Home Fare Hikes Specter of the 5¢ fare haunts the current fare hike debate

Specter of the 5¢ fare haunts the current fare hike debate

by Benjamin Kabak

The news flew fast and furious yesterday following the Spitzer press conference and the MTA’s announcement that they would be scaling back the fare hike. When the dust settled, Elizabeth Benjamin at The Daily News’ Daily Politics blog came away with steller coverage. She had three posts — here, here and here — with reaction from, respectively, those praising Sptizer, those who think he didn’t go far enough and Mayor Bloomberg.

With all of this information flowing our way, it’s easy to lose sight of what mattered in the day’s news. The bottom line is that the public came away with something of a victory as the MTA announced it would keep the base fare at $2; scale back increases on Unlimited Ride Metrocards and toll increases; and probably throw out plans to implement peak and off-peak fares on New York City Transit-controlled buses and subways. I see three things wrong with this outcome, and the last culminates in an analogy to the five-cent fare, a historical era in New York transit that still reverberates today.

Who benefits from this decreased fare hike proposal?

Not as many people as you would think. As Chris noted, this fare hike announcement is basically a political gambit. Only about 10-15 percent of riders pay a full fare of $2, and the vast majority of those riders are tourists in from out of town who don’t know any better. The average subway rider, after pay-per-ride discounts and Unlimited Ride Metrocards, pay a fare of about $1.31, and that’s about to go up.

The MTA is still going to raise fares on everything but the base fare. So the rest of us will be saddled with a fare hike. And you know what? That’s not a bad thing. You’ll see why soon.

Where did this extra money come from?

Over at NY1’s The Call Blog, New Yorkers are mocking the MTA for magically “finding” $220 million that can be used to stave off this fare hike. The writers and those folks who got through to the show this evening make it sound as if MTA CEO Lee Sander found the money in bundles under his mattress. If only it were that simple.

As the MTA noted earlier today, this additional money came from four sources: higher-than-expected ridership ($60 million); a real estate tax windfall ($60 million); underspending ($60 million); debt service costs ($40 million). The debt service costs went down because the U.S. economy is tanking. Thus, the real estate tax windfall is going to disappear at some point in the not-too-distant future.

So now all of those folks at NY1 should be able to understand how the MTA came to possess $220 million more than they originally anticipated. It doesn’t take Alan Greenspan to understand that an agency looking to grow and provide for a healthy economic future cannot be left in the position of relying on end-of-the-year windfalls that may not always materialized. But that’s just where the MTA has been left today.

So what does all this have to do with the 5¢ fare?

Well, it starts with a statement from New York Assembly Speaker Sheldon Silver. “Governor Spitzer and I, along with my Assembly Majority colleagues from the metropolitan area, agree that the $2 fare should be saved. The Governor this morning also acknowledged something that I have been saying all along – that there is a need for additional state resources for the MTA,” he said. “I will continue to fight for those additional resources, so that there is no added burden on straphangers.”

The emphasis there is mine because, once again, we’re hearing history repeat itself. When the subways first opened in New York, the five-cent fare allowed the Interborough Rapid Transit Company to operate the subways at cost in 1904, but soon, New Yorkers became convinced that the five-cent fare was a God-given right. Mayoral races (such as this one in 1928) were won and lost on support of planned fare hikes, and when unification of the subway lines under the control of the city cropped up in the 1930s, the five-cent fare was front and center in The Times’ coverage.

As the five-cent fare lingered and politicians abused this low fare to gain popular support, the subways slipped further into debt and disrepair. By 1948, when the subway fare finally went up to 10 cents (and, yes, the public protested), the subways were operating at monumental losses that would eventually send the system spiraling into the depths of the 1970s and 1980s. Have we learned any listens from that five-decade mistake? Apparently not.

Once again, politicians are grandstanding on the fare issue at the cost of our subway system. In fact, Sheldon’s talk of saving the $2 fare is, to a word, what politicians had been saying about the five-cent fare for fifty years, and we all know where that led us.

For all of the MTA’s problems, the people running the show right now — Lee Sander and his staff, in particular — are top-notch public transportation experts. They know the economics of the MTA inside and out. When they say the potential exists for a $6 billion deficit by 2011, I may raise an eyebrow or two, but in the end, their projections aren’t going to be off by $6 billion. Even if they again “magically” find $220 million every year, that still leaves the subways facing a $5 billion deficit if the fare hike isn’t implemented or another solution isn’t presented to the MTA.

In the end, the man I consider to be one of the preeminent economic minds in New York right now, Mayor Bloomberg, issued the wisest statement. While Spitzer and Sheldon claim they will fight for more funds for the MTA from the state, the reality is much more complex. Upstate Republicans will be loathe to fork over those funds and the windfall from congestion pricing (a potential casualty in any upstate-downstate battle) aren’t due to reach the MTA for at least two more years. Bloomberg, our billionaire mayor, knows this much.

“We need to know how the MTA is going to dedicate the money needed to expand service to communities that currently aren’t being served by public transit and to improve service to communities that are. The $354 million in federal funding we’ll get if we adopt a congestion pricing system will provide some of the money the MTA needs, but we don’t yet know where the rest of the money will come from,” he said.

We need to know how the MTA is going to dedicate that money, and as the Mayor said, we need to know where the rest of the money will come from. While Gov. Spitzer claims the state and city will fork over an addition $600 million per year starting in 2010, this theoretical money is no sure bet, especially when compared to the revenue from a potential fare hike.

