Fare Hikes

As you, my faithful readers, continue to debate the least worse fare hike option, the MTA has announced the looming schedule of fare hike hearings. At this sessions, New Yorkers engage in a reasonable dialogue on transit funding mechanisms the time-honored tradition to spewing invective at MTA Board Members while politicians go unchallenged on their lack of transit support. The hearings resemble circus sideshows, but this year, the outcome could determine if pay-per-ride users shoulder the fare burden or if unlimited card users again get the shaft.

The hearings all begin at 5 p.m. at their various locations, and there will be overlap. Thus, MTA Board Members won’t hear all testimony. Registration opens at 4 p.m. and closes at 8 p.m. Speakers are limited to three minutes each. Comments can also be submitted online and via video at a few so-called satellite locations. After your jump, the fare hike hearing schedule.

There’s a fare hike heading our way, and absent a miracle in Albany, there’s nothing anyone can do to stop it. The Straphangers have rightly pleaded with Gov. Andrew Cuomo to do something, and The Times did the same in Saturday’s paper. This growing chorus of voices calling for more state support may be able to avert a steep hike in 2015, but there’s not enough time for the notoriously slow-moving state political machine to kick in gear before the MTA has to start generating more revenue.

So we, the riding public, are left with trying to make the best of a bad situation. On Monday morning, the MTA will officially unveil the various proposals all aimed at generating a few hundred million dollars a year more, and throughout November, the authority will hear public feedback. Oftentimes, those meetings devolve into a mess of public complaints against the MTA and little of substance concerning the fare hike proposals. But there’s a lot riding on this year’s hike. (Ed. Note: The four scenarios outlined below are confirmed as the ones under consideration by the MTA. Public hearings will take place during the second week in November.)

As I’ve mentioned before, how the MTA approaches this hike will tell us a lot about who’s paying more. Will the MTA once again go after unlimited ride card users or try to bump up the pay-per-ride costs? I looked at this issue last week, and it’s not an easy one. The claims that a pay-per-ride bump would negatively impact those who can least afford to pay are partially borne out by demographics numbers, but even that impact may be overstated. Still, it’s a consideration.

As we wait out the official announcement, enough leaked stories — designed to gauge rider feedback — have led us to know something about the looming fare hike. So from information gleaned from various articles, let’s look at the competing proposals:

As I’ve mentioned before, I’d prefer scenario 1, but that’s because I’m a 30-day card user who enjoys the benefits of pre-tax Metrocards each month. According to numbers provided to me by the Straphangers, such a scenario results in a $60 annual increase in transit spending for 30-day card users, a $50 bump for 7-day card users and a whopping $208 increase for pay-per-ride users. That’s a disparate impact if ever I saw one.

Scenarios 2 and 3 lead to considerably more spending by everyone. Under 2, 30-day users would be on the hook for over $200 more per year, and the break-even point would jump to 59 rides, an all-time high. With no increase in the base fare and a small decrease in bonus, pay-per-ride users would likely have to spend around $20 more per year. That’s hardly equitable either.

The new proposal — Scenario No. 4 above — comes to us from today’s Daily News. In his piece, Pete Donohue notes that MTA officials are not likely to eliminated the discount, as, per one Transit official, “the reaction [was] very cool.” With a seven percent bonus at $2.50 per swipe, the effective fare would be around $2.32, and thus, under proposal 4, the break-even point for a $112 30-day card would be 49 rides, one less than the current 50-ride mark on the $104 cards. Signs are, as Donohue notes, pointing the way toward such a scenario.

But let’s toss this one wide open. Though no one wants a fare hike, pick your poison. I’ve opened the poll below and am curious to see how SAS readers would go if given the choice. It might not be ideal, but that’s where we are today.

In 1998, when the unlimited monthly MetroCard made its New York City debut, the MTA priced this item at $63. In the intervening 14 years, the price has risen by $41, and today, that same card costs a cool $104. The MTA has been particularly aggressive in rising the prices for these unlimited ride cards in order to combat declining revenue per trip, but these cards increase subway ridership overall. It’s quite the catch-22, and it’s rearing its head once again.

