Home Fare Hikes On congestion pricing, service cuts and user fees

On congestion pricing, service cuts and user fees

by Benjamin Kabak

OldMTANYCTlogo Micheal Bloomberg, our third-term mayor who campaigned into office on the back of a platform of transit reform, has been noticeably silent as the MTA’s finances have come crashing down over the last ten days. He hasn’t pledged more support for the beleaguered transit agency, and although his appointees on the MTA Board have vowed to vote against the service cuts, that is largely a symbolic moved aimed to shore up support amongst parents who are dreading the end of the Student MetroCard program.

Yesterday, Bloomberg broke his silence in a way. While at the climate talks in Copenhagen, the mayor stressed the need for congestion pricing in New York City. “I don’t think that congestion pricing and those kinds of things are dead; more and more cities are doing it,” he said while on with CNBC’s Squawk Box. “Next time, come March, [the legislature is] going to have to balance a budget, and I think any kind of revenue source is going to be on the table, and it may in fact still get done.”

Later on, the Mayor tied his congestion pricing plan to the MTA’s current financial woes. Although he didn’t offer up anything more than an “I told you so” comment, he has a point. “You see all of the cutbacks in the MTA budget. The MTA has got to find another source,” he said. “If we had done congestion pricing two years ago, perhaps they wouldn’t be in this situation.”

The Mayor’s comments led me to some thoughts on user fees and service cuts. In the parlance of those who study economics and society, user fees are as they sound: They are charges — fees — of use for public goods. Congestion pricing is a user fee because it is a charge levied on drivers who use the roads, contribute to congestion and bad air quality and lead to overall reduction in economic efficiency in transit-focused areas. Subway and bus fares are user fees because they are charges levied against those who ride public transit. The money is, in part, used to offset the costs of operating the system or, as in the case of congestion pricing, used to offset the societal costs of unnecessary driving.

With user fees, those being charged can oftentimes pass along the costs. If the city were to institute congestion pricing, people who have to drive — delivery vehicles, plumbers, taxis — can simply charge those who are relying on their service for the fees. A plumber based in Williamsburg who makes 15 calls a day — say, seven in Brooklyn and eight in Manhattan — can raise his rates slightly per customer to cover the planned $8 congestion fee. Implemented properly, user fees should maximize the societal benefit from the use of public goods.

The MTA has another option when it is faced with a legal mandate to balance the budget. It can hold user fees steady but provide less service for the same price. Since the agency has promised not to raise fares this year, their only choice is to cut what they offer. Does this, I wonder, make sense?

As a transit-based city — the “most transit-dependent city in the country,” as Andrew Albert said — we as a society are better off with more service. (In fact, that is the beauty of the MTA’s capital budget, but more on that later today.) As a 24-hour city, we need the trains to run efficient service patterns that minimize transfers and waits. We need the buses to provide service where the subways do not and cannot run. We can’t afford to see longer wait times, more crowded trains and fewer buses. We are a service-dependent city used to paying user fees for a barely acceptable level of that service.

In the end, this digression leads me to one conclusion: I would prefer a fare hike — or better yet, congestion pricing — to cover the MTA’s current budget gap while the service cuts are pushed off the table. I will continue to advocate for the end of the MTA’s subsidies of the student MetroCard program; that is very much the city’s and state’s responsibility to fund. But in terms of increase midday headways and reducing weekend service, I will advocate for user fees instead. It might cost us a few dollars more, but it is an investment well worth it for the financial well being of the city as a whole.

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22 comments

MTA Mythbusting: back again « On Transport December 16, 2009 - 2:30 am

[…] Now, enjoy this newly-updated version, which still includes some myths about bridge tolls and congestion pricing, since Bloomberg now indicates that it might be on the table again. […]

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rhywun December 16, 2009 - 7:19 am

Sheldon Silver just appeared on my television responding to Bloomberg’s remarks by reiterating his support for the tiny minority of his LES constituency that drives everywhere and claiming that “closing parts of Broadway has caused congestion”. I have to wonder if such mendacity is deliberate or just a result of being completely out of touch after decades of nearly unopposed power.

