Free Fares, for Better and Worse

The idea of offering fare-free transit — so that moving about the city becomes cost-free, at least to the rider — has been around for decades. In some ways, the policy rationale is strong, and the benefits are straightforward. But the deeper one looks, the trickier implementation becomes.

Against the backdrop of spiking fare evasion and increasing enforcement to try to contain it, advocates and legislators have once again embarked on a push for the Metropolitan Transit Authority to remove fares altogether. Over the past year, the MTA got the opportunity to experiment with this idea, making five bus routes across the city fare-free. The pilot ended this Sept. 1, but proponents, led by state Sen. Michael Gianaris and Assemblymember Zohran Mamdani, think it has laid the groundwork for a future expansion of free transit, a move they say will help the working class, the city’s economy and our climate goals. 

With this sporadic but persistent pressure to remove the farebox, and a yearlong pilot program as reference, it’s worth exploring what such an initiative would entail and what the outcomes would be.

What it costs

Public transit is funded by a mix of taxes — about $8.5 billion, or 44%, of the system’s operating budget — and the farebox, which covers about 26% of operating costs. Historically, the MTA’s farebox recovery rate — the ratio of fare revenue to operating costs — has been among the highest in the nation, hovering around 53% in 2019, but that figure has been slashed due to fare evasion increases, operating cost hikes and the MTA’s inability to recoup COVID-era ridership losses. Other transit systems across the U.S. have seen similar problems, like Los Angeles, another city with a coalition actively fighting for free transit, whose 2019 farebox recovery ratio of 14.9% fell to less than 5% in 2022.

The amount needed to replace the fares depends on what parts of the system would be made fare-free. Right now, the most concerted effort for free fare programs in New York, and the scope with the most precedent globally, is with local buses. The Independent Budget Office estimated that waiving bus fares would cost $652 million a year, while legislators and advocates behind the Fix the MTA campaign put that figure at around $778 million. However, some advocates and legislators want to leave no stone unturned. If Albany wanted to replace the farebox completely in the next budget, they would need to find approximately $5.2 billion in new annual revenue, a figure that increases annually.

How? That’s the multibillion-dollar question.

Politicians and pundits have floated many revenue-generating ideas, such as expanding the City’s paid parking and hiking parking fees, increasing tolls, introducing a new gas tax or imposing a weight tax on SUVs. Payroll and mobility tax hikes are also plausible options that have been debated, as well as utilizing revenue from downstate casino licenses. There’s the oft-cited idea of raising taxes on the wealthy, with one iteration from the Office of the New York City Comptroller suggesting that a progressive personal income tax scheme could raise around $900 million annually in New York City alone. Wealth taxes are ideas progressives relish implementing alongside pied-à-terre taxes and other fees on real estate transactions and developments. The state Legislature would likely have to pass several of these measures to generate enough revenue. Obtaining that recurring annual revenue — more than quintuple the amount expected to be raised through congestion pricing — is possible, but given what the City and state have just gone through, it’s fair to call it highly unlikely.

What riders gain

But assume for a moment politicians could make it happen. What would the result be?

The most obvious benefit of free fares is the financial savings for commuters. Public transit is already a good deal compared to automobile travel, but it’s not exactly cheap in a city with a punishingly high cost of living.

With the weekly OMNY fare cap of 12 paid rides per week, subway and local bus riders could save up to $34.80 per week, ballooning up to $84 a week for express bus commuters. Those who qualify for the City’s Fair Fares program already get 50% fare discounts, but they too would get savings of up to $66 per month. Considering that public transit riders make noticeably less than drivers, and nearly 20% of riders struggle to pay the fare, those savings become incredibly consequential, allowing riders to pay for other essential needs or enjoy a little more leisurely spending.

Commuters wouldn’t just save money. They’d gain intangible freedom to move about the city, whether for work, leisure, health care, education or any other reason. And that increase in freedom is good not just for the riders but for the economy as well.

Jurisdictions that have tried free transit have also seen increases in ridership, ranging from as low as 3% to as high as 85%. New York’s fare-free bus pilot saw ridership increases of 30% on weekdays and 38% on weekends. 

