Bulletin #3 - A Deep Dive Into Fares

By Annie Lloyd

On May 11, with a possible fare hike set for July, riders who were eager to return to transit and who are fed up with AC Transit’s slow recovery pressured the AC Transit Board of Directors to delay the fare increase to 2022.

The increase would have raised the price for single rides on AC Transit buses from the current price of $2.50 to $2.75. The board passed the planned increase in 2019 as part of a five-year fare schedule, with the intention of matching fares to inflation and ensuring reliable revenue for AC Transit. Director Jovanka Beckles requested a report to consider pushing the increase by either 6 months or 1 year, in light of the impact from the COVID-19 pandemic.

Public comment says no to a fare increase

Riders who want to see vibrant, well-funded transit came to the meeting and demanded the board reject the fare hike. All the commenters emphasized the poor timing of the increase and the risk of discouraging bus riders from returning to transit. One commenter, Patrick, pointed out that “AC Transit isn’t even running the bus route that goes by my house, so the fact that you’re asking to increase fares when you aren’t even running the bus, makes it a moot point because I can’t ride AC Transit because you haven’t provided bus service to our neighborhood.” And increased fares wouldn’t even help AC Transit’s finances, if steeper prices lead to fewer people taking the bus.

The board ended up voting unanimously to delay the increase by one year. The riders’ testimonials sealed the deal. The recovery from the pandemic will be tough unless the Metropolitan Transportation Commission steps up to the plate and distributes the money from the American Rescue Plan stimulus before the next fiscal year starts in July, but keeping fares steady will hopefully help bring riders back as soon as possible.

Why have fares at all?

While postponing the fare increase is an important short-term win for riders and bus operators, the real fight shouldn’t be about whether or when fares increase — it should be about ending fares once and for all. Our transit fights should always raise expectations about public services like transit, housing, and education: Given the immense wealth that workers in California have produced for our economy, why shouldn’t we use some of that money to make transit free for everyone? What would it look like to never pay to board a bus or train? In the long run, limiting the fight to preventing fare increases constrains the imagination of what public transportation can provide

To understand why we don’t have free (or even very cheap) transit, we need to look at the history of our transit systems in the US. 

The majority of public transportation systems in the United States are public versions of formerly private businesses. The Key System in the East Bay, the Pacific Red and Yellow cars in Los Angeles, the IRT, BMT, and IND subways in New York City, the Chicago Surface Lines, etc. were private companies driven by the profit motive. They provided mass transportation to growing cities, but their construction, choice of route, and maintenance were closely connected to real estate speculation and capital accumulation in each city: transit lines were designed to make more money for the wealthy by making new, rich suburbs viable. They all also charged for use, with the occasional promotional free fare to draw in new customers. 

Starting in the 1950s, most mass transit companies in the US were on the brink of bankruptcy. Declining passenger counts and the inability to maintain and update infrastructure led to disaster for these companies because they relied exclusively on farebox revenue to sustain operations. 

The mass production of cars and urban development which prioritized drivers were the most significant material changes leading to the decline in use of mass transit. Despite reduced ridership, local politicians who knew their downtown constituents relied on the transit service were determined to maintain the systems. This didn’t translate into real investment, though, until federal funding entered the picture. 

The 1964 Urban Mass Transportation Act was the first major federal funding for mass transit and infused cities around the country with massive financial windfalls, many of which used them to purchase the transit companies and form public authorities to run them. Local governments started investing more heavily in transit because they could rely on federal legislation to either fund directly or match funding for new projects. Importantly, these early subsidies were for capital projects only. This means the purchasing of new fleets, the building of new stations and lines, etc. — anything but the regular maintenance and operations of the existing system, including wages for workers. Federal funding for operations only began in 1974. 

But relatively generous federal funding for public transit ended with the onset of the Reagan administration and its obsession with slashing spending on public goods. Funding had to then increase at the state and local level, and remains mostly a patchwork of non-federal funding to this day. Federal funding for operations completely dried up in 1998, when Congress again restricted federal funds to capital projects only, except for in rural communities.

One possible interpretation of this reduction and then reversal is the long war on public sector unions, and the continued bipartisan resistance to strengthening the power of labor in the U.S. The 2020 CARES Act was the first piece of legislation since then that has allowed for federal funding to go towards transit operations. Mostly, though, the past three decades have seen increased costs for building and operating transit as well as increased state and local responsibility for those costs. 

