Kansas City Streetcar, fixed guideway transit, and marginal pricing.

Wikipedia tells me that the OKC streetcar, post-pandemic, was costing $420k a year, collecting $60k a year in fares, for a net loss of $360k a year. With perhaps 15k riders, that's about $23 dollar per rider, which is absurd. So, I hope the areas it is serving are experiencing a whole lot of additional economic activity and new development, because that's a lot. 

More absurd is that a few years earlier, it was free to ride but had 75,000 riders. So the math says $420k a year, collecting $0k a year in fares, for a net loss of $420k a year, for a cost of about $6 per rider. So running things fare-free, they were getting 4x the benefit! 

The case for 'free buses' is often questionable--is the reduced travel time reduced stop times worth the reduced fare? But for fixed guideway transit, the calculation is different, because a fixed guideway transit system already represents millions in fixed costs investment. The OKC streetcar was built on the cheap, for $23m. So assuming a (SWAG) of 4.35%, they are already paying a million dollars a year of interest on the debt to build the thing. So its not $420k to operate, it's 1,420k to operate. Which, at 15k riders, is ~$94 a rider. BUT! At 75k riders, that's ~$19/rider. 

Once you've built a thing, your best option is to maximize the service you are providing. And the way to do that is to make the marginal cost of people using the service as close to zero as possible. And the way to do that is a pass system. My yoga studio runs $150 a month or $30 a class. And when I'm on a per-class basis, it makes me reluctant to take a class. But while I'm on the monthly pass, I've got every incentive to maximize my use. And that's exactly the logic every fixed guideway transit system should be exploiting, because their marginal cost of additional trip is very small, and their fixed costs very large. 

Of course, during the commute peak, transit capacity actually matters and its standing room only. But that's a fraction of the day, and the rest of the day should have discount pricing. Restaurants don't have 'happy hours' because they want you to be happy--but to draw people in during a slack time where they have to 'staff up' prior to the peak, and so they suffer the costs regardless. 

NYC Transit Fares

At some point, you have to ask if benefit from fares is really exceeding the cost of fares. Time has value. Fifty people on a bus waiting fifteen seconds while someone fumbles for a quarter is a grotesque waste of time. Simple Benefit cost analysis says that even if every person on that bus is only making $10/hour, that's over two bucks wasted, to obtain a quarter. It's a a calculation every transit agency should be making, but for NYC it's especially pertinent.

You may ask "But it is worth forgoing the revenue from the 50 fifty people?". Say it's $2.50/persons, so that's $125 in revenue, and we can assume not everyone is taking 15 seconds. Say everyone is taking five seconds to pay when boarding (on average--most people take 2 seconds, Spiders George takes 30), so every rider is imposing about 66 cents in lost time on every other rider. Then add in the cost of the fareboxes. And the cost of the man who comes to empty the fareboxes. And the armored truck that comes to collect the coins. And the person who sorts the coins and takes them to the bank. And the machine that smooths out all the bills.

Then add the opportunity costs of slowing down your bus. A bus is a $600,000 vehicle, and a bus driver runs about $100k a year (with benefits). Quick google says it costs $215/hour to operate a bus in NYC. Now, as a though experiment, lets say I can double the speed of my bus if I stop collecting fares. Suddenly, I need half as many buses and driver to provide the same service, and my cost per hour drops to $110/hour.

And you start to wonder "How much money are we actually making by collecting this money, once we subtract out our costs?". And then consider the benefits to riders--people where they are going, twice as far or twice as fast. A 20 minute bus trip becomes a 10 minute bus trip, for 50 people. That's 83 dollars of benefits, right there.

Actual math for non-fare collecting might only be ten percent faster, but the principle applies: 66 cents less in time cost per rider ($33), $21 dollars less in operations costs, a couple dollars less in fixed costs, $8.30 in benefits provided to riders, and the seemingly impressive $125 you've collected in fares looks a lot less impressive.

Now consider the imposed congestion costs. Everyone not in a bus is in a car, and every car is adding to congestion, imposing delay on all the other drivers, all of whom are very likely making much more than $10/hour.

A final note to the status quo folks, who claim "but we already have the fare collection equipment": overhead walks on two legs. Everything bought needs maintained, needs cleaned, needs repaired, and (eventually) needs replaced. And those replacement costs all need financed, all of it with debt. And all of that needs done by people who need paid, and who need paid enough to afford NYC rents.

Of course, this is a deeply NYC-centric argument--most places can't manage to put 50 people on a bus. But it's still a good thought experiment on the trade-offs that come from collecting fares, and especially for onboard fare collection. It was painful to ride Pittsburgh's light rail--in an era BRT has definitively proved the benefits of off-board fare collection, a light rail was still stopping to collect fares.