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Part 2
Tax Evaluations
and Research Reports

Evaluation of the  
Public Transit Tax Credit

Introduction

The Public Transit Tax Credit (PTTC) was introduced in Budget 2006 to encourage individuals to make a sustained commitment to public transit use and to reduce traffic congestion by providing a tax credit for the cost of public transit passes. The PTTC was part of a broader government strategy to promote a cleaner, healthier environment, which also included major investments in public transit infrastructure. The Government acknowledged at the time that the success of the credit would in part depend upon transit authorities’ willingness to continue to work to boost ridership through quality service and low fares—two of the factors that affect the demand for public transit.

The Department of Finance has committed to the Commissioner of the Environment and Sustainable Development to undertake an evaluation of the PTTC starting in 2011. This study provides a descriptive analysis of the PTTC, examines the conditions required for the measure to be effective in changing individuals’ behaviour with respect to public transit use, and discusses a number of factors relevant to an empirical assessment of the effect of the PTTC.

The main findings of this study are:

  • Canadians are increasingly aware of the PTTC and benefit from it in large numbers: approximately 1.5 million taxfilers claim the credit annually for themselves and/or other family members.
  • Key conditions for the PTTC to be effective in increasing public transit use are present:
    • The demand for public transit is sensitive to price: International research suggests that the behaviour of public transit users is sensitive to permanent shifts in transit fares. Research also indicates that the price sensitivity of public transit users increases with time as users gradually take into account the new price levels in their long-term decisions (such as where to live or whether to buy an automobile). This suggests that public transit users would react positively to a measure that has the effect of permanently reducing the after-tax cost of public transit, and that the degree of response to the measure is likely to increase with time.
    • The benefits of the PTTC appear to be captured by public transit users: The PTTC, which reduces the cost for individuals of using public transit by up to 15%, is delivered directly to transit users through the tax system. For the credit to be effective in providing an incentive to use public transit, the benefits from the credit must not be reduced or eliminated by coincidental increases in public transit fares. The fact that public transit fares have remained relatively stable following the introduction of the PTTC suggests that public transit users have been the main beneficiaries of the credit.
  • Growth in public transit ridership in Canada has accelerated over the second half of the past decade, growing by 2.9% annually on average over the 2006 to 2010 period, compared to 1.9% over the 2001 to 2005 period.
  • Factors such as economic conditions, the cost of alternative modes of transportation, the quality of public transit service, population aging, urbanization and environmental awareness can also affect the demand for public transit.
  • A multivariate analysis over a prolonged period of time could help separate the effect of the PTTC from these factors, but this would remain a complex task. Such an analysis is not possible at this time given that the PTTC was introduced in July 2006, which provides for only a few years of observations. 

The paper is organized as follows: the first section provides a description of the PTTC, the second section presents key facts on PTTC claims, the third section identifies the primary conditions necessary for the PTTC to be effective, the fourth section discusses some key observations relevant to the assessment of the effect of the PTTC on public transit use, and the final section presents the paper’s conclusion.

Description of the PTTC

The PTTC came into effect on July 1, 2006, with the aim of encouraging public transit use by making public transit more affordable. The maximum value of this non-refundable credit is equal to the cost of eligible public transit passes times the lowest personal income tax rate (15.25% in 2006, and 15% in subsequent years). For example, an individual who purchases passes costing $80 per month throughout the year would receive up to $144 in federal tax relief for that year, at a 15% credit rate.

The PTTC applies to eligible transit passes purchased for travel in the current taxation year. An eligible transit pass is one that allows travel for an extended period of time. This includes annual and monthly passes, and, since 2007, weekly passes purchased for a period of at least four consecutive weeks, as well as electronic fare cards used for at least 32 one-way trips in a month. Individuals can claim trips taken by bus, ferry, subway, train or tram. There is no limit on the amount that may be claimed.

