A question about the proposed Measure R extension: are fare increases imminent?

With the possibility that Los Angeles County voters will be considering a Measure R extension on the November ballot, Metro has been getting a lot of questions from customers and media.

The big one: will Metro have to raise fares to have the money to operate new Measure R transit projects if they are accelerated?

The answer from Metro CEO Art Leahy, and this is nothing new: There are no fare increases proposed by Metro staff at this time. However, even without a Measure R extension, it is likely that Metro will consider fare increases and/or a change in fare structure in the coming years to help balance its budget, as is required by law.

First, some background. In 2010, the Metro Board of Directors approved the agency’s Long Range Transportation Plan covering the next 30 years. The plan explicitly stated the following (and we’ve reported this before):

“Metro transit fare revenues currently pay for only 29 percent of our cost to operate transit services. Cost savings are essential to improving this percentage to the planned level of 33 percent. Specific cost strategies are being implemented, but fare adjustments will be necessary to avoid serious deterioration in transit service.”

In this fiscal year, fares are estimated to cover 27 percent of Metro’s costs. Obviously there is work to do to get that number moving in the direction to reach the 33 percent threshold.

Metro staff have been working on a draft financial plan that considers the impacts of a Measure R extension on the agency’s finances. Here’s what Metro CEO Art Leahy wrote about the plan in a recent email to staff:

“Preparing this draft document enables us to inform the Board of Directors and the public about the financial impacts of the proposed Measure R extension.

Let me underscore the word draft. The Board has not adopted the plan. The Board has not even discussed it yet, and staff has made absolutely no recommendations on fare changes or paring expenses. But the fact is we do have a draft plan and that plan does not include excessive or frequent fare increases, deficits or major service cuts.

This year, our farebox recovery ratio is forecasted to be about 27 percent, among the lowest of any major transit property in the world. Metro has had only three fare increases in the past 17 years. In fact, the Long Range Transportation Plan (LRTP), which was unanimously approved by the Board, assumes a 33 percent farebox recovery ratio to be achieved by FY 2015 and then maintained by periodic fare structure adjustments or cost savings throughout the entire LRTP period through 2040. We assume that the transit rider will be paying for one-third of the operating cost to provide Metro transit services. Transit sales tax or other revenues such as lease revenue from joint development at Union Station and around other Metro Rail stations and advertising dollars will be used to subsidize the other two-thirds of our operating costs.

As it is, we will not face an operating deficit for another four years, and it is projected then to be $65 million, about 4.4% if nothing changes. But I assure you we will take action to avoid a deficit. Going forward, vigilant cost and revenue management will be necessary to ensure future success.”

Leahy also made two other points worth repeating:

•If Metro can reach a fare recovery ratio between 30 and 33 percent, there are no projected operating deficits, even if all Measure R transit projects are completed by 2025.

•Metro continues to plan to increase bus service hours by 10 percent by 2039 while the agency will continue to integrate its bus and rail system with other municipal operators as well as Metrolink and Amtrak. The idea is to create a regional transit system.

I’d like to add a final note: there are few government agencies these days projecting surpluses in the future. That’s just the nature of the beast of government. Costs rise, costs must be reigned in. It’s a constant exercise in financial planning and one that Metro is heavily engaged in.

 

21 replies

  1. These are the only three ideas that any American transit agency has on the table:

    Higher fares.
    Higher taxes.
    Massive service cuts.

    So long as transit remains in government hands, nothing will change.

    Contrast this to Asian PRIVATIZED transit agencies:

    Fairer fares based on travel distance whose fares have been stable for years
    Zero taxes used for operational costs (farebox recovery ratios of 100%+, self sustainable on their own)
    High frequencies

    Doesn’t take a genius who’s getting transit wrong (taxpayer funded government based American transit agencies) and who’s getting transit right (privately owned Asian transit corporations).

  2. Frank M.

    You don’t know what you are talking about. Lets take Tokyo for example, where I just spent the last few weeks. You assume they have over 100% farebox recovery because they simply use distanced based fares and are somewhat privatized. While they make money off their real estate holdings, they can do so because of a variety of different policies.

    In Tokyo, first of all fares are much much higher than Los Angeles. The minimum fare on the Tokyo subway is approx. $1.60 and that is for going just one stop. Go 8 or 9 miles and you are looking at $3.00 easy. The bus system in Tokyo uses a flat fare of $2.75. Again, they do not use distanced based fares, because they are an operational nightmare on a crowded big city bus system like Tokyo or Los Angeles. Try implementing a distanced based fare on a crowded articulated bus like you have on Wilshire and you will seriously slow down the line.

