National Free Travel for older people

and those with a disability

The Worcestershire Concessionary

Travel Partnership

Explanatory Notes for Operators

Third Issue (a) - FEBRUARY 2008

The Worcestershire Concessionary Travel Partnership is a partnership of Local Authorities coordinated by Worcestershire County Council and administered by JMP Consulting, offering Free Travel to residents of Bromsgrove, Malvern Hills, Redditch, Worcester City, Wychavon and Wyre Forest Districts.

Scheme Commencing 1^st April 2008

1. Legislation

Statutory Minimum Requirement

Enhancements

Alternative Provision

Eligibility

Elderly people

- defined as persons who have attained the age of sixty years.

Disabled people - defined under several categories as someone who:-

- at any time on Saturday, Sunday and on Bank Holidays.

- and on journeys commencing between 0930 and 2300 on weekdays.

2. The Worcestershire Scheme

The Worcestershire Concessionary Travel Partnership

Bromsgrove District Council Worcester City Council

Malvern Hills District Council Wychavon District Council

Redditch Borough Council Wyre Forest District Council

Enhancements in the Worcestershire Free Travel Scheme

* Note: Excludes journeys operated at `Premium Rates' such as National Express Services, Excursions and Tours. Journeys which require passengers to transfer to another vehicle outside the boundaries of the County are not included, only unbroken journeys.

**Note: A reciprocal agreement has been made with Herefordshire. Passes issued by Herefordshire should be accepted in Malvern Hills and Worcester City as if they were a local pass prior to 0930, passes from these districts should be accepted in Herefordshire..

***Note: A reciprocal agreement has been made with Herefordshire for companion passes issued by Malvern Hills and Worcester City to be accepted. A companion to anyone showing a valid Companion pass issued by Herefordshire should be allowed to travel in Malvern Hills or Worcester City at all times, and vice versa. i.e. a valid Herefordshire Companion pass should be treated as a valid local pass at all times in Malvern Hills and Worcester City and a valid Malvern Hills or Worcester City pass should be treated as a valid local pass in Herefordshire at all times.

Participation of Operators in the Scheme

Community Transport

Companions

Details of Passes

* Note: Transitional arrangements mean that travel concession authorities will continue to be required to offer free concessionary travel in their local area for a period of six months after 1 April 2008 to concessionaires who hold “old” passes issued to the local authority's design. The arrangements do not in any way affect the duty of all English travel concession authorities to recognise "new" passes as valid for all-England travel from 1 April 2008, and to reimburse operators in respect of such journeys starting in their areas. Furthermore, the transitional arrangements should not be confused with provisions for the issuing of temporary passes should there be a supply problem with the national pass. As any temporary passes would be issued under regulations made under the 2007 Act, in legal terms they would be treated identically to the permanent passes, until their expiry date.

The transitional arrangements do not require a local authority to accept "old" passes issued by other local authorities, nor do they require an authority to offer any discretionary enhancements (under the 1985 Act) if it does not wish to do so (whether or not such enhancements were previously offered).

** Note: London Freedom Passes will not be renewed immediately therefore these passes will differ from the standard English National Pass issued elsewhere in England. From April 2008 Freedom Passes should have the English National Symbol `red rose' applied as a sticker.

Additional Costs

Obligations of Operators

Obligations of Authorities

Right of Appeal

Transitional Review

Ongoing Review

* Where any operator taking part in the scheme has failed to produce data for claims up to 31^st March by 1^st June, the Partnership reserve the right to extend the review date by an appropriate amount to reflect the period of delay.

3. Revenue Foregone

The Worcestershire Free Travel Scheme

From time to time operators may be requested to provide sample data which identifies separately the number of trips commencing prior to 0930.

Average Fares

Payments

F.a.o. David Ivill at JMP Consulting Ltd

Latchford House

Shenstone Business Park

Lynn Lane, Shenstone

Lichfield, WS14 0SB

Please note that reimbursement is based on a Claims system, using the appropriate documentation. Claims will be processed by JMP who will instruct relevant authorities of the amounts payable to individual operators. Invoices should not be submitted.

by telephone to : 01543 482300 (Switchboard)

: 01543 482367 (Direct Dial)

by fax to : 01543 482399

by email to : concessions@jmp.co.uk

4. Reimbursement Procedure

*Worcestershire County Council will provide assistance where necessary to identify the appropriate district for any stop in the county.

