Second Ave. Sagas

Is the subway fare too low?

Written by

Benjamin Kabak

in

,

Take a look at the table above. It’s from the Feb. 22 Transit Committee meeting materials, and it presents an overview of how much straphangers paid for their subway rides in 2009. To me, it almost suggests that the fares are too low.

As you can see, despite a base fare of $2.25, the average New Yorker paid just a $1.41 per ride. Yes, this represents an increase of eight cents over 2008, but in real dollars, New Yorkers are getting a good deal on their subway rides.

This cheap ride, of course, comes from pay-per-ride bulk discounts and the prevalence of unlimited-ride MetroCards. In presenting this fare information, the MTA also provided a breakdown of MetroCards by type. In 2009, 49.6 percent of all subway riders paid with an unlimited ride card, and another 36 percent took advantage of the pay-per-ride discounts. The remaining 14.3 percent of subway and bus riders used cash or didn’t buy enough to qualify for the pay-per-ride discounts. Those are the tourists, the infrequent riders and those who cannot afford to spend more than the cost of the next ride they plan on taking.

For New Yorkers who complain about higher subway fares and fare increases, this real cost of a ride skews just about everything. In the packet, Transit mentions the cost of a subway ride in 1996 before the MetroCard discounts went into effect. That year, the average cost per ride was $1.38. Based on inflation alone, we should be paying an average fare of $1.89 or 33 percent more than what we pay today. Instead, we pay an average fare that equates to $1.03 in 1996 dollars. That’s a cheap ride indeed.

Maybe, then, the MTA’s problems aren’t only declining state subsidies, lower-than-expected tax revenues and the loss of student transit support. Maybe the MTA’s problems are that the fares are just too low. The agency might be in a weaker financial position today than in 1996 because fare revenues have not kept pace with inflation, and as labor, fuel and other costs have risen, the fares have declined markedly since 1996.

So, who wants to advocate for a 33 percent fare hike?

Comments

50 responses to “Is the subway fare too low?”

  1. Christopher

    I hope that Walder looks hard at fairs, recognizes what is a premium service (subways) and figures out how to balance out the differential while encouraging riders to buy the types of MetroCards that have the lowest cost to service. And perhaps look at inflation adjusted fare increases that are automatic. Maybe in the same way that a mutual fund can auto-balance, it’s a more complex algorithm, one that takes into account cost to service as well as premium vs. non-premium service?

    Reply
  2. Russell Warshay

    If the MTA was able to shed all unnecessary operating expenses, would we even be asking this question?

    Reply
    1. Josh K

      Which unnecessary operating expenses? Just making casual, unsubstantiated statements doesn’t provide much to go on.

      Reply
      1. Benjamin Kabak

        Thanks for bringing that up, Josh. I meant to ask this earlier but was away from my computer and subsequently forgot. I’m not really sure the MTA can shed that much in “unnecessary” operating expenses. At some point, running a transit authority that services over 8 million a day is going to have some fairly steep fixed costs no matter how strong or weak the unionized workers are.

        Reply
      2. Alon Levy

        Conductors, for one.

        Reply
        1. Russell Warshay

          Exactly. $200+ million/year, just in the subways, adds up.

          Throw in the over-the-top benefits, and here we are.

          Reply
      3. pete

        Bustitute the subways at night for repair and maintence. Every service change gets overtime or double pay. Cut the phantom union shifts from the pick. Stop using contractors, develop institutional memory. A $80K union worker is still cheaper than a $200K consultant or $100K union construction worker (gross to contractor for that worker). Go through the work rules and eliminate waiting periods. 5 MTA track workers standing around watching 1 track worker clean something is normal today. If your going to pay a bachelors or masters salary, they better having the training of a bachelors or masters and be a jack of all trades.

        Reply
  3. Jonathan D.

    Truthfully, people are REALLY bad at math. A better idea would be to trumpet the base fare dropping to $1.75 and just eliminating all discounts and unlimited cards and calling it a day. The MTA would look like heroes for “lowering the fare” even in a time of great economic concern.

    Reply
    1. Ray

      Smartest thing I’ve read all day. I think.

