Treating Transit as a Utility

Evan Manvel

Switching the Portland region to a fareless system would make international headlines. We would be sending a bat signal to the sustainability world – a big bus outline in the sky.

When you go for a walk, drive, or bike ride, you don’t reach for your wallet. But when you decide to catch a ride on a bus or light rail, you’ve got to pay.

We know walking causes shoe wear, bikes need tuning, and cars require payments, gas, insurance and repairs, but paying for transit is a different sort of feeling.

Simply put, other forms of travel don’t face the psychological (and small monetary) hurdle of transit’s marginal cost, the impact of reaching for your wallet. Economists explain it as a comparison between fixed costs and marginal costs; everyday folks notice having a monthly pass or being in the free rail zone makes us more likely to ride.

We’re struggling to fund transit – the current nickel fare increase and TriMet ballot measure are just the latest indications.

Most of TriMet’s operational costs are funded by a regional payroll tax. The payroll tax provides a broad-based funding source, providing a system that offers a transportation option for employees getting to and from work. The rest of TriMet’s funding must be cobbled together, with 21% coming from farebox revenue and monthly passes.

Charging at the farebox has its benefits – it is a user fee, so that one beneficiary of transit pays. It provides a method of excluding people we may wish to keep off our transit vehicles. It encourages people to walk or bike instead. And it covers quite a bit of TriMet’s operational costs, meaning more transit service than would otherwise be possible with current funding streams.

But farebox collection also has drawbacks. It slows transit, as people line up to pay and fumble for change. It’s the leading source of conflict in transit operations, leading to delays, arguments, and problems. And the costs of collection – both in keeping fareboxes and ticket machines operational and managing the money – are an administrative burden.

Meanwhile, transit benefits many people – including those who aren’t in it. Remember that article in the Onion – “98 percent of Americans support the use of mass transit by others”? That’s because each bus can mean 40 fewer cars on the road, public health improves, and pollution decreases. (A more complete list of benefits).

Those who defend fares and fare hikes note that in surveys more people cite frequency and convenience of service as a disincentive to transit use, rather than cost of each trip. Keeping the service and therefore ridership up requires boosting fares. Yet, that’s the framework of a zero-sum game – either you raise fares or cut service.

There’s another option – we could think of transit as a utility. The idea isn’t mine – my neighbor in Colorado wrote about it in 1980. Transit could be seen like streets and sidewalks, sewers and water mains - something provided with each home, and paid for by the homeowners each year (with perhaps hotel, airport, and car rental fees paying for visitor’s use of transit).

Instead of transit be the one form of transportation with a clear marginal cost every boarding, the one that requires scrounging for money and paying it, we can level the playing field.

Switching the Portland region to a fareless system would make international headlines. We would be sending a bat signal to the sustainability world – a big bus outline in the sky. The signal would be seen by those looking for an innovative place to set up headquarters, bringing more companies like Vestas and ReVolt. We would be backing up our commitment to address the climate crisis with bold action.

What would it mean for ridership and TriMet? I’m not aware of large cities who’ve tried before-and-after fare experiments, though many smaller cities and areas have gone fareless. Denver held a part-of-the-day fareless transit experiment in the 1970s, boosting off-peak ridership by 67% (while decreasing peak ridership slightly). Hasselt, Belgium, population 70,000, has had a 13-fold increase since abolishing fares. All signs point to transit use increasing significantly by making it fareless.

If we’re serious about fighting the climate crisis, about providing quality transportation choices for everyone – especially the quarter of Oregonians who cannot drive – and being an international leader in sustainability, making transit a utility would be a bold next step.

My neighbor’s original article was: Bob Komives, “Why not treat transit like a utility?” Journal of the American Planning Association, Volume 46, Issue 3, July1980, pages 372-377.

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    Fabulous big-picture thinking Evan!

    I've been reading a lot of other fascinating TriMet coverage at Portland Afoot lately, but this idea cuts through the marginal game and gets right to the re-thinking we need to turn the failure in operational service around!

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    Austin is probably the largest city that has had free transit, 1989-1991. And then discontinued because people became concerned about "undesirables".

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    Matthew - interesting! Thanks for that note. Do you know what happened to ridership?

    As a side note, I try to refer to it as "fareless" rather than "free."

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    I'll go you one better. Make Wi-Fi AND mass-transit public infrastructure (i.e. utilities) paid for through general tax revenue streams (i.e. property taxes).

    Both also benefit businesses as well.

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    The key question is, how would you replace the revenue that currently comes from the farebox?

    The numbers are interesting. The current payroll tax is .6818%, or $57 a month for someone earning $100K. That's what they pay now. If you raised the tax rate by 26% and eliminated fares the $100K earner's monthly rate goes to $72. That's $15 more, and you get the equivalent of a monthly pass.

