Report to/Rapport au:

Report to/Rapport au:

Transit Committee

Comité du transport en commun

and Council/et au Conseil

13 November 2007/le 13 novembre 2007

Submitted by/Soumis par: Nancy Schepers/Deputy City Manager/Directrice municipale adjointe

Planning, Transit and the Environment/Urbanisme, Transport en commun et Environnement

Contact/Personne-ressource: A. Mercier, Director/Directeur, Transit Services/Services du transport en commun

613-842-3636 ext. 2271, alain.mercier@ottawa.ca

City-wide

Ref N°: ACS2007-PTE-TRA-0010

SUBJECT:	SMARTCARD FARE SYSTEM

OBJET :	SYSTÈME DE PAIEMENT PAR CARTES À PUCE

REPORT RECOMMENDATIONS

1. That the Transit Committee recommend that Council approve Transit Services joining the Greater Toronto Area Fare System (GTAFS) project with a view to full implementation of the Presto smartcard system in Ottawa by 2010 subject to the following conditions having been met by April 1, 2008:

· Provincial Cabinet approval of the proposal presented to OC Transpo by Ministry of Transportation staff as described in this report;

· Successful negotiation of central system fees to enable OC Transpo to reduce overall commission to approximately one percent;

· The STO Commission reaching a funding agreement to proceed with a technology upgrade; and

· Signing of the GTAFS Procurement Governance Agreement, the GTAFS Operating Agreement and the GTA Funding Agreement.

2. That the Transit Committee recommend to Council the delegation of authority to the Director of Transit Services to act on behalf of the City to approve and execute the GTAFS partnership agreements.

3. That the Transit Committee recommend Council approval of these recommendations be contingent on approval in the 2008 Capital Budget of an increase in project authority from $15 million to $21.200 million, recognizing that the actual cost to the City will be $15 million (or less) as a result of Provincial funding and the potential for Federal funding, as a result of the ability to integrate STO operations.

RECOMMANDATIONS DU RAPPORT

1. Que le Comité du transport en commun recommande au Conseil d’approuver l’adhésion des Services du transport en commun au projet de système de tarification de la région du Grand Toronto (STRGT) en vue de la mise en œuvre intégrale à Ottawa du système de cartes à puce Presto d’ici 2010, sous réserve des conditions suivantes, qui doivent être respectées au plus tard le 1^er avril 2008 :

· l’approbation par le Cabinet provincial de la proposition soumise à OC Transpo par le personnel du ministère des Transports de l’Ontario, comme le précise le présent rapport,

· la conclusion d’une entente sur les frais associés à l’adoption du système afin de permettre à OC Transpo de réduire la commission touchée par l’ensemble des détaillants pour qu’elle corresponde à environ 1 p. 100 des ventes de billets et de laissez-passer,

· la réalisation d’une entente de financement avec la Commission de la STO afin de procéder à une mise à jour technologique,

· la signature des ententes sur les modalités d’acquisition, d’exploitation et de financement pour les besoins du STRGT;

2. Que le Comité du transport en commun recommande au Conseil d’habiliter le directeur de Services de transport en commun à approuver et à conclure, au nom de la Ville, les ententes de partenariat relatives au STRGT;

3. Que le Comité du transport en commun recommande que l’approbation de ces recommandations par le Conseil soit conditionnelle à l’adoption dans le budget des immobilisations de 2008 d’une hausse du financement alloué au projet, qui passerait de 15 à 21,200 millions de dollars, du fait que les coûts réels assumés par la Ville s’élèveront à 14,268 millions compte tenu des fonds provinciaux, ou à moins de 15 millions (ou moins) si la Ville obtient un financement provincial ou possiblement des crédits fédéraux pour l’intégration au système de cartes à puce de la Société de transport de l’Outaouais (STO).

EXECUTIVE SUMMARY

Assumptions and Analysis

In September 2006, a report was presented to Transit Committee outlining the concept and functional requirements for a smartcard system for OC Transpo. The report was accepted and, as part of the 2007 budget, $15 million in capital authority was approved for a smartcard fare payment system. In November 2006, staff were approached by Ministry of Transportation of Ontario (MTO) staff to discuss the possibility of Ottawa joining the Greater Toronto Area Fare System (GTAFS) project, suggesting that it would bring significant cost savings for Ottawa, reduce implementation risk, and make good use of resources already committed to the GTAFS project by the MTO. Negotiations have been ongoing since that time to ensure that the Ottawa user requirements would be properly covered and that a satisfactory financial arrangement could be agreed.

