Greater Greater Washington

Metrobus, MetroAccess fares have declined with inflation

Metrorail fares increased recently in 2003, 2004 and in 2008. What used to cost $1.10 now costs $1.65. Are Metrorail fares growing too fast? Or have fares not gone up enough compared to inflation? Have bus fares kept up with inflation? How has government support of rail, bus and paratransit changed over time?

The recent Metrorail fare increases have kept up with inflation, which has been enough to keep subsidy growth in check. For Metrobus and Metroaccess, fares have not kept up with inflation, and subsidies have increased even after accounting for inflation. Member jurisdictions have occasionally resisted these subsidy increases. Today, that's leading to service cut proposals.

Metrorail:

Metrorail fares have been pretty stable over time. We've had a huge increase in ridership since the 1990s, added a lot of new service (more frequent trains, early morning and late night service, longer trains). The WMATA workforce aged and started drawing pensions, as the first Metrorail operators working when the system opened in 1975 must have at least 34 years of service by now. And we've endured a few energy crises. Even with all these changes, the real price of Metrorail service for the same distance has stayed pretty constant. This chart accounts for the fact that before 2003, you got a 10% bonus when purchasing $20 or more.* Between 1980 and 2003, bus and rail had the same base fares, and from 1977 to 1980 it it was actually more expensive to ride the bus than to go three miles on the rail.

The other interesting trend is the timing of fare increases. Before 2001, Metrorail fares appeared to increase just after recessions and recede somewhat during boom times. I attribute this to situations similar to the current Metro funding shortfall, where during a recession the local governments are unwilling or unable to increase operating assistance to transit, and rather than cut service to balance the budget, the agency increases fares. Recently, the trend has been a more steady increase.

Over the past five years (since FY2004, earliest data available), Metrorail subsidies have stayed flat or declined slowly (about $3.3M less per year) over time after correcting for inflation (2.1% per year real decline). This is likely because fare increases have kept up with added system costs.

Metrobus:

Metrobus fares have declined fairly steadily over time at a rate of about half a cent per year after accounting for inflation. This doesn't sound like a lot, but over 33 years of operation it adds up to just about 20 cents per ride, meaning that Metrobus fares should be about $1.45-1.55 today to keep up with inflation. Additionally, since MetroAccess fares are based on bus fares, returning bus fares to their historic level would reduce the MetroAccess funding gap. The timing of Metrobus fare increases does not appear as tied to economic trouble as Metrorail.

The long-term Metrobus subsidy trend has grown, at a rate of $14.6M per year (5.5% per year). Service is gradually becoming more expensive for the localities to provide. This is probably driven by real increases in personnel costs as well as the fact that increased ridership cannot be handled as easily with increased vehicle size like with Metrorail. Additionally, as mentioned before, fares have not kept up with inflation, especially over the past five years.

MetroAccess:

MetroAccess fares are based on Metrobus fares, so they also have not kept up with inflation. MetroAccess subsidies are increasing rapidly (13.6% per year). These costs have been growing at a rate of about $5.8M per year since FY2004.

Subsidies:

WMATA subsidies have grown in inflation-adjusted dollars at a rate of $17.1M per year (about 3.7% per year). The two charts to the right show the real percentage growth rate and the contributions to the overall subsidy from FY 2004 to FY 2010. For FY 2010, I knew the Metroaccess subsidy from Board reports, but for Metrobus and Metrorail I had to assume that the decline in real subsidy was shared equally as a percentage of the previous years' subsidy. This may or may not be correct, the cuts in bus service or rail service may be more severe, which would change the subsidy balance.

Conclusion:

Metrorail fares have stayed generally flat relative to inflation for trips of equal length.** Also, the recent fare increases, combined with other operating revenues, have been enough to keep Metrorail's government subsidies from increasing. Therefore, it would not make sense to increase Metrorail fares based on an argument that fares have not kept up with prices, or that rail customers are not paying enough for their service.

For Metrobus and Metroaccess, it's a different story. Based on real subsidy increases over the past five years and a steady downward trend in fares, Metrobus and MetroAccess fares and operating revenues have not kept up with system operating costs. However, such a difference brings up important social equity concerns. Metrobus riders are more likely to be poorer, more transit dependent and less likely to have full time employment (demographic information here). That makes a stronger case for increased government support for those services, as opposed to service cuts or fare increases in order to balance the budget.

Additionally, Metrobus acts as a feeder service for Metrorail. At least some of Metrorail's success in terms of attracting riders is the inexpensive bus service that extends the reach of stations beyond those who can find a parking space or walk to the station.

I think a reasonable compromise would be to increase bus fares with the rate of inflation, but it's not necessary and would likely be counterproductive to increase the fares enough to keep the subsidy cost growth rate as low as it has been for Metrorail. Bringing them back into line would mean about a $1.50 bus fare today, which is probably too big an increase all at once. Maybe the fares should increase by 10 cents each time Metro increases rail fares.

Member jurisdictions have occasionally resisted the subsidy increases resulting from inflation. Today, that resistance is driving the proposed service cuts. Service cuts reduce the benefit of having a transit system in the first place. Would it be better if fares kept up with inflation, reducing pressure for service cuts? Maybe with fare increases, there would be money for increased service after the recession is over.

* I was not able to determine when the 10% bonus started. Therefore, I applied it to all fares before 2003 by multiplying them by 0.91.