The credit applies to individuals who purchase public transit passes for use within Canada. It may be claimed by taxfilers on behalf of themselves, their spouse or common-law partner, and their children who are under age 19 at the end of the taxation year.

Key Facts About PTTC Claims

This section presents information on annual PTTC claims and on the provincial/territorial distribution of PTTC claims, as well as a profile of PTTC claimants based on their income level, gender, age and family type. The information was compiled using individual income tax returns for the 2006 to 2008 taxation years.[1]

Because the PTTC can be claimed by a taxfiler on behalf of other family members (i.e., a spouse or common-law partner and children under the age of 19), care needs to be taken when interpreting the numbers. This section provides information on the number of claims and amounts claimed but does not provide information on the number of public transit users covered by these claims.

In addition, the numbers presented in this section are based on PTTC claims reported by individuals on their tax returns, whether or not the claims actually resulted in tax relief.

Annual and Provincial/Territorial Distribution of PTTC Claims

Table 1 presents the total number of PTTC claims and amounts claimed from 2006 to 2008, with a breakdown by amount claimed for 2008.

The large increase in the number of PTTC claims observed between 2006, the year the PTTC was introduced, and 2008 is consistent with Canadians’ growing awareness of the credit:

  • According to tax return data, the number of claims increased by 40% from 2006 to 2007, and by 15% from 2007 to 2008. These increases are well beyond growth rates in public transit demand observed over that period, which would suggest that a number of taxfilers already using public transit started to claim the PTTC after the introduction of the credit,[2] or that some frequent riders that previously bought tickets started buying transit passes eligible for the credit since they became less expensive. Changes to eligibility criteria to include weekly passes and electronic fare cards also likely contributed to increases in PTTC claims in 2007.
  • In comparison, preliminary data for 2009 indicate a 2% increase in the number of PTTC claims from the previous year, which suggests that most people were likely fully aware of the credit two years after its implementation.

Table 1 also shows that the average claim for 2008 was $710, with three quarters of the claims being under $1,000. The significantly lower average claim for 2006 is due to the fact that the PTTC was introduced in July 2006, allowing individuals to claim only up to six months of public transit expenses for that year.

Table 1
Public Transit Tax Credit Claims (2006 to 2008)
  Claims Amount Claimed
 

  Number
Share of
Total (%)
Average
($)
Total
($) (‘000)
Share of
Total (%)
2006 916,525   390 357,564  
2007 1,276,776   661 843,333  
2008 1,473,046 100.0 710 1,045,632 100.0
By amount claimed ($), 2008:          
  0–500 624,135 42.4 248 154,466 14.8
  501–1,000 504,805 34.3 754 380,724 36.4
  1,001–1,500 243,883 16.6 1,219 297,302 28.4
  1,501–2,000 52,243 3.5 1,702 88,919 8.5
  2,001–2,500 29,968 2.0 2,249 67,409 6.4
  2,501 and over 18,012 1.2 3,154 56,811 5.4
Note: Numbers may not add up due to rounding.
Source: Department of Finance.

Table 2 presents the distribution of PTTC claims by province and territory for the 2008 taxation year. It shows that the average amount claimed varies substantially across jurisdictions, with higher values generally observed in jurisdictions with large urban centres, where public transit tends to be more developed. For instance, Ontario and Quebec together accounted for about 77% of the total amount claimed in 2008. In comparison, they accounted for 60% of the total taxable income reported by individuals in 2008.

Variations across jurisdictions could also potentially be explained by differences in characteristics of the population since, as is shown in the following section, the use of public transit may vary significantly among categories of individuals.

Other factors not related to the urban concentration or characteristics of the population might also help explain variations across jurisdictions. For instance, public transportation arrangements made available to students by school boards or universities can have an effect on amounts claimed to the extent that the monetary benefits provided by these arrangements or the eligibility criteria differ across jurisdictions.