      Reply
  4. John

    I think the economics is pretty clear: do away with unlimiteds (or make it very expensive), keep the 2.25 fare, and discount unpopular bus routes and off-peak subway fare. Basically, they need to charge as though they’re actually trying to make money. Actually this strategy would not be inconsistent with statements Walder has made in the past; could be he’s actually considering this.

    Reply
    1. SEAN

      Removing bulk fare purchases are a sure way to reduce ridership do to nearly 50% of riders pay in bulk AKA unlimited Metrocards. Also the MTA gets payed $89 per card sold reguardless if the card is used or not.

      An easier idea would be no more change on busses & no more transfers without the use of a Metrocard. Similar policies are in effect on OCTA in Orange County CA, RTc Las Vegas & WMATA.Day passes are substitutes for transfers.

      Reply
      1. Jonathan D.

        Nothing personal, but no! Let’s think about a little bit of the math here.

        1.) While half of riders may currently pay using unlimited cards, these people rode before unlimited cards (to some degree), and won’t just leave the system.

        2.) Only the people who would not now pay a 2.25 (or whatever the fare ends up at without unlimited cards), would leave the system. This is MUCH less than half of all riders

        3.) The average fare is much lower than the base fare. This means that while you are correct in saying the MTA gets the $89 no matter what, an incredibly small percentage of people are not getting their money’s worth on the card. If you could instead somehow force unlimited people to ride less, this is a good idea, but other than conning them out of riding the system while still ensuring they pay, I don’t see how this can be done. Unlimited cards induce ridership, not reduce it.

        4.) Just based on the average price-elasticity of subway systems in the US, if the fare were to rise 33%, the subway would lose 11% of its current trips. This would generate huge volumes of revenue. It is unclear, based on the way unlimited cards are used, if this would even occur. Because the MTA only registers on swipe in, out of system transfers by metrocard are an unknown. I know I do it very frequently (say from 57th and 7th to Columbus Circle), because it doesn’t cost me anything. I wouldn’t do this if I were paying per ride, but the MTA also wouldn’t lose my ride (I would transfer at TS instead). This complicates the actual gains/losses involved. Additionally, unlimited cards induce short trips that could otherwise be taken by bus or by walking. Many times, these trips are the most profitable, but if the card is already depressing fares, it’s not worth keeping these trips (these trips are always the first to go when there is a fare hike). One option here would be to raise the price of the subway and lower the price of the bus. This would remove additional ridership at peak times that could be taken by someone needing the ride from elsewhere. I don’t know if the MTA is willing to mess with it’s overall fare structure, though.

        Reply
      2. Jonathan D.

        Additionally, only about 1-2% of bus trips are made with change on a bus. Eliminating it does literally nothing. In fact, because these people are terrified of metrocards, it’s possible you will lose every last one of these trips. Eliminating paper transfers (like here in DC) is operationally efficient, but does little to reduce the cost burden.

        Reply
      3. Mike

        Obviously you’ve never had to take a bus in the morning to work and realize that your Metrocard is out of money.

        Reply
  5. Boris

    I wouldn’t mind if the MTA raised fares by 33%, but only if it presented the rationale that doing this is required to keep up with the higher costs of labor, materials, and debt service. That would please the riding public but antagonize the unions and the state legislature, although at this point it’s hard to antagonize them more than they already are.

    Reply
  6. Jehiah

    I really think that the MTA should be able to quietly discontinue the pay-per-ride discounts, as they wouldn’t actually change the fare price.

    Reply
  7. Francis

    Am I wrong in suspecting substantial amounts of fraud from the sale of “swipes” from unlimited ride cards? Anyway, the obvious revenue-maximizing answer is to raise the price of the unlimited ride cards while leaving the other prices the same. An average fare of $1.60 would bring several hundred million of revenue, even assuming some decrease in ridership.
    On the other hand, attempts to solve the problem only on the revenue side are doomed to failure in the long run unless we confront head-on cost problems, particularly unsustainable out-at-55 pensions. Better to have the MTA go bankrupt than to raise $300 mil to pay retirees who don’t even work there any more.

    Reply
    1. Benjamin Kabak

      I don’t think there’s substantial amounts of fraud from the sales of swipes. There’s some fraud, but many are hesitant to pay and cops crack down on that now and then. I don’t think it significantly erodes the MTA’s revenue base.