Generation Rates

- Tier 1:

Where services operate frequently* it is assumed that an additional 75% more journeys will be made as a result of the free scheme existing. Therefore, for every pass holder carried, operators will be paid a sum equivalent to 0.5714 of the average fare applicable on these services.

The application of this generation factor is explained in detail in Appendix 2a.

- Tier 2:

Where services operate less frequently* it is assumed that an additional 55% more journeys will be made as a result of the free scheme existing. Therefore, for every pass holder carried, operators will be paid a sum equivalent to 0.6452 of the average fare applicable on these services.

The application of this generation factor is explained in detail in Appendix 2b.

- Tier 3:

Where services operate infrequently* it is assumed that an additional 35% more journeys will be made as a result of the free scheme existing. Therefore, for every pass holder carried, operators will be paid a sum equivalent to 0.7407 of the average fare applicable on these services.

The application of this generation factor is explained in detail in Appendix 2c.

- Where services are operated by Community Transport schemes under Section 19 agreements, there will be no reduction to take account of generated travel. Please note that normal eligibility criteria for travel on the services of any schemes must be enforced.

* Note: The current definition of the three tiers is detailed In Appendix 3 which also details how service frequencies on a corridor or area will be dealt with.

Additional Costs

Average Fares

Appendix 1 - Responsibilities

As appropriate from April 2008

The six district authorities of Worcestershire are each responsible for the issue of Concessionary fares passes for elderly people and those with a disability residing within their area.

The six district authorities of Worcestershire are each responsible for the reimbursement of operators for journeys commencing within their area.

The Worcestershire Concessionary Travel Partnership co-ordinates the scheme for all six districts, administered by JMP Consulting. This is the first point of contact for operators regarding reimbursement claims.

All claims for reimbursement should be made to JMP Consulting who will advise each partner authority of payments required. Operators will receive separate reimbursement payments from each authority into which they operate. JMP do not hold the budget for payment of accounts, and have no responsibility for actual payments, but can be approached at any time to investigate the status of any payments within the process.

In order to ensure that reimbursement claims are processed efficiently it is important that operators submit clearly defined information identifying separately the number of journeys made by pass holders boarding in each local authority area irrespective of the issuing authority. Operators are advised that from April 2008 anyone in possession of a valid pass issued by any one of 291 Travel Concession Authorities in England is eligible for FREE Travel after 0930 on Monday to Friday and at any time at Weekends and Bank Holidays anywhere in England.

Whilst individual local travel concession authorities are responsible for all travel undertaken under the terms of the statutory free travel scheme as described above, they can only accept responsibility for journeys undertaken by anyone holding a relevant local pass under the terms of the enhanced scheme. i.e. pass holders from outside Worcestershire are not entitled to Free travel prior to 0930 on Monday to Friday.

Appendix 2a: The Generation Factor explained

FREE PASS Scheme - 75 % GENERATION FACTOR

_______________________________________________________

If 100 eligible passengers were carried before scheme, and each paid a full fare of £1 to the operator.

100 @ £1 = £ 100.00

Therefore £100 was received by the operator direct from passengers

Assuming 75 % more journeys are being made by eligible passengers after scheme, due to the advantages of concessionary travel, 175 passengers are now being carried. However, they pay no fare direct to the operator.

175 @ £0.00p = £ 00.00

Therefore the operator receives nothing direct from passengers

The Partnership agree to pay the revenue which the operator has lost.

i.e. £100.00

A calculation needs to be made to convert an on-bus passenger figure to a claim figure.

The returns of the operator would suggest that he should have received £175.00 because he carried 175 passengers on journeys with a normal full fare equivalent of £1.

But, for the operator to only receive £100 this figure has to be multiplied by 100/175 (i.e. by 0.5714)

Therefore the calculation is:

Full Fare Equivalent x 0.5714 = Claim

i.e. £175.00 x 0.5714 = £ 100.00

Therefore an operator now carrying 175 passengers on journeys where the full fare equivalent fare is £1 would actually receive £100, on the basis that only 100 passengers would have been carried if the scheme did not exist. Therefore the operator is no better off and no worse off due to their participation in the scheme.