Table 2
Public Transit Tax Credit Claims by Province and Territory (2008)
  Claims Amount Claimed
 

  Number
Share of Total
(%)
Average
($)
Total
($) (‘000)
Share of Total
(%)
Newfoundland and Labrador 3,286 0.2 267 878 0.1
Prince Edward Island 221 0.0 339 75 0.0
Nova Scotia 18,773 1.3 483 9,067 0.9
New Brunswick 3,902 0.3 379 1,480 0.1
Quebec 443,394 30.1 674 298,953 28.6
Ontario 557,378 37.8 903 503,187 48.1
Manitoba 37,638 2.6 454 17,085 1.6
Saskatchewan 17,014 1.2 244 4,154 0.4
Alberta 176,016 11.9 461 81,055 7.8
British Columbia 213,613 14.5 603 128,721 12.3
Northwest Territories 348 0.0 297 103 0.0
Yukon 184 0.0 223 41 0.0
Nunavut 38 0.0 234 9 0.0
Other1 1,241 0.1 664 824 0.1
 
Total 1,473,046 100.0 710 1,045,632 100.0
Note: Numbers may not add up due to rounding.
1 Includes non-resident and multi-jurisdiction taxfilers.
Source: Department of Finance.

Profile of PTTC Claimants

Table 3 presents a breakdown of PTTC claims by taxable income level, gender, age and family type for the 2008 taxation year. In order to facilitate comparison between the different categories of taxfilers, the table also includes a relative claiming ratio for each category. The relative claiming ratio represents the share of total PTTC claims accounted for by a given category of taxfilers relative to their share of the overall taxfiler population. For instance, women accounted for 53.0 per cent of all taxfilers claiming the PTTC in 2008, in comparison to 51.3 per cent of the overall taxfiler population. In this case, the relative claiming ratio of women is 1.03 (i.e., 53.0 divided by 51.3). A ratio above 1 (below 1) indicates that taxfilers claiming the PTTC in the category in question account for more (less) than their share of the total taxfiler population.

With respect to income levels, the table shows that:

  • Individuals in the first tax bracket (those with less than $37,886 in taxable income) account for nearly 60% of all PTTC claims. This group, however, has the lowest relative claiming ratio among the various income classes (at 0.87).
  • Individuals in the second and third tax brackets (those with incomes between $37,886 and $123,184) account for slightly less than 40% of all PTTC claims but have the highest relative claiming ratios (1.26 and 1.33 respectively).

With respect to gender, the table indicates that women reported proportionally more PTTC claims than men (their relative claiming ratio being 1.03). This result is consistent with the 2006 Census, which reveals that nearly 14% of employed women used public transit to commute to work in 2006, compared to nearly 9% of employed men (see Table 4).

The relative claiming ratio appears to have a negative relationship with age.

  • The youngest age group (between 15 and 24 years of age) has a relative claiming ratio of 1.63 compared to 0.22 for the oldest group, which includes those age 65 and over.
  • This is consistent with the facts that the primary reason for regularly using public transit is to commute to school or work and that the proportion of the population that is employed decreases substantially after age 65.[3]
  • This is also consistent with the 2006 Census which shows that, even among the employed, the use of public transit to commute to work decreases with age. About 15% of employed individuals between 15 and 34 years of age relied on public transit in 2006, compared to about 7% of employed individuals age 65 and over (see Table 4).
Table 3
Public Transit Tax Credit Claims
by Income Level, Gender, Age and Family Type (2008)
  Claims Amount Claimed
 

