Beyond the Farebox: The Real Costs and Benefits of "Free" Transit
This article is published as part of Strong Towns’ ongoing partnership with the data analytics firm, Urban3. Visit this page to learn more.
(Source: Flickr/Nick Bastian.)
There’s been some debate recently about whether or not buses should be free. Some cities are even moving forward with this approach. Jerusalem Demsas argues that most bus riders care more about improved frequency, increased hours, and quality of service—and that those things should be addressed first, especially before removing a funding source. On the other hand, Sparky Abraham argues that charging for services at point of use is a regressive approach to paying for public services, like a sales or excise tax. He goes on to make the case that even utilities should be free up to a point, considering that failure to pay can result in eviction and even property seizure, which are particularly harmful to low-income residents. There are important points on both sides. Even small bus fees can hurt the wallets of riders with modest budgets, but transit systems shouldn’t throw away an important revenue source if they plan on improving frequency or coverage.
This debate gets at an important question: How do we pay for services that cities and urban residents need? Do the most fortunate bear more responsibility for contributing to these shared services? I’m no political theorist; I’m an urban planner. My perspective isn’t from the lofty perch of theory, but from my experience working for and with cities. That said, here are a few points I think are missing from this conversation.
Make Existing Systems Fair
Local governments have to pay for services somehow. Most of their revenue tends to come from property taxes. Urban3 helps cities make informed land use decisions by showing how these taxes are correlated with urban design. While we encourage cities to pursue more productive land use types, we’re also inclined to think critically about how we pay for stuff—especially when it comes to property assessment.
We know, for instance, that homes on the lower end of the value spectrum are more likely to be overassessed and homes on the higher end are more likely to be underassessed. This means owners of modest homes pay more than they should in property taxes, while owners of expensive homes pay less. In an analysis of Buncombe County, Urban3 found that by underassessing expensive homes in 2021, the county was likely missing out on $9.4 billion in untaxed value, or nearly $46 million in county taxes. This doesn’t include unpaid tax revenue to cities that are also losing out.
Should we tax the rich more? Maybe. Should we improve service before cutting fees? Perhaps. These are important questions to ask, and they lead to healthy debate about how we maintain “the commons.” What this debate obscures is the fact that there is an untapped gold mine right under our noses: If we just improve an existing process, the county stands to rake in tens of millions of dollars. Most local governments already rely heavily on property taxes to pay for public services—there’s no debate there—and they may be able to increase funding to public services while making the whole system fairer by improving their existing process of assessment.
Importantly, this approach focuses on where communities can generate their own funding source. Many propositions for improved transit revolve around federal grant money. By focusing on a sustainable revenue stream in their own jurisdiction, local governments can worry less about the uncertainty and administrative work that comes with external funding.
There’s also a point to be made on how underassessing expensive homes amounts to a subsidy for the rich. Which is more egregious: subsidizing transit that helps meet important environmental and socio-economic goals, or gifting tax breaks to wealthy homeowners? If you’re concerned about subsidizing the wrong things, buses should be last on your list.
Stop Spending Money on the Wrong Things
While figuring out ways to raise more money for services is important, so is figuring out how to spend it in the right way. In a country where we still struggle to learn the lessons from overbuilding throughout the 20th century, arguing to not make poor investments in infrastructure feels just as radical as raising the corporate tax rate.
It’s socially acceptable that bus riders pay for transit service yet only recently has it become popular to charge drivers to park their cars on public streets—and to not require developers to pay for the cost of parking. Slowly but surely, planners are realizing “that’s always the way we’ve done it” is not good enough justification for managing public services.
Every poor investment decision has a direct and negative impact on what local governments can and should be spending money on, particularly when they float bonds to pay for bad investments. Take Castle Rock in Colorado, where half of their debt is in interest alone. By investing in poor land use patterns and Growth Ponzi Schemes, local governments deplete their resources and are unable to invest in ways that are more financially productive and resilient.
We know that auto-oriented transportation and land use systems have high external costs, not the least of which is measured in human lives—over 40,000 people will die this year on our roadways, to speak nothing of the poor health outcomes that result from disincentivizing walking and biking. Yet countless state and local governments still continue to socialize the costs of highways and stroads, leaving residents to shoulder burdens of wasteful development patterns that destroy our environment and leave cities with costly infrastructure liabilities. Auto-oriented investments in infrastructure cause harm and provide no return on investment.
Better land use planning undoes harm caused by decades of land use policies that induce the overbuilding of auto-oriented infrastructure. And changing policy is mostly a procedural, one-time investment. The upside on the return is limitless. Investing in public transit most certainly does no harm. But with an investment, what do we get in return? We help free up money for individuals by removing the requirement to own and maintain an automobile, reduce congestion, and increase access to jobs, which helps residents and local businesses. Despite transit commonly being criticized as a waste of money, industry professionals agree it provides a clear return on investment, up to $5 for every $1 spent.
Of course, return on investment isn’t just financial. Think of a park. Sure, there is some roundabout way of calculating cost savings for health care or environmental remediation, but parks provide clear aesthetic and recreational value. There is a non-quantifiable benefit to having a quiet and peaceful refuge in a city. Holistically, it’s easy to see how parks fit into goals for cleaner air, cooler cities, healthier residents, and the like. Planners can and should be articulating what exactly cities are getting from their investments and ensuring, at the very least, that those investments do no harm.
But a too-narrow focus on the sticker price of, say, a bus ride lets local governments off the hook for all the more subtle ways that their existing policies take from some to subsidize others. While I also dream of cities with superb transit and impressive urban design, I realize the path toward stronger communities is slow and incremental. Let’s start where we can by improving what makes sense—the property taxes that every homeowner must pay—and letting go of what doesn’t—subsidizing wasteful and destructive car dependency.
Billy Cooney is an analyst at Urban3. Cooney recently graduated from Georgia Tech with a master’s in city planning. He focused his studies on urban design and GIS, creating site plans for development projects and analyzing access to green space. A fan of visual communication, he enjoys using maps as centerpieces for community conversations about land use planning and development. His goal in any capacity is to use research, data, and community involvement to create places that are equitable, sustainable, and beautiful.
Prior to graduate school, Cooney worked in the public sector where he helped write plans and policies for multi-modal transportation and affordable housing. Before that, he explored urban history and the sociology of public space at the New College of Florida.