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Scott E December 16, 2009 - 8:38 am

That MTA Mythbusting article listed beneath the comments is dead-on. It’s a shame the only ones reading it are those who are already “in the know”.

User fees are good – to an extent. And we’ll always argue over fare structures (should occasional riders pay more than frequent ones?) But like every other source of revenue for the MTA, it’s not fixed. A dedicated source of revenue (which isn’t rescinded two weeks before the budget is due) is necessary. Transit in this region is like highways everywhere else, and should be funded the same way.

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Streetsblog New York City » Today’s Headlines December 16, 2009 - 9:27 am

[…] Bloomberg: Sooner or Later, Albany Will Revisit Road Pricing (Observer, News, NY1, SAS) […]

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Eric F. December 16, 2009 - 9:46 am

Isn’t the fact that fares don’t cover operating expenses the entirety of the problem? If fares = operating costs you’d have no deficit, and the MTA wouldn’t be a huge drain on very other part of econoic activity in the state by virtue of the taxes imposed on everything New Yorkers do to subsidize it. Just a suggestion.

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AK December 16, 2009 - 10:12 am

“MTA wouldn’t be a huge drain on very other part of econoic [sic]activity in the state.”

The obvious response to this is that without the public transit system of NYC, the state’s economy would fold like a deck of cards.

However, more substantively, I’ll make you a deal, Eric. F. As a subway/bus user, I will be willing to pay for 100% of the MTA’s costs via fares if you agree to pay 100% of the costs of operating motor vehicles. I won’t pay a cent for your road repairs, bridge maintenance, environmental cleanup, and medical expenses that come with choking our atmosphere with carbon emissions, and you won’t pay for a cent of my transit needs either. Sound good?

In all seriousness, if you wanted this plan, the fees/taxes on automobile use would have to skyrocket, given the enormous social costs associated with driving. Under your “pay-for-what-you-use” plan, gas would cost way more than $3/gallon, as well.

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Andrew December 16, 2009 - 10:33 pm

No, the subway doesn’t recover its operating costs from the farebox – but it comes a lot closer than the streets above the subway do.

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Today’s Headlines | NYC No Fee Apartment Rentals December 16, 2009 - 9:51 am

[…] Bloomberg: Sooner or Later, Albany Will Revisit Road Pricing (Observer, News, NY1, SAS) […]

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JL December 16, 2009 - 10:20 am

Instead of calling it a user fee or even a tax lets call it what it really is, a price on a service. Road pricing does more than put a cost on negative externalities such as pollution, it also puts a real cost on road use. In Manhattan it is nearly impossible to build high capacity roadways given the high cost of real estate and the high density of people. So therefore the city is left with what it has, a limited amount of road capacity and a massive subway system.

From there the logical step would be to charge to use either form of transportation based on demand. That is why congestion pricing was purposed, because driving on the streets of Manhattan are otherwise free. This is also why Jay Walder proposed reduced subway fares at night, because demand is so low during the evening. It’s time for New Yorkers, and America for that matter, to wake up and realize there needs to be a new way to fund and price our infrastructure. Otherwise we are going to be on a long and bumpy road to the bottom of the economic market.

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Jordan December 16, 2009 - 11:09 am

I probably will offer up a unpopular view, but here it goes anyway.

I don’t believe in subsidies in 99.9% of cases because they are inherently inefficient. I agree with Ben, the student fares should be ended immediately. The whole argument that students will skip class because they don’t want to pay the fare is a personal choice and personal responsibility. If they deem the costs of the fare to outweigh the benefits of the education, so be it. It’s not the common person’s problem or decision to make for them. I disagree with Ben that it is the city or state’s responsibility to fund and rather the student’s responsibility to fund.