  Number
Share
of Total
(%)
Relative
Claiming
Ratio
Total
($) (‘000)
Share
of Total
(%)
Total 1,473,046 100.0 1.00 1,045,632 100.0
By taxable income level ($):          
0–37,885 851,039 57.8 0.87 508,640 48.6
37,886–75,769 461,497 31.3 1.26 389,344 37.2
75,770–123,184 122,414 8.3 1.33 112,281 10.7
123,185 and over 38,096 2.6 1.03 35,366 3.4
By gender:          
Male 692,159 47.0 0.96 503,705 48.2
Female 780,887 53.0 1.03 541,927 51.8
By age:          
15–24 303,087 20.6 1.63 134,507 12.9
25–34 360,670 24.5 1.52 258,183 24.7
35–44 296,370 20.1 1.15 245,450 23.5
45–54 313,284 21.3 1.08 259,692 24.8
55–64 139,996 9.5 0.61 123,056 11.8
65 and over 59,639 4.0 0.22 24,744 2.4
By family type:          
Singles, no children 741,025 50.3 1.30 456,606 43.7
Couples, no children 288,014 19.6 0.59 233,229 22.3
Singles, one or more children 89,252 6.1 1.34 64,784 6.2
Couples, one or more children 354,755 24.1 1.04 291,013 27.8
Notes: Numbers may not add up due to rounding. Income levels correspond to the 2008 personal income tax brackets.
Source: Department of Finance.

The distribution of PTTC claims across family types indicates a high relative claiming ratio for single individuals and a low ratio for couples without children.

  • Singles are on average younger and therefore more likely to use public transit than the population as a whole, which contributes to their high relative claiming ratio (1.30 for singles without children and 1.34 for those with children). In fact, about 45% of single taxfilers are between 15 and 34 years of age, compared to about 29% of the overall population of taxfilers. These individuals, according to the 2006 Census, are the biggest users of public transit within the employed labour force.
  • In contrast, couples without children are on average older than the overall population of taxfilers, and are therefore less likely to use public transit. About 64% of couples without children are couples where one or both spouses are age 55 or over, compared to about 35% of the taxfiler population as a whole. This helps explain the low relative claiming ratio (0.59) observed for that category of taxfilers.
Table 4
Use of Public Transit by Employed Labour Force Participants (2006)
  Employed
Labour Force
Employed Labour Force Using
Public Transit to Go to Work
 

  Number of Individuals
Number of Individuals
As a Share of Total (%)
Total 14,714,260 1,622,725 11.0
By gender:      
Male 7,755,770 670,350 8.6
Female 6,958,490 952,375 13.7
By age:      
15–24 2,321,495 384,695 16.6
25–34 3,011,125 405,100 13.5
35–44 3,633,245 344,660 9.5
45–54 3,652,960 315,445 8.6
55–64 1,804,755 151,800 8.4
65 and over 290,670 21,020 7.2
Note: Numbers may not add up due to rounding.
Source: Statistics Canada (2006 Census).

Primary Conditions for the PTTC to Be Effective

The effectiveness of the PTTC in increasing public transit use primarily depends on the extent to which potential users are sensitive to a reduction in the cost of using public transit. It also depends on the incidence of the tax credit and whether the benefits provided by the PTTC (up to 15% of eligible public transit expenses) are captured, as intended, by individual users of public transit and not by public transit providers through increased fares.

Price Sensitivity of Public Transit Users

Substantial international research has been conducted on the responsiveness of public transit users to a permanent change in transit fares. The results vary somewhat by region, with studies reporting a slightly higher degree of commuter responsiveness in Europe than in North America and Australia, and by the type of transportation, with bus riders being generally more sensitive to price changes than subway or light train users.

Nevertheless, one important point of consensus emerges: the majority of studies have found that public transit users are sensitive to a permanent change in price, and that the responsiveness increases with time. The longer a price adjustment is in effect, the greater will be the response of transit users. This finding is key to the assessment of the PTTC as it suggests that the effectiveness of the credit should increase over time as individuals take into account the price reduction due to the credit when making their long-term decisions (such as where to live or whether to buy an automobile).

Since the degree of sensitivity varies with time, price elasticity estimates[4] are often calculated for the short run and the long run.