There is a common misconception that the application of the reimbursement factor of 0.5714 has made the operator worse off - because for every 100 passengers he is only receiving £57.14 and not £100. However, the increase in the number of passengers must not be overlooked, and the total income has to be considered rather than the rate per passenger because for every 100 passengers who used to travel there are now 175.

Appendix 2b: The Generation Factor explained

FREE PASS Scheme - 55 % GENERATION FACTOR

_______________________________________________________

If 100 eligible passengers were carried before scheme, and each paid a full fare of £1 to the operator.

100 @ £1 = £ 100.00

Therefore £100 was received by the operator direct from passengers

Assuming 55 % more journeys are being made by eligible passengers after scheme, due to the advantages of concessionary travel, 155 passengers are now being carried. However, they pay no fare direct to the operator.

155 @ £0.00p = £ 00.00

Therefore the operator receives nothing direct from passengers

The Partnership agree to pay the revenue which the operator has lost.

i.e. £100.00

A calculation needs to be made to convert an on-bus passenger figure to a claim figure.

The returns of the operator would suggest that he should have received £155.00 because he carried 155 passengers on journeys with a normal full fare equivalent of £1.

But, for the operator to only receive £100 this figure has to be multiplied by 100/155 (i.e. by 0.6452)

Therefore the calculation is:

Full Fare Equivalent x 0.6452 = Claim

i.e. £155.00 x 0.6452 = £ 100.00

Therefore an operator now carrying 155 passengers on journeys where the full fare equivalent fare is £1 would actually receive £100, on the basis that only 100 passengers would have been carried if the scheme did not exist. Therefore the operator is no better off and no worse off due to their participation in the scheme.

There is a common misconception that the application of the reimbursement factor of 0.6452 has made the operator worse off - because for every 100 passengers he is only receiving £64.52 and not £100. However, the increase in the number of passengers must not be overlooked, and the total income has to be considered rather than the rate per passenger because for every 100 passengers who used to travel there are now 155.

Appendix 2c: The Generation Factor explained

FREE PASS Scheme - 35 % GENERATION FACTOR

_______________________________________________________

If 100 eligible passengers were carried before scheme, and each paid a full fare of £1 to the operator.

100 @ £1 = £ 100.00

Therefore £100 was received by the operator direct from passengers

Assuming 35 % more journeys are being made by eligible passengers after scheme, due to the advantages of concessionary travel, 135 passengers are now being carried. However, they pay no fare direct to the operator.

135 @ £0.00p = £ 00.00

Therefore the operator receives nothing direct from passengers

The Partnership agree to pay the revenue which the operator has lost.

i.e. £100.00

A calculation needs to be made to convert an on-bus passenger figure to a claim figure.

The returns of the operator would suggest that he should have received £135.00 because he carried 135 passengers on journeys with a normal full fare equivalent of £1.

But, for the operator to only receive £100 this figure has to be multiplied by 100/135 (i.e. by 0.7407)

Therefore the calculation is:

Full Fare Equivalent x 0.7407 = Claim

i.e. £135.00 x 0.7407 = £ 100.00

Therefore an operator now carrying 135 passengers on journeys where the full fare equivalent fare is £1 would actually receive £100, on the basis that only 100 passengers would have been carried if the scheme did not exist. Therefore the operator is no better off and no worse off due to their participation in the scheme.

There is a common misconception that the application of the reimbursement factor of 0.7407 has made the operator worse off - because for every 100 passengers he is only receiving £74.07 and not £100. However, the increase in the number of passengers must not be overlooked, and the total income has to be considered rather than the rate per passenger because for every 100 passengers who used to travel there are now 135.

Appendix 2d: The Additional Costs Payment explained

_______________________________________________________

The generation factor discounts reimbursement payments to take into consideration that in the absence of the scheme some journeys would not have been made. The additional cost payment included in the Worcestershire Scheme makes an allowance for each of these additional passengers towards the additional cost that the operator may incur as a result of these generated passengers travelling.

