This week, the civil grand jury for Monterey County issued its report on the Monterey-Salinas Transit. It was tasked with answering a specific question. Go here if you want to read more about the question and the grand jury’s answer.
But here is what I found striking: fares account for only 5 percent of the MST’s revenues. The rest is subsidies.
Jun 11 2023
I will let my readers separate the grain from the chaff—and there is both—in the piece of a Wall Street Journal columnist who spent a few months as a journalist in residence at the University of Chicago's business school (James Mackintosh, “What I Learned About ‘Woke’ Capital and Milton Friedman at the Univer...
Jun 11 2023
Show me the contract. In effect, postwar single-family zoning represented an agreement under which homebuyers accepted restrictions on other types of uses in their neighborhood in order to be protected from negative externalities that neighbors might create, without the protection of the covenant provided by single-fa...
Jun 10 2023
This week, the civil grand jury for Monterey County issued its report on the Monterey-Salinas Transit. It was tasked with answering a specific question. Go here if you want to read more about the question and the grand jury's answer. But here is what I found striking: fares account for only 5 percent of the MST's re...
READER COMMENTS
Jon Murphy
Jun 10 2023 at 10:21am
Interesting. I just did a quick back-of-the-envelope calculation for DC, NYC, and Boston of the same. Their share is 12.6%, 24.5%, and 43%, respectively. I’m not sure what to make of it, but it seems like MST is unusually dependent on subsidies.
Dylan
Jun 10 2023 at 3:24pm
Interesting. Surprised that Boston is such a big chunk user financed, at $2.4o a ride, it’s among the cheapest subway systems I’ve been on. Wonder if things are more user supported in Europe, where fares tend to be much higher and infrastructure costs are typically lower?
Jon Murphy
Jun 10 2023 at 4:21pm
I was surprised too. I wonder if some services of the MBTA are run for profit and others draw on the subsidies?
steve
Jun 10 2023 at 5:21pm
I suspect that poor guy who got stuck forever on the MTA is still paying and accounts for a lot of that.
Steve
Jon Murphy
Jun 10 2023 at 8:19pm
Poor Charlie
TMC
Jun 10 2023 at 11:34am
If they were as valuable as mass transportation proponents claim, they wouldn’t need any subsidies, never mind ones this big.
Dylan
Jun 10 2023 at 3:29pm
Not necessarily, if the benefits mostly are outside of the system*. If mass transit significantly reduced traffic allowing for less road construction and maintenance and improved commute times for those that still drive, you wouldn’t expect that to necessarily be covered by the riders of the system, as the value is at least partially going to people who are not the customer.
*I’m not saying that is the case, I think that’s an empirical question and will have different answers for different cities.
Jose Pablo
Jun 10 2023 at 6:10pm
So according to your “model”, meat eaters should be partially financed by fish lovers, since they (the meat eaters) make fish cheaper and more widely available. So, there would be part of the value of eating meat going to people different from the meat eaters.
Also, since people driving their own cars are reducing overcrowding of the mass transportations system, they shouldn’t be paying the full cost of riding their cars since some of the benefits would be flowing to the mass transportation systems’ users.
The only way of coming with a “fair price system” would then be, by nominating a CWE (Committee of Wise Economists), that can establish all these “fair prices” once all the ways that consumption of one good or service affects the availability of all other goods and services are taken into account
Wait … this has been tried before, Gosplan … if I recall it right it didn’t work that well.
steve
Jun 10 2023 at 12:18pm
Shouldn’t you also want to know the value obtained by the subsidies? How many more people are able to work, effects on traffic, etc? You subsidize stuff you want more of and maybe you get more people working and less crime. At 5% not sure you get much but would be good to know what happens.
Steve
Richard Fulmer
Jun 11 2023 at 8:00pm
What you’re proposing is, in effect, to eliminate any objective cost-benefit analysis. Any public expenditure could be validated by conjecture – by theorizing possible intangible or indeterminate benefits.
One benefit of free market solutions is that they succeed or fail on the – very concrete – question of whether enough people are willing to part with their hard-earned money to buy the goods or services being offered.
Government officials who are clever enough, could clear the hurdles that your suggestions imply to countenance anything, thereby wasting scarce resources and unnecessarily creating pollution. By contrast, in a free market, no one is clever enough to convince investors to endlessly throw their own money down a rat hole.