  • Based on a review of recent economic studies on public transit (listed in the annex), the median short-run elasticity estimate is -0.4. This means that a 10% drop in the price of public transit would lead to a 4% increase in transit demand.
  • In comparison, the median long-run elasticity estimate is -0.75. This estimate also corresponds to the mid-point elasticity obtained by Litman (2011) from his review of the literature, and to the estimates obtained for Canada, the U.S. and Australia by Holmgren (2007) from his literature review.

Incidence of the PTTC

Trends in prices to date suggest that the benefits of the PTTC are largely captured by public transit users as intended, and not by public transit operators through increased fares, which would reduce the incentive effect of the measure.

Chart 1 presents the Consumer Price Index (CPI) for public transit from 1995 to 2010. The data show that public transit fares grew at a steady pace in Canada over the 15-year period, averaging about 3.8% per year. There were no marked price increases following the introduction of the PTTC: the average annual growth rate in public transit CPI from 2006 to 2010 was 4.0%, slightly higher than the long-term growth rate.

Consumer Price Index for Public Transit in Canada (1995-2010).For details, refer to previous paragraph.

Impact of the PTTC on Public Transit Use—Some Observations

The PTTC was introduced in July 2006, which means that it is not possible at this time to empirically assess its impact through a time series analysis of the data.[5] Nonetheless, a number of observations regarding recent trends in public transit use and factors affecting the demand for public transit can be made.

Data Availability and Trends in Public Transit Use

Ridership is a commonly adopted indicator to measure the use of public transit. It is generally defined as the number of trips taken by transit passengers in a particular geographic area over a given period of time, typically a calendar year. For instance, an individual regularly using public transit to commute to work would count as 480 passenger trips over a year (assuming 240 working days during the year). Whether this individual has to transfer to another vehicle or not during his or her trip may influence ridership estimates, depending on how these transfers are treated. Unless otherwise specified, passenger trip estimates do not generally count transfers as separate trips.[6]

Ridership numbers provide an indicator of the use of public transit by all types of riders, including regular commuters and sporadic users. As such, it may not be the best measure to assess the effect of the PTTC, which targets regular public transit users. Measures such as the number of riders boarding vehicles with a pass or the number of monthly or weekly passes sold each year may be better indicators. Such measures, however, are not available in Canada on a consistent basis.

The Canadian Urban Transit Association (CUTA) is the primary source of statistics on urban transit in Canada. CUTA collects on an annual basis a wide range of statistics through a survey of its membership, which includes most transit operators across Canada. In this study, CUTA statistics on passenger trips have been used to examine recent trends in ridership in Canada. The data, which cover the 2000 to 2010 period, have been adjusted to take into account the effect of changes in the list of transit operators covered by CUTA data on total ridership estimates.

According to CUTA data, total public transit ridership in Canada increased by 27% over the last decade from 1.478 billion passenger trips in 2000 to 1.872 billion in 2010. This represents an average annual growth rate of 2.4%.

As shown in Chart 2, annual ridership growth varied from year to year, with significantly lower rates in years of poor economic conditions such as 2001 and 2009. Growth in public transit ridership accelerated following the introduction of the PTTC, with ridership growing by 2.9% annually on average over the 2006 to 2010 period, compared to 1.9% over the 2001 to 2005 period. The lower ridership growth observed in 2003 is in part attributable to the effect in Ontario of the SARS (severe acute respiratory syndrome) crisis and the electricity blackout that occurred in August of that year across much of the northeastern part of North America.

Chart 2 - Public Transit Ridership in Canada (2001-2010).For details, refer to previous paragraphs.

While recent trends in public transit use could suggest a positive effect from the PTTC, a multivariate analysis would be required to attempt to capture the net contribution of the PTTC to ridership growth. To be statistically meaningful, such an analysis would need to consider several years of data and take into account other factors affecting the demand for public transit.

Other Factors Affecting the Demand for Public Transit

Although price level is important, other factors also affect the demand for public transit, which can make it difficult to determine the effect of individual factors.