The Ministry proposal successfully addresses all of Transit Services’ unique requirements. These include:

· integration with the STO smartcard system to allow seamless fare payment for customers travelling between Ottawa and Gatineau,

· incorporating the successful employer deduction based Ecopass program and building upon it by offering all customers the opportunity to take advantage of the convenience and fare savings,

· integration with Para Transpo so that all customers have a smartcard account and the smartcard fare payment options are available to them

· integration of the smartcard system with the current SmartBus system.

Should the Ministry offer be approved, Transit Services would participate fully in its ongoing governance and would be eligible to sit on the various committees and fully participate as a member in the decision making at all levels including Executive Committee, Steering Committee and various sub-committees as relevant.

Implementation of the system would be over a 30-month span. If the project started in January 2008, the full system would be complete in the summer of 2010.

Financial Implications

The GTAFS approach recommended in this report would cost the City $14.268 million, and along with a subsidy of $6.978 million from the Province of Ontario the total cost of the system would be $21.246 million. This includes all GTAFS costs, the City’s internal project management and IT costs as well as contingencies and taxes. $15 million in funds are available from the 2007 capital budget budgetary authority (Automated Fare Collection, project # 9003000) to be funded by $14.975 million from Federal Gas Tax and $.025 million from Provincial Gas Tax.

In addition, a joint submission by STO and OC Transpo will be made to the Federal government to seek subsidy for the software required to support interprovincial interoperability. This represents $2.65 million of OC Transpo costs, of which 33 per cent will be funded by the Province of Ontario.

Public Consultation/Input

The smartcard fare system concept has been discussed at several Pedestrian and Transit Advisory Committee meetings and their response has been very supportive.

At the Transit Committee meeting of September 6, 2006, there was concern that the system must be developed in such a way as to allow other city functions to build on it later. This is a feature of the GTAFS.

Another concern raised at that meeting was about the needs of people living in poverty. Discussions have taken place with Employment and Financial Services staff to ensure the system supports the Ontario Works program, and Employment and Financial Services staff will work with the implementation team to ensure the best possible access to electronic fares for this community.

RÉSUMÉ

Hypothèses et analyse

En septembre 2006, le Comité du transport en commun a reçu un rapport qui décrivait le concept et les exigences fonctionnelles d’un système de paiement par cartes à puce proposé pour OC Transpo. Le rapport a été approuvé et des crédits d’immobilisations de 15 millions de dollars ont été inscrits au budget de 2007 pour financer un tel système. En novembre 2006, des représentants du ministère des Transports de l’Ontario (MTO) ont approché le personnel municipal pour débattre de la possibilité qu’Ottawa adhère au projet de système de tarification de la région du Grand Toronto (STRGT), soutenant qu’une telle initiative permettrait à la Ville de réaliser des économies importantes, réduirait les risques potentiels liés à la mise en place d’un tel système et optimaliserait les ressources que le MTO a déjà affectées au projet de STRGT. Depuis, des négociations sont en cours afin de veiller à ce que l’on tienne compte des besoins des usagers d’Ottawa et à ce qu’un accord financier satisfaisant soit conclu à cet égard.

La proposition du Ministère répond à toutes les exigences particulières aux Services du transport en commun, qui comprennent :

l’intégration du système de cartes à puce de la STO pour permettre la perception de droits de transport uniformes peu importe l’origine des usagers, Ottawa ou Gatineau;
l’application du populaire programme Ecopass (pour la retenue à la source) et sont expansion pour permettre à tous les clients de bénéficier de l’aspect pratique du programme et des économies qui en découlent;
l’harmonisation des services d’OC Transpo et de Para Transpo pour que tous les clients possèdent un compte de carte à puce et que les options de paiement par cartes à puce leur soient offertes;
l’intégration du système de cartes à puce au système SmartBus.

Si la proposition du Ministère est approuvée, les Services de transport en commun s’engageraient à participer activement à sa gestion continue et seraient autorisés à siéger aux divers comités chargés du projet et à prendre pleinement part au processus décisionnel à tous les niveaux (comité exécutif, comité directeur et sous-comités pertinents).

