Aug
18

A premature promise on fare policy

By

The Port Authority’s recent announcement of a steep fare hike has made New Yorkers in the region jittery. They worry about the precedent the PA might set. They worry that if one organization starts raising fares to cover the costs of badly-needed capital programs, another might follow suit. The MTA’s great discounted fares could perhaps go up.

The MTA, though, wants to head off this talk before it starts. As Newsday’s Alfonso Castillo writes today, the MTA has again proclaimed that it will not raise fares before 2013 — a condition it agreed to when Albany approved the payroll tax.

Playing off a report released this week by the American Public Transportation Association which explored how nearly 80 percent of transit agencies across the country had to turn to fare hikes or service cuts to fill budget gaps, Castillo asked the MTA of their upcoming plans. The authority pointed to its recent budget and said “no new fares” in no uncertain terms.

“The MTA has obviously been hit very hard, along with transit agencies all over the country, by the economic crisis. It had an impact on our funding in all sorts of different ways and led us to take some painful actions in the past,” agency spokesman Jeremy Soffin said to Newsday. “I think the important point for the MTA now is that, because of an unprecedented cost-cutting effort that began in 2010, we last month put forward a financial plan that shows stability.”

It’s all very well and good that the MTA has found some semblance of financial responsibility as it inches toward stability, but I’m not convinced it should discard the idea of a fare hike so quickly or prematurely. Despite the fact that straphangers complain about, well, everything, the MTA’s current fares simply aren’t that high. I don’t like paying $104 for my 30-day MetroCard, but I recognize that, if I ride a lot as I usually do, it’s a very good deal. According to recent data from the MTA, while the base fare is $2.25, the average fare after bulk discounts has been around $1.62 lately. In constant 1996 dollars, that’s an average of $1.09 while we paid $1.38 15 years ago before the advent of the unlimited ride card.

Essentially, then, the MTA is undercharging for its services. While it should try to keep fares low in order to encourage higher ridership, it’s also sitting on a veritable gold mine. As recent fare hikes have shown, the MTA doesn’t lose riders when it raises the fares. It’s popularity is seemingly based solely on the city’s employment rates, and it likely wouldn’t see a revenue loss even in the event of a steep fare hike.

So now, we come to the denouement of this whole thing. The MTA needs money to fill its capital budget hole, and it also knows that its current budget proposals rest on a shaky set of assumptions. Instead of promising to keep fares low, it could put more pressure on politicians by threatening a fare increase. If the agency says inaction from Albany has left it no choice, it will be tough for politicians to use the MTA as a whipping boy as they so often do during fare hike debates. Maybe some politicians will even be held accountable for eschewing sensible transit policies.

Ultimately, the PA’s ongoing budget debate can serve as a bellwether for the MTA. If one agency can get away with raising its tools and fares so steeply, why can’t the other? After all, fares are the one source of revenue the MTA truly controls, and if it needs more money, it can just up the price of its services as every other business does.



Categories : Fare Hikes

32 Responses to “A premature promise on fare policy”

  1. Joshua says:

    What’s the farebox recovery percentage of the NYC subway system – and how does it compare to rates historically and to other cities?

    My understanding is that the recovery rate is pretty high compared to other cities, but actually somewhat low compared to what it was a decade or so ago.

    • Bolwerk says:

      Seems about 33% in 2009. The way it was explained to me in a usenet posting: if you look at NTD data (NYCTA 2009 in PDF here), add up operating expenses plus capital expenses and divide from revenue. The percentages are farebox operating ratio and farebox recovery respectively.

      Mode              Revenue       OpEx                      CapEx            TotEx
      Bus                 821               2,289        35.9%    349                2,638  31.1%
      Heavy Rail      2,246            3,313        67.8%  3,474               6,787  33.1%
      Demand Resp      12    441   2.7%     20    461    2.6%

      (Apologies for the messy table. WordPress doesn’t allow real HTML tables, or that’d have been prettier.)