Economic Conditions

Economic conditions, in particular employment, are key determinants of the demand for public transit. A primary reason for using public transit on a regular basis is to commute to work. The deterioration in employment typically observed during depressed economic periods will therefore translate into reduced use of public transit.

Chart 3 shows employment and public transit ridership growth in Canada from 2000 to 2010. Each data series has been transformed into an index to facilitate their comparison. The chart suggests that there is a strong positive correlation between transit ridership and employment. It is worth noting that, after 2005, ridership grew more quickly than employment.

The strong correlation observed between employment and the demand for public transit means that economic conditions in the coming years and the pace at which the economy will create new jobs will be key factors in determining the effect of the PTTC on public transit ridership.

Chart 3 - Total Employment and Public Transit Ridership in Canada (2000-2010).For details, refer to the 2 previous paragraphs.

Cost of Using an Automobile

While walking, biking or taking a taxi can be considered as alternatives to public transit, for most individuals the practical alternative is the automobile. When deciding which mode of transportation to use, individuals generally compare these two options in terms of cost and commuting time.

For example, a significant increase in the price of gasoline may induce greater use of public transit. It is generally estimated that an increase of 10% in the price of gasoline results in an increase of about 1.5% in public transit ridership.[7]

Chart 4 presents the Consumer Price Indices for the purchase and leasing of passenger vehicles, overall vehicle operation costs, gasoline and public transit. It shows that, despite reductions in the cost of purchasing and leasing passenger vehicles over the last decade, the overall cost of operating a passenger vehicle still increased at a higher rate than the cost of using public transit, in part due to an increase in the price of gasoline.

Chart 4 - Consumer Price Indices.For details, refer to previous paragraph.

Quality of Service

There is a general consensus in the literature that quality of service is a key determinant of the demand for public transit. Quality of service includes variables such as the quality and availability of information on schedules and trips, security in vehicles and at stations, cleanliness and age of vehicles, coverage of the transportation network, and rapidity and punctuality of service. The quality of public transit service is also affected by the number of public transit vehicles: more public transit vehicles on the road would generally mean more frequent service and more seats available for transit riders.

Capital spending by transit operators grew substantially over the second part of the last decade due to major increases in funding from all levels of government. While public transit falls under the jurisdiction of the provinces, territories and municipalities, the federal government has made significant investments in this area through a number of infrastructure funding programs in partnership with other levels of government. Since 2006, close to $5 billion in federal funding has been provided in support of public transit infrastructure projects across Canada, leveraging investments of $7.9 billion from other funding partners. This includes funding for public transit through one-time initiatives such as the Public Transit Trusts in Budget 2006 and Budget 2008. In addition, $1.1 billion in investments have been made in public transit infrastructure since 2006 through the Gas Tax Fund. According to CUTA data, capital spending by public transit operators from 2006 to 2010 averaged $3.3 billion annually, compared to about $1.2 billion annually from 2001 to 2005.

Such levels of spending would be expected to translate into significantly better transit networks and increased quality of service. Table 5 shows changes in three indicators of the quality of service over the past decade. Reported numbers are weighted average values calculated for the largest transit operators in 2010, which accounted for more than 90% of total ridership. The table shows that the second half of the past decade was marked by a significant renewal of bus fleets (the average bus age decreased by 32% from 2005 to 2010, compared to less than 9% from 2000 to 2005) and major increases in the per-capita total hours of operation of all vehicles (an increase of almost 16% from 2005 to 2010 compared to 1.2% from 2000 to 2005). The average speed of vehicles in service has not improved over the past decade. However, it is not clear what this indicates for the quality of service. For example, it could reflect an increase in the number of routes that are in urban centres relative to suburban or rural zones, rather than a lack of improvement in commuting time.