Fares today

Throughout these ups and downs, fares have remained constant because the money they raise goes directly towards paying for operations. The specific amount that agencies recoup in operations through fare revenue is called the “farebox recovery ratio,” and the amount varies significantly. For example, subways have an average of 61% recovery (which means fares pay for 61% of operations), whereas city buses average at 22%, according to a 2018 summary of the National Transit Database.

This ratio paints an incomplete picture, though. When factoring in the cost of operations and the price of a ticket, the subsidy per rider varies depending on the type of transit. Subsidies are the amount an agency receives from non-fare sources that supplement fares to pay for the cost of operations. If transit agencies ran exclusively on fares, fare prices would reflect the amount it costs to run service, hire new operators, and build new infrastructure. A subway ride would cost way more than it does now, and subsidies are what keep the cost lower. In 2005, Public Advocates analyzed the subsidy amount per rider in the Bay Area and found that each AC Transit bus rider was subsidized $2.78 per trip, whereas each BART rail rider was subsidized $6.14 per trip. Caltrain blew them both out of the water, with $13.79 of subsidy for each ride. The proportion of white riders increases with the subsidy amount. So while fares pay for some of the operations cost in each system, and pay for a higher proportion of operations for BART and Caltrain than for AC Transit, fares for predominantly white systems receive the lion’s share of subsidies. The entire system reinforces racial and class inequality, with wealthy white people at the top.

Removing fares

To remove fares entirely, a separate revenue stream would need to make up for what agencies would lose in fares. The size of this revenue stream would vary for each agency, and for some it is small enough that they’re already looking to make the switch. In Kansas City, for example, fares only bring in $8 million in revenue. The proposal to remove fares, which was put forth before the COVID-19 pandemic, involves re-allocating $4 million from the regular budget and acquiring $4 million in a public-private partnership (a good reminder that removing fares doesn’t make the bus free — someone has to pay for it). LA Metro sees a short-term funding opportunity in re-tooling the present budget, and a long-term opportunity through a mixture of federal funding and possible congestion pricing.

Wrestling with the prospect of free fares means grappling with the immense cost to build, operate, and maintain transportation. But too often agencies and analysts use that cost to scapegoat labor for costing too much or to force a binary on the ridership: either pay for fares or expect reduced service and poor system maintenance. The former argument reflects an anti-labor viewpoint that is incapable of conceiving of labor as part of the public. The latter is merely a bad faith attack, since fares are rarely a significant source of funding for transit, with the exception of high farebox recovery commuter systems which cater primarily to a white ridership. It also assumes that fares are actuallypaying for good service, when fares are more expensive than ever and transit service remains inadequate and unreliable. In the book “Rights in Transit,” Kafui Attoh notes that real fares at AC Transit were at their lowest in 1977, only a couple years after ATU 192 workers were paid the highest real wage in the history of the union. The idea that low fares require low wages for transit workers is baseless. These arguments also rarely consider the vast amount of money agencies pay to police and sheriff’s departments, often to police fare evasion, which disproportionately harms Black and Brown riders. Funds for police could easily be redirected to make up for loss of revenue due to eliminating fares.

The public aspect of public transportation

People who argue against free fares usually refuse to acknowledge the public aspect of public transportation. A common refrain is that, without fares, anyone—truly anyone—can ride the bus. This is often a dogwhistle to condemn unhoused people, teenagers, or anyone whose presence does not resemble the ideal professional, middle class urban residents who planners and politicians like to pander to. The fear of attracting a certain crowd with free fares reinforces the idea that cities should cater to a certain demographic, and that anyone who sits outside that category is disposable. But even with fares, public transportation in most cities is stigmatized as a mode of transport for the less fortunate, driving away people who can afford a car.

Transit agencies operate within a society that rewards highways over bus operations, military over education, and property and profit over people in general. Financial arguments against free fares aren’t actually any good: they just reflect the attempts of the wealthy and powerful to avoid paying for a high-quality, racially and economically just public transit system. Some argue that better and more reliable service is more important than eliminating fares, and that new riders won’t step on a late or slow bus even if it’s free to ride. This is bad logic, since revenue from fares has never provided the finances to support a truly functional transit system.

Why focus on making money on fares when doing that pushes people away from riding in the first place? We should demand free fares and reject the lies that this will necessarily make service worse or hurt workers. We need a movement that fights for high-quality public transportation that is truly for all people.