Jose Pablo
Jun 12 2023 at 3:00pm
How many more people are able to work,
If they are “not able” to work when they have to assume the cost of their own transportation, then it does not make any economic sense having them working in the first place
effects on traffic
The “right” way of take into account the effect on traffic is making the people that use the infrastructure pay for it (its annual maintenance and capital cost). Pretty simple principle. Dynamic pricing would allow the system to “internalize” congestion costs.
We should not be using conjecture to allocate resources when “real markets” are available … unless the people doing so are trying to maximize their chances of being reelected and not efficiency.
Bill Conerly
Jun 10 2023 at 4:12pm
Figures for Portland, OR’s Tri-Met system were similar when a new board member asked, “Why don’t we just make it free?” The chief executive explained that public political support is better if people think that riders are paying their fair share.
MarkW
Jun 11 2023 at 2:01pm
The chief executive explained that public political support is better if people think that riders are paying their fair share.
That’s probably right when it comes to the politics. But I wonder if the miniscule portion paid in fares even pays for the cost of collecting those fares (e.g. the cost of the automated ticket systems, turnstiles, attendants, etc)? I guess I wouldn’t be surprised if the cost of collection exceeds the revenues from fares.
Bill
Jun 13 2023 at 8:07am
That’s part of the justification for not charging fares by the management of the fare-free bus system in Cache Valley, Utah. That offers some idea of the nature of the operation — “We don’t charge our customers for the service we provide, since it would cost more to collect these payments than we would get back in revenue.”
Pete S
Jun 10 2023 at 9:35pm
This is the Farebox Recovery Ratio.
There are many listed from around the world.
https://en.wikipedia.org/wiki/Farebox_recovery_ratio
In most developed countries taxes on fuel pay way more than the cost of the roads to the government.
In Australia, which has a low fuel tax by European standards but high by US standards 53% of fuel tax goes on roads and public transport.
https://www.abc.net.au/news/2022-03-21/fuel-excise-not-being-spent-on-roads-amid-calls-to-cut-tax/100920658
Bill
Jun 11 2023 at 11:06am
The bus system in Cache Valley, Utah, is “fare-free,” and seems to have expanded into the hinterlands, wherever there might be a potential rider.
Joseph Smith
Jun 11 2023 at 11:00pm
Same here in Houston TX for Houston Metro. Highest recent Farebox was 4.89% of revenues in 2020. Latest budget shows about 3.8%. I was shocked to learn this. Sales tax revenue is the largest revenue source.
Rebes
Jun 12 2023 at 8:57am
What percentage of total car and truck transportation expenditures comes from subsidies if you factor in that the government builds and maintains roads?
Bill
Jun 12 2023 at 9:35am
One would need to account for user fees represented by taxes on fuel and the fact that a significant part of fuel tax revenues are diverted to fund non-highway programs.
Jon Murphy
Jun 12 2023 at 12:11pm
To Bill’s point, the fact the government builds and maintains the roads doesn’t imply they’re subsidized. They may be, but not necessarily. We’d have to take into account things like gas taxes, registration fees, tolls, and the like. It’s probably still subsidized, but perhaps not as much as one thinks.
Bill
Jun 12 2023 at 2:21pm
And to the extent the taxes, fees, and tolls you list do not cover the cost of supplying highways, part of the reason is the diversion of these funds to other uses: https://www.cato.org/blog/highways-gas-tax-diversions
Jon Murphy
Jun 12 2023 at 10:59pm
Agreed 100%. That complicates the analysis even more!
Jose Pablo
Jun 12 2023 at 7:22pm
The fact that government builds and maintains the roads, without charging anything to road users, sure means that the use of public roads is subsidized.
The fact that government taxes gas sure means that the use of gas is taxed (like so many other things)
Now, for each individual you could work out how much he/she pays on gas taxes and how much he/she avoids paying for the infrastructure he is using. But this balance is meaningless in the “which activity is subsidized” discussion and would be different for each individual (depending, for instance on the type of road he is using most of the type or the type of car he is driving). And all of this does not change a bit the fact that the use of public roads is subsidized (for no valid economic reason) and the consumption of gas taxed (for no valid economic reason either)
Otherwise, following your rational, no activity would ever be subsidized since all of them are “financed” by taxes on other activities or by raising additional debt (which is, simply, “a tax on other activities waiting to be collected”)
Comments are closed.