    Even with these fares, people flock to the system in Tokyo and are willing to ride against the armpits of their fellow citizens. There even used to be people on the platforms that would shove people into subway cars so they could fit as many people as possible, although this has ended as apparently too many women were getting groped on the train because of it.

    People may be astonished that so many Japanese would pay so much to ride. Well, as I have said before, that is due to completely different planning policies that don’t allow for hardly any car parking, super narrow streets, tolls on freeways, fees on car registration, fees and taxes on car purchases, and higher gas taxes. For example, a taxi ride from Narita Airport into central Tokyo (about the distance from Ontario to Downtown LA) costs more than $350. Yes, you read that right, and that is why people have no problem paying $40 to ride the train in. If Metrolink would charge that no one would ride, but in Tokyo practically everyone does. Also, it took massive amounts of tax dollars to construct their train and subway systems in the first place.

    You say you want no fare increases and no tax increases and that we should look to Japan and Asia as examples as to how to run their systems. They do run a nice system, but their reason they can run over 100% farebox recovery is because they have higher taxes on auto related usage at every step of the way and higher fares. Major contradiction in your statements.

  3. Matt,

    You don’t know what you are talking about. Lets take Singapore for example, where I just spent the last few weeks.

    In Singapore, first of all fares are much fairer than Los Angeles.

    I will cite an example of riding the train from Farrer Park to Boon Keng (one stop). All fares have been calculated to USD to make it easy for everyone.

    The single ticket ride for this short trip is about $0.94.
    If you use a EZ Link card similar to TAP, it is reduced to $0.65.
    If you are a senior, the price is $0.45.
    If you are a child, the price is only $0.28.

    Does this sound so confusing that there are four different fares just for short distances?

    No. And clearly no tourist or business person or the many American expats in Singapore had a hard time figuring this out. It is very simple that any backpacker who arrived at Changi Airport could figure it out. It’s so simple that kids who just entered kindergarten could figure this out on their own.

    You have a loadable fare card. Tap in, tap out, that’s it.

    And yes, the case is true for buses in Singapore as well. You tap in when you get onboard and you tap out when you get off the bus. The EZ Link card deducts the amount based on travel distance. It’s simple as that.

  4. And no, high auto taxes having nothing to do with transit in Singapore. They tax over 100% for a car that only the wealthy can afford even a Corolla.

    Being said that, tax revenues don’t even do a bit to help fund mass transit operations in Singapore; if only 100 people can own a car in Singapore because they tax 100% for a $20,000 Toyota Corolla, that means only $2 million dollars is collected in taxes. $2 million hardly pays for anything to fund the operations of mass transit in Singapore.

    So where do they get the funding to keep mass transit in Singapore running? Privatization. Investments through shareholders. The drive for profits. And how do they get profits? Through a more rational, fairer fare system that makes it attractive for Singporeans to actually use mass transit for short and long distance needs.

  5. Lock the turnstiles at every metro station and covert to 100% tap, and metro could probably meet that goal without raising fares or only slightly raising fares. Everyday I ride I see about 1 person being cited for no fare.

  6. Sorry Matt but I have to make an argument that you will need to explain:

    If you say population densities and cost of ownership of cars were the key factor, why then is New York City, still struggling with financial woes?

    Tokyo: high density, discourages car use, runs on a distance based system, profitable at over 100%

    vs

    New York City: high density, discourages car use, runs on a flat rate system of $2.25, struggling with financial woes

    Both Tokyo and NYC have high population densities and are cities that make car ownership a hassle. One of them however, runs on a distance based system and the other relies on a flat rate system. Why is Tokyo self-sustainable whereas NYC still needs to keep coming back to taxpayers to bail them out?

  7. We had private transit (rail -PE etc.) in this country before and the gas, highway and auto lobby killed it.
    Now if we had $7 a gallon gas and $1 transit fares, we would probably have very high transit usage of all kinds, bus or rail. Until the true cost of auto ownership is factored in, we will have this imbalance. A good start would be tollroads and decent increases in gas/sales taxes. 1 cent or 1/2 cent increases are really not enough when the backlog of projects is huge.
    Also, if private transit is the solution, how come I not many are knocking down the door to operate city bus systems ?

