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Public Transportation: Social Service or Utility?  

By Frank Gruber

May 17, 2010 -- In last week's column about bus fares, I argued that better service should be a higher priority for Santa Monica's Big Blue Bus than lower fares, but I didn't mean to imply that fare revenues could cover the cost of public transportation. I received some comments wondering if I was saying that.

No, public transportation is one of those items in a modern economy that are subsidized to enable the creation of greater amounts of economic gain. (Private transportation is subsidized, too, but don't get me started on that.) Think of downtown Santa Monica and all the economic activity and the wealth that has accumulated there in the form of high property values, good salaries and profits; none of that could exist there without public transportation. (This fact that will become obvious to you if you take a ride on one of the BBB or Metro buses leaving downtown late at night -- it will be full of service workers going home. These workers make much of the economic activity in downtown possible.)

Good transportation creates wealth. On a mega-level, the increased values of property along transit routes pay for the cost of mass transit. While running a freeway through an established urban area will decrease the values of adjacent properties, running a freeway out into undeveloped land will make those properties much more valuable.

But discussions about fares and service levels don't typically take place at the mega level. As with the Santa Monica City Council's pending decision about increasing BBB fares, they take place on the "margins" and involve balancing between particular fares and particular services.

In response to last week's column I received a number of responses from knowledgeable people involved in public transportation, some agreeing with me, some pointing out the problems in my argument. One basic problem is that it's a fact that after fare increases ridership typically declines, at least in the short-term.

My response to this is that one shouldn't expect anything different. When fares go up, without service improvements, customers are paying more money for the same thing, and somewhere some customers are going to make decisions not to buy the service as often. But that only raises another question: why not try offering more and better service to attract more riders, even at a higher price?

And why charge an artificially low price to people who could and would pay more -- isn't that leaving money on the table?

I received a response to last week's column from a friend who works for a transit agency in the Bay Area. He started by telling me that given that fares cover only 22% of the BBB's operating costs, it would be unrealistic to think that any fare increase could by itself finance a significant upgrade in service. But he had this to say about attitudes toward the social role of public transportation:

"People, especially people who don't ride, tend to view the transit agency as a social service, rather than as a utility, like the water company. Everybody needs water, but in most instances poor people have to pay the same rates as everyone else. The best response for poor people is to create jobs and income, so they can pay for water, the bus, and whatever else. The prices of most goods aren't based on income. This isn't callousness, it's an argument about what the right way is to deal with inequality."

Exactly. And the comparison works not only with utilities, but also with other essentials, such as food. We do not mandate low prices for food (that entails rationing). We have, however, food programs for the poor, the best known being food stamps, and the government also lowers some food prices by subsidizing farmers (mostly to grow the wrong crops, but don't get me started on that either).


The same should go for transit -- fund low-fare programs for low-income people, and subsidize the transit providers (the "farmers") to keep prices generally low, but then give transit agencies like the BBB flexibility to adjust both fares and service to maximize both revenues and ridership.

Remember -- the way to save low-income people the most money in the realm of transportation is to deliver a public transportation system that's good enough that they don't need to own cars.
However you look at it, though, good public transportation needs money, which leads me to the City Council's approval last week of an increase in the rates the City charges in the downtown parking structures. The increased revenues from the higher rates will, according to the staff report, generate annually about $2.1 million in additional revenue. While some of that will be used to rebuild one of the parking structures, about $1.5 million should be available each year to fund programs to increase transit, bicycle commuting, and carpooling by downtown employees.

The council's approval of the rate increase was welcome but weaker than it should have been. I hope that, as the staff report put it, it was only the "first phase" in implementing last year's landmark Walker Parking Study (see column of September 8, 2009, Revolution is in the Report).
The council did not in fact increase hourly rates in the structures (it did increase the maximum daily rate from $7 to $9, still less than what private lots charge), and it delayed one of the Walker study's most important recommendations, reducing the current two free hours to one.

The council's action directed most of the rate increase at commuters who buy monthly passes, the cost of which increased approximately 50%, from $82.50 to $121. The increase was warranted, but without reducing the free hours, this will only incentivize more commuters to play the game of moving their cars every two hours (or every three hours if they use the Santa Monica Place structures).

But the council's action was a good start. The council should now connect the parking rate increase to the BBB fare discussion in this way: the council should direct staff to put the increased parking revenues directly into improving BBB service. The council should not use the new revenues to subsidize fares, but to improve service so that when it increases fares, the council can say to bus riders that even though fares are going up, they will receive better service in return.

The reason why it's fair and why it makes sense to use increased parking revenues to subsidize transit is that short of establishing tolls or congestion pricing, parking is the only way to tax drivers for the use of something that is in short supply -- road capacity.

Congestion is the externalized cost of making the marginal cost of driving (the cost independent of fixed costs like depreciation or insurance) cheap. The link to transit is that congestion slows buses. When you're in a bus with 30 other riders, stuck in traffic surrounded by cars with solo drivers, you start to think about ways to charge those drivers for taking up space on the road. At the moment, parking is the only arrow in the quiver.

Meanwhile, to the car drivers, the council can say, "we're going to use your money to improve transit so that (a) more people will take the bus so that the traffic you face will get better, and (b) you have an alternative to driving and paying for parking."

Congestion is one cost of cheap parking. Bad service is the cost of low fares. Let's work both sides of the street.

* * *

Yesterday a volunteer for Measure A, the School District's parcel tax, stopped by my house to make sure that all the voters here had sent in their ballots. She said that many voters were still unaware that they had to send in their ballots. So this is just a reminder -- mark your ballot yes on A, and mail it in.

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