Impacts of Transit Benefits Programs on Transit Agency Ridership , Revenues , and Costs

The federal tax code allows employers to provide tax-free transit benefits to employees. Although transit benefits programs are commonly promoted as having advantages for transit agencies, such as increasing transit ridership and transit agency revenues, their effects and effectiveness are not well understood and need to be better assessed. This research is designed to help transit agencies, policy-makers, and organizations that promote transit benefits better understand what effects they might expect from a transit benefits program and how to quantify these effects. Overall, the research found that transit benefits programs can be effective for transit agencies attempting to meet various goals, in terms of increasing ridership and revenues, and decreasing costs. However, it is critical to set realistic expectations and conduct valid evaluations to assess these effects. Introduction U.S. tax law allows employers to offer employees tax-free transit benefits (U.S. Department of the Treasury 2004). Regardless of how the benefits are offered (employer-paid, employee-paid, or a combination of the two), both the employer and the employee enjoy tax advantages since neither pays federal payroll or income taxes on the benefit. Although the cost savings from the benefits are relatively Journal of Public Transportation, Vol. 11, No. 2, 2008 2 straightforward, their impacts on transit ridership are not as well understood, and little rigorous research has been conducted on the topic at a national scale. While it makes intuitive sense that transit benefits programs should increase transit use, it is possible that these programs primarily support existing transit riders. To induce employers to offer transit benefits, many transit agencies have established programs that allow employers to purchase various pass types and vouchers at a discount, in bulk, or using other types of incentives. These programs make it easy for employers to offer transit benefits, as well as provide the transit or other sponsoring agency an opportunity to “brand” their program and increase their name recognition. In addition, tax law allows employers to purchase fare media on a cash reimbursement basis if no pass or voucher is available in the region, giving the agency another incentive to create a transit benefits program. This research focuses on how transit benefits programs affect transit agencies in terms of ridership, revenues, and costs. The following questions provide a rough outline of the topics covered in the article: • How much systemwide ridership and revenues come from transit benefits programs? The share of overall ridership and revenues that come from employer programs affects the extent to which these programs can help retain and attract riders and yield cost savings to the transit agency. • Do transit benefits programs increase transit ridership and revenues? Research on the impacts of transit benefits programs on employee travel behavior suggests that such efforts can increase transit ridership. This article explores the extent to which transit ridership and revenues increase, and how program design affects revenues per rider. • How much do transit benefits programs cost to administer? These costs include staff time for employer outreach as well as marketing and other fees. • Are there differences in revenue, ridership, or cost characteristics between different program types? If different types of programs (e.g., universal passes, monthly passes) generate different levels of revenues per rider and have different costs, it is useful for transit agencies to understand these effects so that they can offer the program options that best meet their goals. Impacts of Transit Benefits Programs Data Sources and Approach The results summarized in this section are drawn from interviews that the research team conducted in 200 with representatives from the following seven transit agencies. These agencies were selected to participate because they provide a range of mode options and program types, cover various geographic areas, and have differing ridership levels: • Washington Metropolitan Area Transit Authority (WMATA), Washington, D.C. • Metropolitan Atlanta Rapid Transit Authority (MARTA), Atlanta, Georgia • King County Metro, Seattle, Washington • Regional Transportation District (RTD), Denver, Colorado • Metro Transit, Minneapolis/St. Paul, Minnesota • Santa Clara Valley Transportation Authority (VTA), San Jose, California • Valley Metro, Phoenix, Arizona As the focus of the research was ridership, revenues, and costs to transit agencies, and the differences between different types of pass programs, we studied only agencies that operate their own program pass or voucher programs. A subset of voucher programs are operated by private third-party providers, sometimes as the sole program, sometimes in conjunction with public agency programs. However, the research team chose not to include regions where these were the only programs, as they represent only voucher and not pass programs. The research team conducted the interviews using an interview guide, asking follow-up or clarifying questions when necessary. In some cases, the persons interviewed sent additional information following the interview. Table provides background information on the seven transit agencies. As part of the project, the research team also collected ridership surveys and surveys pertaining to commuter benefits where available. Types of Transit Benefits Programs Of the seven transit agencies interviewed, four had multiple programs. Types of employer programs offered included monthly passes, stored value cards, universal passes, and vouchers (which can be traded in for transit fare media or used on vanpools). Generally these situations have evolved in response to employer demands and available technology. As Table shows, three of the seven agencies have only one employer program, and King County Metro has seven. Journal of Public Transportation, Vol. 11, No. 2, 2008 4 Ta bl e 1. S um m ar y Ch ar ac te ri st ic s of T ra ns it A ge nc ie s an d th ei r Pr og ra m T yp es (2 00 3) Impacts of Transit Benefits Programs Ridership Impacts Among the agencies interviewed, employer programs contributed between and 2 percent of total transit riders, and agencies with trend data available have shown increases in employee participation over time. However, it is difficult to determine if the increases in employee participation have led to increased ridership systemwide; in two cases the answers is a qualified yes, while in two others the effects are unclear. Employee Participation Employees participating in transit benefits programs make up a substantial portion of total transit ridership for many transit agencies. The agencies interviewed estimated that the percentage of all riders using employer transit benefits programs was between and 2 percent. The highest percentages of transit riders who participate in employer-sponsored transit benefits programs were at WMATA, Valley Metro, and King County Metro. WMATA attracts a large number of federal employees who receive full employer-paid benefits. Valley Metro is the smallest of the seven agencies in terms of total systemwide ridership, but has the largest number of staff working in employer outreach (including rideshare programs), so the program’s success may stem in part from this intensive effort. Table 2 provides ridership figures for each program and the percent of total system riders using transit benefits. Employee Participation Trends Employee participation in transit benefits programs has been increasing for nearly all of the agencies that provided historical participation trends. Even where employer participation has declined or remained relatively unchanged, employee participation has consistently increased. Five agencies had trend information on the number of employees participating in transit benefits programs, which is graphed in Figure .2 Three of these are universal pass programs, which track the number of employees at participating employers. While generally not all universal pass recipients ride transit, the figures assume that all of King County’s UPass program employee participants ride transit, since students, faculty, and staff are allowed to opt out of the program. Journal of Public Transportation, Vol. 11, No. 2, 2008 Table 2. Employee Participation in Transit Benefits Programs (as of 2003) Impacts of Transit Benefits Programs Figure 1. Trends in Employee Participation at Five Transit Benefits Programs Most striking is the large jump in participation in WMATA’s transit benefits program from 2000 to 200 . Two factors contributing to this increase were the increase in the tax-free limit from $ to $ 00 and implementation of an Executive Order that requires federal government agencies to fully pay for transit benefits up to the tax-free limit for all interested executive branch employees in the Washington, D.C. region. VTA, MARTA, and RTD have shown much steadier increases in employee participation over time. VTA and MARTA reported being affected by economic downturns, and all three had fare increases (or in the case of MARTA, a reduction in the employer discount that made employers’ costs higher). The strong employee participation figures seem to indicate that the programs are fairly resilient in the face of financial obstacles for employers. Participation in King County’s UPass has been steady, but the program only serves the University of Washington, and so it may have reached its saturation point among potential recipients. Contributions of Transit Benefit Riders to Overall Ridership Growth It is difficult to develop quantitative estimates of the extent to which the transit benefits programs have affected overall transit ridership at agencies over time Journal of Public Transportation, Vol. 11, No. 2, 2008 because it is impossible to state what ridership trends would have been if such programs were not in place. Ho