>Long-term Trends in Metro fares and Budget

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Metrorail fares increased recently in 2003, 2004 and in 2008.  What used to cost $1.10 now costs $1.65.  What’s going on?  Are Metrorail fares growing too fast?  Or is Unsuckdcmetro.com right, and the fares haven’t gone up enough compared to inflation?  What about bus fares, those have been pretty stable, have they kept up with inflation?  How has government support of rail, bus and paratransit changed over time?  I took a look at some historical data to figure it all out.

Metrorail

image003 The most interesting thing about Metrorail fares is that they are 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), had the WMATA workforce age and start drawing pensions (the first Metrorail operators working when the system opened in 1975 must have at least 34 years of service by now), and had a few energy crises.  Even absent all these changes, the real price of Metrorail service for the same distance has stayed pretty constant (you have to take into account the fact that before 2003, you got a 10% bonus when purchasing $20 or more*).  Interesting to note, 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 (2.2% per year real decline, not statistically significant).  This is likely because fare increases have kept up with added system costs.

Metrobus

image004Metrobus fares have declined fairly steadily over time at a rate of about half a cent per year after accounting for inflation (about a 0.5% decrease, and statistically significant).  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, this would improve 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 is upward, at a rate of $14.4M per year (5.5% per year – statistically significant).  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 – statistically significant).  These costs have been growing at a rate of about $5.8M per year since FY2004.

Overall Trend

image001 The overall trend for WMATA subsidies is up in inflation-adjusted dollars at a rate of $16.9M per year (about 3.7% per year – statistically significant).  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

Contrary to what unsuckdcmetro.com found, Metrorail fares have stayed flat relative to inflation for trips of equal length**.  Also, the fare increases we have had recently, 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, as Metrobus riders are more likely to be poorer, more transit dependent and less likely to have full time employment (demographic information here).  image003Additionally, Metrobus acts as a feeder service for Metrorail, and 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 that bus fares should increase with the rate of inflation (meaning about a $1.50 bus fare today, probably too big an increase all at once, but maybe a 10 cent increase each time the fares are increased), but that 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. 

In summary, it looks like the fare increases we’ve had recently for Metrorail have kept up with inflation, which has been enough to keep subsidy growth in check, but for Metrobus and Metroaccess, fares have not kept up with inflation, and subsidies have increased even after accounting for inflation.  These subsidy increases have occasionally been resisted by member jurisdictions, and in this case are leading to service cuts, which decrease the benefit of having a transit system in the first place.  Would it be better if fares kept up with inflation, and there was less 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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About perkinsms

I'm an engineer and father interested in transit, parking and economics.
This entry was posted in calculations, economics, government, transit, WMATA. Bookmark the permalink.

2 Responses to >Long-term Trends in Metro fares and Budget

  1. lrbrown says:

    >Assuming a 10% discount for Metrorail for everyone because there was a 10% discount available is misleading, as is assuming all bus riders ride for $1.25 today.While you may be right that a Metrobus fare increase to $1.50 would be too big a jump, the transition away from paper transfers has apparently been successful enough that I would support an increase in the cash fare to $1.50. For the infrequent rider or out of towner, $1.50 is probably about the same as $1.35.

  2. Michael says:

    >That’s a fair comment. If you change the bus fare data to use $1.35 for the current fare, the trend rate changes to 0.5 cents per year from 0.6 cents per year, with a 17-cent decline over the past 33 years.For rail, it doesn’t change the 5-mile ride at all (the difference is still not statistically significant based on an F-test).However, if you eliminate the 10% bonus correction, the 10-mile trip has trended downward by 1.5 cents per year, for a 46-cent decline over the past 30 years, and the 15-mile trip has trended down 3.7 cents per year for a $1.00 decline over the past 28 years. Those decline rates are significant at a 95% confidence level.I don’t know how many people bought fares without the 10% bonus at the time. Certainly regular riders would have had enough incentive to do so, and people who got the federal transit subsidy had it included on their Metrocheks.

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