Home MTA Economics Funding transit through a 36-percent fare increase

Funding transit through a 36-percent fare increase

by Benjamin Kabak

As part of my efforts to expand the dialogue on transit funding solutions and the measures for which advocates should push, I jumped into the fray Monday with a call for market-rate on-street parking spots. The proposal generated a lot of talk with most in favor to a tiered on-street parking system that somehow does not encourage more driving.

Today, I want to look at another approach — a very extreme approach at that — to the MTA’s funding problems: Is it possible to fund the system solely through farebox recovery? In other words, how high would the MTA’s fares have to go for the agency to cover its deficit by itself? The answer is rather terrifying.

During the fare hike debate and the discussion over the MTA’s fiscal future that unfolded for nearly four months this year, various numbers concerning farebox revenue were bandied about. The widely accepted formula centers around the idea that, counting passengers who opt out of mass transit, for each one percent the fare goes up, the MTA captures an additional $50 million in revenue. A ten percent increase nets $500 million, and that 23 percent increase with which we were threatened last November would have resulted in a $1.15 billion windfall for the MTA.

This is some easy math then. If the MTA were to attempt to cover their $1.8 billion revenue through farebox money alone, the agency would have to raise fares by 36 percent. The prices would contain a certain element of sticker shock. Those 30-Day Unlimited Ride MetroCards would cost $110. The base fare would have jumped from $2 to $2.75. Tolls and commuter rail fares would seem equally as steep.

Now, on the one hand, those fares sound expensive. On the other, by tying fare hikes into the cost of inflation, we’ll be there soon enough. Meanwhile, is a $110 30-day ride card that out of the realm of the ordinary? Based on the numbers from my two MetroCard Challenges, my average fare would wind up at around $1.50. That’s what it cost to ride the rails from November 12, 1995 until May 3, 2003.

As I’ve mentioned in the past, maybe one of the real financial problems is that New Yorkers are expecting a cheap and subsidized subway fare but put pressure on the MTA to make that a reality. Straphangers are barking up the wrong trees. The MTA can impact those financial indicators that are within its jurisdiction. That includes fares and services. Politicians though can ensure that the MTA is getting a subsidy that allows it to avoid this hypothetical 36 percent fare increase.

Last year, I proposed doubling the fares and a lengthy and contentious discussion ensued on this site. This proposal — a 36-percent increase and a budget relying nearly 75-90 percent on farebox recovery revenue — is equally as absurd. Maybe, though, it needs to happen before our politicians become wise to the ways of mass transit. Don’t worry, though; I won’t be on the steps of City Hall pulling for this one.

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john July 8, 2009 - 1:36 am

I am actually totally in favor of this… that fare is really just not that high (certainly not compared to driving), and would hopefully make the MTA a lot more effective.

One place it would really help is in aligning the MTA’s incentives. Under a system of near total farebox recovery, when the system’s ridership increases, that’s a good thing for the MTA because the increased revenue instantly increases the operations budget to provide better service on overcrowded lines. It might make it better worth the MTA’s while to do things that improve passenger experience, like cleaning stations.

Jason July 8, 2009 - 7:12 am

i’m all for it as well. An extra 50 cents for the base fare really isn’t a huge leap and finally the MTA will have no excuse whatsoever to not be fully funded.

rhywun July 8, 2009 - 7:46 am

Same here. $2.75 is just not that outrageous when you look at the fares charged around the world by certain other, more successful systems.

Alon Levy July 8, 2009 - 6:46 pm

Which other systems are you thinking of? In Paris, Madrid, and Seoul, the fares are lower, and in Tokyo and Osaka they’re lower for short and medium-distance trips. Among the major transit systems of the world, only London is more expensive than New York.

rhywun July 8, 2009 - 8:14 pm

I was thinking of Hong Kong and Tokyo–I don’t know what the *average* fare is on these systems but the fact they’re charging higher for longer distances seems sensible to me.

Working Class July 8, 2009 - 8:19 am

The fare should be no less than $3 with zero discounts. The unlimites ride should comparable to a monthly LIRR or MNR pass from a moderate distance to the city.

