Should public transport be 'free'?

[Simon]

Recovered from Forum Loss incident

@BillM (Bill McLean) 2016-10-08 07:30:31 UTC #1

The Policy Development Committee has a working group looking at transport policy. One proposal currently under discussion is whether to abolish fares and fund all public transport (PT) from tax revenues. We are interested to know what the broader party membership thinks about this question.

In Sydney, the total fare revenue from trains, buses and ferries was $1.2 billion in 2013, which is also the budgeted cost of runnning the Opal ticketing system for 15 years (so ticketing costs about 7% of revenue). The farebox recovery ratio in Sydney is only about 20% (low by international standards) which means that 80% of the cost is already being funded out of general taxes.

In 2012, the Estonian capital Talinn (pop. 435,000) made PT free for anyone who is a registered resident in the city, providing the largest test case for the policy. This article and this one explain that some of the effects were surprising, in particular

The most important finding is that the sensitivity to price, which we can measure in terms of increase in ridership, was much smaller than one would anticipate. And in fact, the sensitivity to frequency was much more significant.

Also, the mode shift from cars to PT was marginal; instead the main shift was from walking/cycling. A more positive outcome is that low income residents made more use of PT.

One problem with the current PT subsidy in Sydney is that the cost is carried by the state as a whole, which naturally causes resentment among people who do not have access to any service. Up to a point, I think this reaction is reasonable, and that a “beneficiary pays” principle should apply. That is, some proportion of the subsidy should come from local taxes or charges, either an explicit property levy or through land tax. (In theory, the choice should not matter much, since the levy would depress land values, but the politics might be different.)

An important point to remember is that the subsidy is not only a benefit to PT users; it also buys “negative congestion”, so people who never use PT are also beneficiaries. In particular, CBD businesses would have much less access to employees without PT.

@alexjago (Alex Jago) 2016-10-08 08:30:31 UTC #2
My other community-group-involvement hat is being part of a PT lobby group, and our policy on fares approximates to:

• existent
• not too expensive…
• yet high enough that a vehicle full of peak-fare adults should making a profit
• minimal ‘gimmicks’, particularly rortable stuff like ‘8 then free’
• somewhat distance based: if it costs the same to go 20 km and 2km, then either the short trips are too expensive or the long trips are being overly subsidised.

As for the cost of PT being carried by the state as a whole, yes, this happens – but I dare say all infrastructure and service costs per capita are much, much higher out in the country, so it balances out. And of course, most Australians live in a city anyway.

Funding via land tax seems to a good idea in general as long as the modelling is done correctly. I believe this has sort-of-happened on the Gold Coast, where the local council has increased rates near the light rail.

Side note: issues with large developments is that there might be enough people to justify a railway branch and enough developer cash to co-fund it, but there isn’t enough core capacity in the CBD for those services. Brisbane has the latter problem now, but we have bigger problems; most of our developers’ idea of transport planning is allocating an easement while putting trains in the brochure.

[MarkG (Mark)]

Let’s examine the bigger picture for a moment. Although every public transport system in the world is differently designed, there have only been two ways to actually fund these things.

One way, we can call the Hong Kong approach. Hong Kong has built the best mass transit network in the world, and in record time. It did it thusly:

1. Identify land around where stations will be built. Give control of this this land over to a publicly owned transport developer (ie CityRail).
2. The transit developer invests its own money to develop the mass-transit system which will connect to this section of land.
3. The land then becomes valuable by virtue of being around a public transport hub. The transit developer can then lease this newly valuable land out to businesses to build a commercial hub, or sell the land, or use the land in some other way to create revenue. This is how the costs for the project are recovered and turned into profit.