    I doubt that's the end of the story, but it looks like an interesting story.

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    By all means, continue to tax the producers and the property owners for the riders. That way the riders have no skin in the game at all. I assume that the property owners are going to willingly vote this new tax upon themselves via the polls?

    Be prepared however for the law of unintended consequences when the producers start demanding efficieny and effective numbers regarding asset use, maintenance and ridership. Don't forget that this also places the gold-plated Trimet benefits package on the chopping block.

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      More delusional thinking that somehow people who ride on public transit are not "producers" in society.

      BTW, everyone (except for the homeless) pay property taxes either directly (they own property) or indirectly (they rent)... whether they are "producers" or not.

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    I'm not sure that it's financially or politically feasible to do this - no matter how good an idea - anytime soon.

    I think a reasonable first step would be to make transit use for everyone under age 18. We should encourage young people to get acquainted with how the system works - and help them develop habits that will last a lifetime.

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    Perhaps when we give out food stamps we should include a transit pass, as well as making it free for the young?

    And perhaps give people who arrive at the airport a couple free passes? Or let them use their airline ticket as a pass to downtown?

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      These are neat ideas, too. I've been wanting to do an Ideas Issue of Portland Afoot, and some of these should definitely be among 'em.

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    I like this idea, but it is not politically supportable unless you have a major part of the population using mass transit exclusively. And even in places like Japan and Europe where there are large subsidies for transporation, riders still have to pay.

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    Lets not forget, Fareless Square - from downtown, through the Rose Quarter - was very popular here in Portland till just recently, when current TriMet management killed it off, in order to pay for their free senior citizen pass program.

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    "And perhaps give people who arrive at the airport a couple free passes? Or let them use their airline ticket as a pass to downtown?"

    Good idea. (reply function is kaput on my PC)

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    Opps hit 'post' too fast.

    Might also want to do this for people coming in via amtrak too.

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    While I appreciate the big picture thinking here, the utility concept for transit is flawed.

    Electricity is a utility - we pay for every kilowatt we use.

    Natural gas is a utility - we pay for every unit we use.

    Etc., etc.

    Economics is the science of allocating scarce resources, and transit clearly falls within that definition. User fees are a better way to allocate scarce resources than pushing the cost off on others. If you want to subsidize those who don't have the means to pay, that's another issue, but watch out when trying to make everyone pay for everyone else's transit (or anything else). It's a recipe for failure. Tri-Met's 21% operating cost fairbox recovery is already at that point. Drop it to zero and watch the wheels come off the system even faster.

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      Steve- In many utilities, we simply pay for basic service. That is, there's a flat fee that everyone pays, because building a sewer pipe or water pipe to a building costs something, regardless of the marginal costs of how much sewage or water goes through it. Similarly, providing transit lines has some fixed costs, regardless of how many people use it. Perhaps "utility" is not the most artful term, granted.

      If economics is the science of allocating scarce resources (I think it's broader than that, but...), our healthy climate is one of those scarce resources.

      The current subsidization of those who pollute by all of us is an example of failure; were we to correct that (distorted) market failure we might indeed see more people using transit.

      The challenge is the flawed price signal, and until people have a dashboard read out on how much money their trips are costing them, or are forced to pay, they're going to get confused by the hidden costs, allocating the fixed costs, etc.

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    Transit is more than just people riding a train or a bus. It's people not driving and fewer tax dollars spent on providing road improvements, among other things. It's a part of a much bigger picture of mobility that we all pay taxes on. Why put transit in a box? I appreciate Steve's point about allocating scarce resources, but, again, perhaps that's not seeing the big picture.

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    Politics aside, I see a couple policy arguments against fareless transit.

    The cold-hearted one: Riding bus and MAX will be less pleasant if destitute people are always riding it. Which they would, because it's free shelter. This would be bad for ridership, the environment and ultimately for the public's support of mass transit.

    The wonky one: It removes TriMet's (already weak) incentive to focus on improving ridership among its core users. Is it a coincidence that the 72, one of TriMet's most-ridden and least expensive bus lines, didn't receive any cuts at all this month?Part of TriMet's calculation, I suspect, was that that bus is less expensive to run than others.

    Without the farebox, route decisions would become purely political -- which suburban businesses would convince TriMet to run unprofitable lines to their door, hurting the urban poor, in exchange for payroll tax support?

    As Evan says, the switch to a flat percentage rate on most workers would make TriMet less like a business, reacting to its customers, and more like a utility, reacting to other institutions. In some ways that'd be good, other ways bad.

    Another idea to pay for this, by the way: expanding payroll tax to include nonprofits, school districts, the federal government, and out-of-state insurers. Believe it or not, they're all exempt.

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