Le système serait mis en place sur une période de 30 mois. Si les travaux sont entamés en janvier 2008, l’implantation devrait être achevée à l’été 2010.

Répercussions financières

Selon la stratégie recommandée dans le présent rapport, il en coûterait 14,268 millions de dollars à la Ville pour mettre en oeuvre le STRGT, et le coût total du système s’élèverait à 21,246 millions, si l’on ajoute les 6,978 millions de la Province de l’Ontario. Ce montant comprend tous les frais associés au STRGT, les dépenses internes engagées pour le projet, les coûts liés aux services de TI ainsi que les dépenses imprévues et les taxes. Dans le cadre du budget des immobilisations de 2007, une autorisation budgétaire de 15 millions de dollars a été approuvée pour ce système (perception automatisée des tarifs, projet n^o 9003000), laquelle devait être financée par des recettes de 14,975 millions de dollars tirées de la taxe fédérale sur l’essence et de 250 000 $ provenant de la taxe provinciale sur l’essence. Aucune autre subvention fédérale ou provinciale n’était alors prévue.

En outre, la STO et OC Transpo uniront leurs efforts en vue d’obtenir une aide financière du gouvernement fédéral qui servira à l’achat du logiciel de soutien à l’exploitation interprovinciale du système. Cette initiative représente des pressions de 2,65 millions de dollars pour OC Transpo, dont 33 % seront financés par la province de l’Ontario.

Consultation publique/commentaires

Le concept du système de paiement par cartes à puce a été débattu à plusieurs réunions du Comité consultatif sur les piétons et le transport en commun et a été très bien accueilli par les participants.

À la réunion du 6 septembre 2006 du Comité du transport en commun, certains se sont dits préoccupés par le fait que le système doit pouvoir intégrer d’autres fonctions municipales dans l’avenir, ce qui constitue l’une des caractéristiques du STRGT.

D’autres inquiétudes portaient sur les besoins des personnes qui vivent sous le seuil de la pauvreté. Des discussions avec le personnel de Services d’emploi et d’aide financière ont eu lieu pour veiller à ce que le système soit accessible aux prestataires du programme Ontario au travail. En outre, Services d’emploi et d’aide financière travaillera de concert avec l’équipe chargée de la mise en oeuvre du STRGT afin que ces personnes aient le meilleur accès possible au système.

BACKGROUND

Transit Services has followed the progress of electronic fare payment systems in the transit industry, and particularly contactless smartcard systems, for over 10 years. In 1997, IBI Group was retained to carry out a fare system study for OC Transpo with the emphasis on smartcards. In April 1997, the Transit Commission approved the introduction of an electronic transfer-issuing machine as a first step towards an electronic fare system but recognized that, at that time, the technology had not developed to the point at which a positive business case existed for a full smartcard fare system. Electronic transfer issuing machines were successfully installed on the transit fleet following that decision.

In 2003, a study was carried out by KPMG to determine the role of smartcards within the City and, specifically, whether a smartcard fare payment system was now suitable for implementation by OC Transpo. The study included an examination of the business case, given the current experience of smartcard technology in the transit industry. This work was updated in 2005 to reflect the requirements for fare collection of the proposed Light Rail Transit (LRT) system.

The major recommendations of the KPMG⁽[1]⁾ report were:

· that it would be cost-effective to implement a Smartcard Fare Payment system for OC Transpo; and,

· the City should adopt the development of a multi-application smartcard as a long-term goal, with transit as the first step.

In late 2005, staff moved forward with the next step in the process to develop a system concept and functional requirements for the procurement of a Smartcard Fare System, assess the internal impacts of implementing the system and prepare a detailed business case for the system. This work was carried out by an experienced team from IBI consultants, who were selected as a result of a competitive procurement process.

On September 6, 2006, a report was presented to the Transit Committee outlining the functional requirements for a smartcard fare system for OC Transpo. The report included two recommendations, both of which were approved by Council on September 27, 2006. The first was to approve the smartcard system concept and functional requirements and the second was, in essence, to allow an RFP to be issued immediately with the award of a contract contingent on:

· Council approval of the $15 million capital that was to be included in the 2007 budget; and,

· a final review of the preferred proponent’s proposal by Committee and Council, prior to contact award.