Congestion pricing is a terrible idea. It takes money out of people’s hands for no acceptable reason. The city would have to impose an astronomically high fee to drive during certain hours in certain areas to have any real impact on congestion. And for those goods and services that rely on transport during those times in those areas, the fees would just be passed along to consumers. It raises the prices for everyone and provides marginal benefit, if that. It’s obviously in most of our interests to have the congestion pricing since we probably don’t rely on car trasportation (following a public transit blog and all), but we all will feel the costs in one way or another.

If we want to make the subway system a public good, which it technically is not, then we as a society need to make it as accessible to everyone as possible. There are two ways, to balance the budget by raising fares for all users and subsidizing those who are priced out of it due to budget constraint or to cut the fat to minimize fares. Personally I’m in favor of a cut the unnecessary spending at the Albany level and paying by consumption approach, but I understand that there are those that would disagree with that.

The reason I don’t want a fare hike is that I personally distrust the MTA/Albany. I don’t believe both parties will hold up on their ends of the bargain. Albany will surely just cut funding further sooner rather than later and the MTA will still inconvenience me too often than I deem acceptable by either have delays, doing maintenance at inconvenient times, or altering service in one way or another. If I pay more, I want my service to improve, and clearly through a fare hike right now, service would just remain the same. But again, that’s more personal.

Either way, something needs to be done because cutting service benefits no one.

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Eric F. December 16, 2009 - 11:37 am

“The obvious response to this is that without the public transit system of NYC, the state’s economy would fold like a deck of cards.”

Ok, but isn’t that true about our phone system, our electricity system, our gas systems? But all of these are provided without subsidy. The government targets a few people for hardship subsidies, but there is no general subsidy for the use of these factors, and in fact their use is heavily taxed (in part for the MTA!).

“However, more substantively, I’ll make you a deal, Eric. F. As a subway/bus user, I will be willing to pay for 100% of the MTA’s costs via fares if you agree to pay 100% of the costs of operating motor vehicles.”

No problem. I use both, and think that it’s silly that I am taxed through the nose to drive over the Throgs Neck Bridge in order to subsidize my ride on the 7 Train.

“choking our atmosphere with carbon emissions”

I’d ask that you reacquaint yourself with grammar school science. “Carbon” is short for carbon dioxide, which is a non-toxic gas that you create in your own lungs when you breathe. If you want to choke while walking down the street, walk by a bus stop.

“fees/taxes on automobile use would have to skyrocket, given the enormous social costs…”

That assumes an anti-car bias. What you see as a social cost, many millions see as a vital mobility device. I’m glad you don’t own or ever use a car, but many of us use cars as a critical part of our lives.

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Benjamin Kabak December 16, 2009 - 11:48 am

If you could please use the reply button to respond to someone else’s comment, I’d appreciate it. It makes these threads easier to follow.

Anyway, you can’t argue that in New York City driving a car doesn’t carry a huge social cost; it most definitely does. It does in the form of increased asthma rates around high-traffic areas. It does in the form of lost economic productivity due to high rates of congestion. It does in the form of the high costs of road maintenance.

You’re talking about driving over the Throgs Neck Bridge when numerous transit options exist to get from point A to point B. You choose to drive, and you penalize everyone else for it.

For those people that do not choose to drive and have to drive due to business, as I wrote above, those people can pass the costs along to customers. Millions of people live in New York simply because they don’t want to use a car as a “critical part” of everyday life. Those they do choose and the rest of us pay a cost.

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Eric F. December 16, 2009 - 12:27 pm

“It does in the form of increased asthma rates around high-traffic areas.”

I just don’t buy that. Vehicle emissions have gotten way more benign over the years. I remember smelling the fumes under the apartment buildings headed to the GWB, when I was a kid. Those fumes could knock you out. Now, I can drive with the windows open through the Hollan Tunnel and not smell a thing. The air quality in this area is better than it’s been in 50 years, not worse. If asthma rates are increasing that cannot possibly be a response to vehicle emissions. Further, those emissions will only decrease in future years as mileage improves, emission controls improve and older vehicles are retired.

