Farebox Revenue
Keeping track of farebox revenue provides the authority with important financial management information:
- To construct the farebox recovery ratio and other benchmarks and indicators that measure the bus system’s financial performance.
- To assist the authority to set and adjust the fare level.
- To determine the degree to which the bus system can fund capital investments from farebox revenue.
- To assess the ability of the authority to maintain a positive farebox debt service coverage ratio for any loans used to finance vehicle purchases and capital improvements.
Farebox revenue projection worksheet
The financial model will have a worksheet that forecasts farebox revenue. The contents of this worksheet and how it forecasts future farebox revenue will depend primarily on:
- The authority’s legal and regulatory responsibility to set fare levels.
- The authority’s current financial management role in bus operations.
- The farebox revenue projection methodology used in the worksheet.
- The extent to which farebox revenues are related to other financial benchmarks, indicators and worksheets.
Authority’s legal and regulatory role in setting the fare level
In many countries that have a public monopoly bus system, the bus operator and regulator are one and the same. This creates a conflict of interest (see regulatory framework). As the urban transport system undergoes reform, it should separate the bus operation function from the bus regulation function.
To forecast the future fare level, the specialist responsible for constructing the authority’s financial model may modify the bus operator’s method of fare level calculation to take into account the legal and regulatory reforms that separate bus operations from bus regulation.
Reliability of the database to forecast farebox revenues
In many countries the bus operator provides summary operating cost and ridership input data for authorities to set and adjust fare levels. It’s essential that the authority validate the bus operator’s input data to insure a reliable fare revenue calculation.
If the authority is currently responsible for bus operations, it will have direct access to the fare revenue database. Although this may appear to be a more efficient way to incorporate fare revenue into the financial model, it runs the risk of data manipulation due to possible conflicting authority and bus operator goals. The authority should separate the bus operating accounting function for fare revenues from its role as regulator of fare levels as soon as possible.
Farebox Revenue projection methodology
Farebox revenue projections can be very complex and will most likely involve some of the following factors:
- Social objectives that dictate fare levels for certain bus passenger segments (elderly, handicapped, students, etc.).
- Ridership projections based on quality of service.
- Route coverage and bus frequency.
- Macroeconomic, land use and social trends that influence the generation, purpose, origin and destination of bus trips.
See also
Other revenues