** Regressions of Metrorail fares for 5, 10 and 15-mile trips with respect to time were not statistically significant at a 95% confidence level.

Sources: WMATA budgets for FY 2007, 2008 and 2009, WMATA Board Reports from January 2009-present, CPI data from Bureau of Labor, and author's calculations.

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Michael Perkins blogs about Metro operations and fares, performance parking, and any other government and economics information he finds on the Web. He lives with his wife and two children in Arlington, Virginia. 

Comments

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Michael, thank you for this quantitative analysis.

by Cavan on Mar 9, 2009 1:51 pm • linkreport

Based on the demographic data you link to, the income gap between bus and rail riders is not as large as I would have guessed. It looks like there are plenty of bus riders who could afford to pay a somewhat higher fare.

Would it be prohibitively expensive/complicated to institute a "low-income" reduced-fare program (coupled with a fare increase for everyone else)? I'm guessing that it probably would be, and that's why it hasn't been done already.

by Johanna on Mar 9, 2009 3:56 pm • linkreport

@Johanna: there is already sort of a low-income reduced-fare program: some buses that run entirely East of the River in DC (e.g. the A4 and A8) are only $0.75. Of course the handful of non-low-income folks that ride these buses to work at, e.g., NRL, as I occasionally do, also pay this further subsidized fare, and there are plenty of low-income bus riders elsewhere in the region whose buses cost the full fare.

by thm on Mar 9, 2009 4:29 pm • linkreport

These low-income-reduced fares should stop. They perpetuate the (false) image that transit is for poor losers, because they can't afford a car.

Please note: I am not trying to screw poor people out of money. I just don't like the program. Whether you give poor people money is a totally different debate that is off-topic here. However, it can never be efficient to give poor people all kinds of earmarked money. If you want to give people money, then just give them a lump sum and tell them what they're supposed to use it for (while making sure the math works out). Don't make an infinity of program that nobody understands, but do need oversight of an equally large infinity of bureacrazy (yes, with a z).

by Jasper on Mar 9, 2009 5:06 pm • linkreport

Thanks for the terrific analysis. I disagree with your policy conclusion, however, in that I believe the subsidy level ought to be growing. The solution to underfunding should be greater government support, not higher consumer costs. For me, the goal is always to create incentives to use transit.

In any case, I'm grateful for you taking the time and effort for such a thorough review.

by Rocky6 on Mar 9, 2009 5:20 pm • linkreport

@rocky6: If we could always count on the local jurisdictions to pay whatever shortfall there was in the budget, I'd say, sure, subsidies all the way. But the local governments' resources are not unlimited, and sometimes they balk at continually increasing the subsidy like they are this year. Sometimes they just draw a line in the sand like they did in 2003, and say, it can go up no more than x%.

In those cases, the question is service cuts or fare increases, and I was trying to make the case for bus fare increases. Their costs have been rising and fares have not kept up with the value of a dollar. In contrast, rail fares have kept up with inflation, and net costs have been falling.

While I sympathize with the argument that raising bus fares is unfair to the poor, I feel that cutting their service is even more unfair, and therefore, if governments are not willing enough to pay to keep fares low and service up, then it's better to raise fares than to cut service.

by Michael Perkins on Mar 10, 2009 12:00 am • linkreport

Michael,

As a former bus rider, I have to agree. I could live with paying a higher fare if I had to. It sucks, but it beats having the service along my route cut off. When I was in school, I would have rather paid the extra few cents per trip than walk the four miles along University Boulevard and Veirs Mill Road.

by Dave Murphy on Mar 10, 2009 2:04 am • linkreport

"The WMATA workforce aged and started drawing pensions, as the first Metrorail operators working when the system opened in 1975 must have at least 34 years of service by now."

As far as I know all of the people employed by WMATA when "metrorail opened in 1976" have long sense retired. Most if not all retired after working 25 years.

by Sand Box John on Mar 10, 2009 8:38 am • linkreport

Wanted to update this post. Based on a comment over on infosnack, I redid the calculations based on a $1.35 cash fare for buses (I originally did the calculation at $1.25 based on assuming that the savvy bus rider would be willing to obtain and use a Smartrip card to get the best deal). The bus fare calculation did not change much, the trend overall was -0.5 cents as opposed to -0.6 cents per year.

For rail, eliminating the 10% bonus before 2003 was significant for 10-mile and 15-mile trips. For 10-mile trips, elimination of the bonus led to a -45¢ drop over the 30 years it was possible to make a trip of that length. For 15-mile trips, it led to a -$1.05 drop over 28 years. Both of these drops were statistically significant. For 5-mile trips there was no appreciable trend.

by Michael Perkins on Mar 10, 2009 11:21 pm • linkreport

So what do you propose we do for the poor or do we just say F U

by KK on Mar 10, 2009 11:29 pm • linkreport

message above meant for Jasper

by KK on Mar 11, 2009 1:08 am • linkreport

Michael, great analysis.

What would the analysis show if you normalized subsidies by some measure of service provided, i.e. revenue hours or miles? This would show whether the change in subsidies (your last two charts) are the result of changing a) the total amount of service, b) fare policy, or c) operating cost growth above inflation.

Put another way, should fares reflect inflation, or the transit agency's operating costs? Unit costs (cost per revenue hour, e.g.) usually grow faster than inflation, so over the long term the difference is appreciable.

by Just161 on Mar 12, 2010 9:56 am • linkreport

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