Boston’s subway plays a critical role for the city. Despite a fare increase in 2007 and receiving a dedicated portion of the state’s sales tax, in recent years the agency’s tight budget (driven partly by labor, health care, and energy costs) has prevented needed maintenance and upgrades. With many of the system’s cars nearing the end of their operating lives, it is only a matter of time before service reliability and safety are impacted even more. For these reasons, the MBTA is expected to begin the process of raising fares in January.

In my view, political unwillingness to raise fares has resulted in a situation where the safety, comfort, and convenience of riders are threatened. Fares should be raised, and the additional revenue used for maintenance and upgrades to tracks and train cars. Many of the T’s riders are middle and upper class — and can afford fares that are closer to the true cost of the service. However, I also support creating discounted fares and passes for low-income residents.

To be clear, this is a second-best solution to creating new broad-based taxes that are less sensitive to economic cycles than the sales tax (such as those used in Paris). However the political resistance to raising or increasing any taxes, as well as a widespread “user pay” principle in U.S. transportation means fares will remain a significant source of revenue. As described below, my analysis suggests increasing fares in Boston may reduce ridership slightly, but not result in a “death spiral” of declining ridership and revenue sometimes seen in other cities.

A common objection to raising fares is that it will encourage more people to drive to work. According to an analysis I completed for a class project last spring, the system’s relatively low price elasticity means this effect will be muted for most of the core subway system. This low elasticity is probably due to the high cost of parking in most of Boston and the low existing fares (compared to the price of other transportation options).

In a class paper, I investigated what the effect of increasing the MBTA fare to a new flat rate of either $2.00 or $2.25, or implementing the distance-based or peak fare structure used by Washington, D.C.’s WMATA Metrorail. Below are links to a presentation summary and the original paper.

To do the study, I applied elasticities estimated by the state’s Central Transportation Planning Staff (CTPS) after a 2007 fare restructuring. Using the Automated Fare Collection system data, I made assumptions about where passengers traveled to using the pattern of morning and evening boardings. I found current riders pay different prices based on the fare type:

• CharlieCard fare: $1.70
• Monthly LinkPass average: $1.13
• Systemwide average: $1.26

An important finding is the very low average price being paid by owners of the LinkPass for each trip. Because of the relatively low elasticity for subway trips and popularity of passes resulting in low effective fares, increasing fares would generate substantial additional revenue but also possibly decrease ridership. Note I assume all riders would pay the new fare, if there remains a subsidy for pass holders the magnitudes would be smaller.

New Fare	Revenue Change	Ridership Change
Peak-of-peak only ($0.20 surcharge)	3%	-1.5%
$2.00	44%	-10%
$2.25	58%	-12%
WMATA Distance-Based Fares	52%	-10%

I did consider equity considerations in the paper, however it is difficult to analyze without rider-level data. Distance-based fares would result in dramatic increases in total fares for outlying stations.

For comparison, I completed a quick survey of the cash fare for large, center-city subway and light rail systems (as of August 2011). The results are uniformly higher than the average price paid by MBTA riders, and all except Los Angeles are higher than the $1.70 paid by most per-trip riders in Boston.

• New York City – $2.25
• Chicago – $2.25
• Salt Lake City (LR) – $2.25
• Denver (LR) – $2.25 – $5
• Miami – $2
• Philadelphia – $2.00
• Washington, D.C. – $1.95 – $5
• Dallas (LR) – $1.75 – $5
• Los Angeles – $1.50

Interestingly I may have been too conservative in my analysis, as some of the flat fares discussed here are even higher than those I tested. I hope the results of the analysis mentioned in this article are made public, and compromise options such as low-income subsidies are put on the table for consideration.

Resources:

• Read the complete paper: Analysis of Alternative Fare Structures for Boston’s Subway (PDF)
• See my post describing transit finance in Boston: Why the T is Broke
• See posts on the Washington, D.C. fare structure: Metro’s Fares Analyzed, D.C.’s Metrorail Fares in Context
• See Yonah Freemark’s interesting post on transit finance comparing New York and Paris