Could Uber be the future of public transit in rural communities?

In the Town of Innisfil, Ontario, the costs of subsidizing Uber are now more than it would have cost for the municipality to buy and operate its own public buses

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      The following by Ellie Ruggles is excerpted from Smart Cities in Canada: Digital Dreams, Corporate Designs edited by Mariana Valverde and Alexandra Flynn and published by James Lorimer & Company Ltd. It has been slightly edited for length.

      In 2017, Innisfil and Uber entered a partnership to provide a rideshare transit system, a first in Canada. The partnership enables Innisfil residents to use UberPool, a platform that allows individuals travelling in the same direction to share a ride. Despite the possibility of sharing, the price was to be subsidized by the municipality. Only residents with an Innisfil billing address would be able to benefit from the subsidized prices.

      The partnership between the town and Uber rolled out in two stages. The first stage started in 2017 and consisted of Uber gathering data on popular destinations within Innisfil. Stage 2 began in March 2018 and saw the addition of two new fixed fare Uber destinations. As somewhat of an afterthought, it was decided that residents who do not have credit cards and smartphones can phone the municipality, during weekday office hours only, to book their Uber ride.

      In 2019, the most recent phase of the project ushered in additional changes to help decrease transit expenditures and address financial accessibility issues, which will be the focus of the concluding section.

      Innisfil Transit (which is its formal name, not Uber) is funded by a combination of property taxes, the Provincial Gas Tax program (which funnels some of the provincial gas tax revenue to localities), municipal funds and development charges. Fares are not a source of revenue because they are paid to Uber rather than the municipality. But increasing the fares paid by passengers reduces costs to the town through lowering the subsidy paid by the town to Uber.

      How does it work?

      Using the Uber app, Innisfil residents can request rides 24/7. There are three types of trips residents can request with the app. The first is booking a ride to or from a set destination within the township. These locations were identified by the municipality through data collected during Stage 1 and from feedback from residents. The cost of these trips is a flat rate of between $4 to $6, even if the passenger is coming from 10 or 15 kilometres away and the municipality pays Uber the difference.

      This means Innisfil residents do not face surge pricing for these destinations during peak periods. The original pay scale for key destinations was between $3 to $5, but this was increased in April 2019 to help offset costs. Based on data collected by Uber, the top destinations in 2018 were the Barrie South GO Station, the Innisfil Recreational Complex, the Alcona Lakeshore Library, the Innisfil Heights Employment Area, and Innisfil GO bus stops.

      The second type of trip residents can request is to a location within Innisfil that is not listed as a key destination. For these trips, residents receive a $4 deduction from the Uber-set cost of their trip. For example, a trip from Cookstown to Big Bay Point would cost $42.25, rather than the market rate of $46.25. Originally residents would receive $5 off, but this was reduced to $4 in April 2019.

      Matching riders going the same direction is enabled by using UberPool. Since 2017, Uber trips with more than one passenger have increased from 17 percent to 31 percent. While this creates efficiencies, only two passengers per address are allowed, as per the rules for the UberPool app.

      This UberPool rule has been noted as negatively impacting families and households who would like to travel in a larger group. Since Innisfil Transit is using the UberPool platform and app, there is no way for the town to change the rules without disrupting the entire system. As well, all individuals who are matched for a trip must pay the applicable rate.

      The cost of subsidizing Uber grew as Uber rides became more popular than predicted. As of 2019, Innisfil council implemented a 30-ride per month limit for the subsidized rides. If residents go over the limit, they no longer receive the subsidy for the trip and must pay the full market fare. Residents can apply for an extension of the subsidy for 50 trips by demonstrating a need. Seniors, students, those without a vehicle and low-income residents are given special consideration.

      Impact of Uber on Innisfil

      Uber’s demand-responsive transit system has resulted in benefits for Innisfil residents but also problems. In terms of benefits, the popularity of the service and the positive input provided by Innisfil residents through surveys suggest that a demand-responsive transit service was needed in the rural municipality.

      In 2017, 26,688 trips were completed with 3,493 unique riders and 1,393 different drivers and an average wait time of 9 to 10 minutes. By 2018, ridership grew significantly, with a total of 85,943 trips taken by 5,749 riders and 2,203 drivers and an average wait time of 6 to 10 minutes. The quality of Innisfil Transit was reviewed by residents through the town’s online customer satisfaction survey.

      In 2017 and 2018, respondents were happy with the service, with 61 per cent responding either very satisfied or satisfied in 2017 and 66 percent in 2018. These data align with survey responses regarding main reasons for using the service: going to work (43 percent), shopping (27 percent), medical appointments (20 percent), school (15 percent) and 58 percent for other reasons, including social and recreational activities like attending community events or as an alternative way home after drinking.

