Why requiring a transit fare recovery rate is ineffective

Senator Richard Madaleno and Delegate Brooke Lierman introduced a bill in the House and Senate that would repeal the "Farebox Recovery" requirements which currently mandate that the MTA covers 35% of its operating cost with revenues from the fare-box.

The fare-box: A poor metric for success

On first glance the topic looks as if it would only concern transit geeks. In reality, though, requiring a transit agency to be profitable like any other company (even if the profitability margin is set low) is onerous and affects everyone in the region. There is hardly transit agency in the world that makes a profit, with a couple of exceptions such as Hongkong and Singapore where density and ridership is very high. For the rest of the world subsidies for transit are investments in economic development, access, equity social justice, and smart growth. For those investments the return does not accrue at the farebox but in the overall health of a city and its region.

“For years, the farebox recovery mandate has acted as an impediment to achieving a high-performing transit system. It’s time to repeal that mandate and replace it with meaningful performance goals and metrics so that Marylanders are experiencing high quality service from our state’s transit system.” Delegate Lierman

Ironically, transit systems that are starved for funds thanks to fare-box recovery mandates and their narrow definition of cost-benefit on the "company" level defeat their own goal. Agencies with such cost control perform worse on the fare-box recovery metric than those who invest, modernize and expand. Only investment can move a company out of a death spiral, that applies to transit agencies just as for private business.  Zurich, Switzerland, may be the poster child for a turn-around through solid investment. Zurich in the seventies had a run-down tired transit system with aging streetcars when it decided to invest and upgrade its fleet and services in a 10 year program and SFr 200 million annual investments. Today the Swiss city runs a very reliable and extensive light rail and bus system (32% mode share) and has a fair-box recovery of over 60%.

The narrow confines of a farebox recovery model that prohibits investments suggests that the most profitable agencies would be those that provide limited transit only where demand is high, during rush hours or on the most traveled routes and that agencies should charge high fares. Clearly, that model is not only in conflict with a social reality where shift workers work odd hours, where poor people, the elderly or those too young to drive don't have access to cars, (55% of MTA riders are dependent on transit) it is also in conflict with a denser metro area where transit is much more economical and feasible than a car.

The Baltimore Light Rail: Riders like it but it has a poor fare box recovery

To see the effects of the myopic cost-benefit model, one has to only go back in history to the time when the extensive streetcar systems of many US cities where abandoned as too expensive to maintain and operate.  The streetcars were replaced by the bus. The result typically was worse service and further decline of transit and revenues. By contrast, the few cities that kept their legacy streetcars and modernized them such as Boston, Pittsburgh, or San Francisco, today provide far better transit service than the "bus towns"and have better fare box recovery rates. Cities with anemic transit (usually no rail) have the worst fare-box recovery rates such as Austin with 9%, Miami 16.1% and Cleveland with 21.5% while the transit cities such as Boston, Chicago and Philadelphia, all have a recovery rates over 50%. (2009 source).

States and transit agencies across the country have seen debates about the fare-box recovery metric. Colorado requires RTD to have a 30% recovery rate (RTD invetsed big in FasTrack thanks to dedicated regional sales tax increases), California requires 20% in urban areas, both lower mandates than in Maryland.

A bill to repeal the fare collection rate mandate had also been introduced in Annapolis last year. It was derailed and did not pass even though MDOT did not take a position on it and was neutral. The sponsors of the new bill have learned from the experience. They broadened the base in support of a repeal and included businesses. The supporters agree that transit should have performance metrics to ensure that the tax dollars supporting a system are spent wisely. The proposed bill suggests as such metrics:

o Reliability
o Efficiency of service provided to riders,
o Increased ridership,
o More connections to job centers, and
o Frequent service

The 2017 bill is not only supported by transit activists such as the Central Maryland Transportation Alliance, Get Maryland Moving, the 1000 Friends of Maryland, Transit Choices of Baltimore, or the Maryland Transit Opportunities Coalition, but also by unions such as SEIU and ATU and businesses and business groups such as Sagamore Development Corporation (Under Armour), Tradepoint Atlantic (Sparrows Point), and the BWI Partnership.

In the long run not enough to serve a large metro area: The bus

Maryland businesses increasingly find it difficult to attract talent to open positions that aren't located in the central business district and hard to reach by transit.

Cities find that the more city locations become attractive for development, investment and relocation, poor transportation appears as an obstacle for this otherwise desirable shift away from sprawl: There simply is no space to accommodate additional cars on the existing roadways, and often not even with buses, unless buses are allowed to have their own lanes, signal priority, offsite amenities at stops; in short real investments that require not to be stuck with a rigid fare-box requirement,

Source: MTA website

The MTA hasn't met the 35% requirement in years, in fact, the current recovery rate hovers around 28% on average, with MARC trains far exceeding the required 35% and LRT being the caboose with only 17% recovery, even though the trains are far more popular than buses. But that doesn't stop MTA representatives from using the fare-box requirement to block off additional expenses, The most recent example came during the City Council hearing about the use of student passes for after school activity related rides on MTA buses and trains. Even though there is hardly any actual cost for MTA, the agency spokesperson insisted that the fare box recovery would require MTA to ask the school system to pay the about $200,000 additional fares for those student trips.

As in private business, transit needs investment to be safe, to thrive and to meet the ever changing customer demand. The fare-box recovery requirement is a straitjacket preventing just that flexibility.

Klaus Philipsen, FAIA

Baltimore SUN Op-Ed article about fare-box recovery
BBJ article about the repeal bill