An issue raised during Committee discussion of the system was the desire to ensure that the introduction of a transit smartcard would not preclude an eventual expansion to a City Card i.e. a smartcard that could be used for other City services. This issue was the subject of detailed discussions with Libraries, Traffic and Parking Operations, and Parks and Recreation to ensure that no immediate opportunities are being missed and that options for the future are maintained. Following these discussions, an informal presentation was made for City staff and Councillors.

Supply Management Division, Transit staff and IBI Consultants commenced work thereafter to plan an OC Transpo smartcard fare system procurement process, one that would have not been dissimilar to the Light Rail procurement process, with an initial qualification stage followed by Draft and then a formal RFP. This work continued over Q4 of 2006.

In early 2007, the City’s Auditor General presented a report on the OC Transpo fare system. The report underlined concerns about vulnerability of the current fare system to fraud and strongly recommended the implementation of a smartcard fare system as soon as possible.

As part of the 2007 budget, $15 million in capital authority was approved for a smartcard fare payment system.

In November 2006, staff were approached by the Ministry of Transportation of Ontario (MTO) staff to discuss the possibility of Ottawa joining the GTAFS project, suggesting that it would reduce implementation risk and make good use of resources already committed to the GTAFS project by the MTO.

Negotiations have been ongoing since that time to ensure that the Ottawa user requirements would be properly covered, including integration with STO, and that a satisfactory financial arrangement could be agreed. The results are described in this report.

DISCUSSION

GTAFS Project Overview

The transit agencies in the Greater Toronto Area, under the guidance of the Ministry of Transportation of Ontario, have been working since 2002 towards developing and implementing a single, integrated smartcard system that would allow seamless fare payment travel for transit users in the Toronto region. One smartcard would be used to pay fares on the services of up to nine transit providers. The goal of the GTA of seamless travel across multiple service providers is similar to that of the OC Transpo system where integration with the STO smartcard fare payment system is very important to customers.

For the GTA model, the MTO would manage the overall system and be responsible for the central back-office system. Members of the consortium would pay for the direct costs of equipping their bus fleet for smartcards and pay their portion of the overall system development cost. The central system would be developed by the MTO and provided free to members.

In October 2006, the MTO awarded a contract for the GTA smartcard fare payment system to Accenture Inc. as a result of an open and competitive procurement process.

GTAFS Proposal

The MTO had been in contact with Transit Services staff over the past few years to determine interest in joining the GTAFS consortium. Following the award of the contract to Accenture Inc., the MTO formally approached OC Transpo in November 2006 about participating in the GTA system. As there was now a contract in place with ‘go live’ implementation dates of late 2008, it seemed prudent to enter into discussions to determine what MTO could offer Ottawa.

The first step in this process was to carry out a ‘gap analysis’ to identify differences in requirements between the OC Transpo and GTA systems. Once these were known, the MTO could then make a financial proposal to OC Transpo. The major gaps identified were Ottawa requirements to integrate with the STO smartcard system, the integration with Para Transpo to include all customers under the smartcard umbrella, integration with the on-bus GPS mobile data unit that would be used as the operator interface device for smartcards as well as GPS, and the handling of Ecopass customers by the system. The final proposal from MTO was to include the cost to overcome these gaps so that all OC Transpo requirements were met.

The City of Ottawa has now received a firm proposal from the Ministry to implement a smartcard system for OC Transpo. The proposal, which would bring OC Transpo into the GTAFS as a full member, includes user requirements, capital and operating costs, and time lines. Information is also included on the subsidy that would be provided by the Provincial government and the conditions that would apply.

The information now available has been used to revise the business case for the OC Transpo smartcard and, based on this, the recommendation from staff is to proceed with the smartcard system for OC Transpo under the GTAFS umbrella. This recommendation to proceed is contingent on funding from the Province of Ontario being confirmed by Cabinet, the STO Commission reaching a funding agreement to proceed with the upgrade of their readers, and a satisfactory agreement with the GTAFS on ongoing fees and commissions.

OC Transpo User Requirements

The system would make use of contactless smartcards and readers. Contactless cards are widely used in the transit industry because they allow rapid boarding and the maintenance requirements of on-bus units, with no moving parts, are much lower than for magnetic strip cards. Customers would be able to configure their cards as any one of a number of possible period passes (Ecopass, annual, monthly, semester for students, etc.) that would allow unlimited use during the period paid for. In addition, customers would be able to ‘load’ the card with money and have the fare for a trip deducted from the card on boarding a bus or on the O-Train platforms. The current O-Train ticket vending machine would be priced at the regular cash fare.

