Who Should Pay for Social Fares?

King County Metro announced a low income fare policy last week. Here is a press release. While laudable, why is it the transit agency's responsibility to pay the $8 million or so annually? This situation is something I discussed a bit in the Atlantic's CityLab, where I noted that transit agencies are  forced to be social services but without just compensation. Here is what I wrote about services, though it can be applied to fare policy:

Of course, lifeline transit services exist because somebody wanted them and people need them. Transit agencies are expected to pay for these services that serve a social purpose but that strain operating budgets.

This is from the King County press release:

"Rising housing costs are leading many families to locate in lower-cost locations that may be farther away from where they work," said Mike Heinisch, executive director of South King Council of Human Services. "Providing a low-income fare is one way we can help keep the region more affordable for working families and ensure equal access to economic opportunity." 

"As a social service agency, we work with people who are in dire need of affordable public transportation to get to training classes, meet with case managers, find and get to jobs and health care appointments, as well as other important appointments," said Mahnaz Kourourian Eshetu, executive director of Refugee Women's Alliance. "The efforts of our County Executive and County staff to make the discounted transit fare widely available to people who need it the most is admirable and will have a positive effect on the County's economy while creating stronger communities. It was an honor to serve on this task force."

"King County is one of the first regions in the nation to put a low-income fare in place, helping to make sure that our bus service really is serving the whole community," said Alison Eisinger, director of Seattle-King County Coalition on Homelessness. "We can be very proud that we are putting our values into practice in this way, by taking a big step that will help advance greater equity and access to opportunity. Thousands of people, and our community as a whole, will benefit from this progressive policy."

So Human Services, the Refugee Women's Alliance and the Coalition on Homelessness are all part of a coalition supporting low fares for certain groups. While I agree that all of these groups deserve affordable travel, I don't see why these benefits should be paid directly from the transit budget. These should be paid by someone--probably King County--to the transit agency, and I realize these are somewhat one and the same.

King County has asked voters to raise taxes to pay for transit services many times over the past decade, and they expect many service cuts coming up. Expecting the transit provider to also provide social services is not sustainable unless someone directly pays for those social services. The public has a social obligation to provide access to opportunities, but this doesn't mean the mass transit operators should pay for social programs.

There are many alternatives, but the Paris compensatory indemnity program is one place to start.

The Social Contract for Public Transit

I have a piece in the Atlantic's City Lab arguing that public transit is not meeting its social contract. As I conclude:

So does public transit serve its social obligations? Increasingly the answer is no. The way transit is financed in the United States distorts investment and operating priorities away from those who rely on transit service the most. Transit agencies are also asked to provide a social safety net — offeringreduced transit fares for school kids, senior discounts, or lifeline services to underserved areas that few politicians are willing to pay for. A more relevant question is why public transit agencies are solely responsible for managing disparate social goals. It need not be this way.

Transit Referendums Have Always Been Popular

Source: The Onion

There were lots of transit and transport related referendums on ballots this year, and about 80 % of them passed. This is essentially par for the course for these types of measures, and nothing to get excited about as some type of shift in priorities or sentiment by the public. The past few years have seen similar rates of passage for transit and transport projects (see here), and these measures generally have broad support across the electorate. See this recent report from NRDC for a snapshot of current support across party lines, which has been fairly steady over time, and see The Onion piece above for a 12 year old joke about how popular transit is. While many vote to support transit, most vote to support transit for someone else.

Where officials seem to be cannier in their approach is they realized that bond measures are more popular than tax measures. Here is the abstract from a paper by Dixit, et al.,:

Transit is an integral part of a sustainable transportation system in any
region. Proposals for transit initiatives that are brought to referenda
include a funding vehicle, either tax based or bond based. A tax-funded
proposal imposes the cost on the present generation of residents, whereas
a bond-funded proposal delays the burden to future generations. The aim
is to investigate whether the success of proposals in referenda is related
to the use of taxes or bonds for funding. This question is investigated
with the use of data from 111 transit referenda held in the United States
from 1999 to 2007. It was found that proposals that use taxes for funding
are less likely to pass than those that use bonds.

In broad terms, transit ballot measures are popular because other people using transit will help make driving easier--e.g. people support transit as a form of congestion reduction as they expect their personal harm from congestion will decline after other people switch modes--and future generations will pay for the improvements. Such a deal.

Pushing costs onto future generations is nothing new. For instance, New York's Metropolitan Transportation Authority has long pursued a bond strategy driven largely by public demand for services now and repayment later. See this paper by James Cohen for details or this working paper of mine here.

Is Transit Ridership Up Enough?

