Transit: Should it Be Expensive, Cheap or Free?

What would happen if, instead of making transit more expensive to riders, we made it cheaper, or even free?

Rohit Aggarwala had a provocative post in CityLab earlier this week arguing that transit fares in the United States are too cheap. By failing to recoup enough revenue from riders, Aggarwala argues, the nation’s transit systems are missing out on a source of funding that could leverage the massive investment in capital repairs and improvements that those systems require.

The comments section of the piece contains some pointed criticisms of both the analysis and the argument, the most persuasive of which to me are the post’s big city-centrism and its failure to consider the ongoing (and growing!) subsidization of the mode with which transit competes most frequently: car travel.

But Aggarwala’s piece sparks a useful debate over just what we want our transit pricing policies to accomplish, and it invites one to ask: what would happen if, instead of making transit more expensive to riders, we made it cheaper, or even free?

Fare-free transit is already being used by a few small U.S. transit agencies. In general, fare-free transit systems (which, in the broadest definition, would include free shuttles of all kinds) tend to take root when a major institution – a university, medical center, town or business (or, in the case of Boston, our airport) – decides that it would rather pay the cost of running a transit service than deal with the headaches of automobile congestion or the expense of providing more parking. In other cases, institutions might provide free transit passes to their constituents (such as through the UPass programs profiled in our report from earlier this year on campus efforts to reduce driving) for use in a transit system that otherwise charges fares.

Fare-free transit has some important advantages. Not having to collect fares means that passengers can board faster, drivers don’t have to instruct patrons on the use of the payment system, transit agencies can avoid the expense of fare collection equipment and staffing, and would-be passengers can choose to use transit at the spur of the moment, regardless of whether they have fare cards or exact change available. Not charging fares, in short, can make transit service quicker, more convenient and more efficient.  Unsurprisingly, when transit agencies eliminate fares, ridership tends to increase: Chapel Hill, North Carolina, for example, has seen transit ridership more than double since it went fare-free in 2002.

There are certain places, of course, where fare-free transit would be a disaster. If you think it’s hard getting a seat on a New York City subway or the Washington Metro at rush hour now, just imagine trying to do so if fares were eliminated. There is certainly an argument to be made that some transit passengers can, should and would pay higher fares and that doing so would both increase revenue and could reduce overloading of the system at times of high demand.

But it would scarcely be productive if the means by which we build a better transit system – increasing the revenue flowing to transit agencies by hiking fares – simultaneously insures that fewer riders use it. There is lots of evidence (PDF) to suggest that raising transit fares would lead to precisely that result.

It is also important to put what Aggarwala terms “subsidies” for transit in context. Local governments across the United States spend $47 billion each year in general tax revenue to build, maintain and operate their local street and highway networks. Few people reckon these expenditures as a “subsidy” to drivers, even though they are. As long as that is the case, there is no reason why we should see local expenditures on transit as any less legitimate an expense than local spending to fix potholes, replace traffic lights or enforce traffic laws.

All of this still leaves us, of course, with the problem Aggarwala initially sets out to solve: where to get the money we need to bring our transit systems up to 21st century standards. That’s a question with no easy answer.  Redirecting money we currently waste on boondoggle highway projects could be a start. Repealing outdated statutory and constitutional prohibitions on the use of state gas tax revenue for transit would help. Value capture mechanisms that ask the property owners who benefit from transit improvements to help pay for them are worth a look.

It may also be that, as universities and other institutions have found, there is a compelling business case for improving public transportation. Perhaps local and state governments, institutions and citizens will realize that a high-quality, smoothly functioning transit system provides benefits in economic development, job access, attractiveness of a city to skilled young people, environmental quality, congestion relief and more efficient and productive use of increasingly valuable urban space that are well worth the costs of that investment. Maybe they will even decide that they want to encourage maximum use of that capital investment by reducing or eliminating fares.

In this day and age of infrastructure gridlock on Capitol Hill, that thought might seem Pollyannaish, but the continued high rate of success of transit funding ballot initiatives nationwide suggests that there is an appetite for smart, well thought-out investments in public transportation. Raising fares on riders, while it might play a limited role, is unlikely to be a silver bullet solution to the nation’s transit funding challenges. And in many places, it could actually represent a big step backwards.




Tony Dutzik

Associate Director and Senior Policy Analyst, Frontier Group

Tony Dutzik is associate director and senior policy analyst with Frontier Group. His research and ideas on climate, energy and transportation policy have helped shape public policy debates across the U.S., and have earned coverage in media outlets from the New York Times to National Public Radio. A former journalist, Tony lives and works in Boston.