Under your analysis, you’d think that a neighborhood with a bridge approach, ringed by the Clearview Expressway and Cross Island Parkway and sliced by the L.I.E. would have awful health problems and would be a terrible place to live. Yes, I’m describing Bayside, Queens, and if we hit the lottery maybe we could afford a house there.

“Lost opportunity due to congestion” is circular. We have not added capacity and we are suffering for it.

“You’re talking about driving over the Throgs Neck Bridge when numerous transit options exist to get from point A to point B. You choose to drive, and you penalize everyone else for it.”

It is not realistic to say that there is another way for a family to go from Elmhurst to Fairfield. People use that bridge because they have to.

It does in the form of lost economic productivity due to high rates of congestion. It does in the form of the high costs of road maintenance.

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Alon Levy December 16, 2009 - 6:09 pm

I just don’t buy that.

Complain about it to Greg Mankiw, who computed in 2003 that a carbon-balancing externality tax would come out to $1/gallon, and a pollution-balancing tax would add $2.21/gallon. There are more costs of cars – one environmental study in 1999 concluded that to balance military protection, pollution, and social costs of sprawl, gas taxes would have to rise between $5 and $15 per gallon, depending on one’s assumptions.

Per-vehicle pollution is going down, but overall VMT driven had been going up until 2000, which more than made up for efficiency gains and pollution reductions.

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AK December 16, 2009 - 12:37 pm

I am not one to get in grudge matches, but given a personal attack, I’ll respond with three quick points.

1. Grammar school science? You are kidding, right? CO2 is literally destroying our atmosphere. There is really no debate over this (unless you believe Sen. Inhofe (R-OK) and his band of science-denying loyalists). See: http://www.carbonemissions.com/ for more information. It isn’t hyperbole to suggest that carbon emissions pose the single greatest threat to man’s survival (with the possible exception of nuclear warfare).

2. Our phone, electricity, and gas systems are MASSIVELY subsidized by the Federal Government. How? Well, for starters, the phone networks are satellite based and took full advantage of NASA technology/launch pads to send satellites into orbit. Who tracks the satellites and makes sure they aren’t struck by orbital debris? Thats’s right, NASA, at the cost of the taxpayer. As for electricity, the Stimulus alone provides $61 billion for energy production and dissemination, including $11 billion for the creation of a Smart Energy Grid. Last but not least, Gas/Oil industries are subsidized by huge grants for research, safety, etc. For example, the Feds, under the Natural Gas Pipeline Safety Act of 1968, provide over 80% of the costs for ensuring the safety of pipelines. The Stimulus has provided $6.7 billion for a pipeline project, which extends 1,679 miles from the Rocky Mountain region in Colorado, through parts of Nebraska, Kansas, Missouri, Illinois, Indiana and ending in eastern Ohio.

The industries you cited are the beneficiaries of massive government subsidies.

3. You are right about one thing: I have an anti-car bias. I disapprove of a method of transportation that is environmentally unsound, harmful to public health, geopolitically disruptive, and significantly more dangerous than other transit options (planes, trains, ships). Obviously cars have wonderful qualities– after all, who doesn’t like door-to-door service! But the social costs, borne all too often by the poorest of the world’s population, are far to great to justify the convenience.

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Eric F. December 16, 2009 - 1:44 pm

1. CO2 emissions don’t “choke” anything. If you think we all must ride trains to save us from the global warming, fine, but our air quality has zilch to do with carbon dioxide. You breathe out carbon dioxide into the faces of your family and friends when you speak to them.

2. NASA? That is really unpersuasive and unresponsive. Why is the MTA treated differently than other public utilities. I really don’t get it. We’d do better if the subsidies were targeted to poor riders, outside of the MTA’s own fare setting process, and not by indiscrimiately subsidizing rides.