Customers who do not have a smartcard would be able to pay their fare with cash on all buses.

With the introduction of the system, there would be a card reader on each bus and on O-Train platforms. Smartcards would be issued and recharged at OC Transpo Sales and Information offices and at approximately 100 vendors. It would also be possible to replenish cards through the Internet, by telephone or by pre-arranged direct debit. The card readers would be able to read STO smartcards, and the STO readers would be able to read OC Transpo cards.

A back-office system would manage the information to and from the on-bus readers and the revaluing machines. It would keep track of fares collected and ensure that only valid cards can be used.

The application of a Proof of Payment (POP) system would remain in place and be integrated with the new Smartcard Fare Payment system. OC Transpo currently operates a POP system on 225 articulated buses and on the existing O-Train. Customers who have a valid pass can board articulated buses by the rear doors and do not have to pass by the bus operator and customers can board the O-Train through any door. The enforcement of POP would be done with portable smartcard readers.

STO Integration

Today, OC Transpo and STO customers enjoy seamless free transfer privileges between systems. This is very important to both OC Transpo and STO customers, as they often have to rely on the other service provider to complete their transit trip. As well, it gives customers more choice when both systems serve their destination.

Since 1998, STO have operated a successful smartcard system that has resulted in the elimination of all paper passes. The stored value feature of the system has not yet been implemented. STO customers using the smartcard to transfer to OC Transpo must have a paper receipt indicating the smartcard is a valid pass. Customers boarding either system who pay cash and intend to transfer onto the other system must receive a paper transfer and show this to the operator on the transfer bus. Customers paying with tickets use tickets of that service provider, and use a paper transfer to complete their trip on the other system.

With the implementation of the GTAFS by OC Transpo, the current level of integration between the two systems would be maintained. Discussions have taken place between OC Transpo, STO and the GTAFS to determine the required changes to support continued seamless transfers and agreement has been reached on how this will be done. The OC Transpo system would read STO cards and the STO readers would be upgraded to read OC Transpo cards. Smartcards configured as passes would provide automatic transfer privileges. OC Transpo customers paying with stored value (electronic tickets) on OC Transpo would have their card updated with an ‘electronic transfer’ that would be read by STO readers. The reverse applies for STO customers paying on STO buses and who then transfer to OC Transpo. Similar to present day operations where OC Transpo and STO do not accept one another’s paper tickets in their farebox, OC Transpo customers would not be able pay their fare using stored value on STO. The same applies to STO customers, who would not be able to pay their fare with stored value on OC Transpo buses.

Ecopass

OC Transpo operates a highly successful employer payroll deduction program known as Ecopass. Major employers in the City can join the program and offer their employees the convenience of automatic deductions for their transit pass. Today there are over 20,000 subscribers to the program. The new smartcard system must maintain this program. As well, this convenience must be offered to new customers who do not work for a participating Ecopass employer.

The GTAFS would integrate with the existing Ecopass program to carry this program forward. Current users would receive a smartcard that will be configured as an Ecopass and would be valid as long as payments are received. More importantly, the GTAFS would allow all other customers to enrol in a pre-authorized payment system whereby the price of a monthly pass will automatically be received from their bank account each month. It is expected the convenience of automatic payments would attract up to 30,000 current pass users to join the ‘personal’ Ecopass system.

The Ecopass interface would allow employers to electronically provide a list of employees who have paid for transit for the upcoming month and whose smartcards should be extended for another month of transit. This concept would be expanded to other groups. Initial discussions have taken place with Employment and Financial Services to provide smartcards to eligible Ontario Works and Community Pass recipients and then activate the cards based on information provided each month. This approach would replace the time consuming procedure of physically distributing paper passes each month. This same concept will be used with school boards when bulk purchases are made.

Integration with SmartBus System

The smartcard system would require information to be displayed to operators (e.g. valid fare or not) as well as allowing operators to enter instructions to the card reader (e.g. accept a second stored value payment from a card). In addition, the smartcard system would require a communication system to transfer all transaction data from the bus to the central system and to transfer blacklisted card numbers from the central system to all bus readers. The SmartBus system would be leveraged to provide these functions. Changes would be made to the SmartBus mobile data terminal to handle the display/input functions while an interface between the GTAFS and SmartBus would be developed to enable the smartcard system to tap into the existing SmartBus communication system.

