Management & Operations

'Shrinkage' requires scrutiny in these austere times

Posted on June 1, 2002 by Steve Hirano, associate publisher/editor

In the retail world it's called "shrinkage." In the transit industry, it's called "fare evasion." Regardless of how you want to label it, it's an unavoidable consequence of running a business. That doesn't mean, however, that it should be shrugged off. Even if it accounts for only a small percentage of loss each month, fare evasion needs to be aggressively countered. After all, it's unfair to the paying customers if transit agencies overlook the criminal acts of the non-paying crowd. The honest folk will feel cheated (and some will eventually turn into dishonest folk). More importantly, the lost revenue is even more critical these days as budgets are pinched by shortfalls in tax revenue. Although no national statistics are available, it's probably a fair guess that fare evasion on bus and rail lines accounts for up to 5 percentage points of lost revenue. If transit agencies could prevent half of this shrinkage, that would translate into hundreds of millions of dollars of extra revenue nationwide. There are no free rides Of course, it would require an investment of time and money to reduce the incidence of fare evasion, offsetting some of the potential revenue gains. Although not purchased chiefly for this purpose, high-tech fare collection systems are making it tougher for criminals to defraud transit agencies. There are also relatively inexpensive methods of curtailing illegal free rides. As Assistant Editor Janna Starcic mentions in her article "Are Passengers Taking You for a Ride?," training bus operators to identify bogus ticket media and passes is important, as is emphasizing to them the seriousness of this crime. Rail operators, especially those with honor-system policies, can launch campaigns to aggressively pursue fare evaders and to remind patrons of the often-steep fines for fare evasion. There are other ways of bringing down the rate of fare evasion. The Los Angeles County Metropolitan Transportation Authority (MTA), which reports a 5% evasion rate on its rail lines, is considering a plan to end the 9-year-old honor system by installing turnstiles on its Red Line subway system and hiring 130 civilians to help manage the ticketing. In the past 12 months, there were 37 million boardings on the Red Line. A 5% evasion rate is equivalent to 1.85 million free rides. Not only would the addition of turnstiles make it more difficult for fare beaters to get a free ride, it would enable police officers who currently check riders for tickets to fight crime in other areas. On the down side, of course, would be the reduction of police presence on the subway system. Security has high priority Although MTA officials maintain that security on the Red Line would not be compromised under the plan, it cannot be denied that there would be fewer armed, uniformed officers patrolling the system. Patrons who feel less safe because of this change might be less inclined to ride the subway, especially if crime rates increase. Thus the potential revenue gains from installing turnstiles might be offset by lower ridership. So where does that leave us? Transportation security is a salient issue, especially since the events of Sept. 11. The recent assault at the El Al terminal at Los Angeles International Airport points to the importance of having immediate security response to possible terrorist acts. Having a strong police presence on rail lines is comforting to the operators and to the public. Transit properties need to minimize their losses in revenue due to fare cheaters, but not at the expense of overall security. Having police officers checking tickets on the L.A. subway may not be the most efficient manner of ensuring payment, but it serves another purpose -- reducing the threat of terrorism and improving response should an attack occur.

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