Transport London and its farebox ratio

The BBC ran a story yesterday that Mayor Ken Livingstone promised to drop fares on Transport London by 5 percent by October 2012 if he is elected.

Boris Johnson, by contrast, has said that he will stick to the existing formula for raising fares, which is the retail price index plus 2 percent.

So that formula says it all; it’s a policy-level move to shift more of the burden onto the users themselves.

Sure enough, that’s what the Beeb’s numbers suggest, showing that users are covering about 54 percent of TCL’s costs–certainly not bad by any measure to US operators.

The other part of the story I don’t quite understand–they’re arguing over a surplus, which is not a word I’m used to seeing in transit finance, and I can’t quite figure out if there is an actual surplus or there isn’t–or there was, but central government austerity measures meant the agency used that surplus already.

What do you think of the approach? At least with a formula, transit riders would know what kind of fare increases to budget for, as I think US austerity measures are likely to pull back on federal support for transit very hard.

Is there a moral case for free transit for students?

Student MetroCard March: “This Is What Democracy Looks Likes” – Gothamist:

From the students:

We all came out because we can’t make it without our MetroCards. We cannot afford it, we cannot pay. Some of us are on food stamps,” and “A lot of us don’t live around here and this school helps us a lot because we don’t have good schools around us.”

From one of the instructors at one of the protesting schools:

“I don’t know why they want to cut the metrocards now, when we’re in a recession and times are so tough on everyone.”

Here’s why: “they” have a name, the New York MTA, not the “the gummint”, and “they” have an $800 million dollar budget deficit, recessions are hard on everybody, including and especially transit companies, and transit service, like all public services, cost money to provide, except in the Goodship Lollypop land of American’s brains. So we’ve refused to raise the federal gas tax since 1993, which was 17 years ago, studiously avoided increasing the tax during boom times, and states didn’t exactly race to make up the gap caused by inflation (though New York has tried; it’s a pretty high-tax state, for fuels anyway.) So the money has to come from somewhere or the service has to go away, and transit companies are looking at their patrons. You want transit, you pay. Welcome to the neoliberal hangover, kids.

We can compare this to a story reported via CNBC on German Millionaires who have volunteered to close Germany’s deficit by paying 10 percent of their income over the next 10 years. (Via the TaxProf). There are a number of appealing things about this story, like the apparent altruism of rich people who seemingly get their obligations to society. And it’s reasonable that the wealthy can and should pay more. But I am also not sure that such an approach is just. It’s probably more expedient. German millionaires are not fools, and they know that their glittering cities and spotless transit and decent schools are part of the capital that drives economic growth. This approach should bother us to. It indulges the neoliberal’s attitude about taxation which can be described as “Don’t tax you, don’t tax me, tax the guy behind the tree.”

Why should millionaires foot the entire bill? What if they paid 9/10ths and everybody else increased their expectations of themselves by 1/10th? Or 99/100s to 1/100? Redistribution via taxes does have a well-established moral theory behind it (Nancy Fraser and John Rawls), but it’s a bad idea to let the citizenry at large, even those not well off, pay nothing for services they use or deficits incurred by governments they should feel represent them. Of course, that latter statement is contestable, but if your democratic institutions do not represent you, it’s your fault in some ways, even if it is not your fault in other ways (e.g., the power of elites; however, if elites take on more of the tax bill, how does that break the disproportionate influence elites have over institutions?). Free-riding should not be encouraged even if somebody who can well afford it foots the bill for the ride because our democratic obligations should have some level of reciprocity, to each other and to our institutions.