A few weeks ago, as the MTA leaked word of its looming fare hike plan, it seemed as monthly cards would largely be spared while the base fare would see a big jump and all pay-per-ride discounts would be eliminated. Now, in the face of an outcry over that proposal, a second plan has seemingly emerged that would spike unlimited ride cards considerably. The Daily News, proclaiming obviously that a fare hike will “hit riders hard,” has more:

Bus and subway riders would pay as much as $125 for a monthly MetroCard — a $21 increase — under one of four fare-hike schemes the MTA is mulling, the Daily News has learned. This proposal would increase the price of an unlimited-ride weekly MetroCard to $34 — a $5 boost — and reduce the Pay-Per-Ride MetroCard bonus, sources said. But it would leave the base subway and bus fare unchanged at $2.25, sources said…

The MTA has fashioned four fare-hike scenarios in advance of public hearings set for next month. Each scheme would generate $232 million in additional revenue from bus and subway riders. Two of the proposals would keep the base fare at $2.25. One of these would reduce the Pay-Per-Ride MetroCard bonus from 7% to 5%, charge $34 for the weekly unlimited-ride MetroCard and $125 for the monthly travel pass. The second would ax the 7% MetroCard bonus altogether, increase the weekly MetroCard to $32 (up $3) and jack the monthly MetroCard to $119 (up $15).

As The News reported exclusively last month, the MTA also is considering two other proposals that would raise the base fare a quarter to $2.50. These 25-cent hike proposals would trigger additional fare changes to the MetroCard bonus and the time-based MetroCards.

It’s a bit unclear what the other two proposals look like. Last month, the same Daily News reported that one version of the fare hike would eliminate the bonus entirely while the base fare would jump to $2.50 and unlimited 7-day cards would bump up $1 and 30-day cards $5. It seems as though the MTA is now considering a proposal, mentioned above, to keep the fare at $2.25 while putting the revenue onus on unlimited card users instead.

For personal and policy reasons, I hate that idea. For the past few fare hikes, unlimited card users have gotten the shaft. I understand the MTA wants to recapture what they view as lost revenue from unlimited card riders, but the unlimiteds have also contributed to a marked increase in subway usage over the past two decades. Meanwhile, nearly 47 percent of subway riders turn to unlimited cards, and we shouldn’t be asked to foot the bill every time a fare hike comes along while pay-per-ride users get something of a pass.

It seems likely that the ultimate decision will be made during the fare hike hearings, but the trick is going to be weeding out the noise. Already, the Straphangers, for instance, are saying “enough is enough” when it comes to fare hikes, but short of asking Gov. Cuomo for money that doesn’t exist, they’re not pushing for any other revenue solution. Prices are going to go up; it’s a preordained conclusion. But doing so in a way that spreads the pain is key.

In 1996, at the dawn of New York City’s Metrocard era, the MTA’s average fare tracked closely with the actual fare. A token cost $1.50, and the MTA, thanks to some bulk discounts, saw revenue of $1.38 per fare paid. These days, thanks to unlimited-ride cards and pay-per-ride discounts, the average fare in 1996 dollars is $1.07, far below the rate of inflation. As the MTA looks to keep its books in order, it has tried in recent years to combat this problem.

Last week at the Crain’s New York breakfast, MTA CEO and Chairman Joe Lhota spoke of this problem. The MTA, he said, quoting information available in the July MTA board materials, sees $1.63 per fare paid in 2012 dollars. With a base fare set at $2.25, it’s clear that New Yorkers are enjoyed some healthy discounts as they ride the subway every day. Now, on the one hand, we should enjoy those discounts. It encourages riders to use the system and promotes better transportation options. On the other hand, the MTA needs more money.

And so, Lhota last week mentioned that the MTA is considering doing away with the pay-per-ride bonus as part of the March 2013 fare hike. After a few years of sticking it to unlimited ride users, certain factions within the MTA believed the authority could better draw in money by dumping what has become a rather meager bonus of 7 percent on all purchases of $10 or more. “Do we really need to go to that level of a discount?” Lhota asked.

Now more details concerning the fare hike proposal are coming into view. Pete Donohue broke the news on Sunday evening concerning the details. Here’s how it looks for Metrocard users:

• l Eliminate the 7% MetroCard bonus. A rider who now puts $10 on a MetroCard gets an additional 70 cents of added value.
• Raise the base bus and subway fare to $2.50, from $2.25.
• Raise the price of an unlimited-ride MetroCard by 5%. A 7-Day MetroCard, now $29, would cost about $30. A monthly MetroCard, now $104, would cost about $109.

The MTA will also, Donohue notes, raise fares for Metro-North, the LIRR and its bridge and tunnel tolls while continuing to fight for the revenue it sorely needs from the payroll mobility tax.

