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.
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.
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.
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.
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.
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.
@ 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.
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.
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
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.