Deep in the weeds of the MBTA’s fare revenue there was a golden egg…
There is another way that the federal government subsidizes transit and that is through the pre-tax deduction for transit fares (and parking at transit lots). While this benefit primarily goes to individuals who work in higher paying jobs whose employers participate in these types of programs, transit agencies benefit as well. I only know the details at the MBTA, and it is worth exploring the COVID impacts and thinking about what changes are needed.
Before COVID the MBTA’s corporate pass program was the golden egg of fare revenue. People could only sign up for monthly passes on a reoccurring basis and the cost was subsidized by the pre-tax payment and often by employers. This allowed the MBTA to set higher commuter rail pass prices. It also meant that often high income riders bought passes for which they didn’t take the number of trips required to break-even at the sticker price. The MBTA got revenue from passes without having to provide all of the capacity they could have represented.
This was equity enhancing only because the MBTA has a weekly bus/subway pass that is roughly ¼ of the monthly to maintain pass access for low-income riders not in the corporate program. And because the agency could use the corporate pass revenue to fund service for the bus/subway pass users riding more than the breakeven point. So commuters (really the federal government and employers) were subsidizing everyday riders.
The COVID pandemic likely killed this golden goose for the MBTA. First, many people turned off their transit payroll deductions during the pandemic and will have to be convinced to resign up. And second, it is likely that some continued remote work will make the monthly pass less attractive, even with the pre-tax benefits. It is also possible that large employers will reduce their subsidies for transit (please don’t).
This means even as ridership returns fare revenue could lag behind, thus creating a structural problem if there isn’t a new source of sustainable operating funds. This new source of funds should also be equity enhancing, not higher fares on the remaining riders.
Clearly the MBTA, and other transit agencies previously reliant on pass revenue, have to rethink their fare structures over the next few years, including different products in their corporate programs (will require technology upgrades). It will also be important to make federal and employer transit benefits more available for lower wage workers in industries where remote work isn’t an option.
I would be curious to hear from folks with knowledge of other agencies’ fare mix if there are similar or different concerns about how fare revenue will return. Do people have suggestions about how to make sure the federal transit pre-tax policy remains a useful tool for transit agencies?
The pandemic might have changed some things, but I think mostly it revealed or exacerbated existing conditions. So far it has not fundamentally changed my view of the future of transportation. Three key realities remain true. One, we have to reduce emissions from transportation to address climate change and air quality. Two, we have a limited amount of public space for mobility and increasing demand for it. (The pandemic intensified the demand with more deliveries and public outdoor space for dining, recreation, and non-motorized transport.) Three, our transportation system is unequal, unsafe and inefficient in both funding and how public space is allocated and enforced. (This past year further illuminated the inequity and violence around enforcement in public space and expanded my definition of safety.)
Maybe because I was a math major in college, when faced with multiple problems I like to find the intersection of their solution sets. In this case, the use, space allocation, and funding for systems of shared transport is clearly in the intersection of all three problems. While the space and emissions benefits of shared transport are fairly clear, shared transport is also important as a place for social integration. I believe it is critical for a multiracial democracy to have places where people safely share space with people from different backgrounds.
Over the past decade my thinking about shared transport expanded. In part because I spent several years living and traveling in the Global South and saw a variety of shared transport systems that have been around for a very long time. And as new technology (e.g. electric scooters) and the ability to book fares on smartphones has created new shared mobility opportunities (and a new place for competition to take place).
As I left my research role in Santiago, Chile I wrote a paper about shifting regulatory frameworks for transportation (presented at Transportation Research Board 2017). My premise is that transport can be framed on two axes: the spectrum of how collective/shared the vehicles are, and the role of the state in providing the service (publicness). This graphic could be updated, but the idea is still useful.
As the graphic shows, shared transport ranges from bicycle sharing to trains that can carry thousands. We need many types of shared mobility to match different land uses, demand levels, and personal preferences. There is no one size fits all regardless of who is operating the service. (I want to start thinking about how urban freight/deliveries fit in.)
Given the intersection of problems we need to shift trips from private motorized vehicles to shared vehicles (and non-motorized modes). The important policy questions are often around what is the role of the state in regulating, funding, and operating each service to achieve this goal and provide equitable access. The graphic illustrates there is an increase in publicness as sharing capacity increases. This is due to the need for large capital investment that lends itself to a public monopoly, but public ownership exists across the sharing spectrum.