Table 5
Selected Indicators of Quality of Service (2000, 2005 and 2010)
  Year Percentage Change (%)
 

2000 2005 2010 2000–2005 2005–2010
Average bus age (years) 10.33 9.41 6.40 -8.7 -32.0
Total hours of operation
 of all vehicles, per capita
2.01 2.04 2.36 1.2 15.9
Average speed (km/h) 22.71 22.55 22.16 -0.7 -1.7
Note: Based on public transit operators reporting more than 10 million passenger trips in 2010, weighted according to the service area population of each operator.
Source: Department of Finance calculations using data obtained from CUTA.

In addition, events that could cause major disruptions to public transit services, such as strikes, would also need to be taken into account when explaining variations in ridership. For instance, it is estimated (based on CUTA data) that removing the effect of labour disputes on urban transportation in 2009 would increase ridership growth for that year from 0.1% to 0.9%.

Overall, it appears that public transit operators have made significant investments to improve the quality of service offered in recent years. These improvements, which were coincidental to the introduction of the PTTC, likely contributed to increased ridership levels in the second half of the last decade.

Population Aging, Urbanization and Environmental Awareness

Over the long term, the demand for public transit may also be affected by demographic factors such as population aging and urbanization, as well as greater environmental awareness.

The demand for public transit is affected by the age profile of the population it services. As one of the primary purposes for commuting is to travel to work, an increase in the proportion of retirees in the population will likely result in slower growth in the number of regular transit users.

On the other hand, as individuals get older, they may be more attracted to larger urban centres where social, health and other services tend to be more accessible. A greater concentration of the population around large urban centres would be expected to have a positive effect on the use of public transit since larger urban centres tend to have more developed systems of public transit. Also, operating an automobile in large cities is generally more expensive and less attractive due to heavier traffic congestion and higher parking fees.

In addition, individuals may also factor in environmental concerns in their transportation decisions. These considerations could, over time, be increasingly important as individuals become more aware of environmental issues.

Conclusion

The PTTC, which provides tax relief to Canadians in the form of a non-refundable tax credit for the cost of public transit passes, was introduced in July 2006 in order to encourage individuals to make a sustained commitment to public transit use. Data from tax returns show that Canadians are increasingly aware of the PTTC and claim it in large numbers.

There is evidence that the key conditions for the credit to be effective are present: econometric studies indicate that public transit users are responsive to a permanent change in fares, and data on the price of public transit indicate that the benefits of the PTTC appear to be captured by the target population. It is expected that the effectiveness of the credit will increase as time passes and individuals continue to include it as a consideration in their long-term decisions regarding their transportation options.

Recent trends in ridership could suggest that the PTTC has had an impact on public transit use. However, factors such as economic conditions, the cost of alternative modes of transportation, the quality of public transit service, population aging, urbanization and environmental awareness can also affect the demand for public transit. A multivariate analysis over a prolonged period of time could help separate the effect of the PTTC from these factors, but this would remain a complex task. Such an analysis is not possible at this time given that the PTTC was introduced in July 2006, which provides for only a few years of observations.

Annex

Public Transit Demand Price Elasticity
Estimates Obtained From Selected Studies
  Estimates
 
Authors Short-Run Long-Run
Balcombe et al. (2004) -0.40 -1.00
Bresson, Dargay, Madre and Pirotte (2003)    
  United Kingdom: -0.54 -0.75
  France: -0.30 -0.59
Dargay and Hanly (2002) -0.40 -0.90
Gkritza, Golias and Karlaftis (2004) -0.12 -0.53
Graham, Crotte and Anderson (2009) -0.05 -0.33
Hensher (2008) -0.40  
Holmgren (2007)    
  Europe: -0.75 -0.91
  Canada/U.S./Australia: -0.59 -0.75
Litman (2011) -0.20 to -0.50 -0.60 to -0.90
Parry and Small (2009)    
  Peak hours: -0.40  
  Off-peak hours: -0.80  
Taylor and Fink (2004) -0.34 to -0.44  
Taylor, Miller, Iseki and Fink (2009) -0.52  
Transit Cooperative Research Program (2004) -0.40  
  Median estimate -0.40 -0.75
Note: Some studies estimated price elasticity for different modes of transportation (e.g., bus, metro, light train). Estimates presented in this table are for bus transport.