Without the need for fares, subway gates, turnstiles and other fare evasion design choices could be removed. The new $700,000-per-station anti-evasion fare gates would be unnecessary, the $35 million spent on private security would be saved, and the MTA could discontinue its recent campaign on fare checks on buses. (Fare enforcement isn’t just financially costly either; as recent events have taught us, it can also be potentially fatal.) On top of all those saved contracts, the pedestrian flow would improve on and off subways and platforms, and all-door boarding would become the standard for buses, helping to speed them up.

Transit workers might also appreciate the change. In both the MTA’s free fare pilot and Kansas City, attacks on bus drivers dropped nearly 40%. Interactions over fares were a key source of assaults on bus drivers. Without them, those interactions became a nonissue. The MTA also wouldn’t have to worry about their contracts with Cubic for OMNY readers and the baggage that has come with it. Liabilities like double-charging, frequent and costly rollout delays and easily damaged readers are financial and convenience headaches the system would be able to put behind them.

What the city loses

So what about the drawbacks? They lie primarily in what free transit doesn’t accomplish, how it squares with riders’ desires and what else the revenue needed to replace the farebox could fund. Public policy is about tradeoffs.

Consider those ridership increases. Most of those “new” riders were already using public transit, something Trenton and Denver discovered when they tried their hand at the idea. Only 11% of them were coming from taxis or private vehicles. While that isn’t inherently bad, it demonstrates that the program didn’t tangibly reduce vehicular traffic, the biggest issue plaguing buses. Bus wait times remained unchanged, and with New York’s pilot, pairing that with ridership increases actually slightly hurt speed and reliability, with free buses spending 7% more time at bus stops than the systemwide average. 

Then there is the question of what drives people to public transit and what existing commuters want. Is the fare what’s more often than not keeping people off trains and buses, or is it worries about unreliable service, crime, an inability to get precisely to their destination, and other things?

For prospective commuters, while the cost of public transit can influence their decisions on whether or not to make use of it, it’s not the primary factor — instead, reliability, reach and frequency of public transit, as well as the ease of driving, are more influential factors in determining public transit ridership. Existing riders echo the same sentiments of potential riders, deprioritizing the farebox as an issue of peak concern. Fare-free transit fails to move the needle on any of those metrics, and it risks making it harder to accomplish the other objectives.

Cutting the fare without major service improvements — which seems like the likeliest outcome, in that an already underfunded system would wind up scraping pennies even harder together — would be a Pyrrhic victory. Odds are great that transit would conform to the stereotype many already have in their mind: low quality, underinvested and taken for granted — some of the very sentiments that already drive fare evasion today.

Budget investments are often zero-sum. Using taxpayer money to let people get through the turnstiles for free or eliminating the turnstiles entirely means not using that same money on other transit needs. The cheapest estimate for free buses is equivalent to eight elevator projects annually, using the MTA’s $5.5 billion investment for 70 elevators from 2019. Earlier this year, the MTA bought 60 new electric buses for $70 million. A bus farebox replacement buys 558 of those buses every year. Those new buses would improve frequency, reduce breakdowns, increase reliability and open the door for new bus routes. 

To remove fares throughout the subway and bus system altogether without generating equivalent revenue from other sources would mean many more tough choices. Just the next two years of projected farebox revenue alone, almost $10.6 billion, could pay for the second phase of the Second Avenue Subway, with approximately $3 billion to spare. It is more than triple the amount the MTA paid for its original order for new R211 subway cars, $3.5 billion more than the last investment in signal upgrades and up to $4 billion more than the estimated cost of platform screen doors at 128 stations. And this is without considering the borrowing power the MTA could leverage with that revenue.

It would be foolish of critics to disregard the tangible benefits that the pilot had on the wallets of working-class commuters. However, it’s clear that the MTA has a lot to address before it can reasonably consider replacing farebox revenue. It’s equally clear that a legislative fight to garner money to implement free fares would likely exhaust Albany. In the interim, efforts to expand the eligibility for the Fair Fares program, which offers half-price fares to low-income New Yorkers, is a solid, more targeted approach to help ease the cost of transportation for working-class commuters. The dream of totally fare-free transit is going to have to wait, but perhaps a modernized, financially stable MTA — if it ever arrives — could pull it off in the future.