Para Transpo

It is not practical to equip all vehicles that may be used to provide Para Transpo service, as this would require equipping all taxis. In addition, it would not be possible to establish secure communication links each day with the taxis. For these reasons, a different approach was needed to bring Para Transpo customers under the umbrella of smartcards.

Many Para Transpo customers use both Para Transpo and OC Transpo services and this crossover activity is strongly encouraged. It is important to offer the benefits and convenience of smartcards to Para Transpo customers as well as OC Transpo customers. This becomes a requirement with the eventual elimination of all paper passes and tickets once the smartcard system is fully implemented.

The GTAFS had not addressed this topic until OC Transpo raised it as a requirement. An innovative solution has been proposed to provide all Para Transpo customers with a smartcard account that will allow travel on Para Transpo and OC Transpo.

Governance

As a participant in the GTAFS, Ottawa would participate fully in its ongoing governance.

The GTAFS is directed by an Executive Committee composed of General Managers or similar representatives from each of the participating transit agencies and is chaired by MTO. Each member including the MTO has one vote irrespective of size. All key decisions are by total concurrence of the members participating in the decision-making. Each member can only act with the authority provided by the member’s council or commission.

Ongoing management of the GTAFS is directed by a Steering Committee composed of a representative from each transit agency and MTO. The role of the Steering Committee is to oversee the ongoing operation of the system and to make recommendations to the Executive Committee as required. The Steering Committee is chaired by the Project Director who is appointed by MTO.

MTO transferred the Accenture contract to GO Transit in March 2007, along with responsibility to manage Accenture, and ownership of the related Intellectual Property such as the Open Interface Standards. GO Transit now acts as agent for each transit agency in the procurement and operation of the GTAFS. As detailed in both the Procurement Governance Agreement and Operating Agreement, GO Transit would act as OC Transpo’s agent in OC Transpo’s procurement of its fare system under the GTAFS. The MTO continues to fully and strongly assist GO Transit in executing the contract by supplying key staff for the Project Office including the Project Director, and managing the project on a daily basis on behalf of GO Transit.

At some point in the future, the Accenture contract will be transferred from GO Transit to the newly created Greater Toronto Transportation Authority (GTTA) to manage on behalf of the participants. This transfer should not affect the governance of the fare system nor Ottawa’s participation in the project’s committee structure.

As a full participant in the GTAFS, Ottawa would be eligible to sit on the various committees and fully participate as a member in the decision making at all levels including Executive Committee, Steering Committee and various sub-committee as relevant.

Ottawa would be invited to sign the Procurement Governance Agreement in which Ottawa would be appointing GO Transit to act as its agent in the procurement of the Ottawa fare system and the Operating Agreement which governs the ongoing operation of the fare system. Signing these agreements would require the approval of existing participants, which the MTO would work towards obtaining. As well, Ottawa would be required to sign a Funding Agreement for the project.

The MTO would set up an Ottawa-specific team to work closely with OC Transpo staff in designing and implementing the Ottawa solution.

Interprovincial Interoperability (STO/OC Transpo Fares)

The approach to OC Transpo/STO integration has been agreed at a staff level and the STO Commission has approved this, subject to approval of the Ministry of Transportation of Quebec.

Integration is a key requirement of the system, and the STO Commission’s direction will need to be confirmed before the final agreement with GTAFS is signed.

The costs of integration for STO are estimated at approximately $1.5 million to upgrade their on‑bus readers. OC Transpo’s costs are estimated to be of the order of $2.65 million, of which one-third will be covered by the MTO. It is intended to request the Federal government to cover the $4.15 million, less funding received from Provincial sources, required to integrate the fare systems of the two National Capital Region transit systems.

Timetable

The final decision on whether OC Transpo will be joining the GTAFS project depends on successful negotiation of central system fees and commissions to the range of one percent. The deadline for a decision is April 1, 2008. The Ministry would like to start the OC Transpo project in January on the understanding that if negotiation of the central system fees and commissions fails, the Province of Ontario will cover the costs of work to that date. The Ministry would like the project to start immediately so that the special needs of OC Transpo are considered in the development of the base system design that is now well underway for the GTAFS. The Ministry recognizes OC Transpo has considerable expertise in the administration of transit passes and they would like to ensure this knowledge is included in the base GTA system and then available to be used by other GTAFS partners.

