This post floats a proposal for across-the-board transit fare cuts funded by tax increases. My considered bottom line about the proposal appears further below. Click here to jump to the bottom line.
Is now the time to sharply cut transit fares in Massachusetts? T fares have risen much faster than inflation, more than doubling since 2003.
Lower fares would result in more riders. More riders means less cars on the road which is good for everyone. Transit already carries a big share of the traffic on the most common routes into the core of the Boston area — approximately 40% region-wide. Even a small shift to transit could make a big difference in congestion.
I’m not suggesting that the MBTA and other transit authorities should run with less money. We are in the middle of a sustained effort to provide better quality transit service and that costs money.
Statewide, transit authorities raise approximately $800 million per year from their riders through fares. To cut fares, the legislature would need to identify annually recurring funds and permanently pledge them to the MBTA and other regional transit authorities. The pledge would be combined with a legal mandate that the funds be used to replace fare revenue. The transit authorities could then make decisions as to how specifically to allocate the reductions. The reductions would be permanent in the sense that future increases would be limited by existing law.
For example, a 9 cent per gallon gas tax increase and a one dollar per ride charge to Uber/Lyft users would raise a little less than $400 million. This should be enough to cut transit fares in half statewide. Likely, it would be a bit more than enough given that ridership would increase and generate additional revenue.
Drivers in western Massachusetts generally drive further each day than Boston drivers and do not want to subsidize the Boston region with gas tax payments. The new collections should be returned to the regions that they are collected from to assure geographic equity. If, within a region, the collections exceed the amount necessary to eliminate transit fares, the excess should be returned to cities and towns in the region for road improvement.
How ridership changes in response to fare changes is a subject of extensive empirical research, locally, nationally and internationally. For some riders on some routes, time savings are a more important consideration than fares. That tends to be most true for rail and subway routes that can move much faster than road traffic. Except when they benefit from dedicated lanes, buses tend to move more slowly than traffic because they stop frequently. Bus ridership is more sensitive to price changes than rail ridership.
Analysis of past fare changes in the Boston region shows roughly a .15 “elasticity of demand” ratio. In other words, a 10% fare increase would yield a 1.5% ridership loss. A 50% fare decrease would be outside of the historical range of experience, but if the .15 ratio held, we could expect an overall ridership increase of something like 7.5%. On the other hand, a fare decision of that magnitude would send a strong message of support for transit ridership and might lead to a larger increase in usage.
A careful analysis would need to be done by each transit authority about how to allocate the fare decrease to achieve manageable ridership increases. The authorities would have to think carefully about fare equity and how the changes affect lower income riders. An across-the-board even decrease would be easy to explain and would probably pass equity muster, but there are other possibilities.
For example, the MBTA could completely eliminate fares for local buses while making a more modest adjustment for the subway. This would benefit some of the lowest income transit users. It would have the additional benefit for both riders and drivers that buses would not be pausing in traffic while riders pay their fares. It might also greatly simplify the implementation of any new fare technology, although it would mean foregoing the ridership data provided by collections.
There is also a good case for targeting commuter rail fares. Commuter rail fares are distance based, so that commuting from endpoints like Worcester and Lowell can cost several hundred dollars per month. On the Worcester line in particular, we need to drive ridership up in advance of the disruptions likely to be caused on the MassPike by the Allston interchange construction.
As much as we struggle to provide more affordable housing, people of modest income find themselves increasingly priced out of the urban core. We need to make it economically feasible for them to commute to the high employment core of the region or they will be deprived not only of their preferred housing but of employment.
Reader Reaction Poll Results
We should raise taxes to cut transit fares as outlined above.
|Not sure or don’t like the question as framed (N=82)
|Readers responding within 48 hours (N=398)
A gas tax increase of 9 cents combined with an Uber/Lyft fee increase of $1 would suffice to cut all bus, subway and commuter rail fares in half all across the state.
Insights from Comments
Thanks to the almost 400 people who chose to submit their quick reaction to the proposal for a broad-based fare cut funded by tax increases and especially to the over 100 who chose to comment in more detail below. I have read all of the comments through October 13.
The overall reaction to the proposal among my readers was supportive, but the critical input was also helpful and I’d like to summarize my own thinking at this point. There are several reasons to like the proposal of a broad fare cut, but they all need to be examined and qualified. A fare cut targeted to low-income riders may make more sense.
First, a fare cut seems to speak to equity. We tend to think of transit users as having more modest incomes, and certainly, the most wealthy usually have more comfortable options. However, areas well-served by transit tend to become more desirable and expensive. Only 28.8% of all MBTA users actually qualify as low-income. See Table 7. from the CTPS analysis of the most recent MBTA fare increase analysis. (Low income is defined as below 60% of the median household income.) Lowering fares for all transit users is not a well-targeted method for supporting low-income households.
Moreover, lowering fares by raising the gas tax or the Uber/Lyft fee would burden many low-income households, many of whom have no access to transit. As more and more people of limited income are priced out of the low-household-mileage urban core into high-household-mileage suburbs, the gas tax falls more and more regressively on households. And it polls badly (opposed by 68%, even for funding better transit).
Second, a fare cut promises to reduce congestion — the more people that take public transit, the fewer cars on the road. This argument makes sense on its face, but I do not believe that it is compelling. Congestion is most frustrating at rush hour. People driving at rush hour are mostly employed, so mostly not at the lowest end of the income spectrum. They are sufficiently affluent that that they can afford to drive into the city and incur parking costs, so they are less likely to change their commuting behavior based on a fare cut: They are likely to be making decisions more based on time and comfort rather than money.
