Does Metro ask riders to pay too much?
Metro is one of the most expensive rail systems in the country, with fares ranging as high as $6.75. But aside from pure sticker shock, Metro riders pay a much higher percentage of the cost to provide the service than riders in other cities do.
All transit systems in the United States provide information about their "farebox recovery ratio." This ratio is the percentage of operating costs covered by riders' fares.
For example, if it costs $10 million per year to run a transit system, but the system only takes in $4 million each year in fare revenues, the farebox recovery ratio is 40%. The remaining 60% of the cost to operate the system must come from other sources (most likely taxes or other subsidy).
The farebox recovery for the Metrorail system for 2011 (the most recent year with available data) was 67.8%. This is the 3rd-highest farebox recovery ratio in the nation for all heavy rail, light rail, and commuter rail systems.
Among heavy rail systems, the average farebox recovery ratio is 46.4%, and systems range from 20.2% (Baltimore Metro) to 76.6% (New York City Subway). The range for light rail systems is between 12.0% (Dallas) and 57.4% (San Diego), with an average of 29.6%. Commuter rail averages 33.3% and ranges from 6.2% (Portland WES) to 62.3% (Metro-North).
What can cause a high farebox recovery ratio?
It's important to note that high fares are not the only reason for high farebox recovery ratios.
New York, for example, has the highest farebox recovery ratio, but their fares are not actually as high as those on San Francisco's BART or Metro. In 2011, the fare to ride the New York Subway was a mere $2.25, plus bus transfers are free. WMATA's highest fare in 2011 was $5.45. In 2010, the highest fare on BART would set you back $10.90.
So if New York has fares that are so much lower, how can it have a farebox ratio (76.6%) higher than Metro (67.8%) or BART (76.1%)?
The answer is in the service efficiency. New York is extremely dense and extraordinarily transit-dependent. As a result, the subway is very productive in terms of the number of riders per train, and that means that New York's system is more efficient. So despite lower fares, straphangers pay a larger percentage of the share.
BART is at the other end of the spectrum. That system is designed much more like a commuter rail system than a subway. The long distances between stops and the lower density of the Bay Area mean that the trains run with fewer passengers, and the agency charges much higher fares, asking riders to pay a larger share.
Metro's recovery stays high
Between 2002 and 2011, Metrorail has had an average farebox recovery ratio of 62.2% and has ranged from 58.1% to 67.7%.
One reason that Metro charges riders so much to use the rail system is the funding situation in the region. With a lack of a dedicated funding source, WMATA has to go to the jurisdictions each year to ask for money. Because the jurisdictions have a variety of funding priorities, WMATA is competing with other things for resources, and it can be a difficult battle to get additional subsidy.
In 2011, rider fares across all modes paid 46% the cost of operating Metrorail, Metrobus and MetroAccess. The local jurisdictions paid 41%.
The way WMATA gets subsidy from its constituent jurisdictions is by calculating the cost to operate the system, subtracting estimated fare revenues, and then allocating the rest of the cost using a complex formula.
Lowering the cost of the fare would decrease the revenues Metro gets from fares, and would mean that jurisdictions would be responsible for paying more. This would put the additional burden on taxpayers in each jurisdiction, regardless of whether they ride Metro or not.
But that's fair, because everyone in the region benefits from Metro. Not only because traffic is reduced by other people using transit, but also because of the enormous economic benefit that Metro provides to the region.
A study released in 2011 estimated that Metro creates an additional $224 million in tax revenues for local jurisdictions each year due to demand to locate within 1/2 mile of stations. The study also indicated that having Metro has allowed the region to grow without adding new roads, an investment estimated to cost the region $4.7 billion.
What might a change look like?
It's difficult to estimate exactly how lower fares would affect the budget.
In 2011, WMATA earned fare revenues of $571,418,362 from rail passengers. That's 67.7% of the cost to operate Metrorail, and is 36.7% of WMATA's overall operating budget.
The local jurisdictions put in $647,248,856 to the operation of the system, about 41.6% the cost of operating the system.
If Metro fare revenues were to drop 10% (through lower fares), the local jurisdictions would need to make up the difference of $57,141,836. A 10% drop in fare revenues would also lower the farebox recovery ratio to 60.9%.
Getting down to the average farebox recovery ratio for heavy rail systems in the United States (46.4%), would mean dropping fare revenues by 31.5% to just $391,665,363. That would mean an additional $179,752,999 annually from the jurisdictions.
Were Metro to target a farebox recovery ratio of 46%, what might riders experience in terms of fares?
Using the ridership data that Metro provided and a fare table, I estimate Metro earns about $2.1 million in (rail) fare revenue each weekday.
Assuming that revenue fell by 31.5% as well, daily revenues would need to drop to around $1.5 million to get to to a farebox recovery ratio of 46%.
One path to doing that would be to always charge off-peak fares and drop all fares 45¢.
Note, this model assumes a peak hour ridership elasticity of 0.15 and an off-peak elasticity of 0.40. That means that for every 10% that peak fares drop, ridership increases by 1.5%. For every 10% that off-peak fares drop, ridership increases by 4%. The model also assumes that all trips use full-fare trips (no senior discounts) and are paid with SmarTrip (no surcharge).
So, for example, the current SmarTrip peak fare between Addison Road and Archives is $3.50 and is just $2.75 off-peak. Making all fares off-peak and dropping their cost by 45¢ would mean that for both peak and off-peak trips, the ride between Addison Road and Archives would cost $2.30.
It would mean dropping the average fare (currently about $3.00) to $1.94.
That scenario would lower estimated daily revenues to about $1,507,453. It would also raise average daily ridership from 729,115.1 to 778,782.8.
This example is just meant for illustrative purposes, to give you a sense of the dynamic in play between fares, ridership, and subsidies.
What should WMATA do?
From a practical standpoint, it would be almost impossible for WMATA to lower the farebox recovery ratio at once by dropping fares. However, it could work with the jurisdictions over time to hold fares steady (or lower them) as jurisdictional subsidies increase.
It's a tough time financially not only for WMATA, but also for many of the region's jurisdictions. They already contribute significant amounts toward Metro. Asking them to contribute even more will be difficult. However, with proper political pressure it may be possible.
Metro's fares are among the highest in the nation. It's unfortunate that riders are being asked to shoulder such a large burden, but it will be difficult to change the situation.
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