The Case for Fare-Capping


What if I told you that poor people pay more to ride transit than rich people. Seems unfair, right?

But that’s one of the unintended consequences of most unlimited ride passes most U.S. transit agencies offer. Weekly or monthly passes can do wonders for riders, but the upfront cost is often too much for low-income people to afford, so they end up paying more per ride than people who don’t blink at the price of an unlimited.

In this video, TransitCenter explains how a policy known as “fare-capping” makes unlimited transit passes available to people who can’t cover the full cost all at once.

The concept is simple: If you purchase single rides, the system still caps the price you pay in a given period. So if a single fare costs $2.50 and a daily pass costs $5, you can take three or more rides in a day and still only pay $5. Weekly or monthly spending on fares would be capped in the same way.

Last year, Portland’s Tri-Met became the first U.S. agency to institute fare-capping. The agency estimated it would reduce fare revenue between 1 and 1.5 percent, but would also reduce fare evasion.

In order for fare-capping to work, agencies need to have a fare system in place that counts how many trips people make with their farecards. As more agencies adopt reloadable farecards that track people’s rides, fare-capping should become standard practice, TransitCenter says.

28 thoughts on The Case for Fare-Capping

  1. Buffalo’s transit system is re-doing its fare system later this year and is planning to institute fare-capping as well.

  2. Flat fare rates and unlimited monthly passes both support transit sprawl development over compact communities. It would be better to get rid of monthly passes and use the time and resources to build a zone or per mile system.

  3. Monthly passes offer a discount because the agency locks in revenue in advance. It’s a legitimate business reason. It’s like going to Costco. You’re gonna get a better price on the 24 pack. As a consumer of transit, I lock in savings by buying the pass. Then the object is to use it as much as possible so the marginal cost of each trip declines. If I’m not getting a break, my biggest economic incentive to use transit is gone and as a result I will use it less. That’s how economics works, Angie. You’re actually promoting policies with this socialism crap that will encourage people to drive more. Not cool, Chica.

  4. Since you seem to be an expert in economics, please tell me how fare capping is socialist. If you want to talk about redistribution, it’s actually the low-income transit dependent population that subsidizes people with enough disposable income to buy a pass under the current fare structure. Reduce their costs and you’ll see higher ridership, not to mention a higher quality of life. I don’t disagree with your argument about incentives for people who actually have a choice, but that’s not the only force at play. And calling a professional journalist “chica” is really condescending.

  5. If you want to see Fare Capping in action, take a look at Trimet Portland’s Hop system. It’s brilliant – removes another barrier about deciding whether to use transit or not, since the rider automatically gets the best deal for each trip, daily and monthly!

  6. I am for limited fare capping. with full fare capping as described here, most riders will no longer buy unlimited or monthly passes. This would probably reduce revenue some. I believe a better solution is a cap that is about 10% above the daily or monthly rate. Under the example given, daily capping would be $5.50 a day, basically two full cost round trips. Trips above that are free. For a monthly, 10% would be rounded to $132 a month, or 48 riders a month if you pay by trip vs. $121 per month if you pay upfront. That seems fairer, and you still have a cap, just at a higher level. There is still a benefit to purchase a monthly, and transit agency does not lose money, riders who use the system a lot get a bit of a discount and a payment amount that is capped.
    NYC Flat fare was developed to move people out of Manhattan to outer areas, which worked.

  7. Absolutely backwards. Flat fares (usually within city limits or the operational territory of a transit district ) are a recognition that citizens can and should be able to access any neighborhood without paying a surcharge; thus having a greater choice of medical, retail, educational, and employment opportunities. It is roughly 20 miles between the north and south boundaries of Chicago; given that the city is one of the most segregated in the US a zone system would be a Title VI violation and a return to redlining. As to urging compact cities, New York certainly is yet as rents have skyrocketed more lower and middle wage workers have been pushed out of Manhattan. It is bad enough that they have to endure a crumbling subway system; charging them extra for the long rides to work in unconscionable.