The American Public Transportation Association (APTA) released a report this week highlighting that transit ridership in the first quarter of the year is up five percent over last year. Here is the press release. This is good news for transit, and I guess we should be happy. However, I argue that we should not get overly excited about any increase in transit ridership because we have been spending billions and billions of dollars over the past couple of decades with the intent of increasing ridership. We should consider first whether transit ridership increased as much as it should have. Between 1990 and 2011 overall transit ridership increase about 20 percent (from just under nine billion to about 10.5 billion, data available as an Excel file through the APTA site linked above) while the US population increased over 23 percent. Cities like Los Angeles, after 25 years of massive investment in rail, have achieved the same ridership levels in absolute terms that they had in the mid-1980s. Meanwhile, bus ridership, which represents well over half of all transit ridership and most ridership outside of a few cities, has declined over the past twenty years by almost eight percent.

While is is certainly good that transit ridership has increased, it is important to also consider if ridership has increased as much as it should have considering the investment made. Planners rarely, if ever, go back to review how their plans work out. In the case of transit investment, some reflection on how successful it has been is worthwhile and should be encouraged. Perhaps the ridership gains are worthy of the amount spent, but that's not immediately obvious. It seems we should be asking if ridership is up enough before getting excited about the gains reported this week.

A Proposal for New MTA Revenue by Taxing All Foreigners Living Abroad

The New York MTA is in a semi-permanent state of financial distress. Over the decades this had led to an array of various funding mechanisms that bring needed revenue to the system, but the prospects of new revenues are shaky at best. The state legislature is not exactly forthcoming with new taxes or other money.

Without making normative claims about the structure of MTA finance or transit finance in general, I have a suggestion for new MTA money based on the ideal form of taxation: taxing all foreigners living abroad. The way this would work is that all hotel rooms in New York City (average nightly rate is about $200) would be charged $5 per occupied night, and then the room key would work as a transit pass.

In New York City there are about 90,000 hotel rooms. At an 85% occupancy rate, 76,500 rooms at $5 per night will generate about $140 million annually. Obviously some of this revenue will be offset by fewer tourists and travelers buying MTA fares because the key will be their transit pass, but I suspect that the net gain in revenue will still be over $100 million each year. The fare pass can be limited to only the room key(s) so that families and groups will still have to buy some fares, and visitors not staying in hotels will still have to buy conventional fare passes. Overall this plan can raise a lot of money and is a way that tourism and business travelers can directly improve the lives of New Yorkers by making the transit system more financially solvent. This doesn't solve all of the problems of MTA finances, but will help quite a bit.

This proposal will correct current transit subsidies going to tourists. Since the MTA effectively loses money on each fare paid, tourists who use the subsidies are having some of their travel costs paid by the city and state through MTA operations. By charging travelers for their transit use through a hotel tax the travelers will be paying closer to the full cost of providing transit service.

A lack of light rail isn't the problem in Detroit

Here is a project that is helping to give light rail a deservedly bad reputation, at least as far as capital costs go. The Detroit's Downtown Development Authority just approved $9 million to help build a $120 million LRT line. The good news is most of the money for the line is privately supplied. The bad news is Detroit doesn't have the necessary conditions for LRT to succeed. The biggest problem is Detroit is shrinking, specifically the employment base is shrinking. As employment centers are the biggest predictor of transit usage, this doesn't bode well. It's also not clear if there is any residential density near the stations in order to fill the trains, and as the city is losing population this is not going to get better. I also doubt Detroit is suffering from heavy congestion.

The biggest worry is more fundamental. Why are business leaders in Detroit fighting for a partially privately funding LRT line in the first place? Not having LRT is not Detroit's biggest problem. Not enough cars probably is closer to the top of the list. Granted, Detroit sees the demise of the carmakers and wants to broaden their industries and occupations, but direct subsidies to businesses and residents is a much better way to spend money than on LRT. Detroit should focus on generative economic policies, not redistributive transportation projects.

Bad ideas in transit finance

New York's MTA has not been able to get on the gravy train of corporate sponsorship. They have been trying to sell the naming rights to the subway station closest to Citi Field, the new home of the Mets. They don't have any takers, however. That's probably for the best since it is unlikely that the name of the stadium will remain Citi Field very long. Stadia tend to get renamed every few years through mergers, acquisitions or fraud. (Remember Enron Field?) That's fine for a stadium. If Citi is replaced there won't be any confusion about where the Mets play. For a subway stop, that's bad. If the station is replaced, or worse yet, if the name gets moved, there is a lot of potential confusion. System knowledge makes transit easier to navigate. Switching station names reduces this knowledge and will likely discourage some future transit trips. I know the MTA needs to raise money, and I'm all for selling advertising on trains and within stations, but the naming rights are a bad idea.