      Reply
      1. John

        I don’t even get what that is. How would you sell a swipe? Like you meet someone at the turnstiles with your unlimited card, they give you a dollar or something, and you swipe your card? But then you can’t go through because you get locked out. Who has the time to do that?

        Or like if you only use the subway during the week, do you sell it to somebody to use on the weekends for less than they would otherwise pay? In which case, how could anyone crack down on something like that?

        Reply
        1. Aaron

          I read once that most of the time people doing that aren’t actually selling swipes, they managed to gum up the reader so as to let unlimited people through, basically. I’ve long since filed this under “urban legend” because of the 18-minute timer between swipes.

          Reply
          1. Joe

            Actually if you go through the turnstile but do not let it click down, and pull it back up, it stays unlocked until someone finally pushes it around. It was the trick when one of us forgot our metro card. I used to do it nonchalant, the cop never noticed.

            Reply
        2. Quinn Hue

          How to make money from selling swipes:

          1. Find a buddy/henchman/ or partner-in-crime.
          2. Buy/acquire a couple of Unlimited Metrocards. A quantity of around three will do if one is a novice beginner.
          3. Decide who’s going to be the lookout and who’s going to sell the swipes. One should toss a coin or play a game of Rock-Paper-Scissors.
          4. Gum up the Fare Machines to not accept money, and to not dispense SingleRides (Electronically), or just literally shove gum physically into the machine.
          5. Find someone attempting to purchase a card and descend on your prey. Do so as if one is dealing hard drugs. Time this with the arrival of trains if platform is in view of turnstiles/purchase area.
          6. Exchange cash and swipe said person through. Name the price by oneself.

          Keep track of which cards have been used to allow maximum revenue.

          7. Count your earnings and decide to either share your money (begrudgingly) with your friend/henchman/ or partner-in-crime or to forcibly deny payment.

          Reply
    2. Aaron

      Better to have the MTA go bankrupt than to raise $300 mil to pay retirees who don’t even work there any more.

      And yet I bet if your 401k was canceled out so that Goldman Sachs would be able to emerge from bankruptcy, you would be pretty unhappy. Reduce pension benefits going forward? Fine by me. Cancel out current obligations so that others can pay less in taxes? Most reasonable people would call that “fraud.”

      Reply
      1. Ray

        Sweeping pension reform is required. From what I’m seeing these public union salaries and benefits no longer ‘lag’ behind those in the private sector. Time to swim with the rest of the fish and take your chances in the open sea like the rest of us. Invest wisely you grow into a big fish. Invest poorly you get eaten. If your pension fund is broke … you picked the wrong investment house. If your 401K is empty… you chose the wrong funds. Same thing.

        Reply
        1. Aaron

          If your pension fund is broke … you picked the wrong investment house.

          Pensions are actually guaranteed by insurance, which is part of the deal. You should read a summary of ERISA some day, it’ll be beneficial to have a serious conversation about labor costs and risks as well as labor conventions in the United States. You should also read up on the Pension Benefit Guarantee Corp – although the MTA isn’t a part of this because PBGC only covers private entities – to my knowledge the NYS Comptroller fills this role for public entities in New York, although my law license is out west, not in NY – this shows that, indeed, pensions do not “go broke” – they can be under-capitalized, they can need payouts from PBGC or from states’ general funds, but a pension that stops paying out is a business or agency that is violating the law. If you want the MTA to negotiate new employees into a 401k plan? Great idea, let’s talk. But taking that right away from current employees who have paid into the system, that’s unlawful under state and federal provisions.

          The lack of knowledge about basic tenets of labor law on this blog makes me want to bang my head on a wall at times. I say this as a white collar person myself (and someone who has worked in employer-side labor law, no less!), but seriously – people here are pretty damn sure that they want to screw over the TWU but they can’t exactly figure out how. Dial it back a bit and learn some about what you’re talking about before hitting the “Submit Comment” button.

          Reply
          1. nycpat

            Thank you.

            Reply
          2. AK

            “If you want the MTA to negotiate new employees into a 401k plan? Great idea, let’s talk. But taking that right away from current employees who have paid into the system, that’s unlawful under state and federal provisions.”