3. Right, you hate cars. I assume you don’t own one and never use one. Excellent. Most of us, however, don’t want to live that way, because it’s a lousy way to live.

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Benjamin Kabak December 16, 2009 - 1:56 pm

I’m not going to further insert myself into this argument over hating cars vs. finding them useless in the city. But I want to point out something. The majority of households in New York City are not car-owning house holds.

The 2000 census found that 54 percent of New York City households are not car-owning house holds. In Manhattan, 78 percent of households are car-free; in the Bronx, 60%; in Brooklyn, 54 %. Queens (34 % car-free) and Staten Island (20 % car-free) are the only areas of the city where car owners are in the majority, and not coincidentally, those two boroughs sport some of the least transit-accessible areas in the city.

Most of us, I’d say, do want to live car-free in New York City.

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Eric F. December 16, 2009 - 2:34 pm

Ok, so about 1/2 of Brooklyn households own cars, 2/3 of Queens residents own cars, and 4/5 Staten Island people have them. Sounds pretty useful to me.

“Most of us, I’d say, do want to live car-free in New York City.”

I don’t think that’s true even if you confine New York City to Manhattan. But, Mr. Kabak, it would be quite conceit to think that you don’t “use” a road network simply because you don’t own a car. I don’t have a thing to do with the port facilities in Elizabeth, but I most certainly “use” them. You use the road network every day just by living a modern life in this city.

You also live at the center of a region of 20 million people — a region in which NYC is increasingly an impassable roadblock to regional commerce due to a transparently antiquated and underbuilt road system (in much the same way as its airport system had managed to cause problems for flight delays across virtually the entire country). This is not an island, at least not figuratively.

AK December 16, 2009 - 2:43 pm

This is actually a very good point, Eric. I agree that we (the non-car owners) do “participate” in the road network in the way you imply.

I would argue, only, that transit advocates would most likely prefer an arrangement where more train tunnels are constructed into/around Manhattan (one just broke ground last week, another cargo tunnel is in the engineering stages), rather that Moses-style superhighways.

Benjamin Kabak December 16, 2009 - 2:45 pm

But, Mr. Kabak, it would be quite conceit to think that you don’t “use” a road network simply because you don’t own a car. I don’t have a thing to do with the port facilities in Elizabeth, but I most certainly “use” them. You use the road network every day just by living a modern life in this city.

My family is one of the 23 percent of Manhattan households with a car. But the four of us who have access to it use it generally just to leave the city for areas that don’t have public transit. It’s not really a conceit at all. I certainly understand the role roads play for essential functions in the city and the need to have them. No one is denying that. You seem, at least in your comments here, to be conflated nonessential and essential driving without allowing for the costs driving exacts on the residents of the area.

As for “impassable roadblock,” that’s due just as much to the fact that too many non-essential vehicles are on the road as it is to our supposedly antiquated and underbuilt road system. As history has shown time and time again, more roads simply leads to more congestion. Building more roads never alleviates congestion. Adding fees that deter non-essential driving and that essential driving can pass on to consumers is what works to clear up that roadblock.

Alon Levy December 16, 2009 - 6:11 pm

Half of Brooklyn households own a car, but most own just one car, not three. Even Queens has about half the vehicles per capita ratio of the US.

AK December 16, 2009 - 2:02 pm

1. You are right, “choke” was the inopportune verb choice. I was using choke with regard to all the emissions cars produce (CO2, which destroys the atmosphere, and other emissions which lead to air pollution).

2. How is NASA unresponsive? The use of NASA technology is a titantic subsidy for the telecommunications industry. But, if you don’t see that, here’s another subsidy the government provides: Universal Access Fees–> http://www.entrepreneur.com/tr.....05655.html

3. If you want to live that way (with cars), fine. Just pay your share of the social costs that come with your decision, which right now, drivers most certainly do not.

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