METRO fare collection provides important usage data, required under state law

London - Westminster - Victoria Tube Station / Image credit Lewis Clarke (CC BY-SA 2.0)

Sec. 451.061. FARES AND OTHER CHARGES. (a) An authority shall impose reasonable and nondiscriminatory fares, tolls, charges, rents, and other compensation for the use of the transit authority system sufficient to produce revenue, together with tax revenue received by the authority, in an amount adequate to:

(1) pay all the expenses necessary to operate and maintain the transit authority system; …

The Texas Transportation Code – Chapter 451 Section 451.061

Many interesting topics popped up on the local scene over this past week, but several news outlets carried the story that the Harris County Metropolitan Transit Authority (METRO) had been considering doing away with charging transit patrons fares to use METRO. Several people emailed me the story, and I was also pelted a little on social media about the matter.

METRO made the decision this past week to keep charging fares for transit use after conducting an analysis over whether to do so. METRO’s current fare charging structure can be read here. METRO’s fare charges are fairly typical of transit industry practices in that the agency charges a flat fare for local routes (currently $1.25), but charges more if you are taking a longer, commuter type trip. The suburban commuter trips are divided into zones, depending on the length of the trip, with longer trip rides costing the transit patron more. The highest fare METRO currently charges is $4.50 per trip for long distance commuters using the Park and Ride network, which mostly serves the downtown Houston / central business district. METRO practices price discriminatory behavior, in that the agency charges half price for students, the elderly, and for disabled people to use transit. METRO also indulges in occasional giveaway promotions, such as during the Houston Livestock Show and Rodeo, when the agency typically gives away rides for free. One should note that both the price discounts to certain groups and METRO’s occasional promotional giveaways, though both are no doubt hugely politically popular, are against state law!

What shocked many acquaintances of mine when they heard that METRO was considering doing away with fares was that the agency collects such a small percentage of its revenues at the fare box. METRO’s fare box recovery amounts to between 6 to 15% of agency costs, depending on whether you are talking about operating costs, or comparing incoming tax revenues, or overall agency revenues which include federal grants. The actual figure as to how much METRO has been collecting at the fare box in recent years has been hovering at around $75 million per year, give or take a few million dollars.

As Dug Begley wrote in his story, former METRO chair Gilbert Garcia, along with Harris County Commissioner Steve Radack, and blogger Tory Gattis, argued that METRO should do away with charging fares. Setting aside the issue that doing away with fare collections is against state statutory law, the primary arguments for doing away with fares is that METRO’s costs of fare collection and enforcement are nearly as high as fare box revenues. Hence, doing away with fare box collections saves the transaction costs of collection and enforcement. A second argument for doing away with fares was that doing so would lead to a boom in ridership. The first argument is more persuasive than the second. The main reason why I find the boom in ridership argument unconvincing is that one group of riders that would be attracted to using METRO are the homeless and criminals, both of which would scare off other transit patrons from using METRO. Another is that METRO is of limited utility for most Houstonians because of Houston’s low population and spatial density. The final reason is that METRO has a long and provable track record of making wildly optimistic predictions about transit ridership that don’t pan out.

Yet, the main reason for continuing to charge transit patrons for using METRO has to do with the fact that fare box recovery remains the one true metric by which someone can measure METRO’s actual utility, and not the utility claimed by METRO due to politics. METRO’s fare box recovery rate is extremely low when compared to transit systems elsewhere around the world. In urban areas around the world with heavily utilized transit systems, fare box recovery is taken very seriously. If you go to London and spend any time riding the London Underground, the first thing you will notice when you walk into any Tube station is that access to the station is heavily controlled. The first thing a patron runs into is a line of turnstiles stretching across the entire length of the entryway to the station. Cameras with facial recognition technology are prominent, and more often than not there will be a security officer at the entrance on the lookout for patrons looking to jump the turnstiles to evade paying the fare. Fare box evasion in London is estimated to be at 1.8 percent of revenues, which amounts to 80 million UK pounds per year.

Another reason for collecting fares may be political. METRO just won a big bond referendum. It’s hard to tell, but prospective bond holders may insist on inserting a clause into bond contract covenants that METRO continue collecting fares as a condition of issuing the bonds. At bottom, bond holders want their money back, and one way of helping to ensure that they get paid back would be to continue collecting fares.

What METRO’s collection of $75 million per year at the fare box amounts to is that it shows Houstonians that METRO collects an average collection of about $200,000 in fares per day. The actual figures fluctuate, as most of METRO’s patrons are workers going back and forth during the week, as can be seen in METRO’s ridership reports. Since METRO’s daily patronage during the week amounts to some 300,000 boardings, my best estimate is that METRO has some 130,000 – 140,000 actual riders per weekday (out of a service area population of 3.8 million), with some patrons transferring between trips. In addition to ridership reports, fare box collections are a second, market signal-orientating way of measuring transit’s effective utilization. What the debate over METRO’s fare box collections revealed, whether people want to admit to or not, is how few Houstonians are actually taking METRO. That statement will, no doubt, cause certain people to boil over in outrage and blow a gasket, but would this debate have ever taken place if it weren’t true? It also reveals widespread public ignorance of state law, and how sloppily METRO follows the state statutory codes governing its very existence.