Two things of note:
a) "passenger demand of just 3 percent — and attributed most of that gain to other factors, such as service improvements and new priority lanes for buses"
b) "if any modal shift is happening, it’s that some people are walking less and riding transit more"
The former suggests that service quality and speed matter more than fares. The latter suggests that they are spacing their bus stops too closely (400m), so that the buses are acting a pedestrian circulator, rather than a pedestrian extender. The latter is the more important point.
For buses, there is increasing marginal cost (of delay) per passenger. Every stop makes the journey longer. The more people on the bus, the greater the cumulative delay. If boarding takes 15 seconds, and there are four passengers on the bus, the result is 60 seconds of person-delay. If there are 8 people, the resulting delay is twice as large.
For a pedestrian facing the choice whether to walk or wait for the bus, the per passenger delay caused by boarding is immaterial. The only time-cost is waiting for the bus. If a bus comes every 5 minutes, it is worth waiting about 3 minutes to catch the bus. A comfortable walking pace is 5 m/s, so for any distance over 180m**, it is worth wait to catch a bus. On which basis, bus stops would be placed every 180m. So every four blocks would add a minute of travel time***, per passenger. Ergo, as headway (buses/hour) rises, distance between stops should rise as well.
* 3 minutes x 60 seconds/minute x 5 meters per second
**About 1 SLC block.
***Four blocks-->four stops x 15s delay/stop
'Best Bus', and the 'Bad Bus'.