Scott E July 8, 2009 - 8:40 am

Working Class has a point, which has been said several times in the comments on this blog. The base fare is too low – and the discount for high-volume users is also too low. For years, the subway fares have been such that the 5-day-a-week, twice-a-day commuter would pay the same thing whether getting a 30-day unlimited or a pay-per-ride card. (By contrast, the LIRR/MNR monthly pass is equal to 2-3 weeks of peak round-trips).

We can either fund the MTA coffers through those who live and work in the city (either by fares or taxes, ultimately it hits the same people); or we can target the tourists – and there are plenty of them – by charging them more than we charge the everyday folk. Many cities, and entire countries, exploit tourism for funding. The MTA can please its political constituents, and raise money, by raising fares for occasional riders and lowering them for frequent riders.

Christian B July 8, 2009 - 9:46 am

I also don’t see this as either outrageous or absurd. My question though, is why don’t more subway systems institute a system like D.C’s which has people swipe on both ends of the system and charges based on distance traveled (they also don’t allow volume discount)? Ben, I am sure you know more about this than me, but what is the difference between the two systems and why does D.C. do one way and NYC (and Chicago) do it another way?

Publius July 8, 2009 - 10:19 am

WMATA collects fares based on distances traveled because the system is comprised of a number of different jurisdictions (two states plus the District, and several different counties), none of which is willing to fund the system on an equal basis. New York and Chicago do not have this problem because each operates within one state. Metro-North faces a similar problem: the reason that it only recently started using newer cars on the New Haven Line was that the State of Connecticut was unwilling to fund the service at the same levels as New York.

Rhywun July 8, 2009 - 10:32 am

The MTA charges a flat fee citywide largely for political reasons. The same political pressure which keeps fares artificially low also prevents a more sane system of charging by distance traveled.

Jonathan July 8, 2009 - 10:16 am

If the authorities made it easier to use Transitchek with unemployment benefits and SSI benefits, I think the fare could and should double. One advantage I see about total funding from the fare box is that it would reduce the unions’ stranglehold on the subways as the system wouldn’t be as dependent on Albany, with its fondness for public employee unions, for full funding.

Andrew L. July 8, 2009 - 11:25 am

It’s a testament to your ability to look at the complex issue of funding the MTA from all sides that you’re even discussing this possibility. Kudos to you. Far too many of we transit advocates react with instinctive vitriol at the news of a fare hike. Many politicians are even worse, using it as an excuse to invent some sort of progressive streak to boast to their constituents, rather than tackling the real issues.
So, time and time again we rail against (pun intended), what are far too often, fairly reasonable increases in the base fair – particularly given the massive projects that the MTA routinely undertakes to improve/extend service. Then we are left with half-baked alternatives like the recent legislative corruption of the ravitch plan. As a result, we are slowly choking the life out of the system.
I understand that the system is often used by the most underprivileged amongst us, but mobility equity should be a matter addressed at the state level through tax deductions or some sort of grant program. It should not hold the entire system captive through prolonged deferred maintenance. If the MTA was a private company, free to change its fares on a regular basis, to cover cost increases and to grow with inflation – do you think we’d be making a big stink about it every few years? No, it’d simply be a matter of life, like when the grocery store changes the price of a gallon of milk. We should give the MTA – subject to some level of reasonable oversight – this level of independence.


Niccolo Machiavelli July 8, 2009 - 10:13 pm

Clearly your readers are willing to cough up some more for their TA rides, all well and good. But, I think your numbers should be adjusted to account for price elasticity of demand to make it a more effective and serious argument. Actually, as demand decreases as a function of price increases there are more seats which makes it a more valuable ride for those with the coin. Is that what you call a win/win in blogtown?

petey July 9, 2009 - 3:20 pm

i too think that this is a good suggestion, not absurd at all. not only is it morally reasonable, it sounds as though it would provide insulation from albany interference. but please, no dissing the tourists: one fare rate for everyone.


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