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The Two Dollar Fare

by Bruce Schaller, Mar 10, 2003
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Transit officials approved an increase in subway and bus fares for the same reason that Jesse James once visited banks: they needed the money. The Metropolitan Transportation Authority expects the fare increase to generate over $350 million a year, helping to close a billion dollar budget shortfall.

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Prior to the fare increase, the MTA faced sharp criticism from newspaper editorial boards, transit advocates and even the city and state comptrollers for not fully disclosing its finances and demonstrating the need for the fare increase. But there was no broad public uprising against the fare increase, which upped the cost of a single ride by 33 percent, from $1.50 to $2.00. The new fare takes effect on May 1.

One reason for the relative public quiescence is a widespread view that avoiding cuts in transit services is more important than avoiding a fare increase. Riders would rather have their pocketbooks squeezed than be any more squeezed while riding subways and buses. This preference partly reflects how crowded the transit system has become with rapid ridership growth over the past half-dozen years. It also reflects memories of cutbacks three decades ago that led to a downward spiral in both service and ridership. In fact, the public complained far more extensively about the proposed closing of 177 token booths and cutbacks in their staffing, and the authority backed off of that proposal; it now plans to close just 62 token booths instead, the biggest change from the MTA's initial proposals.

Another factor in the public receptivity to a fare increase is the MetroCard fare incentives. Riders have saved millions of dollars as a result of the various fare discounts implemented in the mid to late-90s. The MTA points out that even with this fare increase, the average fare will still be lower than it was after the last fare increase -- $1.30 per ride after this increase compared with $1.38 in 1995.

A third factor is the passage of time. With almost eight years since the last fare increase, many riders figured that their time has come.

Since this was the first fare increase since the fare discounts were put in place, transit officials faced important decisions about the structure of the new fare. They chose to make incremental extensions to the fare innovations begun in the mid-1990s. Most notably, the 30-day unlimited ride pass will be more attractive. At a price of $70, the 30-day pass will be 42 times the cost of a bonus per-ride MetroCard, down from 46 times under current fares. Riders will save money with the 30-day pass if they use transit in order to commute and an occasional additional trip.

The new fare also increases the discount for bonus MetroCards. Currently, riders get 11 trips for the price of 10, making the effective cost per trip $1.36 instead of $1.50. The new fare introduces a 6-for-5 bonus (or 12 for 10), making the per-trip cost $1.66 instead of $2.00. The threshold for getting the bonus is also reduced from $15 to $10.

The one area where transit officials backed away from MetroCard discounts came with the one-day pass. This so-called "Fun Pass" is becoming a more expensive lark, rising from $4 to $7. Some officials considered the $4 Fun Pass to be underpriced when it was first introduced. It is also used fraudulently by enterprising folks who buy several passes and re-sell trips to people at subway turnstiles. The new $7 price makes that fraud a little less profitable.

The new fare also incrementally addresses issues raised by transit advocates who sought to make the MetroCard discounts more accessible to a wider range of riders. Reducing the threshold for getting the bonus to $10 is one step in this area. Another step is the MTA's plan to begin offering this fall to replace lost or stolen 30-day passes for an unspecified "insurance" fee.

Another innovative step is a pilot "City fare" on the commuter railroads for off-peak travel in the city. Riders will be able to travel within the five boroughs on the railroads for $2.50, thus opening additional opportunities for rail travel.

Even with these steps forward, the effects of the new fare are likely to be regressive across income groups. Low-income riders are the group most likely to pay the base fare, which will cost 33 percent more. High-income riders are the group most likely to buy the 30-day pass, the cost of which increases by only 11 percent.

The overall fare increase for transit riders is 25 percent, the same as for the commuter railroads. Drivers will be less affected by the MTA actions since bridge and tunnel tolls are increasing by only 15 percent.

The new fare is likely to affect individual riders in several ways. First, a fare increase always reduces ridership - the MTA estimates by more than 70 million annually for this increase. The subways and buses are likely to be a little less crowded as a result.

Second, riders will be recalculating what they want to purchase. It may make sense to buy a 30-day card instead of a 7-day card. The $70 is a large up-front cost but the savings will be larger. For those not buying a pass, it will make even more sense to take advantage of the bonus, which will be twice as large and available for smaller purchases.

A RECAP OF THE KEY NUMBERS

Base fare: $2.00 instead of $1.50

Bonus MetroCards: 6 rides for $10 instead of 11 rides for $15 (or $1.67 per trip instead of $1.36)

7-day pass: $21 instead of $17 (you save money with the 7-day pass compared with the bonus MetroCard if you make 13 trips a week - no change from the current situation)

30-day pass: $70 instead of $63 (you save money with the 30-day pass compared with the bonus MetroCard if you make 43 trips a month, down from 47 trips currently)

One-day pass: $7 instead of $4 (you save money with the one-day pass compared with the bonus MetroCard if you make 5 trips a day, up from 3 trips currently)

Bruce Schaller is Principal of Schaller Consulting, which provides research and analysis to government, business and non-profit groups seeking to identify and meet customer needs in the transportation sector. He is also a Visiting Scholar at the Center for Transportation Policy and Management at New York University.
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