The additional cost payment uses the same generation factor used to discount reimbursement payments to determine the number of additional passengers for whom a payment should be made.

i.e. where 1000 passengers are carried and the appropriate average fare for reimbursement purposes has been determined as £1, the application of a 75% generation factor resulted in a payment of £571.40 being calculated.

The principle of the 75% generation factor is that of the 1000 passengers now travelling only 571.4 would have travelled in the absence of the scheme (For every passenger previously travelling 1.75 now travel, i.e. 571.4 x 1.75 = 1000). Therefore 428.6 have been generated (1000 - 571.4). Under the terms of the scheme a payment of 9p will be made for each of these additional passengers in addition to the reimbursement determined above. In this case that would be 428.6 x £0.09 = £38.57.

The full reimbursement calculation is therefore:

(1000 x £1.00 x 0.5714) + (£0.09 x 1000 x (1 - 0.5714) )

£571.40 + £38.57 = £609.97

With an average fare of £1 this provides the same reimbursement that the application of a generation factor of 63.93% would have provided. As the average fare increases the effect of the fixed sum will vary. The summary table below given examples of the effect of a 9p additional cost payment at three different average fare levels on the three average fares used in the Worcestershire Scheme.

SUMMARY TABLE

Reimbursement for £100 revenue foregone would be:

Appendix 3 -

Definition of the three frequency tiers used to determine generation rates in Worcestershire from April 2008.

For the purpose of determining the generation rate applicable to a particular service or group of services, the general frequency of operation will be considered when the scheme is initially implemented or when a timetable change occurs.

Tier 1 - applies where journeys operate more frequently than hourly in each direction.,

Tier 2 - applies where in each direction there are at least four journeys per day, but where the service is no more frequently than hourly.

Tier 3 - applies where there are no more than four journeys per day in each direction.

Notes: 1) Where a number of services combine for the majority of a particular route the frequency of the combined services will be considered for the purpose of definition as a frequent or infrequent service.

2) Any service operating only as an evening service will be considered in association with any similar daytime services in the determination of frequency.

3) The Partnership will discuss with operators as appropriate the individual merits of any service for designation within the above three tier system.

Appendix 4 - Additional Costs - extract from DfT Guidance.

3.6 Estimating additional costs - “A”

3.6.1 There is no doubt that the introduction of a concessionary fares scheme is likely to result in additional costs for operators. These costs fall into three categories.

o Scheme implementation costs;

o Marginal operating costs;

o Capital costs.

3.6.2 Wherever a TCA proposes to pay additional cost to operators on an average cost per generated passenger basis, the TCA is advised to request local evidence from operators to assist in the estimation of a fair additional cost rate, and to ensure that these costs are truly marginal. In line with the Regulations relating to the 1985 Act, it is acceptable for TCAs to pay these costs on the basis of evidenced claims. The decision to pay these costs on the basis of a rate per generated passenger, may be a mutually acceptable means of dealing with the additional cost issue, but this should not detract from the assembly of local evidence.

3.6.3 Where a route straddles administrative boundaries it may be necessary for the burden of additional costs to be apportioned between TCAs. In such cases TCAs should work together with operators to agree a reasonable approach for such apportionment.

Scheme implementation and administration costs

3.6.4 Costs associated with the production and distribution of passes will be borne by the TCA. There are, however, likely to be other administration and implementation costs such as publicity, ticketing software changes and management time which will be incurred by the operator, for which reimbursement should be made.

Marginal operating costs

3.6.5 In general the additional demand for bus travel generated by a concessionary fares scheme will be accommodated via increased frequencies rather than through the purchase of higher capacity vehicles on a timetabled service. It is for operators to provide evidence on the amount of additional resource required to cater for any additional generated passengers. In the absence of evidence the default assumption for additional costs per generated passenger is that they are zero or very low, typically in the range of £0.01 - £0.15 per generated trip, including an element of capital costs. However there may be cases where amounts outside this range can be

justified by supporting evidence.

3.6.6 Where there are low load factors outside the am-peak period¹⁴ additional marginal costs in most cases will be limited to small amounts of additional time, ticketing costs, additional cleaning costs and allowances for claims from the additional passengers (see below). In other cases, additional marginal costs could comprise the costs of acquiring and running a larger bus,

or running extra journeys, which could be substantial. In a few cases, operators might need to invest in new infrastructure (parking, maintenance facilities, staff accommodation) for the additional buses that are required to meet the demand generated by free travel.

