RTD has proposed another fare increase, this time a 12.5% increase from its current value of $2.00 to $2.25. The bus fare in 2002 was $1.10, which would be $1.34 in today’s dollars. The graph below shows the actual bus fare from 2002 to 2011, along with what the 2002 fare would be if the rates went up only with inflation.

RTD bus fares over time (click to view larger)

The fare is clearly increasing at a rate that is much more than the rate of inflation. These unsustainable increases are driving us to drive, or in some cases to simply do without basic transportation.

Why have RTD bus fares increased beyond inflation by so much? RTD says “Expenditures have increased due to several factors including expansion of services, federal requirements such as ADA service, capital maintenance and expansion and inflationary pressures (particularly fuel, utilities and parts).” Fuel prices have in fact increased more than inflation since 2002, but not at all like this. RTD also says that salary and wage increases have not exceeded inflation. They also claim that administrative costs “have not increased as a percentage of overall expenses.” (Be careful with this wording. Since overall expenses are increasing faster than inflation, it means that administrative costs are indeed increasing faster than inflation too.)

It is difficult to evaluate the reasons that RTD gives for this crisis, but the funding mechanism for the system is part or perhaps most of the problem. Politicians who set the system up and who now do not change it are to blame. Here are some of the problems with the funding system.

1. The sales tax revenue that pays for most of the service is, roughly speaking, constant, so that a small change in system cost must result in a large change in the fare. (In fact the sales tax revenue has decreased significantly due to the recession.)
2. The sales tax funding does not increase with increased ridership. This removes the incentive for RTD to increase ridership. In fact it makes increased ridership a hardship for the RTD administration. Their jobs are easier if they raise the fare and reduce the service so that ridership drops to zero. In that limit they would still collect most of the revenue, they would have no work to do, and no expenses except for administrative salaries, new computers, and the administration Christmas party. I am not saying that this is what happening, but this is in fact the economic pressure that the current funding mechanism exerts. RTD actually does an admirable job of resisting this economic pressure.
3. If RTD’s claim is valid that ADA costs are not being met by a separate revenue stream, then this unfunded mandate represents a very unfair tax on bus riders to support this social service.
4. There is rule that RTD must collect 30% of revenue from the fare box. Although this rule might help give RTD an incentive to maintain some riders (at the highest possible fare), it is counterproductive because it limits the amount of subsidy allowed for the bus system. RTD is competing with the marginal cost of driving a car, which means the cost of driving after car ownership, insurance, maintenance, and traffic enforcement are paid for. Given the current state of our transportation system, we cannot have a good bus system unless we subsidize it even more. In principle, public transit is cheaper than our current system of private automobiles, but it cannot be cheap until most people use it. In many respects the situation is the same as the road system that we currently have set up for cars, in which central governments maintain the system, police it, and pay for the wars to protect the oil supply.

If the cost of using the bus is close to the marginal cost of driving a car, then the ridership drops when the fares are raised, and the revenue generated is not proportional to the fare increase. If they raise fares beyond this, the system will spiral down to the hard wall in which only desperate people, who do not have any alternative, will ride the bus. Thankfully we are not in this situation, although many other US cities are. When a round trip fare for a family of 4 costs more than taking a taxi, we are obviously close.

If it is currently not feasible to change the funding mechanisms for RTD, then perhaps Boulder should drop out of RTD and form its own bus system. Formation of a new system would provide the opportunity to set up a more suitable funding arrangment. If we set up a system that is fundamentally better, other regions of the Front Range would probably follow our lead, and pretty soon the whole system would be better.

The recent crisis in the Fastracks program has been a disaster, but it has helped bring attention to the fundamental flaws in the RTD funding mechanism. The funding issues surrounding Fastracks helped Boulder RTD board member John Tayer recognize the problem, and he has worked to set up a committee to study ways to improve the funding structure for RTD. The committee will meet at 3:00 pm on 16 November at the RTD offices, 16^th and Blake Street. Although the problems are easy to see, it will not be easy to change the funding structure. Everyone will want to get something out of it, and the general political mood is not favorable to productive debate. We should still try. It is not the intent of the RTD committee to consider taking steps that are as bold as parts of RTD (e.g. Boulder) dropping out and re-forming with a better funding mechanism, but a series of weaker steps might help.

It is probably impossible to stop the new fare increase. RTD is telling us that they either have to raise the fare so that fewer people ride the bus, or cut the service. As absurd as this sounds I believe them because of the way that the funding mechanism is set up. If they cut service in low-density areas, then some areas could fall outside of the RTD service zone, which means those areas would not be taxed. This could result in a spiral of reduced funding and subsequent service cuts. If they raise the fare, it simultaneously reduces ridership (which saves them money) and generates a little extra fare revenue. They really are caught between a rock and a hard place. I would rather see a smaller RTD funding district that only serves the higher-density areas with lower fares, but I am not sure that this is even a possible outcome unless the funding mechanisms can be changed.

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