  8. Right, Taipei Metro (another Asian country) runs at over 100% farebox recovery ratio, they run on “astronomically expensive” distance based fares that start off at 20 TWD (66 cents! whoa man that’s an arm and a leg! call my bankruptcy lawyer!) or a discounted price of 16 TWD (whopping 53 cents! man I’m going to be broke! waaah!) when using the EasyCard.

    http://web.trtc.com.tw/e/TicketALLresult.asp

  9. @ Frank M

    You can’t just do a simple exchange rate conversion for tapei. You have to take into consideration cost of living expenses as well. Those $0.55 might have the same purchasing power as $1.00 over here. Also labor cost in the United States are much higher than they are in most East Asian countries, Japan and South Korea might have comparable labor expenses so those systems fare structures should be looked closely when considering a distance fare implementation in the U.S..

  10. John W.

    That is a fair question. In comparing Tokyo and New York, it is important to remember that New York is far more than Manhattan, and the other 4 boroughs are much more car friendly. In fact, Manhattan makes up less than 20% of NYC’s population so it really isn’t comparable to a place like Tokyo yet to most Americans Manhattan is New York and vice-versa.

    Planning policies are a key factor, but not the only factor. Compare a taxi ride from Newark, NJ to Manhattan vs. Narita to Tokyo. The New York taxi is going to cost less than a 1/4 of the Tokyo version despite that airport being pretty far from the City too. Taxi travel in NY is much more popular, cheaper and accessible than in Tokyo. Some people even in Manhattan never really use the subway and instead just opt for taxis. Car ownership is still much more expensive in Tokyo than in NY even for the small amount of New Yorkers who live in Manhattan.

    With that, the average rider in Tokyo is paying more than in NY because of the fare structure as the average ride probably incurs a $3 fare in Tokyo vs. $2.25 in NY (excluding any passes for both cities). When we have the Regional Connector in 8 years or so and many more people riding, Metro would probably be wise to go with a distance based fare that will result in a fare increase for most riders and we’d have similar fares to the Bay Area and DC. This will be difficult though as the light rail stations won’t all have faregates. Also, public outcry for the fare increase will be intense and may scuttle any such proposal as it did in the mid-90s with the Blue Line.

    In the meantime, we already do have distanced based fares here in SoCal. It is called Metrolink. If people want to compare fare systems why not compare to those locally like Metrolink or even BART. For people citing places like Singapore that charge cars enormous amounts to pass through portions of the city and saying they are profitable solely because of distance based fares is completely disingenious. Tokyo, with perhaps the most comprehensive public transit in the world doesn’t even use distance based fares for their bus system so they certainly don’t believe it is a major factor in their profitability.

  11. When Frank M, LAX Frequent Flyer, and John W show up at zoning meetings demanding that LA (about 2,400 people/sq km) be allowed to get as dense as Tokyo (4,300), Taipei (7,300), Seoul (10,400), Singapore (11,100), or Hong Kong (25,900), and that gas in the US should be as expensive as it is in those countries (doesn’t matter if you put the gas tax to transit or not, increasing the price that much would drive a modal shift), then we can talk about privatization.

    For reference, New York urban area is 1,800 people/sq km. If you want the densest urban area in the US… look out your window, we live in it.

  12. mark r. johnston,

    “Also, if private transit is the solution, how come I not many are knocking down the door to operate city bus systems”

    Because LA makes it illegal for private transit operators to compete directly with Metro. This is defacto the case because in LA, it is illegal for taxi companies to pick up passengers off the street. They have to be radioed in. In addition, it is illegal for cab companies to pick up and drop off passengers at bus stops.

    If such laws didn’t exist, we’d have private transit operators from Asia competing directly with Metro.

  13. Matt D,

    “LA (about 2,400 people/sq km) be allowed to get as dense as Tokyo (4,300), Taipei (7,300), Seoul (10,400), Singapore (11,100), or Hong Kong (25,900), and that gas in the US should be as expensive as it is in those countries (doesn’t matter if you put the gas tax to transit or not, increasing the price that much would drive a modal shift), then we can talk about privatization.”

    Tokyo, Taipei, Seoul, Singapore, or Hong Kong didn’t wake up one day to find themselves with a dense population they have today. At one point, they all realized that population densities were getting high, that it’s stupid to run flat rate fares, and they moved to privatization.