3.6.7 To assist in their budgeting TCAs should seek to engage operators immediately to gather evidence on existing timetables and to identify areas where capacity might become an issue as a result of a new concession.

3.6.8 Even where generated trips are absorbed within existing capacity, there could be some additional (variable) costs for the operator. Some costs could rise with occupancy, potentially fuel or insurance costs for example, but operators will need to demonstrate the existence (and cause) of such additional costs. In any case these estimates would be expected to be at the lower end of the £0.01 - £0.15 per generated trip estimate.

Marginal capital costs

3.6.9 Where an operator needs to provide additional capacity on a route, to accommodate generated trips, the cost might be expected to be somewhat higher up the range. Strong evidence of higher costs, such as high load factors outside the am-peak, should be sought by TCAs from operators. This could be demonstrated ex-post by an increase in off-peak vehicle kilometres, or off-peak vehicle seat kilometres (larger buses needing to be used). Where additional services are provided the revenue benefits from additional non-concessionary passengers would also need to be taken into account in determining the eligible net additional costs. TCAs should bear in mind that operators are entitled to make an industry-norm rate of return on additional capital investment.

3.6.10 If operators wish to claim for additional costs based on increased capacity it is important that there is no inclusion of capital costs within the marginal cost estimate; this would be double counting. The £0.15 upper marginal cost per generated trip figure, is based upon cost data for London which includes some allowance for operators to maintain load factors in the pm peak.

3.6.11 Whilst it is up to the TCA concerned to consider whether such costs are best paid as a capital or revenue sum, it should consider whether there are adequate safeguards in place to ensure that the value obtained from a capital grant can be secured throughout the life of the asset to which the grant applies. It is quite acceptable for additional capital costs to be paid over the

life of the asset in accordance with the accounting policy used by the operator concerned, based on a continuing local use of, and need for, that asset.

3.6.12 In summary the key principle in estimating additional costs is that they should be supported by operator evidence. TCAs will need to satisfy themselves that they are avoiding double counting these costs, and in particular that they are distinguishing properly between marginal and one-off capital costs.

3.6.13 Although some TCAs effectively `roll up' additional costs into an overall reimbursement rate calculation, for transparency this practice is best avoided so that the calculations underpinning additional cost reimbursement are easily understandable.

14 Average service loads are around 9 passengers per bus outside London (including peak hours services). The equivalent figure for London is 14 passengers per bus.

Appendix 5 - Average Fares - extract from DfT Guidance.

3.5 Calculating the `average' fare - “P”

3.5.1 Operators need to be reimbursed for the average fare foregone: however, this is not usually as simple as looking at the quoted full fare. For example, return fares often cost less than two single trips. The existence of travelcards and day passes typically further reduces average fare levels (although not necessarily in the off-peak). Another complication is that concessionary travellers might travel different distances than non concessionary travellers (especially with the introduction of the national concession) and ticket prices vary with distance though often not uniformly. Finally it is possible that in the absence of concessionary schemes the operation of the market might in any case lead to discounted fares for some of those now benefiting from the concession.

3.5.2 Thus it is necessary to analyse ticket revenue in conjunction with data on trips to estimate the appropriate fare for reimbursement calculations. In general we would expect the fare estimate from these situations to be somewhat lower than advertised full fare single rates.

3.5.3 On some services it is possible that concessionary pass-holders will represent the majority of passengers after the introduction of the national concession. In these circumstances it is debatable what the average fare ought to be: operators would face limited incentives to keep ticket prices down. Particular caution should be exercised to determine appropriate average commercial fare levels (and reimbursement) where services are characterised by this mixture of passengers.

3.5.4 One technique that TCAs may want to consider in estimating the appropriate average fare to apply for reimbursement purposes is to develop a basket of fares based on available data. By way of example, Table 3 shows the number of trips undertaken by fare-paying passengers, with a hypothetical operator, with a simple fare structure:

Table 3: Estimating weighted average fares - an example

3.5.5 Clearly here the average fare per trip is not simply the price of a single ticket: there are two types of single tickets available, one for short distance trips and one for longer trips. The existence of return tickets and travelcards further complicates the situation (bringing it closer to reality). The average fare per trip is calculated by dividing Total Revenue by Total Trips. This is 7,240/7,400 giving an average fare of £0.97 per trip, slightly less than the short-distance single fare.

