeted for 2016, thanks to falling fuel prices, which historically reduce transit ridership.
The Rock Region board is expected to consider the proposed budget later this month.
On Monday, the board's finance committee reviewed proposed capital expenditures for 2017, as well as a proposed fare review policy, which the agency hasn't had.
Under the proposed policy, a fare review would be triggered by one of five factors.
The first is a farebox recovery ratio, which is the percentage of the agency's operating expenses supported by the fares passengers pay.
Under the latest figures agency officials are using, the farebox recovery ratio is 13 percent while the average for similar-size agencies is 15 percent. The proposal would set a fare review if the farebox recover ratio fell below 13 percent, but committee members said they wanted to study the other agencies before making a decision.
Other triggers include not having reviewed fares for three years, advances in technology, fare policies that don't achieve agency goals or a situation in which the board deems a review to be necessary.
"Our issue is we don't just have a profit motive," Varner said. "There's also making sure that you're not charging too much so that the people who absolutely have to rely on transit can ride the transit.
"It's not just the bottom line. That's not our only goal. It's what types of fares are you offering? Are they meeting the needs of individuals who don't necessarily have transportation options? It's a bit more complex than pricing a commodity."
The fare review policy came up during discussions that led to a proposed ballot initiative that would have dedicated a one-fourth percentage point increase in the county sales tax to transit. Voters rejected it in the March primary election.
Had it passed, the agency would have expanded regular bus service and put in limited bus rapid transit routes on high-traffic corridors in Little Rock. Bus rapid transit features larger buses with platform stops that foster development and has some portion of the route dedicated to the buses.
"That's a major limitation in our current funding structure," Varner said. "There are very few revenue sources that we control."
The finance committee will meet again -- no date has been set -- to discuss the fare review policy, and it likely won't be ready for the board to consider until next year.
Metro on 11/01/2016