Until those questions are answered and the proper legislative bodies stamp their seals of approval on the $600 million package, I can’t help but fear that we’re re-entering a period where the populist politics of a fare hike will overrule the economic reality of the situation. And that is not a pleasant future to contemplate.

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Alfred Beech November 21, 2007 - 7:32 pm

Portland’s MAX system has a built in mechanism: fares will rise each year in accordance with the increase in cost of living. No surprises, no fuss. Why can’t this be implemented elsewhere?

Todd November 21, 2007 - 9:50 pm

Fantastic post Ben. You’re a better source of information then most news media!

Second Ave. Sagas | Blogging the NYC Subways » Blog Archive » Remembering the subways on Thanksgiving November 22, 2007 - 3:15 am

[…] MTA’s efforts at reaching out to the public. While I think we should question the recent changes to the fare increase proposals, I certainly appreciate the way the MTA is trying to engage its riders in discussing long-term […]

Julia November 24, 2007 - 9:37 pm

Ditto. Makes me glad the MTA reads your blog!

Spitzer and Silver are infuriating. How are “additional resources” for the MTA going to materialize in a state budget with a multi-billion-dollar deficit?

Niccolo Machiavelli November 25, 2007 - 7:29 pm

Great post. I’d like to see such a clear piece on how the move from Petroleum Business Tax based bonds to Fare Box Based bonds set in motion the forces of debt upon the fare payer. Complex I know, thats why I’m looking to see it.

Also, conspicuously absent is any discussion of farebox operating ratio. I understand that the Chicago Transit Authority (the mass transit system not the band) controls fare by pegging the FOR at 50%. MTA is doing better than that. Maybe that would be a good way to approach price setting on the MTA.

Marc Shepherd November 26, 2007 - 9:38 am

This is one of the best posts I’ve ever seen on this blog. It should be required reading for all politicians and subway riders.

I think most politicians realize that the $2 base fare is symbolic, and that most riders don’t actually pay this fare. In that sense, the comparison to 1948 is inexact: back then, the base fare was the only revenue lever they had. Nowadays, they can raise fares in other ways (e.g. the unlimited ride discount), which they will surely do.

Even with a $600 million increase in state subsidies, which there is no assurance the legislature will actually approve, we are still nowhere near the level of investment that the subway system requires. Phases II thru IV of the Second Avenue Subway are so far away that many riders will never live to see them.

Streetsblog » Today’s Headlines November 26, 2007 - 12:48 pm

[…] More Street Fairs and Pedicabs (News) ‘Save the Fare’: A Grandstanding Tradition Since 1904 (Second Ave Sagas)For G Line Riders, Even an ‘F’ Looks Good (NYT) Bereaved Brooklyn Brewery Founder Speaks […]

Brooklyn James November 26, 2007 - 2:39 pm

Bloomberg is a big part of the problem — the city simply needs to come up with money for operating costs; it’s giving less than in the days of Koch. (Please don’t let Bloomberg count the $2 billion the city’s financing for the 7 line expansion; that’s never been a priority project of transit experts.) Spitzer has already made a promise to increase the subsidy by 2010; Bloomberg hasn’t. For him, everything is riding on congestion pricing.

walter madhu October 4, 2014 - 5:27 pm

bloomberg is a disgrace to the human race, ed koch was a hero and a great man

Second Ave. Sagas | Blogging the NYC Subways » Blog Archive » Introducing the MetroCard Challenge November 26, 2007 - 2:45 pm

[…] all of talk swirling about $2 base fares and Unlimited Ride MetroCard cost increases, I thought it would be fun to see just how much per ride I pay for my 30-day Unlimited Ride […]

Second Ave. Sagas | Blogging the NYC Subways » Blog Archive » As new fare plans arrive, hike honeymoon ends November 27, 2007 - 1:10 am

[…] cancel those celebratory parties. As I noted, politicians shouldn’t play populist games with fare hikes when the MTA needs the money, and as Chris at East Village Idiot aptly noted, the fares for the […]

Second Ave. Sagas | Blogging the NYC Subways » Blog Archive » The MTA’s Capital future will not be free November 28, 2007 - 1:26 am

[…] for this money, he knows not to expect too much from the state or city. As long-time reader Julia noted a few days ago, how is the state, already facing multi-billion-dollar debt, going to find more money for the MTA? […]

Second Ave. Sagas | Blogging the NYC Subways » Blog Archive » With the fare hike, the subways are still a good deal March 4, 2008 - 11:50 pm

[…] per ride could drop to nearly $1.00 per ride, people aren’t paying a full fare. As I’ve written in the past, the average cost per ride comes out to approximately $1.31. Even with a 6.5 percent increase, the […]

Second Ave. Sagas | A New York City Subway Blog » Blog Archive » Thinking Out Loud: The MTA should double the fares July 24, 2008 - 1:27 am

[…] discussed how a five-cent fare kept around long after inflation and the cost of running the subways demanded numerous fare hikes had ruined the subway system forever. Today, with the talk swirling of another fare hike in 2009 […]

Report Highlights the Need for Smarter Infrastructure Planning and Spending in New York City | Mobilizing the Region March 20, 2014 - 4:51 pm

[…] these systems. Investing in the subway is clearly the biggest bang for the buck. Despite a chronic history of underinvestment, the 800-mile system still carries 5.4 million riders per day, for a total annual ridership of 1.7 […]

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