  8. Hong Kong, Tokyo, Amsterdam, London, Munich, Stockholm, Paris, would all disagree… basically every major transit system outside of North America runs a zone or distance-based fare system. The US transit community should look to places other than New York for inspiration. Flat fares undermine the same communities they purportedly support as residents take transit to category-killer locations and abandon their own neighborhoods. (Same dynamics as US suburbia where drivers use marginal-cost free roads to go to Walmart, instead of participate in their neighborhood economy.) To use your example health care access example, when the queens resident takes the subway to manhattan to go to the podiatrist and pays 2.75 instead of a 3.75 under a zone system, the 1.00 subsidy isn’t to the resident, it’s to the podiatrist. It drives concentration of wealth.

  9. If a monthly, $120 charge is too much for some to pay, why not consider allowing bi-monthly payments. $60 is a lot easier to save up for the initial purchase, and then the money that would have been spent on daily rides can instead be saved for the next payment.

    My point is, at some point it becomes the responsibility of the individual to maintain fiscal discipline and save what would have been spent on daily fares to purchase the monthly pass. If a transit agency can make it easier for people to make that initial buy-in they by all means should.

  10. All those cities you mention have transit subsidized by government to a much larger extent than U.S. cities. The systems are more comprehensive and convenient.

    They also charge more for gasoline at the pump, so it is still worth it for people to pay higher fares on transit than to drive. Gasoline is much cheaper in the U.S., so pricing long transit commutes too high encourages more people to drive.

  11. Unless the person doesn’t have access to a financial institution that doesn’t charge a large fee for a low balance.

    “at some point it becomes the responsibility of the individual to maintain fiscal discipline”

    Is this from Atlas Shrugged or The Fountainhead?

  12. One good thing about getting a monthly pass there is an incentive to use your pass as part of a sunk cost, sort of like a gym. I am all for daily capping, but monthly capping may reduce ridership because people have the incentive to ration their trips as much as possible to still be cheaper than a pass. Due to a commuter check snafu this month I actually am buying single use fares and I for one certainly use transit less.

    We need to stop using 40 rides as a cost driver for passes. If we want to increase ridership, the pass needs to be affordable enough to allow flexibility. Deeply discounted annual passes, subsidized by business, civic, and residential partners is the best way to go. ORCA in Seattle is a good example. Monthly unlimited passes can also slot into a lifeline pass program for low income residents that allows social service agencies to help shoulder some of the cost.

  13. Many (perhaps most) systems that offer monthly passes also offer weekly passes, albeit at less lucrative prices.

  14. The big asian systems run profit on their transit systems. The euro systems have similar farebox performance as New York & Chicago (our best performing/least subsidized systems by ridership or mile). A transit system like San Jose would be much more subsidized by rider, by mile, etc. than any of those systems. But that’s neither here nor there.

    The transit community gets right that when automobile driving is not priced correctly it distorts economics and creates subsidies for the biggest offenders. eg. employees would demand higher salaries to work in an office park 30 miles outside of town if the full cost to drive there was priced in (say, $6/gal and $15 in tolls). The transit community understands that the subsidy is not to the employees trudging out to the office park (or walmart, or outlet mall), but to the companies that have located in a place that’s only economic viable with massively subsidized roads. In transit, short rides subsidize the long ones, so the result is people are economically incentivied to travel further (it’s “induced demand”) . It’s the same as most Germans have cars but drive them sparingly since gas & tolls are expensive but Americans have cheap gas & roads so we drive incessantly.

    Outside of the transit community, most Americans think raising gas taxes is like a crime against the poor and middle class. That’s crazy. Let’s get transportation pricing correct – both transit and cars – and we can approach with poverty direct ways.

  15. A few more reasons for fare capping over monthly pass.
    * Make the transit experience more dignifying. The necessity to buy a pass from certain places at certain times is un-dignifying, if not downright inconvenient. Transit has to compete with car dealerships that opens on weekends that promise cars for those who have bad credit or no credit.
    * With stored value cards transit agency gets the revenue anyhow. The difference is whether they need to prepay for a pass at once or earn their pass as a loyalty reward.
    * Stored value card allows better access to retailers. Basically those cards would be purchased and funded as if it is a retail gift card. No need to have specially trained staff to process the purchase of pass with a special computer system. The best scenario is that transit riders can pay for rides at their favorite retailer. If they shop at Costco, they can pay for their transit card at Costco. If they like their ethnic supermarket, they should do it in the same transaction as their grocery. They should also be able to add value to their card and earn their pass by putting down a $20 bill at the bus farebox.
    * Less planning involved. If a rider gets a job and has got into the rhythm with taking transit to work in the middle of the month. They will get the best discount just by riding. They can pay whenever at a rate they can afford. If they want to pay $20 every week, then they should be allowed to do that and earn their pass.