The GTAFS proposal includes a timetable, which would see implementation take place over a period of two and a half years. If the Ottawa project start-up were January 2008, which would be possible were Council to approve the project before the end of November, the full system would be complete in the summer of 2010. This would include both passes and stored value (electronic tickets).

An advantage of joining the GTAFS project is that significant emphasis will be placed on the system development of the stored value capability. When Ottawa was proposing to purchase its own system, it was anticipated that, while bus passes would be fully implemented after two years, the addition of stored value electronic tickets would come significantly later, because of its complexity.

Business Case

The introduction of a smartcard system would have significant impacts on the organization. The printing and distribution of paper tickets and passes would no longer be necessary and the vendor network would be smaller. Customers would have a range of convenient ways to add value to their cards.

There would be new costs associated with the system, the most obvious of which would be the maintenance of the equipment and software.

The introduction of smartcards would significantly reduce the cost of fare fraud by ensuring that a valid fare is paid and by ensuring that fare instruments do not remain in circulation after they cease to be valid (e.g. are stolen, Ecopass not returned after payment ends, etc.).

The system would offer all customers the option of signing up for pre-authorized payment programs patterned after the successful Ecopass program. Instead of employer deductions, the system would make use of bank account debits. The convenience of this feature, as well as the convenience of stored value payments will attract more customers to transit and encourage them to use transit more.

The business case for the proposed system has been updated with the new information available using conservation assumptions. The business case is sensitive to the rate of commission that would be charged by the central system. For example, if a one percent commission could be agreed, there would be a strong positive business case with a payback period of six years with the MTO subsidy taken into account. However, if a two percent charge were levied, which is the current arrangement for the GTAFS partners, the business case is not attractive, as the payback period approaches eight years.

The GTA model to be implemented in the Toronto area will strongly encourage customers to use stored value instead of passes to pay for transit. Most transactions will be paid for by credit card, which will entail a bank charge of about 1.75 percent. In Ottawa, we should build upon our successful pass program and push the expansion of pre-authorized payment for ongoing transit use among all customers to limit banking overheads. The intention is to limit payment for automatic monthly transit use to pre-authorized bank debits that carry a charge of only $0.10 per transaction, regardless of the amount of the transaction. Payment by credit cards for pre-authorized payments would not be permitted, thus saving the bank charge of 1.75 percent. The recommendation to proceed with joining the GTAFS project is dependent upon successfully negotiating the central system fees and commissions so that the average commission is one percent instead of two percent.

Risk Analysis

Detailed negotiations have taken place with the GTAFS staff to ensure that, as far as possible, the terms of the agreement are favourable to Ottawa and that the risks associated with the project are minimized. The risk analysis is summarized in Document 1.

In general, there are significant benefits for Ottawa to join a large project on which a great deal of work has already been done. Because the project is well underway, we were able to benefit from the thinking and analysis of the GTAFS team and focus our efforts on identifying gaps in the requirements to ensure that Ottawa’s particular needs would be met. We would benefit from a contract with the system integrator, Accenture Inc., based on detailed specifications developed by the GTAFS that provides firm pricing, and supplemented to cover Ottawa’s special requirements.

The complex back-office system that deals with customer relations, data management and financial functions would be fully operational and thoroughly tested before the Ottawa system went live. This would minimize a significant risk for Ottawa including transfer of liabilities for the value of unused funds (debt obligation) to the GTAFS versus the City.

On the other side, joining a large consortium would have its disadvantages. Ottawa would be one member of the GTAFS Executive Committee and the project governance structure would be more cumbersome than would be the case for a system developed specifically for Ottawa. However, the GTAFS discussions so far have been reasoned, and every effort has been made to accommodate Ottawa’s needs.

The project schedule is another area where there would be risk because the proposed Ottawa implementation time-lines are dependent on the progress of the project in the GTA (in particular the timing of ‘Launch 2’). However, this risk should be weighed against the risk that would be associated with an Ottawa specific system development. If we were to immediately start a system procurement process for this project, the schedule would lag behind that proposed by GTAFS by at least a year.

Integration with STO poses another risk for this implementation. The ability for residents of the National Capital Region to transfer between STO and OC Transpo services seamlessly is an important system objective. This risk would be present whether or not we took the GTAFS approach and hinges on the ability of OC Transpo and STO to successfully implement the agreed structure.

