Why I don’t like FRR as a metric

In my last post, I discussed a possible metric to judge transit agencies by: mobility per subsidy.  In that discussion, I mentioned how that metric relates to and encompasses many of the other traditional metrics used to judge transit systems and prices, like equity/fairness and ridership.

Here, I’ll compare it to one of the cost-effectiveness metrics mandated by the Capital Metro board: Fare recovery ratio.  FRR is the ratio of all costs collected as fares: Farebox revenue / Total costs.  Unlike ridership or equity, mobility per subsidy does not encompass FRR; in fact, it actively conflicts with it and seeks to replace it.  There’s a reason for that: mobility / subsidy is a measure of efficiency, or benefit per cost.  FRR is not a measure of costs or benefits, but is instead a measure of the incidence of costs.

This is frankly an insane thing to measure.  For example, suppose MetroBus had a $100M budget to run 20 bus lines and collected $10M in fares and $90M from tax revenues.  This would be an FRR of 10%.  Then, one day, they discovered that there were tremendous revenue opportunities in running buses with wrap coverings.  So much, in fact, that 5 new buslines could be added that would completely pay for themselves, at a cost of $25M and revenues of $25M.  Now, MetroBus would be running 25 buslines with a $125M budget, collecting $10M in fares, $25M in ads, and $90M in tax revenues.  By mobility metrics, this is an unequivocal win: 25 buslines for $90M is much better than 20 buslines for $90M.  But FRR was actually reduced from 10% to 8%.  By FRR logic, fares should be raised because running buses became more efficient!  You might say that this is an odd case, but it should at least give you pause when your metric argues for you to do the exact opposite of the right thing.

Under the mobility per subsdiy metric, fares should not always be zero.  Assessing fares can be useful for two major reasons:

1) demand management, such as preventing rides that are of negligible mobility usefulness, such as rides for the benefit of air condition or one-block rides from crowding out rides that have positive mobility usefulness, and

2) Raising revenue.  As long as the revenue raised doesn’t interfere with the service provided (say, by making enough of the potential users avoid using it), this helps either return money to the taxpayers or increase mobility-providing services.  Either way, it can improve the mobility per subsidy metric.

These are similar reasons for charging fees across municipal government.  The Austin Planning Department charges a fee for submitting permits.  This both prevents frivolous filings (demand management), and raises revenue.  But it would be frankly insane to measure the effectiveness of the planning department using FRR (permit revenue / operational costs).  Raising permit fees for the purpose of increasing the planning department’s FRR could do real damage to the city by incentivizing people to either skirt the permit process, or else discouraging people from building altogether.

Similarly, raising transit fares for the purpose of satisfying an FRR metric could do real damage to the city by encouraging either fare evasion or reducing mobility and transit efficiency across the city.  FRR is a metric that should simply be ignored.  This doesn’t mean that it isn’t the Board’s responsiblity to ensure that taxpayers get good value for their money–it simply means that FRR is a terribly way of measuring that.

Why I don’t like FRR as a metric

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