This guest post was authored by Sam Sklar.

As transit agencies grapple with significant ridership losses during the COVID-19 pandemic, many are looking to bring back riders by selling fare passes in bulk to employers, schools, and other large institutions.

In Philadelphia, SEPTA recently piloted a partnership with PennMedicine and Wawa called “Key Advantage.” In Boston, the MBTA now offers “Perq.” Denver RTD has “EcoPass.” Smaller agencies have also started to offer employer-based passes.

No two programs are exactly alike, but they all operate according to the same general principle – tapping into a large pool of potential riders by making transit passes available to them at steep discounts.

The concept is not new. Agencies like King County Metro in Seattle have administered institutional pass programs for decades. But ridership losses during the pandemic have accelerated the adoption of these programs and added a sense of urgency to maximizing their reach.

To understand the motives behind institutional pass programs and the impact they are making, TransitCenter spoke to staff in Seattle, Columbus, and Santa Clara County, California.

How do institutional passes work? 

The purchaser of an institutional pass – usually a business, school, or other relatively large institution – receives partial or full access to the transit agency’s service at a heavily discounted price. Through such a program, an employer could provide transit passes as part of workers’ compensation. Or several businesses operating under the same umbrella could distribute bus passes to incentivize workers to take transit, in an effort to reduce traffic and parking dysfunction.

Transit agencies often price institutional passes far below the standard fare rate. Institutions then provide the passes to their constituents at an even lower rate. For instance, say a business has 50 employees in downtown Seattle. Through the institutional pass program, the company would pay $20,000 to provide them all with Orca transit passes, while if each employee were to buy a similar pass individually, the total price would come to over $100,000, according to Seattle’s Orca calculator. The business could then provide the passes to employees as a free benefit. In this bargain, the transit agency acquires fare revenue in bulk and gets access to a large pool of potential riders, and the business gets to sweeten its compensation package to attract employees.

Seattle’s pass is administered by King County Metro with assistance from Commute Seattle, a non-profit that helps foster relationships between employers and the transit agency. Through the program, employers can offer either an unlimited pass or fixed-value card, giving workers greater access to the Puget Sound region’s network of buses, trains, and ferries.

The first iteration of the program launched in 1993, and in the decades since it has made a significant impact. In the Puget Sound region today, 60 percent of transit trips are made with an employer-provided pass, according to Commute Seattle Program Director Kendle Bjelland.

“Let’s say there’s an employee who can make a decision: ‘Oh, I can pay $200 a month for a bus pass or $400 a month for unlimited parking,’” said Bjelland. “Probably people would just choose parking. But with a free pass, that really changes that equation.”

Along with the region’s recent record of service improvements and system expansions, the bulk fare programs are viewed as a major factor behind the shift from car commuting to more efficient modes of travel in Seattle. From 2010 to 2020, the drive-alone commute rate to downtown Seattle fell from 35% to 25%.

In Columbus, Ohio, the downtown business community took the initiative to launch a similar program. Downtown C-pass is administered by the Capital Crossroads Special Improvement District. Each property owner within the district pays a special transit assessment that funds free Central Ohio Transit Authority (COTA) bus passes distributed through their tenants. The program is a voluntary initiative and not the result of legislation or public spending.

Downtown C-pass began as a pilot program in June of 2015. “We worked with four employers,” said Downtown C-pass Program Director Kacey Brankamp. “We selected the employers very carefully so that we felt like it was a good representation of typical employers in our downtown, and we made free bus passes available to 800 eligible people.”

Within three months, COTA ridership among the 800 eligible people roughly doubled, according to Brankamp. “That was a great response, a huge response,” she said. “Our property owners felt confident that if we took this to our entire district we would see the same results.”

Downtown C-Pass launched as a district-wide program in 2018, expanding to tenants at 219 properties. Employees of these tenants can opt to receive a free bus pass in the form of a farecard, smartphone app, or RFID sticker that can be attached to a work badge.

Within a year of the expansion, COTA ridership grew from 5% of eligible participants to 10-14%. “We heard from [employers] that offering the benefit helped with employee recruitment and retention,” said Brankamp. “There were 17 companies that reported making leasing decisions based on this transit incentive. That’s a big deal in a place where overall transit use is so low.”

“We have heard all kinds of stories from people about this [Downtown C-pass] program,” Brankamp added. “From a part-time restaurant worker who now doesn’t have to use their tips to pay bus fare to single moms that are able to save that money… to people that are making six figures that are saying, ‘I love taking the bus now, it’s not as stressful at all to sit in traffic.’”

Implications of an institutional pass program

A virtuous cycle of ridership gains: As Seattle has demonstrated, a widely available, well-publicized institutional pass program can help draw riders to the system. And getting back on a ridership growth trajectory will have knock-on effects, like a greater sense of safety and security among riders.

Financial stability: While institutional passes are sold at a discount, agencies are not giving away the store. “Employers are buying [a pass] for every benefit-eligible full-time employee, so transit agencies are getting paid for each person, whether or not they use it,” said Bjelland of Commute Seattle. When agencies achieve significant scale with these programs, the sale of institutional passes functions as a large and predictable revenue stream, which in turn can improve terms for borrowing to fund investments in better service.

Fairness: For workers with low incomes, access to transit via a bulk pass program can drastically reduce transportation costs for a wide variety of trips. But if the programs are not framed carefully within an agency’s overall fare structure, they may, in effect, subsidize more affluent workers.

To avoid this pitfall, Santa Clara County’s Valley Transportation Authority (VTA) structures prices to reflect the means of the customer. “Colleges are the cheapest, [then] not-for-profit organizations, and then [for-profit] corporations. Lower-income workers and students pay less than the corporate tech companies,” VTA Senior Management Analyst Alvin Lucas told TransitCenter. 

But what about people who don’t qualify for passes through an employer or school? All three of the agencies we spoke to also offer free or very-low-cost fare options for people with low-incomes.

Without such an option, agencies run the risk of setting up an unequal fare policy regime: free passes for people who are employed, full-price fares for those who are not. It’s also worth considering whether foregone revenue from institutional pass discounts would be better spent on boosting funding for low-income fare programs. Agencies should clearly articulate values to guide development of their overall fare policy and structure an institutional pass program accordingly.