The entire Hong Kong mass transit system was funded in this way, including the vastly expensive underground routes which go under the city and ocean and connect islands together. Value capture as a mechanism to fund transport works every time. And there are other advantages:

• Commercial and transport hubs become inherently aligned. This increases the usage of both and helps with urban planning.
• No taxpayer money is required - the project is paid for by the unlocking of land value and commercial opportunities which mass transit brings about.
• There is an inherent bias towards installing transport in the least serviced areas, where the land value is likely to rise the most.
• Transport fares stay low - because putting them up means less use of public transport, hence less traffic to the commercial hubs in which the transit developers are invested.

That’s the Hong Kong approach. Now, let’s review the Aussie approach:

1. Taxpayers pay for the development and subsidy of rail services.
2. Land and capital gains are soaked up by whoever happens to own the land around the new stations.

The advantages of this approach, well … hmm

Now assume for a sec that PPAU advocates the Hong Kong approach to transport funding. Could transport be free under this system?

Sure it could be, because the commercial hubs around stations will be such huge earners. Being at a station locks in a reliable flow of customers that most commercial sites would kill for, and the cheaper the fares, the more customers you get. The higher land value will also generate higher revenue in other ways, which can offset the need to extract revenue via tickets.

I’d submit that merely lowering fares is not ambitious enough for a PPAU policy. For one thing, all the infrastructure for fare collection would have to be kept - the ticket machines, ticket sellers, maintenance crew, ticket checkers, and so on. Keeping all that dead-weight cost and reducing revenue from fares might not be sensible.

And think how much more welcoming and connected the city would be if all the barriers and blocks were ripped out and transport was freely available to everyone. You would open up the city, create more opportunities to low income earners, make it cheaper to do business - free transport would create a whole new platform for a more vibrant economy and civic culture.

Big parties are stuck proposing incremental things. But minor party policies can be more visionary, can propose big ideas and encourage people to look at things differently. Free transport is the definition of that, and it’s much more feasible than most people think. A policy that points that out will make a good contribution to the public debate.

[AndrewDowning]

Hey MarkG, this looks to me like a great laying out of the concepts involved if you were developing a new area.

Any thoughts on how Australia, or lets even just take Sydney as an example, would transition from the current way that transport infrastructure works, to this new way?
Would it only be able to work in new areas? or can you envisage how we might transition a place like the Sydney CBD to such a working arrangement? Looks to me like the land prices are already high there.

[Ryan]

That HK approach sounds good even if it doesn’t result in free transport. Expansion is a worthwhile goal.

As far as free public transport, it sounds nice but I don’t see it having much ROI and personally I see this as another issue where Basic Income can solve it effortlessly.

[MarkG (Mark)]

Yeah, I think existing stations are a sunk cost. The money to build them has already been spent and the land value gains have already been soaked up. The value capture method is just a way to expand into new areas - Western Sydney or the further regions. It’s a way to say: we can bring public transport to more people without spending more money.

When it comes to ROI - it depends how we define the “R” and the “I”. Part of the return from free transport is cultural change - making the city open and participatory instead of atomised. Part of the return is environmental and in public health - look how Paris periodically makes its public transport free because it’s the best way to control pollution.

Free transport might need a subsidy- but not very much, because most of the cost of public transport is already subsidized anyway. And whatever extra subsidy is needed to replace ticket revenue, you should offset against no longer needing to subsidize new stations and infrastructure. On that score alone we’d come out ahead- even if you discount the cultural and health benefits.

[Ryan]

I think of transport as a utility like water, electricity, communications.
Every variation of ROI you provided would probably be outperformed by free communications.

And if the whole “Water is the new Oil” stuff is real then we’d do well to make that 100% publicly owned and free before worrying about if the people in the suburbs are interacting with the people in the city.

[verbatim9 (Andrew A)]

No, The system that is inplace for smart card holders under 14 for free public transport in Queensland is a good outcome.

Better incentives for Adults with a smart card travelling off peak should be investigated.

Other states and territories have similar incentives in place already.

Travel on the TransLink network is free for children aged 4 years and under. Children aged 5 to 14 years (inclusive) are eligible for a concession fare. Children aged between 5 and 14 years travel free on the weekend when they touch on and off with an orange child go card.