T looks to ride-sharing apps to fill gaps
Uber, Lyft, Bridj buy up ad space to sell riders on alternatives as transit agency throttles back
THE MBTA, SLASHING its operating budget after years of bloat, is looking to the emerging ride-sharing industry to fill the gaps caused by service reductions as well as to gobble up advertising space on trains and digital panels in stations.
In a proposed $2.1 billion budget to be presented to the Fiscal Management and Control Board on Wednesday, T officials outline an aggressive approach to hiking the agency’s own source revenues, including a projected 30 percent increase in advertising dollars – some of it from the ride-sharing companies – as well as an increase of more than 20 percent in real estate revenues such as leases. The increases only form part of the picture in the T’s effort to balance the FY17 budget, with cost reductions also playing an important part, including the termination this week of late-night service.
While no firm plans have yet been offered, the budget also targets highly subsidized routes, such as some weekend commuter rail service as well as low-ridership bus routes that could be replaced by the private ride-hailing industry. In the aftermath of the announced termination of late-night service, Uber and Lyft unveiled temporary, heavy discounts on late-night fares. Lyft will temporarily cut its late-night rates by 75 percent, while Uber will provide service between station stops for $5 per person, higher than a T ride but much lower than a cab. Bridj, a private on-demand shuttle service, has been working with T officials to become an alternative to the late-night service.
“To me that’s a sign that the private sector is stepping up,” Brian Shortsleeve, the T’s chief administrator, said in a telephone interview. “We also sold a lot of advertising to them. They paid us big bucks to advertise in stations.”
The advertising is beginning to appear on new digital monitors in front and inside stations. Shortsleeve said, for instance, some of the panels make the announcement that the T’s late-night train service ends on Friday, and that notice is immediately followed by an ad for Uber’s $5 service between stations from 12:30 am to 2 am.
T officials are aiming for an increase this year in advertising revenue from $20 million to $26 million, based largely on installation of digital panels throughout the system. Shortsleeve said the figure is not out of reach despite the fact that the fiscal management board limits advertising and bans products such as alcohol and medical marijuana as well as issue-based advertising. Shortsleeve said there are no plans or need to change that policy at this time to meet the advertising goal.
“The T, quite frankly, has been a laggard in monetizing its advertising and real estate resources,” Shortsleeve said. “I’m confident we’re going to achieve these [targets]. It is aggressive but it should be aggressive.”
In addition to the ramped up effort to increase non-operating revenue, the budget proposal also identifies potential cost reductions that could be backstopped by the private sector. Weekend commuter rail service, for instance, is costing the T nearly $24 per rider in subsidies compared to just over $4.50 during the week. The late-night service required a subsidy of $13.38 per rider as opposed to $1.43 for regular service. Those routes, say T official, can be serviced by the ride-hailing companies.
The budget also is banking on $43 million in revenue from a 9.3 percent fare increase approved last week by the fiscal management board at a raucous meeting. That money, as well as an additional $57 million, will be placed in a “lock box” earmarked for capital projects and service improvements.The T is also counting on $187 million from the state to help pay down its debt service, part of which is carried over from the Big Dig. Overall, officials are eyeing a 1 percent increase in the operating budget and a 4 percent hike in overall expenses.
To keep the budget growth low, the T is looking at shaving wage costs by restructuring salaries, privatizing some services, and reducing overtime. One of the areas of uncertainty is the workers’ pension fund. The agency is looking at an additional $55 million in unfunded liabilities to the fund because of lowered earnings estimates on investments, and Shortsleeve says contributions are only going to go up as pension officials factor in unused sick and vacation days into retirements, something that had not been done before.