      A demand-responsive transit system seems to be beneficial for Innisfil residents and likely would be for other rural areas. The geography and population distribution within the municipality poses logistical and financial challenges for implementing a traditional fixed-route bus service.

      But it is possible that one of the local companies that had expressed an interest in providing on-demand transportation would have avoided some of the issues that developed later; and perhaps the financial terms negotiated with a local company could have been better, or more flexible, than the practice of simply subsidizing UberPool rides and Uber itself.

      While the first two years of the program have provided Innisfil residents with a viable alternative form of rural transportation, financial issues have emerged in the partnership.

      One of these concerns is the relatively unpredictable growing cost of the service. As discussed previously, one of the main reasons for adopting a demand-responsive transit system was due to the cost of operating a fixed-route transit system.

      Rather than initially investing $272,000 for one bus or $640,000 for two buses, the municipality opted for spending $100,000 in 2017 for the demand-responsive system. However, due to the unexpected popularity of the service, the total cost for subsidized rides in 2017 rose to $150,000. By 2018 the cost of subsidizing Uber grew to a larger figure than what it would have cost to buy and operate a bus.

      With the addition of two new fixed fare destinations and a further increase in ridership, the subsidy cost for the municipality rose to $640,000 by the end of 2018. This was a 76 percent increase from 2017 and considerably higher than the estimated average yearly increase of 5 per cent, or 8 per cent for the one or two bus fixed-route service. To try to manage the cost, the Town of Innisfil removed the $5 that had applied to rides that had not originated in the municipality itself (say, if someone had gone to the nearby city of Barrie for an appointment and was going back home to a farm in Innisfil), but subsidy-cutting reforms were not enough to keep transit expenditures within budgets.

      From 2019 to 2020, council approved $885,806 for Innisfil Transit (more than it would have cost to buy and operate two public buses). A March 2019 staff report estimated that without any changes to fares, the total cost of the program would grow to about $1 million, due to the continued growing popularity of the service and Innisfil’s growing population. To save money, in April 2019 fixed fares were increased by $1 and residents were told they would have a maximum of thirty rides a month covered by the municipality’s subsidy (though as mentioned above, in some cases up to 50 subsidized rides are possible).

      Further and relevant to other smart city projects, in this case it is Uber and not the municipality that collects data on rides and customers—although the municipality has the information generated by the subsidy system. Therefore the municipality has no share in any financial or other benefit that Uber may be getting from possessing a significant data set about a (for Uber) unusual territory, that is, a rural municipality. It is not possible for outsiders including public officials to know what Uber headquarters might be doing with data collected in rural Ontario. If Uber uses Innisfil data or algorithms derived from those data to offer services in other rural municipalities, which is likely given Uber’s ambitions and geographic scope, Innisfil residents may feel they have been treated as (unpaid) rats in the lab of a multinational corporation with a less than stellar record on collaboration with public authorities, on treating workers fairly and on a number of other issues.

      Not surprisingly, local taxi companies in the area voiced their concerns about this partnership, citing insufficient insurance coverage and inadequate security check screenings for Uber drivers. To address the insurance concern, Innisfil Uber drivers are required to have $2 million in liability insurance. This follows Uber’s general approach: when faced with complaints from municipalities or the taxi industry the company sometimes forces drivers to obtain commercial driving insurance, rather than, as many taxi companies do, providing insurance through the company’s own policy. No driver security screening apart from Uber’s own requirements—which are nonexistent—have been implemented in Innisfil.

      To try to offset the impacts of Uber on local taxi companies, Innisfil Council approved staff’s recommendation to refund the taxi license fees for 2017, 2018, and 2019. But refunding licensing fees is not a long- term way to create a level playing field. There remain questions about whether Uber’s success in becoming subsidized by the municipality will drive all local competitors out of business, from local taxi companies to the regular public transit (which did not exist earlier, but could have been operating by now if the initial choice made by council had been different).

      One ominous sign of the potential decline of local alternatives is that since Uber does not compel any proportion of its drivers to provide service to wheelchair passengers, not just in Innisfil but generally, the town arranged for residents needing wheelchair transport to get rides with Barrie-Innisfil Taxi. But no accessible rides were booked using the Innisfil Transit system during the first two years of the system’s operation.

      Overall, while Innisfil councillors and staff continue to express a positive opinion about the choice to use Uber to provide transportation and clearly many residents like the service provided, the story told here about the unanticipated problems that emerged—including the very sharp increase in municipal subsidies—serves as a cautionary tale for municipal officials across the country who might be lobbied by large corporations offering data-based solutions.