      I don’t have any historical rates handy, though you can look at NTD yourself to calculate other cities in the USA.

      • ant6n says:

        Does it make sense to count capital expenses towards fare recovery ratio? It seems that Bus+Rail have a fare recovery on operations of 55%.

        • Bolwerk says:

          Well, at least according to Alon Levy, that’s the definition, so yes. I didn’t know that myself until he mentioned it. FWIW, the above seems to jive with what little information on the ratios the MTA does provide on its web site. The 55% you’re referring to is the farebox operating ratio, not the farebox recovery ratio.

          • Alon Levy says:

            Farebox recovery is not about capex; it’s about opex plus depreciation. In other words: capex today gets assigned as depreciation costs over its lifetime in the future.

            • Bolwerk says:

              That’s what I said. From what I was told on usenet that’s exactly what the CapEx column covers. Here is the post. FWIW, the poster who responded to me is generally regarded on there as pretty knowledgeable about financial accounting in general. I only took one grad-level course on it in my life, which leaves me pretty ignorant of it overall.

              (The first-level of quoted text is me. I read the source of a reference for the ratio in a rush, so I got it pretty off.)

  2. Alex C says:

    As the MTA builds and expands more free transfers and expands the system (7 to Javits, 2nd Ave…haha, can’t type that second one with a straight face), that fare is going to need to go up to just cover the extra service made available.

  3. Eric says:

    Until all other funding options are realistically explored, I’m very hesitant to agree with this. New York is already the most expensive city in the country in which to live; I’m not sure making it more expensive is a valid solution when many others exist.

    • Bolwerk says:

      New York is only the most expensive city in the country if you insist on living like a suburbanite. Live in a modest apartment in Brooklyn or Queens, drop the car, and depend on public transportation – then New York suddenly isn’t so expensive. I share a railroad unit with someone else, and we each pay well under $1000/month in rent. We’d be paying even less if I didn’t have a private backyard. With utilities and rent, my living expenses might be $800/month plus food. Many suburbanites probably spend $800 on a car or two.

      • bolwerk answerer says:

        Oh you have enlightened us, yet again, with your infinite wisdom. Thank you so much!

      • Eric says:

        This is a ridiculous statement. I love that “under $1000″ rent for a shared railroad is considered a great deal.

        The fact of the matter is, New Yorkers spend one of the highest proportions of their income on housing. Utilities are higher here. Health care is higher. Child care is higher. About the only thing that isn’t higher is groceries.

        Living here is expensive.

        • Bolwerk says:

          Hey, I didn’t say it wasn’t expensive. It’s not anywhere near as expensive as living in hordes of other places, unless you’re insisting on picking the most expensive part of Manhattan or using a lot more space than you need. Yes, New Yorkers spend a very high proportion of their income on housing. You know what they spend a low proportion of their income on? Transportation, and it makes a huge difference. I agree utilities are expensive, but that’s at least partially offset by lower energy consumption – which is why living in a large city is so environmentally friendly.

          And yeah, the railroad is a good deal. If I had no roommate, which I could dispense with if I wanted, it’d still be a better deal price-wise than a house in the suburbs. Maybe the only downside is I don’t/can’t own it, but I personally don’t see that as a downside.

        • Alon Levy says:

          Are utilities higher per capita, or just per kWh? New Yorkers have much lower energy consumption than the national average, which means per-kWh rates are not that useful.

      • Justin says:

        You can’t even fund a studio for $1000 in the worthwhile parts of Queens and Brooklyn (the parts that are a short distance from Manhattan, where many people have to commute to). And by the way, not everyone wants to live with roommates until retirement, some people would like to have families or otherwise be able to have their own places.

        So where in the outer boroughs are you living, Bolwerk? East New York? Jamaica, Queens? Ocean Hill? Corona? Do you have to dodge gunfire on your way to the public transportation? Because to be honest, that’s the only way you get cheap housing in NYC, unless you and your roommate are living in someone’s basement in a neighborhood like Bayside.