            That’s precisely what Ray suggested. I think most people here realize that the Due Process Clause prohibits state seizure of property (except in certain circumstances, of course). Yes, there isn’t much you can do about current pension recipients, but that doesn’t mean pension reform shouldn’t be near the top of the list for labor negotiations.

            Reply
          3. Boris

            How are these pensions different from Social Security? Social Security is not “paid into the system”; none of us have an account with $x in it. Current taxpayers support current retirees. Also, the payments are only guaranteed by law until that law is changed, which means what I expect to get at retirement now is probably not what I will actually get at retirement (I expect there to be reforms sometime over the next 40 years).

            These two things are explained in the Social Security statement I get every year. I suspect (and hope) that the MTA pensions work the same way, and that while under current law future pensioners are guaranteed certain funds, that law can be amended by the State Legislature (fat chance) or bankruptcy court (more likely).

            Reply
            1. Aaron

              State agencies can’t file for bankruptcy. Municipalities (but not states) can reorganize under Chapter 9. Happened to Orange County in ’94. If MTA were a department of the City of New York, it *might* be eligible for Chapter 9 protection, although I suspect that the City as a whole would have to file under Chapter 9, that it couldn’t “spin off” a subsidiary. At any rate, MTA is created under NYS authority by Albany and any talk about Chapter 9 misses the point. Pigs will fly before MTA files for bankruptcy.

              Saying that a state or its agencies will “go bankrupt” is inaccurate but useful shorthand for saying that the state might, in theory, be unable to pay its obligations. This happened in California in 2009 and we all received registered warrants for our state income tax refunds, commonly called IOUs, until the Legislature finally figured out how to pass a budget. But it’s not bankruptcy. To my knowledge, substantial litigation about the warrants was rendered legally moot when a budget was finally passed and the warrants became redeemable.

              Regarding Social Security, if it were to be eliminated or greatly reduced, I suspect that the Constitutional litigation that would result would be worth a couple bags of popcorn. But the Feds have powers that the state doesn’t have and I (blissfully) don’t know the ins and outs of the Social Security Act. Pension obligations, however, are basically settled law due to the decline of industrial manufacturing late in the last century – Courts and Congress unfortunately had ample opportunity to address this issue, ERISA being one offshoot of that phenomenon.

              Reply
  8. Skip Skipson

    The MetroCard readers should do some simple math to show their unit fare costs to make people realize the bargain they are getting.
    Card Expires XX/XX/XX
    Unlimited 30 Date card
    $89 / 100 swipes = $0.89

    Unfortunately, such a (perceived) simple fix to the readers would probably cost the MTA 200 million dollars.

    When are you having another Metrocard Challenge? Get it sponsored by that web company that serves your ‘Flat Sexy Stomach’ ads. LOL

    Reply
    1. Mike

      Then those who didn’t figure out that they only swipe 20 times a month and still got the Unlimited would know what a big deal they are getting.

      Plus there would be such unpleasant messages at the beginning of the month such as “You paid $89 per ride”.

      Reply
      1. Mike

        *bad deal

        Reply
  9. Ed

    Once again, the approach taken in Latin America is instructive. I don’t necessarily think we should emulate them, it just puts things in perspective.

    Their subway (metro) fairs, while low by our standards, tend to effectively put the trains out of the reach of the poorer people in the cities. However, what we would call gypsy cabs proliferate, in ways that I think would be impossible in New York with its heavy handed police presence. So the poor still get to work via gypsy cabs, or bus systems, which tend to be fairly cheap and effective (the busses actually go fast). The middle class gets to work on relatively clean and uncrowded trains.

    There is much more too it than this, but its food for thought.

    Reply
    1. Benjamin Kabak

      In my mind, though, one of the goals of a successful mass transit system is that it lessens the number of cars on the road. If the MTA prices out poor people such that they have to turn to gypsy cabs just to get to work, it’s not doing its job as a mass transit provider.

      Reply
      1. Rhywun

        The whole point of unlimited cards and other discounts – much as in any other business – is to stimulate demand and result in a net increase in income. This worked great in good economic times, because the incremental cost of adding a new rider (and there were many of those) was less than the cost of transporting them – and now it’s not working so well in bad economic times, because ridership is down but costs continue to go up. Anyway, I think a modest fare increase would be prudent but eventually the economy will pick up again (knock on wood) and the pressure to raise fares will go away.