3.5.6 If, however, concessionary pass-holders have a different pattern of trips the appropriate average fare for reimbursement purposes would be different again. Thus accurate data is desirable to understand the split of concessionary trips. The more detailed example given in Table 4 below recognises that TCAs will have to make explicit assumptions about how many trips to apportion to each ticket type. This is especially true where day, weekly or monthly tickets might have been bought in the absence of a concession.

Table 4: Estimating weighted average fare - an example including including travelcard type tickets

3.5.7 The default position is to assume that new pass-holders behave exactly the same as old pass-holders in terms of average trip lengths. Data from the NTS in Table 5 below shows that in 2006 the average local bus trip length (outside London) ranged from 3.1 miles to 7.7 miles¹³.

Table 5: Average bus trip length by over 60 pass holders (miles)

3.5.8 In the absence of detailed local information these figures could be used with local ticket price details, in conjunction with operators, to determine the average fare. That said, the increasing levels of car-ownership associated with the over-60s and the fact that many of those eligible for passes had previously not taken them up means that this group could well behave differently. Data collection is therefore vitally important.

3.5.9 In practice the best estimate of average fare is likely to be based on a combination of: [i] historical data (where available) about the types of ticket those eligible for concessions previously bought; [ii] surveys of current concessionary travellers; and [iii] operator ETM data about the type of tickets being purchased now by non-concessionary travellers. There would need to be some quality assurance of these last two sources however. Asking concessionaires what ticket they would have bought may not always give accurate data, and the travel patterns of non-concessionaires as indicated by ETM data may not reflect the likely patterns of concessionaires.

3.5.10 Fares changes do not always occur at the beginning of a financial year: they can and do occur at other times, sometimes more than once in a given year. TCAs should engage with operators to understand when fares changes are likely to occur in the year in question so that average fares can be calculated correctly, and should consider using a weighted average fare where this is likely to occur.

3.5.11 The recommended approach to calculating average fares is to agree a methodology with operators based on a weighted basket of fares (as in table 4 above) as part of initial scheme discussions and for budgeting purposes. The actual average fare applied to calculate reimbursement should reflect the changes in pricing expected during the year in question, or there should be some form of year-end correction.

13 This data is provided for indicative purposes only as some of the sample sizes used (notably for rural and met

areas) were small.

3.5.12 The RAT incorporates this basket of fares approach as an option, and this may prove useful in assisting the negotiation of an appropriate average fare between TCAs and operators. TCAs and operators are encouraged to share the best available data.

Annual season tickets

3.5.13 In some circumstances it may be justifiable to treat annual season tickets as different from other fare types for the purposes of average fare calculation. Where an operator can give credible evidence of reduced revenue from sales of a specific type of season ticket to concessionaires as a result of the new concession, TCAs could look to provide operators for full

reimbursement for this revenue.

3.5.14 Effectively this would mean removing this type of ticket from any average fare calculation, and removing an associated number of trips from the number of trips that would have taken place in the absence of a concession (`G' above). A similar approach is theoretically possible with other pass-type tickets but is not recommended.

Appendix 6 - Samples of the English National Pass.

From April 2008 all eligible residents of the 291 English Travel Concession Authorities will be issued with a pass to the standard design shown below. The name and/or logo of the issuing authority indicated in the top right hand sector on the front of the pass will vary. All other details should be consistent.

Example 1: Pass issued to someone meeting age criteria (BLUE BAND)

SAMPLE

Example 2: Pass issued to someone meeting disabled criteria (GOLD BAND)

SAMPLE

Example 3: Pass issued to someone meeting disabled criteria with whom a companions should be allowed to travel (GOLD BAND PLUS `C' in BLUE CIRCLE).

SAMPLE

National FREE Concessionary Travel

Worcestershire Travel Partnership - Q063005

Operator Notes NATIONAL FREE SCHEME Issue 3a - Feb 08

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