The modest shift of people out of vehicles onto transit as a result of fare cuts is unlikely to make a noticeable impact on congestion. To confirm this, consider one of the more favorable places for a high impact — the MassPike corridor, where commuter rail handles about 1/3 of the corridor’s rush hour volume. A crude computation suggests that a 50% fare cut would save less than a minute for drivers. More generally, on most other routes in the region, time savings would be fully diluted amidst traffic flows that do not align with transit.
Explanation of time saving estimate:
The CTPS fare analysis at Table 1 estimates a .1 demand elasticity for commuter rail pass holders and a .2 elasticity for cash purchasers. At rush hour, the elasticity of demand is likely to be towards the lower end, so using a .15 elasticity is an optimistic assumption at rush hour. If a 50% Worcester line fare cut led to a 7.5% rush hour ridership increase (.15 elasticity) and 80% of the new ridership was shifted from vehicles on the Pike, then rush hour vehicle volume on the road would go down by about 2 percentage points from 67% to 65% of the total corridor peak volume. If a 50% traffic reduction from peak is necessary to get down to free flow speeds and save 15 minutes in travel time (as is very roughly suggested by inspection of data in the congestion report at pages 19 and 26), then travel times would likely fall by 2%/(.5*67%) * 15, in other words less than 1 minute.
A third reason to like an across-the-board fare cut is that increasing transit ridership might reduce greenhouse gases. Again, this is compelling at first glance, but we have to keep in mind that most trips are well not served by transit. Statewide, the vast majority of the miles traveled in the state are traveled in passenger vehicles. Moving people on to transit is a very limited emissions reductions strategy — we have to electrify our passenger vehicle fleet. Further, there are many more cost-effective ways to reduce emissions than transit fare cuts, for example, subsidizing electric vehicles.
Explanation of carbon cost-effectiveness statement:
The following assumptions are all as favorable as possible to the carbon cost-effectiveness of fare cuts: (a) .2 elasticity of demand, evenly distributed across modes, so that a 50% fare cut results in a 10% increase in both ridership and passenger-miles traveled; (b) all of the passenger-miles traveled increase is converted from single-occupancy-vehicle use; (c)the transit power sources are 100% renewable and/or no service increase is required; (d) the vehicles replaced get only 15 miles to the gallon.
On these favorable assumptions, the annual cost of saving one passenger-mile of driving through T fare cuts is $1.60, so the annual cost of saving a gallon of gasoline is $24.00 (at 15 miles per gallon) per year or $2.72 per kg of CO2 (at 8.887 kg CO2/gallon).
By contrast, a $10,000 electric vehicle incentive that caused a driver to shift to a fully green electric vehicle that saved 500 gallons of gasoline per year over ten years would be a $2/gallon-saved expenditure for the public, or $0.22 per kg of CO2. Similarly, bringing insulation up to code in an older home is a one-time cost in the ballpark of $9 per therm of natural gas saved annually or $1.81 per kg of CO2 emission (at 5.3 kg CO2/therm) annually for the life of the house, roughly $0.09 per kg of CO2, assuming only a 20 year life. For another comparison, the Obama whitehouse economic advisors estimated the social cost of carbon in 2020 at $42/ metric ton of CO2, or $0.04 per kg of CO2.
Fourth, it seems likely that the modest ridership increases likely from a fare cut could be accommodated without additional service spending. A tighter squeeze is always possible, but at rush hour, most transit routes are heavily crowded already. While crowding is self-limiting, more crowding would hardly be desirable from the perspective of loyal riders.
Many commenters responded with critiques of the MBTA’s service and management. While the service still needs improvement, I believe the current management is strong and has set the system on a course of long-term improvement that we will all begin to feel within a few more years. When we see strong increases in capacity on the Red and Orange Lines and the commuter rail, as we have good cause to expect in within two or three years, that may be a more appropriate time for broad-based fare cuts to attract ridership.
Better-targeted cuts still merit short-run consideration:
- Following the release of an MIT study showing that fares limit limit mobility of low-income households, MBTA management committed to study a discount fare for low-income riders (see livestream of June 10, 2019 meeting at 55:50, July 22, 2019 meeting at 1:12:30 and full presentation at meeting of August 12, 2019 at 1:22:00). Completion of the MBTA’s study is expected later this year. This study may show the way to a more efficient and equitable fare cut that the legislature might want to support financially.
- Fare discounts for low income commuter rail riders has a special appeal, as they would support transit oriented development in gateway cities. Table 7 of the recent fare analysis shows that 93.2% are not low income, so across the board commuter rail fare cuts are not appealing. Yet, it makes sense to consider connecting affordable housing in gateway cities to Boston jobs through discount fares for lower-income workers.
- An alternative targeted approach to fare reduction which some are urging informally would be elimination of fares on buses. Bus fare elimination might simplify implementation of the new fare collection system and tend to benefit lower-income riders. It would also be very inexpensive, since (a) many bus trips also result in subway trips (no fare loss on those trips given existing transfer policy) and (b) fare recovery is generally low already on bus-only trips. Additionally, eliminating bus fares might accelerate buses by speeding boarding. A concern about bus fare elimination was raised by a commenter: we have to consider how we would manage the possibility that if the buses were free the buses would start to be heavily occupied by people who are not actually trying to get someplace. That might degrade service for riders who are using the service as intended. Additionally, since subways would not be discounted many lower-income riders might not actually benefit.
- Studies of MBTA fare increases by the Central Transportation Planning Staff
- National Academy of Sciences Survey of Fare Increase Literature
- Amateur Planner blog on 2012 increases
- Crude estimates of ridership impacts of blanket fare cuts