        The MTA would also have to consider unemployed people, or people who work part time. Raise the fare to $130 a month or $150 a month, and these people feel pain.

        • Bolwerk says:

          I probably won’t replace my roommate, but I don’t really mind having one for now, even if I don’t strictly need one. In fact, I have one precisely because it allows me to save more. If I wanted a family (I don’t), the unit I have now would be pretty good for that anyway. And if, when you do want a family, you can always move somewhere that fits the brood. It’s silly for a typical single twentysomething or thirtysomething to spend several times more than necessary if s/he is anticipating a family down the road.

          It’s easy enough to find sub-$1000 studios and even 1-bedrooms in Astoria, Sunnyside, Woodside, Ridgewood, Greenpoint, parts of Bushwick, more distant parts of Williamsburg, or the North Shore of Staten Island. All are ~30m or less to Manhattan. Maybe they’re more expensive these days, but Boerum Hill, Fort Greene, and even some areas around Prospect Park all probably have similar deals. If you can stand a somewhat crappier commute, Forest Hills, Elmhurst, Clinton Hill or even Glendale, Middle Village, or Maspeth should satisfy your need to avoid all the gunfire you heard about on TV.

          Simply put, there are hyper-expensive living situations to be found, and you can argue that things could/should be cheaper for the lower/working/middle classes. But [living expenses + transportation expenses] in New York just aren’t that high unless you force them to be.

          • Eric says:

            So if you’re a single twentysomething with no kids you can make New York work (barely). Okay then.

            • Bolwerk says:

              Barely? You quite objectively do a lot better than you do in many other metropolitan areas. And there is no reason why the advantages of living in NYC are restricted to single people in their 20s/30s.

              I’ll concede that having two kids changes the calculus, but even then whether you can live comfortably in New York depends very largely on your expectations. If you just need a bedroom to share with your spouse and a room for your kids to share, you still aren’t approaching the costs of a mortgage plus car expenses – and the additional likelihood of needing a commuter rail pass – in much of this region.

              If you need a backyard, driveway, two cars, living room, dining room, large kitchen, and a bedroom for each possible kid, by all means consider the suburbs. Just expect to pay more to survive than many New Yorkers.

              • Justin says:

                Dude, there are no one bedroom apartments in Astoria under 1000. NONE. I’ve looked for apartments recently in that area. Ditto for Sunnyside, Woodside, Greenpoint, etc. Telling the truth isn’t a strong point of yours.

                As for people in their 20s and 30s easily making it in NYC, NYC is a revolving door precisely because many people in that age bracket cannot cut it out here (but more will always arrive).

                • Bolwerk says:

                  Eh, I don’t see how $1000 is a magic number anyway, but you picked it. You should inform my girlfriend she’s underpaying. Silly lady seems to think she leased a 1-bedroom in one of those neighborhoods just last year for $950. Ditto for a colleague who got a 2-year lease on the ground floor 1bdrm of an apartment building near Astoria’s Broadway ($975/mo, but in the interest of honestydisclosure I’ll mention the “bedroom” is almost a closet). They’re obviously being scammed. Dude.

                  Now, I didn’t say it’s easy to get a sub-$1000 1bdrm, but it’s sure as hell possible. And yes, New York is a revolving door – I never said it wasn’t. Instead of accusing me of lying, try to examine the reasons. Housing could be a factor, but add transportation and housing together and the high housing prices argument just plain falls short. You even seem to to half realize it yourself when you say many in the 20s/30s crowd “cannot cut it.” Why do you suppose that is?

          • ajedrez says:

            No way is the North Shore 30 minutes to Manhattan. You’ll be lucky to hit 30 minutes if you live right by the ferry AND are able to time yourself to catch one.

            I mean, if you live near the Verrazanno-Narrows Bridge, you can catch an express bus to Manhattan in about 20 minutes, but that’s not the “true” Notrh Shore.