Overall, from a risk perspective, the benefits of the recommended GTAFS approach significantly outweigh the risks.

CONSULTATION/PUBLIC NOTIFICATION

At the Transit Committee meeting of September 2006, there was general agreement that the user requirements covered OC Transpo’s needs. However, there was concern that the system must be developed in such a way as to allow other city functions to build on it later. This is a feature of the GTA system.

Another concern was about the needs of people living in poverty. In this respect, we are working with Employment and Financial Services staff to support the Ontario Works program, and also to explore other ways of ensuring access to electronic fares for this community.

The smartcard fare system concept has been discussed at several Pedestrian and Transit Advisory Committee (PTAC) meetings. The response from PTAC has been very supportive of the smartcard system.

FINANCIAL IMPLICATIONS

The total cost of the system would be $21.246 million, including all GTAFS costs, the City’s internal project management and information technology costs, as well as contingencies and taxes. The City’s portion of the costs would be $14.268 million, with the remaining $6.978 million funded by provincial subsidy. City funds are available through the $15 million in project authority approved in the 2007 capital budget.

While the total system cost is significantly higher than the previous budgetary figure of $15 million, it includes the cost of STO/OC Transpo integration, SmartBus integration and supports the successful Ecopass program and integration with Para Transpo operations. Although these items were included in the original estimate for the system, discussion with GTAFS staff showed them to be much more complex than anticipated, particularly the STO interface. The GTAFS price is based on a careful examination of OC Transpo’s user and interface requirements and is a fixed price.

The Ministry proposal includes $2.65 million to enable integration with STO. A joint proposal by STO and OC Transpo will be made to the Federal government to seek subsidy for the software required to support interprovincial interoperability. This could further reduce $2.65 million of OC Transpo costs of which 33 per cent will be funded by the Province of Ontario.,

The ongoing operating costs contained in the Ministry proposal for system maintenance and third-party agency management are estimated at $528,000. The benefits of the system should mature by 2012, in the second year of full deployment, with a combined revenue and cost improvement totalling $2.4M. The revenue improvements are due to reduced fare evasion, simplified fare payment and improved boarding times. Cost savings are derived from reduction in labour and printing to handle a paper based system.

SUPPORTING DOCUMENTATION

Document 1 Risk Analysis

DISPOSITION

Following Council approval, staff will initiate the project by:

· developing a work plan to commence in early January 2008;

· completing negotiations and signing the GTAFS procurement governance and operating agreements and the GTA funding agreement;

· requesting, jointly with STO, financial support from the Federal government for the costs of interprovincial interoperability.

RISK ANALYSIS DOCUMENT 1

Category	Risk	Mitigation
Governance	· Ottawa will one of nine or ten voices on the GTFAS Executive committee.	We are negotiating the major issues we expect to have an impact on Ottawa in the coming years. We are encouraged by the cooperative attitude of the other transit systems represented on the project. Ottawa would have an equal voice in all decision making.
Technical	· Is the GTAFS project tied to specific suppliers/vendors? · GTAFS project potential to support future partnerships (i.e. City smartcard). · Coordination with Telecom Ottawa.	The use of open standards enables multiple vendors to supply equipment, which is compatible with these standards. The GTAFS has been designed from the outset to be scalable and expandable to include other payment services such as parking. OC Transpo IT Project Manager will act as the direct contact with Telecom Ottawa and establish a plan that links to the GTAFS office. Monitoring will be done in terms of Telecom Ottawa project management approach and a joint governance arrangement established.
Expansion	· Ottawa must ensure that opportunities to expand the smartcard system to other City functions or into partnership with private firms are not precluded.	GTAFS is aware of this need and will ensure that decisions are made with this goal in mind. The system uses open technology standards and is capable of expansion. Other members of the GTAFS have the same objective.
Branding	· Retaining the ability to use the card for a specific Ottawa brand, or to generate revenue through advertising partnerships should be retained.	The GTAFS has adopted the name ‘Presto’ and the proposal is for Ottawa to use this name too. The card has been distinctively branded to emphasize interoperability across transit systems and other payment opportunities in Ontario. It has been agreed that Ottawa may propose a design for the card to suit local circumstances, providing the ‘Presto’ name co-exists.