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 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.