With the discounts completely gone and the base fare going up, that’s a substantial hike for pay-per-ride users. With the current bonus, a swipe costs $2.10, and jacking it up by 40 cents would represent a hike of nearly 20 percent. Unlimited ride users who were shafted a few years ago would see a more modest increase, and the math would clearly favor unlimited riders. The breakeven point on a monthly card would drop from 50 rides to 44 and on a weekly card from 14 to 12. If this hike goes through, I wonder how long it will take riders to realize this shifting math of a subway fare.

Ultimately, this subway fare hike will be shaped by public input. We’ve seen proposals come and go in the face of public pressure, but the truth remains that the hike will happen. The MTA needs to bring in over $360 million next year, and without support from Albany, the only way to do so is through a fare increase. This one seems to make sense right now. Will we be able to say the same in 2015?

Let me pose a question: Why does the MTA hand out discounts on its pay-per-ride cards? Is it to reward transit riders? To encourage riders to stock up on rides to cut down on potentially long lines at the vending machines? Is it a relic of another era in which the MTA had to encourage its customers to switch from tokens to MetroCards? Mediate on that as we ponder a world without discounts.

Earlier this morning, in front of a crowd of high-rollers at a Crain’s New York breakfast, MTA Chairman and CEO asked and answered his own question about the upcoming March 2013 fare hike. While the authority will release the details next month, Lhota’s comments suggested the days for discounts — steep or otherwise — are nearly over. After internal debate about the topic, the MTA is likely going to ask the public to discuss ending fare discounts for pay-per-ride swipes.

According to Lhota, the MTA captures on average $1.63 per swipe in revenue from all riders who pay while the base fare is $2.25. With a meager seven-percent discount and a need to find $450 million, the MTA may wipe out bulk discounts entirely. Such a move, Lhota said, will go “a long way toward capturing revenue.” Plus, he asked of the current percentage, “do we really need to go to that level of a discount?” It’s unclear what such a move would mean for unlimited card users.

Once upon a time, the discount meant two free rides for every 10 purchased, but these days, we’re down to seven percent. Is it low enough for the MTA to eliminate entirely? The Straphangers Campaign, for one, isn’t too sure. Nothing that “eliminating the discount is no different than a fare hike” — which, of course, is the point — the Straphangers worried that doing away with the discount would penalize low-income riders. “The 7% discount on $10 purchases is more accessible to low-income riders,” they said in a statement, “while the seven-day ($29) or 30-day ($104) are a lot of money to have to put up front.”

Of course, the MTA wouldn’t be doing away with pay-per-ride options entirely; they’d just be doing away with the savings of about 15 cents per ride. Unfortunately, low-income riders aren’t in a position to seek out alternate transportation modes over 15 cents per swipe anyway, but yes, as with any fare hike, they’ll bear a heavier burden.

The Straphangers also say that “providing incentives to make bulk purchases of transit encourages greater subway and bus ridership.” That’s long been the party line from anyone regarding MetroCard discounts, but Lhota said he felt subway riders would buy in bulk anyway. Buying 17.75 rides just to get the 18th and 19th for free isn’t incentivizing too many straphangers, and the system’s heaviest users from just about any income bracket will continue to look to unlimited ride cards.

Ultimately, though, a fare hike is a fare hike is a fare hike, and to generate the revenue the MTA is going to look to raise what we pay for the cost of a subway ride. The full proposals will be available in October, and the public hearings will take place in November. Only then we will learn just what that seven percent discount means to New Yorkers.

When MTA head Joe Lhota announced yesterday a $29 million package of service improvements, he also voice his belief that the upcoming 2013 fare hikes will be pushed back by two months. Although the MTA needs the $450 million in annual revenue the fare hikes will bring, Lhota expressed his desire to avoid raising fares until absolutely necessary. “We owe it to the riders to wait to collect until we absolutely need to collect,” he said.

But should the MTA wait? After all, once the fares go up in March, no one will remember or care about the two-month delay. The fares will be higher, and while service improvements will be rolled out over the next 12-15 months, riders will grumble about the increased costs of a subway trip or bus ride. In the short term, it’s an olive branch offering to perennially unhappy riders. In the long term, it will cost the MTA $90 million.

And therein lies the economic rub. That $90 million seems to be a key figure. When The Daily News first reported on the service enhancements earlier this week, Pete Donohue noted that the authority could restore service thanks to a $90 million surplus, and yesterday, as reporters wondered about the remainder of the dollars, the MTA spoke at length about blossoming ridership. These service improvements are due to demand they said.

