How To Raise Fares

Michael Lewyn's picture

A couple of weeks ago, I was on a bus in Chicago and noticed something that I had not noticed before- that how you paid to get on the bus affected how long you took to get on the bus.  People who flashed monthly passes boarded in a few seconds.  People who put in dollar bills got on a lot more slowly, as they fumbled for the right number of bills.  People who had to pay change took longer still. 

So to speed buses' on-time performance (pun intended) transit agencies should encourage the former and discourage the latter.

How can this be done?  One way is to manipulate the fare structure to disfavor change-fumbling and encourage faster modes of payment- and the national transit funding crisis provides a perfect opportunity to do this.  

Suppose a transit agency has lost 20% of its revenue due to the recession.  The typical transit agency response is either to cut service (the worst possible option, as I have pointed out elsewhere).* The second worst option is to raise fares just enough to cover the deficit- a policy that reduces ridership of course, and does no affirmative good.

But if the agency wants to make buses run faster, it can combine fare increases with positive steps to encourage use of passes and/or dollar bills.  In particular, the transit agency should raise fares to the next dollar increment, and use any surplus to either increase service or reduce the price of weekly and monthly passes.  Thus, riders would have to pay more, but at least they'd be getting some positive benefit from their fare increase.

For example, suppose the Anycity Transit Agency (ATA) currently charges $1.25 per ride, and needs to raise fares to make up for lost government support.  The unimaginative but common decision would be to raise fares to $1.75 (and/or cut service).  In no way does this decision leave riders better off; they have to pay more and fumble for even more quarters than usual. 

Instead, ATA should raise fares to $2.  Even after accounting for revenue lost due to lower ridership, ATA is left with a surplus.  ATA should use this surplus to lower the price of monthly passes (as well as increasing service).  This combination of fare increases and lower fares speeds up bus performance in two ways.  First, riders will be encouraged to use passes (the fastest mode of payment).  Second, riders will not need to fumble for quarters, so even one-time riders will have a faster (if more expensive) commute.   In addition, cheaper passes may create ridership increases at least partially offsetting what ATA has lost due to its base fare increase. 



Michael Lewyn is an assistant professor at Touro Law Center in Long Island.



This is happening in Washington,DC

WMATA, the Washington, DC transit provider is doing something like this. If you use smart card to pay your fare it is quicker and less expensive, except when you try to add value to it on the bus. It is also the only way to get a transfer. There is also a saving for using the card on rail.

Tiering and Price Sensitivity

Seconding this. The CUE Bus circulators in suburban Fairfax, VA have the same tiered pricing as WMATA. I have not surveyed if this has discouraged cash, but I can tell you the process for recharging your card on the bus is the most time consuming act of all. Unlike the Metro, the CUE does not have peak hour pricing. Do the WMATA buses?

An inverse situation may be the EZPass system. Car users with the EZ Pass have little to no price awareness or sensitivity, so the price could be higher or lwoer and they would not know it unless they studied their CC# bill at the end of the month. Most EZ passes are credit card debit , and not stored value, so it may be that their price sensitivity is particularly low. They probably do not care, as queue avoidance, not savings, is their concern.

I would suspect most bus riders who pay cash are more aware of the price of the ride than those who pay with cards.

The Boston area's MBTA uses

The Boston area's MBTA uses this system, charging everyone a surcharge if they use anything other than a pass or a rechargeable fare card. On the buses, though, this innovation has backfired. Instead of adding $20 to a card every couple weeks, many passengers load onto their card only what is needed each time. With value already on your card, you tap it just once as you enter the bus. But many people do the following:

1) Push the button to indicate you are adding value to your card
2) Insert bills and coins, one by one (the machine doesn't accept a handful of change at once)
3) Push the button to confirm the cash is to be added to the card
4) Tap the card (not sure what this step does)
5) Tap the card again to deduct the fare

So instead of being driven by the innovative fare structure to just every once in a while load their card so they only have to quickly tap it for each ride, they pay cash every time, but use their fare card to get the cheaper fare. It seems that about 25-30% of riders are doing this. It is a five-step process that should be one, and it slows boarding down a lot.

What's worse is that when I tried to add a $20 bill to my card on the bus, the machine took it and forgot about it. The driver had to report this and I had to call in to get a refund. In the meantime, I became one of the large minority of people paying a little at a time and using the card just for the discount.

All my troubles during this time with the fare system were compounded when a jackass driver whipped out a new fare card and tapped it as I was putting bills into the machine. He smiled and told me the card will save me money, without giving me a chance to use my own or to tell him I would like to pay the local fare. (On this route the local fare is half of what the long distance fare is.)

A couple days passed and I received my $20 reimbursement--on yet another fare card. So at the end of all this I had money spread across three fare cards, and you cannot combine their value to pay a fare except at one downtown ticket office where I never go.

Michael Lewyn's picture

interesting discussion but not quite what I was thinking of

Rechargeable fare cards definitely add a new wrinkle to the discussion. I was thinking about systems where there are just cash payments and weekly/monthly passes.

Might it be less time consuming to have people be able to choose the "value added" option only at rail stations?

Rechargeable Fare Cards

The gain to the transit efficiency is likely the same whether someone is using a charged card or a monthly pass (there might be a minor difference due to lower user errors by habitual monthly pass users) so it makes sense to include them if that's efficient boarding is the goal.

I wouldn't say only at rail stations because it's the buses that gain the most by quick fare collection (and it goes back to disadvantaging the poorest riders who are more likely to take the bus). Every train station (in Boston) already has separate machines for adding value so those users are not gumming up the queue; so they're already set.

It might make sense to remove the discount for users paying for only one or two fares on board (again disadvantaging the poorer users unfortunately, but is consistent with the purpose of the discount). It would be most helpful to have more ubiquitous ways to recharge such as at convenience stores, atms, or online with a credit or debit card (the online or card-based methods might be unlikely to reach poorer users as well). In New York, as I recall, convenience stores sell precharged swipe cards; of course it's a bit wasteful to keep discarding them; perhaps they can recycle them. (Also in New York I believe the discount is not flat but based on the amount of funding you add to the card. If you pay $5 you get $6. But if you pay less than five you just get when you put in. Higher values have an even greater percentage discount. If the point is to get cash users to switch to off-board collection this doesn't necessarily make sense unless the collection point is also a bottleneck. )

Perhaps they could work out something with stores where the stores get the cash fares from the fare collection boxes and send the value to metro electronically saving them some trips to the bank for small change. I've heard some of the select buses collection points have had issues with people trying to get into them for the cash.

Off-board fare collection

This is really a fundamental issue for transportation planning... You might find it quite helpful to spend just a little time reviewing current practices in various locations, as well as the many proposals for improvements.

You may particularly want to consider that the best options entail off-board fare collection, which eliminates all delays from collecting fares. That is the method adopted by New York City Transit for its Select Bus Service, and has been the modus operandi for light-rail transit in systems throughout the country for a long time.

Employing another solution to collect fares without slowing the vehicles is certainly preferable to setting fare increases at points that may not meet any other policy objectives.

Michael Lewyn's picture

Select bus service

For readers who wonder what urbanresidue is writing about, here's the link to Select Bus payment:

Interesting idea- will have to think about it.

Promoting contactless payment

Chicago used to offer a 10% fare bonus for people reloading smart cards (the fastest boarding mechanism) for this reason. (There are many other reasons to incentivize these cards over cash payments.) However, the most recent round of fare increases got rid of this bonus.

The trouble with raising cash fares too much, particularly on buses, is that they're the most popular way for lower-income people to pay, and thus politically unpopular.

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