        • Evan says:

          I agree that finding a cheap apartment in Queens is quite a chore. However, I would like to dispute a few points of your comment.

          I live in Corona, and it should be said that you can pay over $1000 easily for most apartments in the neighborhood and surrounding areas (Elmhurst, Rego Park, Forest Hills). Central Queens is experiencing a housing boom, probably because of the recent opening of a new mall (Rego Center II) which has become very popular, and now joins three equally popular malls (Queens Center, Queens Place, and the original Rego Center). It could also be that people being priced out of Western Queens and Manhattan see this area as the next best thing. Also, keep in mind that the neighborhood is next to one of the biggest parks in Queens. Whatever reason it is, one thing is clear: though it may have been cheap 10-20 years ago (and according to those who have lived here since the 70’s it was), that is far from the case now.

          Don’t believe me? Go here:

          http://www.zillow.com/homes/fo.....w-York-NY/

          Furthermore, though I’m not sure this was your intent, your comment gives the impression that Corona is the home of constant gunfire. Does Corona have crime? Admittedly, yes, at times there is. However, which neighborhood can really say they’re immune to crime? From the Upper East Side (the groping incidents) to East New York, all of New York is susceptible to crime, and any one of us may encounter gunfire (or any crime) in the place we least expect.

          • Justin says:

            Corona has LeCrack City in it, oops, Lefrak City. But otherwise, your points are noted, it has become a lot more expensive and a market rate apartment even there is well over 1000 if its an one bedroom. And yes, I know about the expansion of the Queens Mall and the new Rego Park Mall (plus in Elmhurst you have the conversion of the Stern’s building into a mall)

            • Bolwerk says:

              Almost any neighborhood that is broadly regarded as “dangerous” seems more to have a narrower sub-neighborhood that is where the actual trouble lies, even Bed Stuy (Chauncey Street recently made the news) or East New York.

      • SEAN says:

        Too your point about living like a suburbanite, there’s a development in Queens called Arverne by the see http://www.arvernebythesea.com. This one of the largest if not the redevelopment projects of it’s kind anywhere in the US.

        A few things my turn some people off such as being in close proximity to JFK, current lack of nearby retail other than Stop & Shop or dencity of the neighborhoods among others. However there’s a 20-year property tax abaintment.

        I thaught the project was interesting, but Forest Hills Gardens is better located for transit users, the shopping is nicer along Queens Boulevard, Austin Street & 71st Avenue.

        Despite the higher priced properties in FHG, once the abaintment is removed, the property taxes very by only $2500 or so.

        Just to be clear if I wasn’t before I was comparing townhouses to townhouses & not single family residentses.

    • Tsuyoshi says:

      The money has to come from somewhere. If you increase either fares or taxes, you increase the cost of living.

      You could argue that increased funding for the transit system would make the city more affluent. The likely scenario is that increased funding leads to better service, better service leads to more middle class people ditching their cars and moving to the city, and more middle class people (and fewer poor people, if we are being honest – new housing construction in this city is scarce) means a more affluent city overall.

      What we’re really talking about is a transit system that aims to serve the middle class instead of the poor.

  4. Bolwerk says:

    We heard about the PANYNJ being threatened with a bond rating downgrade, but could the PA be hedging against future inflation? Just a possibility, but at the very least interest rates are staying low for the foreseeable future, and it’s at least possible that governments will, despite resistance, encourage inflation to reduce the burden of public and private debt. If the PA radically increases fares/tolls before that happens, it’s kind of like getting some additional buying power up front.

  5. Dan says:

    Every person that whines about the fare increases and “how high the fare is” should take a trip to another part of the country like DC, which charges based on distance, like many other transit systems. It’s only cheap for a short 2-3 stop ride, but if you travel the equivalent of going from Brooklyn to Manhattan, the fares can easily jump up to $4 or $5. NYC has a fixed flat rate fare that can get you anywhere in the city.

  6. jj says:

    They should make it $4 each way now , so that all the projects are funded for the inevitable overruns and delays

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