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Rethinking Transit Fares

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Something very interesting is going on in Seattle. As the New York Times reported in a detailed Feb. 28th story, King County Metro Transit, which operates buses, rail lines, and passenger ferries, has begun charging low-income riders just $1.50 per trip, which is more than 50% off peak fares. The idea of two-tier transit fares—often referred to as transit vouchers for low-income riders—has been around for decades. But the apparent difficulty of deciding which riders qualify, and limiting the discounts to them, has been a stumbling block.

King County has introduced smart-card technology and an aggressive outreach effort called ORCA Lift. Lower-income people can sign up at public health clinics, food banks, community colleges, and other locations. People who can verify their income receive an ORCA Lift smart card that works like a regular transit pass, but is coded to charge only $1.50 rather than the regular fare. The goal is to sign up large numbers of eligible people, making transit more affordable for them.

Times reporter Kirk Johnson did some digging and found out that the Muni system in San Francisco 10 years ago began a similar discount-fare program called Muni Lifeline, but it has only 20,000 participants, out of 330,000 daily riders. And Greene County, Ohio, near Dayton, has recently begun a transit voucher program, working with social service agencies to distribute them to their clients. But the Seattle program aims for much larger participation than either of these.

Two-tier transit fares are a breakthrough idea. Ever since city and county governments took over the operation of transit systems in the 1960s, their services have been priced largely to be affordable to low-income riders, which is why transit farebox revenue in most systems now covers less than one-third of operating costs (and none of the capital costs). Yet the demographics of systems like BART in San Francisco, Metro Rail in Washington, DC, and much of the New York subway system are hardly those of low-income people. Large fractions of their riders are middle-class and middle-income (or more), and could clearly afford to pay several times the rates currently charged. Compared with just the out-of-pocket costs of driving and parking, a three-times-higher transit fare would still be a great deal.

I reported last August on a provocative Citylab piece by Columbia University’s Rohit Aggarwala, titled “Why Higher Fares Would Be Good for Public Transit.” He illustrated the point with some very large numbers about how much the New York subway and bus system could invest in capital improvements if its farebox covered 100% of operating and maintenance costs. Along similar lines was another 2014 Citylab piece by David Levinson of the University of Minnesota, “How to Make Transit Financially Sustainable Once and For All.” He offered seven points for a complete revamp of transit finance, including charging fares that would cover 100% of operating costs and using land value capture to cover part of capital costs.

A critically important part of both prescriptions is to end welfare-pricing of transit service. Standard fares should be substantially increased over time, as service levels are improved, while transit vouchers like Seattle’s new ORCA Lift keep transit affordable to those with low incomes. Seattle has now taken the first step; now let’s hope political leaders in King County have the courage to increase “regular” transit fares closer to a cost-recovery level.

(This article first ran in the May issue of Surface Transportation Innovations)

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