Fairer Fares

Introduction

Entrance

Since its inception, BART has occasionally had to increase its fares. While defining what a reasonable fare increase is is often subject to debate, there are few who would disagree that fare increases are a necessary evil. Another thing that most people principally agree about is that there should be a level of fairness and equity in fare increases. That is, everyone should feel the pain of fare increases.

But one group of BART users is pretty immune from BART fare increases. Unlike its relationship with any other local transit agency in the region, for more than two decades now, BART has had an interagency fare agreement with the San Francisco Municipal Transportation Agency (SFMTA) that allows select individuals who purchase a monthly “A” FastPass of the SFMTA unlimited rides on both MUNI services and BART within the city limits of San Francisco (i.e., from Balboa Park to Embarcadero and anywhere in-between). At $76 per month, this “A” FastPass is just ten dollars more than the base FastPass that only allows unlimited rides on MUNI services. What allows these users to be immune from BART fare increases is the fact that they have no transactional relationship with BART; their fare is paid exclusively to the SFMTA and the SFMTA has exclusive say in how much it charges for the FastPass.

So, how does BART get paid for extending its services to SFMTA customers? The way that BART gets paid is through a negotiated reimbursement contract between it and the SFMTA. For every trip made on BART utilizing this FastPass program, the SFMTA is to reimburse to BART an agreed upon reimbursement rate, currently $1.19.

 

The Main Problem (Cross Subsidies)

The main problems that this agreement creates are cross subsidies.

Slider_FaresConsider the fact that the minimum fare to ride BART is $1.85. Yet, the SFMTA only reimburses to BART $1.19 per trip made. Who makes up the $0.66 difference between what SFMTA refunds to BART and what BART would receive if the full fare were paid…? The answer is other BART riders. The reason being is that, if everyone paid the full fare, BART would be able to reduce overall fares and realize the same net revenue. So, BART riders who pay the full fare pay a higher than necessary fare in order to subsidize this service. What’s the price tag of that cross-subsidy? Try $6M per year! That’s right; $6M of the revenue generated from full fare-paying riders is being redirected to subsidize this FastPass program that benefits a select few intra-San Francisco travelers!

But it’s not only BART riders who subsidize this program. MUNI riders do too. Recall that (1) this “A” FastPass is just ten dollars more than the base FastPass and (2) the SFMTA must refund to BART $1.19 per trip made on BART with the FastPass. So, once an “A” FastPass user makes about eight trips on BART, they’ve used up the ten extra dollars they paid that month for the FastPass. Where does the SFMTA get the additional $1.19 for each additional ride that a given FastPass user makes during a given month…? The answer is other MUNI riders. People who use MUNI but not BART for their daily trips within San Francisco are paying higher than necessary MUNI fares in order to subsidize the select few who benefit from this FastPass program. A very rough estimate of this cross subsidy value is $5.3M annually!

The end result, then, is that this program creates a geographic cross-subsidy that grants a select group of riders about $11.3M in fare kick-backs at the expense of other transit users! In essence, only those people who both live and work within a short distance of BART stations in San Francisco benefit from this program. Everyone else who uses MUNI or BART services pays into providing this program. Furthermore, those who benefit most from this service travel the longest distance (i.e., between Balboa Park/Glen Park and Downtown San Francisco). Because these populations who reap the greatest benefit are generally middle- to upper-income individuals, it makes this interagency fare program not only a subsidy, but a regressive one. It, for example, requires West Oakland BART users and Bayview/Hunter’s Point MUNI users to subsidize Glen Park and Ingleside BART users.

 

Other Problems

In addition to establishing immunity from BART fare increases and benefiting a select few users through cross subsidies that come at the expense of other BART and MUINI riders, this FastPass arrangement also creates problems from a transit operations standpoint.

When this program was first created, it served as a mutually beneficial endeavor because, at the time, MUNI was experiencing an overutilization of its capacity while BART was experiencing an underutilization of its capacity. So, in effect, the program allowed BART to make use of its capacity and get paid for doing so, while also allowing MUNI to save from having to operate additional services. Since that time, however, BART ridership has grown to unprecedented levels to the point that it now faces capacity challenges that will continue into the future.

One of the side effects of this program is that it produces induced demand. Induced demand occurs when the price of a good or service is so low or the supply is so abundant that consumers will over-consume the product/service. The former condition applies to this case. When, for ten dollars a month, someone can take unlimited rides on a service as superior as BART, the person will have every incentive to maximize their number of rides so that they can reap the most from the program. Where there exists effectively no travel cost; there are effectively no travel restraints! As BART is facing a state of increasingly limited capacity, induced demand is the last thing we want to encourage.

Finally, BART’s primary purpose in the region is to serve as a regional transit option for longer-haul travelers; not short-range trips. In my opinion, this program diverts BART from serving that purpose, particularly in light of the capacity issues that it faces. If BART is going to achieve overcoming its capacity challenges, a first step would seem to be better-defining the fare structure and service standards so that they reflect and cater towards the population that BART is designed to serve: longer-haul travelers.

 

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