I don’t know exactly what the mix of public and privately operated shared transport services will be in the future (or how Autonomous Vehicles will manifest), but regardless of that future it will be essential to have a digital platform that provides users with information about costs, in both time and money for any given trip, and books fares. Many tech companies have figured this out and are trying to be the platform. But it is critical that the platform be owned by the public sector.
Public control is necessary to ensure fair competition, facilitate equitable access, and achieve public policy goals. The digital platform is essentially the marketplace for shared transportation and, especially if there are private operators, the site of competition by giving consumers (comparable) information. The public sector can set the rules for access to the platform, like ADA accessible vehicles or providing service in low-income communities.
A digital information and ticketing platform also provides the mechanism for government subsidy for transportation, either for equity goals or incentives to shift behavior to shared trips. Subsidy could be applied at the trip level, for types of services, or for individuals. Even if some public transit service is free, a platform allows public subsidy for low-income people to make trips where and when high capacity public transit service doesn’t make sense. For example, free transfers to bike sharing controlled by a different entity or a subsidized taxi trip late at night.
Another key reason for public ownership of the platform is to ensure access for cash users as the trend toward smartphone and contactless payments continue. Cash use is needed for under-banked people and privacy reasons. The platform has to be attached to an easy way for people to add cash to accounts that can be used to pay for all forms of transportation.
The MBTA Fare Transformation project is designed to be the foundation of a public platform. After integrating all of the MBTA services together, the plan is to bring in other services and develop joint fare products. The retail and fare vending machine network will provide access to cash users not only to the MBTA, but potentially to other shared mobility options. If all goes according to plan, it is a good example of a public agency acting proactively to protect the public good in the future.
The federal American Rescue Plan will allow transit agencies to fill their budget holes for the short-term to keep running service as the country starts the recovery from the pandemic. But transit advocates shouldn’t declare victory yet; the long-term funding problem isn’t solved and restoring service isn’t as simple as it sounds.
The pace of returning service varies across transit agencies in part because agencies have been running different levels of their pre-COVID service throughout the pandemic. Different levels are likely due to the percent of pre-COVID service at peak, pandemic ridership, funding, and employee availability.
- The MBTA announced that they are budgeting for full bus and rapid transit service in FY22 (which starts July 1) and working to restore some service sooner. They are currently operating 86% of service.
- The San Francisco MTA said the federal funding buys time, but it’s essential to find new sources of ongoing operating funds to move beyond 85% service restoration by January 2022. Service is currently at 70%.
- LA Metro has been running 80% of pre-COVID service and promised full bus service restoration by September 2021.
- King County Metro in Seattle is running about 85% of service now and their 2021-22 adopted budget funds a return to pre-COVID service levels by the end of 2022. They are planning a significant increase in September 2021.
A key logistical challenge to restoring service will be hiring and training operators. Before COVID many transit agencies were struggling to hire bus operators, there are normal attrition rates of operators even without the additional stress of working through a pandemic, and likely most agencies slowed or stopped their training programs for financial and safety reasons.
Having the funds to run service is not the same as knowing what service to run. Transit service is both a dependent and independent variable in travel patterns. Frequent service is needed to get people to come back to transit, but agencies don’t know yet how travel patterns have changed independent of their service levels. This means that, even with service restored, the service distribution is likely going to have to change over the next few years as our communities recover from COVID.
It is also important to remember that many transit agencies set lower crowding standards and shifted their service to respond to ridership. So getting back to 100% of pre-COVID service doesn’t mean all pre-COVID service, unless that additional service on routes serving essential workers is cut back. For the MBTA, as an example, this might mean that they should aim for over 100% of pre-COVID bus service and remain at less than 100% on ferry and commuter rail.
Service changes are hard, but necessary to align service with demand. So let’s all commit right now that we know there will need to be service changes over the next few years and that agencies and communities can work through them collaboratively.
These changes are also likely going to align in some cases with agencies running out of the third allotment of federal funding. Especially if fare revenue doesn’t completely recover, agencies are going to need new sustainable and progressive sources of funding. Without new funding there will likely have to be service cuts; even with new sources of funding service changes will likely mean some reductions in service where demand hasn’t returned.
We should pivot from the discussion of restoring pre-COVID service to envisioning what data, processes, and trust we will need to get sustainable funding sources and to rebuild more equitable transit networks.
