Austin: Impact of Cap Metro fare increases on ridership
COST Commets: As discussed below, there is an established relationship between transit ridership and fares. Austin’s Cap Metro ridership is the same today as it was 12 years ago. If the historical relationship between ridership and fares as recently confirmed in Houston hold true; Cap Metro will experience significant declines in ridership under its plan to rapidly increase fares.
Let’s roll back Metro fare hikes
By BILL KING
HOUSTON CHRONICLE
Sept. 12, 2009, 5:35PM
(Print edition 09/13/09)
Houston Metro is experiencing a historic decline in its ridership. In July, ridership on Metro’s buses and trains was down by more than 14 percent from last year. The Park and Ride service has been hit hardest, losing almost 18 percent of its riders. Even ridership on the much heralded Main Street rail is down by 5 percent, the first significant decline since it opened in 2004. Through the first nine months of its fiscal year, Metro has carried about 9 million fewer riders. Metro ridership statistics are not the easiest thing to research, but it appears this is one of the largest, if not the largest, one-year ridership decline in the agency’s history.
Metro has offered various explanations for this decline. Initially, it blamed the decline on the recession. However, the loss of jobs in Houston has only been about 3 percent, hardly an explanation for a 14 percent decline.
Also, transit ridership nationally is only down by about 1 percent to 2 percent. (Go to www.apta.com.) Since Houston has been spared the worst of the recession, one would expect any decline in ridership due to the recession here would be less than the national average, not many times higher.
The more likely causes of the ridership decline are the fare increases imposed by Metro last year. During the course of 2008, Metro made a number of changes to its fare schedule. The biggest change came in November when Metro raised its fares from 25 percent to 33 percent, depending on the service. The onset of Metro’s decline in ridership exactly corresponds to the implementation of these increases.
In addition to the November fare increases, Metro made other changes during the year, such as eliminating various discounts and some free transfers. When the November increases are combined with the other changes to fare schedule, the real increase was much larger than the 25 percent to 33 percent advertised by Metro. Since last November, the average rider has paid 82 cents per boarding compared to 55 cents in the previous year, a whopping 48 percent increase.
There are widely recognized industry models that predict ridership changes based on fare changes, so-called elasticity models. These models predict that a 10 percent change in the fares will result in a 3 percent change in ridership. Therefore, according to these models, Metro’s nearly 50 percent increase in fares should have resulted in about a 15 percent decline in ridership, which is exactly what has happened. There seems to be little doubt that Metro’s fare increases are the principal culprit behind the ridership decline.
Metro now says that it knew all along that the increases would result in the ridership going down. In a recent Chronicle story, Frank Wilson said that previous Metro administrations were prepared to get ridership at any price, while his objective was to improve Metro’s “operating ratio,” that is, the portion of the operating costs that are covered by fares.
To suddenly begin sacrificing ridership to improve the operating ratio is a monumental policy shift. Certainly there was no public discussion at the time the rate increases were adopted that one of Metro’s fundamental policy objectives was changing. Nowhere in the public record that I have been able to find did Metro once suggest that the fare increases would result in more than 10 million fewer riders each year. To the contrary, its business plans that were released around the same time boast new services that Metro predicted would attract thousands of new riders.
What is particularly ironic about Metro’s current explanation is that the 50 percent fare increase has resulted in the operating ratio improving by a paltry one percent, from 18 percent to 19 percent. Additionally, fares make up only about 13 percent of Metro’s revenue. The bulk of its revenue comes from sales tax receipts. (Metro collects a 1 cent sales tax in its service area.) Because Houston has been largely sheltered from the national recession, Metro’s sales tax receipts have actually increased this year by about $15 million, making the fare increases largely irrelevant from a financial viewpoint.
The truth is that Metro’s decision to increase fares last year was the last in a long series of ad hoc decision-making by Metro that is based on the self-interest of Metro’s management, especially its desire to grab control of every revenue dollar possible. Metro suffers from a lack of any clear long-term policy goals. I believe most Houstonians think that Metro’s fundamental mission is to reduce traffic congestion. If so, putting 9 million riders back in their cars did not further that goal.
Six years after the 2003 referendum that approved four light-rail-transit lines, a 50 percent increase in bus service and planning for commuter rail, Metro has accomplished none of these goals. Notwithstanding its multiple groundbreakings and spending well over $200 million planning the rail lines, we are only marginally closer to building those lines today than we were in 2003. Today we have fewer buses and fewer bus riders than we did in 2003 and Metro has done virtually nothing in the commuter-rail arena.
It is time for us to have a serious conversation about what we expect Metro to accomplish. That conversation must include what resources we are willing to devote to public transportation and what is realistically achievable with those resources.
In the meantime, however, Metro should consider rolling back its fare increases from last year.
In these difficult financial times, it simply makes no sense to make it more expensive for working families to get to their jobs and at the same time make congestion worse for everyone else.
King maintains a Web site at http://www.billkinghouston.com/
One reader’s astute comment:
Hello?!? Is there anybody in there?!?
Houston has a traffic congestion problem. Any fool can see where it is. Spending billions of taxpayer $s on little toy trains to run people around inside loop 610 is not addressing the problem. That is not where the problem is.
Also, dramatically raising fares on the commuters that had actually begun using mass transit didn’t turn out to be such a great idea. If some of the billions that are being wasted on little toy trains were spent to improve, support, and expand commuter service you might see some riders return. Guess what? Only when mass transit is almost as convenient and materially more cost effective than “do it yourself” transportation will people use mass transit. Got it?