One of the key issues in last month’s debate over the MTA rescue plan centered around source of revenue for a widely-used mass transit system. Should the state and city be subsidizing transit or should the MTA, through farebox revenue, be largely self-sufficient?
Similar to many political economic debates, this one gets to the root of government’s role in society. Those who support government funding of transit recognize that it is a social and public good. The city and state need transit to exist, and transit should turn to the state for money. Those who believe the MTA should survive on farebox revenue trend toward a privatized model of public transportation. Private entities set fares to run a profitable or net-zero operation. The government carries a small percentage — generally close to zero — of the costs but forfeits the rights to any profit.
Outside of a few key examples, the privatization of mass transit systems has been unsuccessful, and the vast majority of the world’s transit authorities rely on significant state contributions. New York, in a sense, is an outlier. It relies on farebox revenue for a majority of its operating expenses. In fact, New York City Transit’s 2009 adopted budget calls for a 60 percent farebox operations ratio. With so few government contributions on the table, no wonder the MTA’s finances are maxed out.
Even within the MTA, the numbers aren’t consistent. A piece by Mitchell Pally, the Suffolk County representative to the MTA, lays it out. In 2008, the MTA’s farebox operations ratios ranged from 16 percent on the Staten Island Railway to 44 percent on the LRR to 53 percent for New York City Transit. That hardly makes sense.
In his call for a dialogue, Pally makes a few good points. He writes:
For the past 44 years, under Democratic and Republican administrations, the state’s policy has been that mass transit riders should not pay the full cost of their ride. Instead, they pay a percentage – with the remainder of the cost coming from taxpayers. This fundamental policy extends to riders across the state, whether they take the LIRR, the city subways and buses, or the buses in Syracuse, Buffalo or Dutchess County…
The operating and capital costs to safely and effectively operate these complex but socially beneficial systems are simply too great to be borne by riders alone – that has been and continues to be the view of governmental decision-makers…
Under the original “doomsday” budget adopted by the MTA, riders would have paid more than 50 percent of the cost of their LIRR ride, and 61 percent of the cost of their subway trip. With the State Legislature’s rescue and this month’s increases, these percentages will be about 44 for the LIRR and 52 for New York City Transit. Are these numbers too high, too low or just right?
The answer can only be found in a public policy argument that must take place as part of the entire MTA financing discussion. Without a real answer, the region will just continue to move from one dramatic fare discussion to another without a real understanding of what is actually being discussed.
Right now, though, Pally is preaching to empty church. Our state representatives in Albany are too busy bickering over leadership issues to focus on anything important that might actually be plaguing New York state. While 62 Senate members fight it out, the rest of us are left to weather a bad economic storm on our own.
In closing, Pally issues a challenge to lawmakers and transit experts a like. “So policy-makers need to adopt an agreed-upon fare-box ratio for each of the mass transit systems in New York State, including the various MTA entities,” he writes. “With such an agreement on the table, the MTA and the public can engage in a reasonable discussion about fare adjustments that will be tied to an inflation-sensitive series of funding sources to cover the rest of the cost of the ride.”
Pally gets it. We need a steadier funded MTA that knows what to expect from its farebox operations ratio and the city and state which it supports. When we will get that is anyone’s guess.
8 comments
In America, transit is something that only poor people take (even when and where that’s no longer true). Thus, there is tremendous pressure to keep the fares artificially low–mostly by means of discounts and especially the single zone fare. (In Hong Kong, the fare ranges from 50 cents to 7 dollars. Their recovery rate is 149%.) Even worse for NYC, the public perception is that all the people in the center are rich and all the people on the outside are poor (even when that’s not true either). Therefore any attempt to charge by distance traveled is politically impossible (much like the congestion fee was). So… we’re going to continue seeing this endless wrangling over recovery ratios, pitting one agency against another or one part of the region against another, and on and on, all because the best tools for solving these endless crises are not politically viable.
You’re right on the money. Politics has been very prominent (no, preeminent) in debates about the subway and bus fare going back to the very beginning. In fact, the 5 cent fare was deemed to be a sacred entitlement for the average subway rider for decades after that fare ceased to be economically viable for adequate subway maintenance. It was a very convenient way for politicians to “serve” the people while papering over the transit system’s rising problems. Meanwhile, middle and upper class people could drive on newly built highways during the Robert Moses era.
Fast forward a century later, and the thinking is the same. The MTA, a quasi-public authority nominally controls the subways, and the people (through their politicians) feel that they are entitled to a cheap fare above all else. Besides, those who don’t ride the stinky, slow subways (and there are plenty of NYC residents who don’t ride the subway regularly) can drive around instead of mingling with the people who ride the subway. Meanwhile, the politicians have no incentive to explain the real cost of running the subway system to the electorate, because this would expose the recent debt financing policy for what it really is. La plus ca change…
If they broke apart the MTA like most people want and raised the metrocard fare to $3 and eliminated ‘most’ of the discounts how would the TA do financially?
At least this would eliminate the upstate vs. city fight because the transit authority wouldn’t have to deal with upstate at all.
Easy: it would be a fiscal disaster. The whole reason the MTA was created was so that bridge & tunnel surpluses could be funneled to mass transit. The people who want to break up the MTA don’t seem to realize that.
The transit authority will always need to deal with upstate, as long as it depends on legislative grace for funding. Without the bridge & tunnel surplus and state subsidies, an undiscounted $3 fare would not even come close to breaking even.
What about if bridges & tunnels was made part of nyct, and if NYC paid there fair share towards transit even though Bloomberg is against it?
MNR, LIRR, and LI Bus can be seperated and deal with the state.
In your scenario, the rational thing for the city to do would be to raise the tolls dramatically (at least for non-residents) and increase service within the city while making it expensive for MNR, LIRR, and LI Bus to interoperate with NYCT. This will make it worse for everyone except city residents with no need to ever leave the city on public transit.
The best transit systems around the world are all big, regional systems that set moving the maximum number of people for the minimum cost as their main goal. They also play well with private transit systems that supplement the public-owned services. The MTA is none of that.
Let me point out the disparity that exists between suburban and city riders.
Why do suburban commuters get a bigger government subsidy than the city riders who need to use NYC Transit? LIRR riders pay for only 44% of their system while NYC Transit riders pay for 52%!!
The politicians in Albany, who have shot down congestion pricing and bridge tolls because of their effect on the working class, aren’t looking after the poor after all!! Surely suburban commuters are much more likely to be wealthy than the inner-city public transit riders, yet Albany is giving the suburbanites a much bigger subsidy!!
That is just ridiculous and shows once again how Albany can’t govern properly.
Ariel, let’s compare farebox recovery ratios, a figure that includes capital as well as operating costs. For New York City Transit it’s 36% this year; the subway has a much higher ratio – in 2002 it was 67% – but the MTA doesn’t break NYCT down to subways and buses. For Metro-North it’s 36% as well. For the LIRR it’s 27%. All of those ratios are 4-5 points down from last year. For the New Jersey Transit’s rail operations, it was 67% in 2007, about on a par with what you’d expect for the subway alone.