Before I left the MBTA I made a powerpoint slide (one of hundreds I made over 6 years) for my last Board presentation and on it I wrote, “ Our commitment is that service at the end of the recovery will be more equitable than before COVID”. At the MBTA Board meeting this week the General Manager reaffirmed this commitment.
Hopefully other transit agencies are also currently making this commitment, or being pushed to make this commitment. The Biden Administration is putting transportation central in their equity agenda. The additional federal funds for transit as part of the American Rescue Plan should stave off service cuts for the short-term, but that doesn’t guarantee service will be ‘more equitable.’ All of this begs the question, what is ‘more equitable’ and how should it be decided, measured, and implemented?
The existing official measure of equity for transit service is a Title VI (of the 1964 Civil Rights Act) equity analysis. The current (2012) Federal Transit Administration Title VI circular sets a process for performing an analysis that measures the equity of changes off the current conditions. This, unfortunately, assumes that the current conditions are equitable. To make service ‘more equitable’, we (agencies and the community) need to acknowledge the ways that the existing service (pre-COVID) is inequitable. This accounting of past, and current, inequitable policies and practices is necessary to build trust between agencies and communities, and to establish the real baseline off which to measure equity improvements.
Researchers, advocates, and transit agencies have been working for years to develop new ways to measure equity that better approximate equity in access (transportation’s central function). There are numerous versions of access to opportunity measures that, for example, look at the number of destinations people in different neighborhoods can reach in a time budget. The MBTA is working on a competitiveness measure that is based off the idea that transit users should have a trip that is ‘competitive’ with car users making the same trip (adding the component of trip quality).
After equity is defined and measured, the results of the analysis have to be translated into changes to the transit network (in space) and levels of service (in time) within the very real context of an operating budget, vehicle, and labor constraints. The MBTA already made equity positive changes to respond to different ridership levels by route during the pandemic. There are more than 20 bus routes with more service than before the pandemic to meet social distancing crowding standards. It would be ‘more equitable’ to keep all or some of this additional service on these routes serving low-income communities of color after the need for social distancing recedes. However, that means the MBTA will need to keep other bus routes running with less service, shift funds from other modes, or receive additional operating resources above those needed to replace their lost fare revenue for the considerable future. (And, of course, work with cities to keep prioritizing buses on streets to make service more efficient.)
Even with the additional federal funds, there are necessary (and hard) decisions facing transit agencies on how to rebuild. More equitable also means decision-making using a collaborative process. Now is the time for realistic conversations between transit riders, advocates, and agencies about how to account for the past, define and measure equity, and make service changes.
Please join me (or let me join you) in making these conversations happen1. Putting all of the service back exactly how it was before COVID is not equitable. To respond to the overlapping crises of public health, economic inequality, and racial injustice we have to rebuild our transit networks as a foundation for a more equitable recovery.
1 If you actually look at the powerpoint slide in question you will see I suggested a simple metric for ‘more equitable’ as measured by percent of service hours serving minority and low-income populations. It is a starting place for a conversation.
Public transit is in crisis, but this moment is an opportunity to rebuild our transit networks to address historic inequities in our transportation infrastructure. When transit ridership dropped significantly across the United States in March, the remaining ridership revealed exact when and where our most dependent riders need to travel. As expected there was significant overlap with the communities of color most impacted by COVID. The uprising for racial justice in the summer of 2020 makes it more imperative that the recovery address past injustices.
Right now public transit agencies in the US are addressing decreased capacity due to social distancing, decrease revenue, and the elevated need to provide access for essential workers. Even with additional federal financial intervention, most agencies will have to make some service cuts and potentially face long term revenue shortfalls. How those cuts are done and how service is restored as riders return will be critical to the equity of public transit and US cities.
COVID could have long-lasting impacts on travel patterns. Higher rates of telework could reduce peak trips. We need changes in how transit service is designed and delivered with a focus on serving all trips, not just peak work trips. Full-time transit riders, especially service workers, need service at different times of day, on the weekends, and to different locations. This makes all day frequency, especially on bus, more important as telework potentially reshapes white collar commuting patterns.
This is a moment with potential for large structural change. Given the scale of the crisis, we have the chance to fix the foundation of public transit networks and to be better equipped to respond to whatever travel pattern changes COVID might bring and to encourage a return to transit. But this will require agencies and traditional transportation advocates to change their usual responses. The conversation shouldn’t be about whether or not to cut service, instead it should focus on how to best serve the needs of the moment and the future. Some service might need to be scaled back due to lack of demand and in order to increase resources elsewhere in the network.