So it appears to me as though the MTA is using a fare revenue increase along with the promise of more riders to expand transit service while relying on that $90 million surplus to stave off the fare hikes for a few months. One way or another, the numbers add up. So while the MTA gets credit for delaying a fare hike, I’m left wondering if it’s sensible policy.

There’s no doubt, with health care costs and pension obligations high and debt service obligations steep, that the MTA needs the dollars. They also have to present a balanced budget at the end of the year. Why not use the excess money to pay down some costs and then just raise the fares as scheduled? Fare holidays or fare hike delays never really pay off in the long run as by September of next year, the riding public will have mostly forgotten the timing of the fare hikes anyway.

Maybe that’s too technocratic of me and the MTA needs some good will for a few months. Maybe the politicians will appreciate it. Maybe the public will too. It’s a customer-friendly gesture but maybe it’s just worth it to get the fare hike out of the way and the money rolling in.

Whether we like it or not — and who would actually like it? — the MTA is going to raise its fares by around 7.5 percent in 2013 and by the same amount again in 2015. These planned hikes were instituted as part of the authority’s attempts at combating inflation and the downward drag on average fares brought about by unlimited ride cards as well as a need to straighten out its finances. What we’re not getting, one MTA official told the City Council yesterday, is more service along with our fare hikes.

In fact, as Hilary Ring, the authority’s director of government affairs told James Vacca’s Transportation Committee, the hundreds of millions generated by the fare hikes will likely go toward the MTA’s ever-increasing health care and pension benefits. It will not, as Ted Mann of The Wall Street Journal reported, “be sufficient to allow for new improvements in the system or to restore some of the bus and subway routes eliminated during the budget crunch of 2010.” Said Ring, “Essentially the fare increase and the toll increase is almost dollar-for-dollar being eaten up by our increase in pension and retiree health care costs.”

As Capital New York’s Dan Rosenblum noted, the MTA expects to see $900 million in revenue from the fare hike while it will be on the hook for over $800 million in increased pension and health care costs. And those figures are in advance of whatever contract the TWU eventually signs covering 2012-2014. The amounts could be greater.

Of course, city politicians were none too pleased with these statements. “It’s hard for me to believe that we’re going to have that type of an increase and we’re going to have no restoration and no improvements in services,” Vacca said. “I refuse to accept that those of us who call ourselves strap-hangers have to accept paying more and getting less.”

The Journal had more on the fallout from Ring’s statements:

Jim Gannon, a spokesman for TWU, characterized the testimony as “a cheap shot,” saying the MTA was trying to blame its financial struggles solely on labor.

Gene Russianoff of the Straphangers Campaign noted that the MTA’s debt-service costs will also rise sharply along the same timeline. “MTA’s spin is to make their work force responsible for the fare increase….Who’s responsible for the pressure on fares and operations—the work force or the borrowing? I think the answer is you probably could make a good case for either,” he said. Debt-service costs for the MTA are projected to top $3.1 billion annually by 2018, said Mr. Russianoff, who said tolls on the East River bridges are an inevitable if controversial solution to the authority’s funding woes.

Mr. Vacca said he will urge the MTA to avoid the 2013 fare hikes if possible. He said he would stress that a rising economic tide—and a possible boom in ridership if gasoline prices continue to rise—could mean more revenue, in the form of fares and an uptick in the tax revenues dedicated to the MTA.

The city plans to contribute $786 million in operating costs to the MTA for 2013 as the authority plans for a budget in excess of $13 billion. It is, in other words, one giant mess.

So what exactly is going on here? On the one hand, Ring isn’t incorrect when he lights the MTA’s increasing pension and health care obligations. The authority is turning into a retirement fund for its legions of employees at the expense of its mission to provide transportation services. The agency can barely consider improving transportation access because of a never-ending increase in its employee obligations.

On the other hand, these obligations are hardly the only costs the MTA must absorb over the next few years. Debt service will continue to remain a steady presence on the MTA’s ledge, and while the revenue generating by increased ridership for the Second Ave. Subway, the 7 line extension and East Side Access will help pay down some of that debt, it too will act as a drain on the MTA’s budget.

Ultimately, then, we’re left in a familiar position: The MTA’s expenditures pie is growing in leaps and bounds, and none of that money is going toward improving service for those who have to shoulder the service cuts. Somehow, we the riders always come out behind.

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.