Cities abolish transit fares, embrace revenue death spiral and dependence on taxpayer subsidies, reports Reason.
Transit officials and transit-boosting politicians in D.C., L.A., and New York City are warming to the idea of being totally dependent on taxpayer subsidies.
The question during, and even before, the pandemic was whether declining ridership would force public transit agencies into a self-perpetuating “death spiral” of fare hikes, service cuts, and fleeing riders.
To stave off this disaster scenario, the federal government showered transit agencies with nearly $70 billion in operating subsidies during COVID-19. But rather than giving agencies the needed breathing room to claw out of their death spirals, this money appears to have encouraged big city transit agencies and transit-boosting politicians to run headlong into the next one by abolishing fares.
Earlier this month, the Washington, D.C., Council unanimously approved a plan to make bus trips originating within the District free to riders. This was coupled with a proposal to spend another $8.5 million on expanded bus service.
Its successful passage has gotten the wheels turning in New York City, where two board members of the Metropolitan Transportation Authority (MTA), which is responsible for operating subway and bus service, have endorsed the idea. Last week, two New York legislators proposed making city buses free as part of a larger package of fare freezes and service expansions that are allegedly supposed to “save the MTA from a looming fiscal emergency.”
In Los Angeles, former Mayor Eric Garcetti’s last action as the board chair of the L.A. County Metropolitan Transportation Authority was to initiate a study of taking both buses and trains fareless, reported the Los Angeles Times last week.
Fare-free public transit systems aren’t unheard of in America. They’re typically found in smaller towns and cities with a small number of riders and a minimal amount of fare collected—both in absolute terms and in the percentage of operating costs covered by fares.
The country’s largest transit agencies toying with the idea of free fares is a new phenomenon. Prior to the pandemic, it would have been unthinkably expensive.
In 2019, bus riders in D.C. and New York City paid $124 million and nearly $1 billion in fares, respectively. In Los Angeles tha year, rail and bus riders paid around $250 million in fares. Making up that kind of money is no joke, even for a huge metro area.
Compare that to Kansas City, Missouri, which made headlines in 2019 as a city of unusually large size abolishing fares on its bus system. That move cost the city $8 million a year in lost revenue.
But the persistent post-pandemic public transit ridership slump has drastically reduced how much even major public transit agencies collect in fares, and therefore, how much it would cost them to get rid of them.
D.C.-area buses brought in just $20 million from fare box revenue in 2021—an 85 percent decline from 2019. (Rampant fare evasion hasn’t helped.) Los Angeles’ Metro took in just $30 million in 2021. Metro waived bus fares entirely from March 2020 to January 2022. New York’s MTA saw its bus revenue nearly halve in 2021 from where it was in 2019.
Meanwhile, bus ridership is at half its pre-pandemic levels in D.C., roughly two-thirds of its pre-pandemic levels in New York City, and 75 percent of pre-pandemic levels in Los Angeles.
The upshot for politicians is that the immediate cost of abolishing fares is reduced. Meanwhile, the political benefits of making something that once cost money free are roughly the same. The legacy of federal operating subsidies has seemingly left behind the impression that taxpayers somewhere will be willing to subsidize lost fares.
Combine these factors, and transit’s biggest proponents appear to have convinced themselves that a reality of low ridership, one fewer revenue stream, and perpetual begging for subsidies is the way to go.
There’s still a few reasons to think fare-free transit isn’t the way to go.
Firstly, while abolishing fares is less expensive now, getting rid of them is still costing transit agencies money that could be spent providing more frequent reliable service. D.C.’s fare-free bus plan will cost $42 million in fiscal year 2024. As mentioned, it also plans to spend $8.5 million on expanding service.
If additional transit service is so important, why not keep charging people fares they are currently willing to pay and expand service by $50 million instead? It wouldn’t be unpopular. Polls of even low-income transit riders suggest they would prefer more frequent service to reduced fares.
Past experiments with free fares have been found to reduce service quality by attracting rowdier passengers, overcrowded buses, and reduced on-time rates.
Free transit boosters argue free fares are worth it because of the ridership gains they will produce. That’s an incredibly low bar for measuring success. If you give something away for free, you should hope more people use it.
Other than maybe the aesthetic benefits of more people riding the bus, it’s hard to see what benefits come from more bus riders in a fare-free transit scenario. They obviously aren’t providing the transit agency itself any benefit. Each new rider is just a cost to them, which has to be covered by subsidies from someone else.
As Jerusalem Demsas notes in The Atlantic, many of the ridership gains from free transit come from people who would have otherwise walked or ridden a bike. That means you’re not getting the reduced traffic congestion and lower emissions that fare-free transit advocates promise.
Even if drivers did opt for a free bus ride, that wouldn’t necessarily reduce congestion for the same reason that highway expansions don’t necessarily reduce congestion: The additional free road space just encourages more people to drive, leaving traffic ultimately unchanged.
One could argue that this phenomenon of latent demand is a good thing: More people traveling means more beneficial economic activity is happening. But those economic benefits are going to be offset by the deadweight loss of the increased taxation necessary to fund free transit.
Lastly, and perhaps most importantly, not every dollar going to transit is created equal. The provider of the funds has its own interests, which shapes transit agencies’ incentives when providing service.
When transit money comes from riders through fares, the transit agency’s incentives are to cater to riders’ priorities. That’s generally going to mean providing frequent, reliable, safe service to people who ride the bus regularly, and expanding service in a way that will attract more riders.
But if all transit money is coming from local politicians, a state legislature, or a far-off federal Congress, the incentives are different. Transit agencies don’t have a need to attract riders. But they might have a need to expand service to more legislative districts as a way of gaining more political patrons.
Instead of spending money on more frequent service, they could be more interested in appeasing politically connected environmentalists and businesses who’d prefer they buy electrified buses. If costs per rider are less of a concern, perhaps agencies will care less about reducing unnecessary, unionized staff. (In New York City, some of the biggest fare-free transit boosters are transit unions.) Perhaps a conservative state legislature would fight against plans to boost ridership on the grounds that it will only cost non-bus-riding taxpayers more money.
Transit agencies already deal with a lot of this. They’d likely do a lot more if fares are abolished. Doing so would sever the last link connecting the interests of transit riders and transit providers. With it would go any incentive to provide good service.
The libertarian ideal is that transit would be privately owned, operated, and funded without the need for government subsidies. That’s not in the cards in most of America. Even people who aren’t committed to Ancapistan but do want transit to work marginally well should want to support public transit fares and the money and incentives that come with them.
Originally published by Reason Foundation. Republished with permission.
For more Budget & Tax News.