    At one point LA will have to make that decision as well. And IMO, that point is now. There’s no point in trying to spend billions of additional taxpayer dollars to fix the fare system and the infrastructure once we have a full system in place. Might as well do it now.

    Furthermore, the high cost of gas and ownership of cars is moot; much as how not everywhere in the US is like LA or NY, not everywhere in Japan is like Tokyo. Once you get outside of Tokyo, they rely on cars as much as we do. If not, why all the pictures of the thousands of cars being swept away in the tsunami? Outside of Tokyo, even Japan relies on cars to get around, despite the high gas tax.

  14. Matt

    “For example, a taxi ride from Narita Airport into central Tokyo (about the distance from Ontario to Downtown LA) costs more than $350. Yes, you read that right, and that is why people have no problem paying $40 to ride the train in.”

    Half true, half incorrect. It is true taxis are expensive in Japan. What you get wrong is trying to apply the logic like how most Americans use taxis. In Japan, taxis are mainly used shared with friends, family, and co-workers. Rarely ever a person rides a taxi alone which is the case in the US.

    That being said, a family of four (mom, dad, and two kids) going on a vacation to Australia, a group of four college kids heading off to a backpacking tour of the US, or four business persons heading off to a business meeting in Europe all have heavy luggage to carry around and for these people, they may better off with a taxi.

    This is because taxis in Japan, much like elsewhere in the world, are charged the same price whether one person is on a taxi or max of four people, or in other words “all passengers are charged for the price of one.” Each of the four people aren’t going to be charged $350 each for using the taxi to get from Narita to Tokyo. No, the $350 it takes to get from Narita to Tokyo or vice-versa is split amongst four people (ends up being about $87.50), which is a fair deal as it gets from terminal to home/workplace straight shot without schleping around luggage onto the train.

    Simple said, no one in Japan (unless that person is very rich) will opt to take the taxi alone from Narita to Tokyo. However, maybe a group of four would. In contrast, if you’re heading off alone to/from the airport and all you have is a duffel bag or a carry-on suitcase the train then might be a cheaper option.

    Different logic applies in Japan. You can’t simply state “one person taxi ride costing $350 so people are better off taking the $40 train.” It’s more like “in Japan, four people might consider taking the taxi and splitting the $350 tab (about $87.50 per person), versus all four of them paying $40 each for the train and schlepping all that heavy luggage around the train station and into the train. The comfort of going from home/work directly to the terminal without dragging luggage around for $87.50 per person, versus everyone paying $40 and dragging all your luggage around onto the train.”

    In the US, this is the opposite the case. In most times, taxis tend to come out dead even, maybe even cheaper when they are used between people. For all it’s worth, a group of four businessmen heading from Downtown LA to LAX comes out much dead even or perhaps even cheaper than taking the Flyaway Bus. And the fact is, taxis are much more comfortable and has better service of “door-to-door” than the FlyAway bus. That being said, FlyAway ain’t really competitive to even the taxi when it is used to share by several people.

    And one correction, Narita isn’t the only airport in Tokyo. There’s also Haneda which is much more closer to the city. Majority of domestic flights and some international flights (there are even direct flights to LA now) that fly here instead of the Narita which is in a different prefecture.

    In a way, the rationale of bringing up Narita as a fair argument is like saying people fly into John Wayne Airport (in a different county) to get into LA. Not really a fair argument to bring up the expensive taxi fare. A fair argument would be to compare Haneda and Tokyo proper with LAX and Downtown LA.

  15. Matt

    “Tokyo, with perhaps the most comprehensive public transit in the world doesn’t even use distance based fares for their bus system so they certainly don’t believe it is a major factor in their profitability.”

    This is also half true, half incorrect.

    Toei buses that run within Tokyo proper run on flat rate fares. However, Toei buses that connects Tokyo to outlying suburban areas, do run on distance based fares.

    I think you’re getting that misconception because you’re just relying on the English page of the Toei bus for your information, which is quite understandable as most English speakers probably have no need to visit the suburbs or outlying regions of Tokyo where most Tokyoites commute from.

    However, on the Japanese page, it does list several bus routes which serve such suburb-Tokyo routes which run on a distance fare system:

    Mind you that this is Japanese only. But at the bottom of the page are bus routes who are on the distance based fare system which provide links to a PDF fare chart:
    http://www.kotsu.metro.tokyo.jp/bus/fare/index.html

    Example of the Ume 70 Toei bus on the distance based scheme:
    http://www.kotsu.metro.tokyo.jp/bus/fare/pdf/ume70.pdf

    So technically again, you are half correct, half incorrect. Not all buses in Tokyo run on flat rate fares; the ones that do mainly serve shorter distance routes within the Tokyo area. Those that serve longer distances and links with outlying suburbs, do use distance based fares.

