What are fair public transport fares?

Public transport fare policy is complex and fraught with compromises.

Some call for free public transport.

Others suggest the cost of car travel in peak periods should be have a congestion charge to provide a more level playing field (like London and Singapore).

At the same time, governments are trying to balance budgets, with less revenue and increasing demands for services.

Government subsidies for public transport are justified on the basis of economic, social and environmental benefits to the whole community, in addition to the direct benefits to users.

Typical examples of reporting by the media:
 “Over-priced and under-delivered.”
“That’s the summation of commuter advocacy groups of Brisbane’s public transport system, which they say is among the most expensive in the world.”

This biased reporting results in poor community perceptions of public transport.

Who pays for public transport?

The two primary sources of funding for public transport infrastructure and services in Australia are:

  • general taxation (paid by all tax payers or rate payers)
  • fares or user charges (paid by passengers)

Fares are the first obvious source of funding for public transport. However, in Australia fares cover less than a third of the cost of providing the service. Increasing fares can affect travel behaviour by reducing patronage.

In Berlin and Zurich the fare box recovery is two-thirds, San Francisco and Washington DC the fare box recovery is more like 60%, and the London underground is 50% by comparison.

Other major sources of funding that are used in other jurisdictions include related business activities by public transport agencies and operators, for example in Hong Kong the MTR generates considerable revenue from property developments at or around their stations.

Value capture is another significant where the public transport agency receives some of the the property value uplifts resulting from improved public transport services. This can take the form of a levy on property taxes within a certain area around a new public transport service.

Why do we need to subsidise public transport?

There are a number of good reasons for governments to fund public transport services using general taxation, examples include:

  • Public transport services benefit users and the general public, such as by reducing congestion
  • Many of the benefits of public transport are difficult to put a value on, for example reducing vehicle emissions and energy use
  • Public transport services underpin economic and social activity, by providing mobility and access with broader benefits than just the users

Jarret Walker in his book “Human Transit” clearly lays out the public transport funding policy dilemma that we need to face up to. He refers to the two ends of the spectrum of provision of public transport services – coverage vs patronage.

Coverage means we are providing a community service of access irrespective of the level of use and this should be funded as a community service obligation. Patronage on the other hand is providing ‘commercial’ services and should be planned and managed accordingly. The policy positon in most Australian cities are not explicit, so we mix the two approaches and this results in the focus on fare box recovery which is not logical.

Should we have lower fares?

Why not reduce fares, or make public transport free, to encourage more use?

Most large cities are already crowded in peak periods and it is very expensive to provide additional infrastructure and services to cater for any increase in patronage from a free fare policy.

Even at 30% farebox recovery for Australian cities, the revenue received is still substantial and difficult to forego in the current fiscal climate.

How can we resolve the question of funding public transport? 

Where a community service is provided, then fund it as such and don’t focus on patronage and fare box recovery.

Fares need to be set at reasonable levels, but this may also require the pricing of alternative travel to be raised to a reasonable level, for example raising the cost of parking in the CBDs.

And develop other sources of funding such as value capture or road user charging for low occupant vehicles, that are directly related to the benefits provided by public transport.

Making better use of current services means increasing the utilisation of current buses and trains – getting more people to travel at less crowded times, to less crowded locations or in the contra-peak directions – not easy tasks and certainly no quick results.

What do you think is fair? How should we fund public transport?

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