References

American Public Transportation Association (2011). Potential Impact of Gasoline Price Increases on U.S. Public Transportation Ridership, 2011-2012.

Balcombe, R., R. Mackett, N. Paulley, J. Preston, J. Shires, H. Titheridge, M. Wardman and P. White (2004). The Demand for Public Transport: A Practical Guide, TRL, Report TRL593.

Bresson, G., J. Dargay, J.-L. Madre and A. Pirotte (2003). “The Main Determinants of the Demand for Public Transport: A Comparative Analysis of England and France Using Shrinkage Estimators,” Transportation Research Part A, 37: 605-627.

Currie, G. and J. Phung (2006). Exploring the Impacts of Fuel Price Increases on Public Transport Use in Melbourne, Social Research in Transport Clearinghouse.

Dargay, J. M. and M. Hanly (2002). “The Demand for Local Bus Services in England,” Journal of Transport Economics and Policy, 36 (1): 73-91.

Gkritza, K., I. Golias and M. G. Karlaftis (2004). “Estimating Elasticities for Multi-Modal Public Transport Demand: A Time Series Approach,” Journal of the Transportation Research Forum, 43 (2): 53-68.

Graham, D. J., A. Crotte and R. J. Anderson (2009). “A Dynamic Panel Analysis of Urban Metro Demand,” Transportation Research Part E, 45: 787-794.

Hensher, D. A. (2008). “Assessing Systematic Sources of Variation in Public Transport Elasticities: Some Comparative Warnings,” Transportation Research Part A, 42: 1031-1042.

Holmgren, J. (2007). “Meta-Analysis of Public Transport Demand,” Transportation Research Part A, 41: 1021-1035.

Litman, T. (2011). Transit Price Elasticities and Cross-Elasticities, Victoria Transport Policy Institute.

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Taylor B. D. and C. N. Y. Fink (2004). The Factors Influencing Transit Ridership: A Review and Analysis of the Ridership Literature, UCLA Department of Urban Planning.

Taylor B. D., D. Miller, H. Iseki and C. Fink (2009). “Nature and/or Nurture? Analyzing the Determinants of Transit Ridership Across US Urbanized Areas,” Transportation Research Part A, 43 (1): 60-77.

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Transit Cooperative Research Program (2005). Analyzing the Effectiveness of Commuter Benefits Programs, TCRP Report 107.


[1] Detailed tax return information for years after 2008 was not available at the time this study was carried out.

[2] The PTTC applies to both existing and incremental public transit expenditures. As such, individuals already using public transit at the time of the introduction of the credit benefited to the same extent from the measure as new public transit users.

[3] The labour force participation rate for individuals age 65 and over was 23% in 2009 versus 69% for those age 15 and over (Statistics Canada, Labour Force Survey).

[4] Price elasticity is the percentage change in quantity demanded in response to a percentage change in price. For instance, if a 10% decrease in the price of a good or service causes the demand for that good or service to increase by 5%, the elasticity would be equal to -0.5.

[5] There exist other methodologies, in particular the difference-in-difference method, which could be applied to data covering short time periods. The difference-in-difference method estimates the impact of an event (e.g., the introduction of a new tax credit) by comparing the behaviour of individuals affected by the event (the treatment group) with the behaviour of individuals not affected by it (the control group). It would be very difficult, however, to apply this method to the PTTC given that the credit applies to all regular public transit users across Canada and that provincial/territorial variation in the credit rate is almost non-existent (only Yukon adopted a similar credit).

[6] When transfers are counted as separate trips, passenger trips are generally referred to as “unlinked” passenger trips.

[7] Based on an average of literature results for the elasticity of transit ridership to gas price. See, for instance, American Public Transportation Association (2011) and Carrie and Phung (2006).

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