    Next time when you visit Japan, maybe you should give a test ride on those buses and see how distance fares. That will be the most fairest way to compare suburb-Downtown commuting transit needs.

  16. @ Frank M

    Its true that “Tokyo, Taipei, Seoul, Singapore, or Hong Kong didn’t wake up one day to find themselves with a dense population they have today.” But they were already there way before transit was privatized.

    Plus this so called “privatization” of transit is Asia were the Goverment owns 50%+ of those systems in stocks sounds completely different than what you have been proposing here, which is to have government completely abandon the mass transit systems in America.

  17. Also were talking about Urban Asian cities not suburban or rural areas were transit may not be as profitable, perhaps even subsidized.

    In an Urban Asian cities aside from gasoline being expensive, you have limited supply of parking unlike here in LA, and the parking that is available is often not FREE. Add in tolls or congestion pricing fees on highways and bridges leading into the cities and the car becomes less appealing in the urban environment. i.e. not rural or suburban asia.

  18. Y Fukuzawa,

    So people in Japan always travel in groups of 4 even foreigners coming into the country? Even then a taxi from Narita is not competitive with a train on price so practically everyone takes the train. Narita is the main airport in Tokyo. Very few international flights go out of Haneda. I was recently traveling with about 12 people in Japan. All of our flights were out of Narita and there wasn’t a situation where 4 of us had similar flight times.

    • Hi guys;

      I’m not accepting any more comments about transit in Japan on this post. The post was about the proposed Measure R extension. If you want to discuss that, please do.

      Steve Hymon
      Editor, The Source

  19. Matt,

    “So people in Japan always travel in groups of 4 even foreigners coming into the country? Even then a taxi from Narita is not competitive with a train on price so practically everyone takes the train.”

    So why are there taxis in Japan? If everyone takes the train, why are there taxi businesses in Japan? If there are no use for them if everyone takes the train, they wouldn’t exist. How are they used, what’s their purpose for their existence?

    Y Fukuzawa explained the rationale of why both trains and taxis co-exist in Japan, all you do is say “everyone takes trains no one takes taxis” when clearly that is not the case.

    Going back to the Measure R discussion and fare increases, it’s pretty obvious what Metro’s doing here. They’re going to say “we’re not planning fare increases” but several years later they’re going to say “oops, forgot about Metro employee’s pension and retirement funds, sorry we’re going to jack up fares to $2.00 for everybody, and no we’re still going to keep it at flat rate so 1 mile or 20 miles, you all have to fork over $2.00.” At the same time, they’re also going to jack up the monthly pass to $100 per month, or $1200 per year.

    At which point, Metro will be scratching their heads why they’re getting themselves deeper in the red as much as how every other failing transit agency in the US get themselves into, only to find that most people have started ditching cars to motorcycles and scooters instead of public transit.

  20. I think eventually, Metro will have to seriously consider distance based fares. LA is just too big and diverse with a mix of residential complexes, businesses, and industrial areas that are spread-out throughout the LA Basin that it is impossible to keep a flat rate fare without screwing someone. Downtown LA is not the only job center for LA. It maybe the most dense one, but the number of jobs and residences elsewhere when added all up, far outnumbers the jobs in Downtown LA alone.

    After hearing both sides of the arguments for a long period of time, I have come to agree that the only fair way to go is distance based fares. Even if Metro is not considering raising fares now, they admit that they have to be done some day. And so long as fares remain flat, there’s no way people are going to be riding mass transit at no matter what the price without regards to distance. It’s $1.50 now, what if when the price to ride the bus or train goes up to $2.00? $3.00? I doubt people will be willing to pay that much for public transit when they will be way better off on a scooter or a motorcycle.

    But the biggest difficulty however will be how to implement distance based fares. People don’t like sudden changes. It has to be gradually implemented and “phased in” so to speak so that people will “get the hang” or “get used to” the idea of distance based fares.

    Maybe we should gradually start implementing them on our subways, light rails, and BRT system. Then we can introduce it to Rapid Buses, and finally to Local buses as well. Make people get used to the idea first before making sudden changes. But it has to start somewhere.