  16. Why? I must say I really really disagree with this. Transit fares shouldn’t be out to trick riders. Fare capping is about promising everyone they can just ride as they want, and they’ll always get the best deal, which is fair to all. A cap above the daily or monthly rates is just taking advantage of riders by forcing them to figure out in advance whether they will come out ahead with a pass. Transit should be easy to ride, and part of that is not forcing everyone into complicated decisions about fares: just give them the best deal for their usage.

    It works just fine in cities like Portland and London without any kind of extra premium.

  17. Worth pointing out that next step of fare capping is to cap across transit modes. For example, if you take Ferry, BART and Muni, the cap is set at say $10 even though ferry might cost $8, BART $3 and Muni $2. The money gets redistributed on the back-end.

    This is potentially simpler way of implementing regional transit where small operators might be providing a free connection to a commuter train passenger.

  18. fare capping is standard in many world-class cities with modern smartcard passes: Sydney, Melbourne, London, Berlin

  19. Excellent point. Many societal problems are caused by this phenomenon– car ownership and excessive driving (long distances encouraging sprawl or unnecessary trips creating needless traffic) being the most obvious example.

    Other currently trends countering this phenomenon are: on-demand car ride sharing, urban congestion charges, and rush-hour toll road premiums, mileage-based insurance, mileage-based vehicle taxes.

  20. Transit agencies shouldn’t be charged with poverty alleviation. Their job is to run an efficient, reliable transportation network that’s convenient to use. Their primary metrics should be maximizing ridership and cost recovery at the fare box. That is a major task and US public transportation generally has considerable room for improvement. Poverty alleviation is important, and subsidizing access to transportation, I’m sure, can have a range of desirable social impacts, but that should be pursued separate from the transit agencies, IMO.

    All of that said I can see fare capping as being a revenue neutral way of making the transit system more convenient for everyone to use.

  21. Is an automatic payroll or bank account withdrawal system possible for passes? Every week, a proportioned share of the monthly pass cost could be withdrawn from accounts; if payroll integration is possible this could happen before the money even hits the bank account.

  22. Actually NY purposely adopted a flat fare system when the system was built to encourage dispersal from high density Manhattan. The flat fare supported development in the outer boros. The same flat fare today makes housing more accessible to the Manhattan core job center and will never be changed politically or practically. However, the commuter railroads in the NY region all have zone based fare systems. So do the suburban bus systems. Only the NYC subway and bus system has a flat fare, and the express bus flat fare is a premium fare more then double the base fare. Zone based fares are appropriate if revenue is important to cost recovery. The NYC flat fare does not undermine communities, it allows people to travel for their needs, including school children which the Board of Ed pays for their free fares which allows more options for schooling. No comparison to suburban car use.

  23. Flat transit fares were the mechanism of the first iteration of sprawl development built on a streetcar chasis, but with all the same economically bifurcating implications as later automobile-based development. Just because we have bigger problems now with autodependency sprawl, the problematic underlying conditions of flat transit fares have never been addressed. Trying to fix it was a political 3rd rail 100 years ago, and still is today because middle class commuters would see their fares rise.

  24. You miss the point. Manhattan could not support the higher density, back around 1900 densities were actually higher then today, but it was overcrowded and in order for the city to grow, it had to disperse some of the population. It is not just middle class but also poorer communities that depend on the flat fare. Parts of the Bronx, Brooklyn, Queens are where both the middle class and the poor live. Unless you provide large subsidies, even middle class housing is difficult in Manhattan. This is why so much recent development has occurred in industrial areas. These now have to have better transit. Also the introduction of free bus to subway transfers with the Metro Card in the mid 1990s helped expand transit access. Further options to extend the time allowed for the free transfer and lower commuter rail fares are being examined. Commuter rail fares are not flat fares, those riders do pay more to travel to Manhattan

  25. Capping doesn’t necessarily require a transit-specific farecard system. London & Singapore illustrate that capping can be delivered for riders using more general contactless payment devices (payment cards, Apple Pay devices etc.) issued by banks & telcos too.

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