        Reply
        1. Rhywun

          Hm. This was supposed to be a general reply, not a reply to your comment Ben (I have one of those too, coming soon…) Sorry for the confusion 🙂

          Reply
        2. Alon Levy

          Unlimited ride cards aren’t just about stimulating demand. They also have two other purposes. First, when they cost less than two swipes per weekday, they effectively make riding free in the off-peak; they’re essentially a form of peak hour surcharge. And second, because a rider only needs to buy such cards once a month, they reduce fare collection costs.

          Reply
      2. Rhywun

        You’re right in a way, Ben. The MTA is NOT doing its job in many parts of the outer boroughs. The mere existence of gypsy cabs and buses proves this. I used to take an (illegal) “gypsy express bus” from Wall Street to Bay Ridge for one dollar less than the “official” bus. This bus wouldn’t exist except for the fact that the official bus is not only too infrequent & too crowded but also too expensive. (And by “too expensive”, I mean perceived value. I am aware that the MTA’s cost of providing express bus service is actually much greater than the fare… but at double the subway fare I think most people would agree that it’s not actually worth it, at least for this route.) And there are many, many parts of the outer boroughs that are even more poorly served by the MTA, yet the agency has the full weight of the law behind them in preventing private businesses from trying to satisfy that need. It’s not right. If a private business can satisfy transit needs that the MTA can’t, they should be allowed to do so.

        Reply
        1. Jonathan D.

          Something can’t be too crowded and too expensive. If it’s too crowded, it’s not expensive enough, demand is overtaking supply at that price. Please stop saying things like too crowded and too expensive. If the bus is still losing money and is too crowded, they won’t run more. They should charge more, though. Unfortunately, they can’t set fares route by route, which would allow for better market-rate pricing. Now there’s an idea.

          Reply
          1. Rhywun

            Something can’t be too crowded and too expensive.

            It’s not like we’re talking about private transit here. The express bus fare ($4 at the time – now $6.50) simply did not provide enough benefit over the subway fare ($2 – now $2.25) despite cutting the trip time in half. There were frequently no seats and often not even any room to stand – necessitating waiting for the next bus.

            You make valid points, and I’m all for opening discussions about private transit. But this ain’t private transit, by any stretch.

            Reply
      3. Russell Warshay

        For many riders, the riding experience, and not the cost, determines if mass transit is chosen over a car. I don’t know what the numbers are, but it would be interesting to find out.

        Reply
  10. pea-jay

    Personally, I love the unlimited ride cards and even at 100 or more per card, they still are a bargain compared to private vehicle use and beats having to strategically have to plan each trip to hit the maximum number of stores/appointments/whatever to avoid using paying for the next ride.

    I used these unlimited ride cards for years in Chicago and get the 1 or 7 day passes when I am in NYC.

    I would love to see the turnstile give a dynamic cost per ride with each swipe to educate folks the value of these cards.

    Reply
    1. Rhywun

      I agree that even at $100, the unlimited card is still a bargain. It’s still easily affordable by the median New Yorker. What should happen if there’s any sort of “major” fare increase is some sort of tax rebate for those who truly can’t afford it – and said rebate should be available on the EZ tax form, too.

      Reply
  11. Alon Levy

    The average fare in these calculations is the average per swipe, not the average per linked trip.

    Reply
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    Reply
  13. Dan

    Wait:

    My trip costs me $2.14 (because of the bulk discount) but requires two swipes as I transfer to a crosstown bus. Do I count as one ride at $2.14 or two rides at $1.07 each?

    Reply
    1. Benjamin Kabak

      I think — but am not 100 percent sure — that it costs as two swipes at $1.07 each. In the pre-MetroCard days a bus+subway ride would have cost you two fares with no free transfer available.

      Reply
      1. John

        I know that this is kind of late, but I think a large part of the reason why the fare is $1.40 isn’t just because of unlimited MetroCards-it is because of the free transfers between buses and between the bus and the subway. If you think about it, the MTA saves money by not having to provide an extra branch of the route and allowing people to just use another route. Also, the subway has a lot of capacity, so the operating costs are very low, so the extra riders transferring from the bus doesn’t really make a difference.

        Reply
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    Reply
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    Reply

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