Fare Recovery & User Fees: Transit is not a business

Most people don't realize that only a few mass transit systems in the world can pay themselves through user fees. The typical fare recovery ratio (the amount of operating costs paid by fares) is 20 to 40 percent, lower if you include capital costs such as new vehicle and infrastructure.

You might argue that we should just raise fares, but when you do that, some people can't afford the increase and others could afford it but choose another mode anyway to save money. That's not because infrastructure for driving is cheaper to provide; it's most certainly not. The operating cost recovery ratio for state-maintained highways is around 50-70 percent -- much less if you include expansion (capital) costs -- because politics has prevented states from charging direct user fees and kept the only indirect revenue source (gas taxes) artificially low.  That's actually quite poor considering that you're not paying drivers like transit agencies are. The cost recovery ratio for local streets is a big fat zero because those are funded entirely by local tax revenue that everyone pays.  [The myth that drivers pay their fair share is a big problem because many drivers resent non-drivers who they believe don't pay for the roads and thus don't deserve safe streets.]

If transit were really a business whose users paid all of the capital and operating costs (plus profit), the fare would be so high that the system would see few riders and have to abandon all but a few key corridors. Those remaining corridors might be profitable, but only for service at the busiest times at the busiest stops. Don't expect any evening service because you couldn't afford what it would cost you.

On the other hand, if we were to switch to a purely libertarian system* and charge everyone for exactly the costs they inflict on the system, transit would cost very little and have very high ridership -- which would mean perpetual expansion, the opposite of the death spiral of fare increases, service cuts and declining ridership that most cities are experiencing today. In such a system, most people would bike at least sometimes because dramatic growth in the number of bicyclists would be complemented by rapid growth in safe cycling facilities.

That may be an impossible task, but we could start by making drivers pay their fair share. Then transit would no longer be more expensive than driving on subsidized roads to a free or cheap parking space.

* Note: I am not a believer in American political style Libertarianism, which promotes the absence of government involvement and regulation and usually manifests itself in the defense of corporate power.  In reality, transportation is by definition a use of the commons because you cannot move about the public realm without a network of infrastructure on which to walk, wheel or operate a vehicle. That network is and clearly should be public. However, the different ways in which we each get around carry various tangible and intangible costs which we tend to ignore. Each one of us should think seriously about the impacts of our decisions on others. My experience with transportation demand management shows that the best way to promote behavioral changes beneficial to society (i.e. more efficient use of resources) would be to have everyone share the costs and benefits according to their own use.