So, going back, is there an ethical rationale for free transit for students? Free transit for students has generally been expedient politics for transit companies. Transit companies want to fill seats and be relevant, and students are a likely a patron group: they are in general are younger, have fewer children, have pretty flexible schedules, have low value of time and thus get less annoyed by the occasional transit fail, and if they are poor, are too poor or too young to have cars at all or if they do, they own crappy and unreliable cars anyway. And, in general, they are cash poor. However, most of these university programs simply tack on a student fee; students pay anyway, indirectly. I don’t know how this works for New York public schools. There is, in general, a greater tolerance for providing free service and deep discounts to students due to their financial straits than there is for providing discounts and service to people based on poverty in general: students’ poverty is considered temporary, and perhaps, even laudable as they sacrifice monetarily in order to invest in themselves. There is an intergenerational aspect to it. Students will graduate someday and then in turn pay higher amounts later in life so that other students can benefit.

Free transit passes most of the tests for reasoned public ethics. You could also make this argument in terms of fewer painful absolutes: instead of letting it be free, offer a steep discount. Instead the unsustainable transit politics gets us to where we are: it’s my way or the highway: I’m entitled to free transit; well, you can chant about your right to mobility until your head falls off, I can’t pay my unionized drivers with promises, so you’re going to pay because we’re out of money. Zero-sum. Boo-yah.

Pricing and Social Equity Seminar Video

To watch the Roundtable discussions, follow this YouTube link:

The issues: Pricing and user charges for things like carbon and gasoline offer an effective means to achieve short-term gains in climate policy, air quality, congestion relief, and agency budgetary ills. At the same time, pricing and user charges also can cut low-income families out of publicly provided services.

But the jury is out—or it should be—on whether underpricing public services really benefits low-income families. Some public infrastructure and services, like roads and water, have significant external costs (like pollution or overconsumpution) that can also hurt low-income communities in the long term. If we fail to “pay as we go” with infrastructure, spending on infrastructure can also displace public funding needed for other services to low-income families, such as public schools. Finally, charging low prices to every user, not just the poor, limits the revenues to public agencies so that service quality can suffer. Those in poverty may be far less able to supplement lower-quality public services with private purchases the way higher income families can.

Welcome and introductory comments
Richard Little, Director, USC Keston Institute for Public Finance and infrastructure Policy

Water pricing and access to services
Moderator: Richard Little, USC Keston Institute

Round table participants:
Randall Crane, Urban Planning, UCLA
Charisma Acey, Urban Planning, Ohio State University
J.R. De Shazo, Public Policy, UCLA
George Chen, LADWP

Development fees and affordable housing
Moderator: Chris Redfearn, USC Lusk Center for Real Estate

Round table participants:
Jenny Schuetz, SPPD, USC
Casey Dawkins, Director, Metropolitan Institute, Virginia Tech
Mike Keston, Chairman of KFG Investment Group

Road pricing and barriers to social inclusion
Moderator: Genevieve Giuliano, USC Metrans Transportation Center

Round table participants:
Ken Small, UC Irvine
Brian Taylor, UCLA
Stephanie Wiggins, LAMTA

Carbon and energy pricing and social equity
Moderator: Chris WEare, USC Center for Sustainable cities

Round table participants:
Dan Mazmanian, Bedrosian Center, USC
Don Paul, USC Energy Institute
Adam Rose, USC, CREATE
Matt Kahn, UCLA Institute of the Environment

Summary, Recap, and Reflections
Richard G. Little.

Reading Richard Arnott

I’ve just been reading the last few days, and as such I was reminded of Richard Arnott’s** urban economics work. What unbelievably good work. Here are my favorites:

Anas, A., Arnott, R., & Small, K. A. (1998). Urban spatial structure. Journal of Economic Literature, 36(3), 1426-1464.

Arnott, R., de Palma, A., & Lindsey, R. (1994). The welfare effects of congestion tolls with heterogeneous commuters. Journal Transport Economics and Policy, 28(May), 139-161.

Arnott, R. & Kraus, M. (1998). When are anonymous congestion charges consistent with marginal cost pricing? Journal of Public Economics, 67(1), 45-64.

**And yes, he’s just as kind as he appears in that picture. He doesn’t always suffer fools gladly, but it would be hard to suffer fools when you’re that freaking smart.