Bus Pass Pilot Program for Low Income Students

In July of 2001, Contra Costa County Supervisor John Gioia, Alameda County Supervisor Keith Carson and Assemblywoman Dion Aroner requested MTC to include in the RTP a three-year pilot program that would subsidize free annual passes for low-income students in AC Transit's service area. The purpose of this proposal is to increase low-income student attendance at 80 middle and high schools in AC Transit's service area.

At the Planning and Operations Committee meeting on December 14, staff was prepared to recommend a pilot program for the Committee's recommendation to the full Commission. However, we received a copy of a legal opinion by AC Transit's General Counsel which asserts that the MTC's pilot proposal covering only a portion of the AC Transit service area would promote "intentional discrimination" and have "disparate impact" on students in school districts in AC Transit's service area that would not be included in the proposed pilot. MTC's counsel does not agree with the opinion's conclusion that a pilot project is inherently illegal if it does not cover an entire service area.

Assemblywoman Dion Aroner has requested the State Legislative Counsel to review the AC Transit General Counsel's opinion to determine if there would be any problem with proceeding with the pilot program. She has reported that the State Legislative Counsel also does not agree with the basis for the AC legal opinion and anticipates a written opinion to this effect will be available within the next several weeks.

Given the uncertainty surrounding the initial staff recommendation, the Committee recommended that the Commission approve the proposed financial commitment of $865,000 in LIFT program funds per year for a two-year pilot program and directed staff to work with the pilot sponsors to finalize a recommendation for the full Commission. Four options were initially considered:

Option 1: The initial staff recommendation to provide LIFT program funds, matched 50/50 with local funds, for a two-year a pilot program to evaluate the impact of providing free transit fares on low-income students' attendance at school and after-school programs in West Contra Costa County, Albany, Berkeley, Emeryville and Oakland.

Option 2: The implementation of a pilot program throughout AC Transit's service area with MTC's contribution capped at the original proposed amount of $865,000 per year for two years.

Option 3: Establish a set-aside of funds within the LIFT program in the amount initially proposed for the pilot in the AC Transit service area to be allocated based on a call for projects open to all school districts in the Bay Area for pilot programs to subsidize transit fares for low-income students.

Option 4: Do not set aside a specific portion of the LIFT program for low-income student fare subsidies, but extend the eligibility of the LIFT program to allow consideration of these types of programs to compete for funding with all other types of candidate projects.

Alternative Pilot Proposal
Commissioners Ralph Appezzato, Scott Haggerty and Mark DeSaulnier and MTC staff met with Assemblywoman Dion Aroner, Assemblywoman Ellen Corbett, Supervisors John Gioia and Keith Carson, representatives of the Oakland and West Contra Costa school districts and AC Transit Board members Patrisha Piras and Matt Williams and their associated staffs on Monday, December 17. This meeting resulted in the development of the following hybrid pilot proposal to offer free bus passes to low-income middle and high school students in all school districts in AC Transit's service area. This proposal eliminates the service area legal issue for AC Transit.

1. AC Transit will reduce the price of their monthly youth pass from $27 to $15 per month for all students in their service area.
2. During the two-year pilot program, AC Transit will offer free youth passes to low-income middle and high school students participating in the Free and Reduced Lunch (FRL) program in all school districts throughout their service area.
3. MTC will provide $1 million per year in LIFT program funds for the two-year pilot. AC Transit will be responsible for assembling the $1 million local match from the following sources: AC Transit funds, Measure B, Measure C, county TANF funds, the Transportation Fund for Clean Air (TFCA) or others. The MTC commitment will be based on the 50/50 match requirement of the LIFT program so that, if the local funding is less than $1 million, the LIFT funds would be reduced accordingly.
4. MTC's financial participation during the two-year pilot is intended to explore the effect of lower/free transit fares on school attendance and serve as a cushion for AC Transit's transition to a proposed permanent reduction in its youth pass fare. MTC's financial participation is limited to the two-year pilot period only.
5. MTC will provide $65,000 for an evaluation of the pilot program in AC Transit's service area, as compared to AC's current youth fare discounts, and an evaluation of student fare policies already adopted by other transit jurisdictions in the Bay Area and elsewhere to identify what could be effective alternatives that can increase attendance by low-income students. These will include programs at the San Francisco Muni, Santa Clara VTA, SamTrans, BART, Sacramento RT, and Portland Tri-Met.

AC Transit currently receives an estimated $5 million per year in fare revenue from the sale of youth passes (7,500 per month), youth discount tickets and cash fares. As shown in Attachment A, during the two-year pilot, AC Transit will need to sell an additional 8,900 passes at $15 per pass in order to break even during the pilot. After the two-year pilot, AC Transit would need to sell 20,200 passes at $15 per pass, in addition to the existing sales of 7,500 passes, to recover the $5 million in youth prepaid fare revenue and still provide the passes for free to the FRL participants without a regional subsidy. There are approximately 100,000 students in the AC Transit service area eligible to purchase a pass. In the alternative, AC could sell fewer youth passes at a higher price or increase fares modestly on its under-priced transbay routes to achieve the same revenue target.

Recommendation
Based on this agreement with the pilot sponsors and AC Transit, staff recommends that the Commission approve the financial commitment to program $1 million in LIFT funds for FY2002/03 and FY2003/04 for the pilot program described above. Based on the uncertainty created by the AC Transit legal opinion, staff further recommends that the Commission extend the eligibility of the LIFT program to allow consideration of these types of programs region wide to compete for funding with all other types of candidate projects in the upcoming LIFT programming cycle.

Staff estimates that the total funding available for the LIFT program for FY2002/03 through 2003/04 is $6 million, including $3 million from MTC's STA regional discretionary funds and a $3 million earmark from the federal Job Access and Reverse Commute Program. Assuming $2.0 million is programmed for the school pass pilot program, the Commission will have $4.0 million remaining for allocation to other LIFT projects.

In fairness to potential projects submitted by other Bay Area jurisdictions, staff recommends that no additional LIFT projects be considered for the AC Transit service area until FY2004/05 unless there are funds remaining following programming of projects for other jurisdictions for 2002/03 and 2003/04. Potential claimants from within the AC Transit service area will be so advised.

Should the Commission approve this recommendation, the provisions outlined above will be forwarded to AC Transit and the local funding partners. Staff will begin work immediately with AC Transit and the local partners and school districts to draft an evaluation plan with a goal of presenting it to the Planning and Operations Committee for approval in February 2002. We would expect an application for LIFT funds to be submitted by AC Transit in the Spring 2002 call for projects.

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Attachment A

Low-income Student Pass
Two-year Pilot Program
AC Transit Service Area
Financial Plan

(all figures are annual)

AC Transit Gross revenue risk	$5.0 million
LIFT	1.0 million
Local Match AC Transit Measure C County TANF TFCA Program	1.0 million
Current Youth Pass Sales (7,500 passes x 12 x $15)	1.4 million
Net revenue risk	$1.6 million
Additional Pass Sales (8,900 passes x 12 x $15)	$1.6 million