Rethinking WMATA Rail Fare Structure

The past two years have been a tumultuous period for Metro in the greater Washington region. Critics have attacked them for wastefully spending funds on expansions while not providing a comprehensive enough system. Weekly maintenance and repairs on the system, a planned effort that will hopefully update the network for the next generation of operation, have negatively effected customer moral. Now the most significant crisis may be the future of federal subsidies which have helped keep WMATA buses servicing lesser used routes and account for depreciation costs in the system which were not originally accounted for through the 1960s to 2000s. It has never been more imperative for Metro to reanalyze its cost and revenue structure to determine a better and fairer metric for dispersing these funding needs.

In our previous analysis Time To Tighten Up the WMATA Budget we discussed the eminent need for WMATA to reduce its benefits package to include pension support from employees, revision of health care coverage, and pay structure more inline with other transit jurisdictions. The effect of these revisions would be creating a new image of WMATAs culture, something which has been under attack, but also creating huge impacts on cost. (Skip to line by line changes) 

Commuters of metro who have selected transit over vehicular travel typical note fuel/parking cost and commute time savings as their main rational for making the switch. Clearly a commuter who can get from Vienna to DC in 40 minutes instead of 80 minutes for $4 parking/$5 ride instead of $10 parking/$3 gas will choose the former. However, it is now being seen, many commuters who save this amount of time, but receive free parking in DC, are still taking metro. To understand this we should think about the difference in per mile gas cost, and per mile travel cost.

For most household budget makers, the cost of travel only includes the cost of gas (and sometimes this is even left out of the household budget). When the government denotes the cost of travel, they attribute a $0.55 cost per mile, $0.40 greater per mile than what most sedans can attain. Is this difference just another example of government bloat? No. Consider how often a car requires maintenance. Outside of the first 30,000 miles of a vehicles life, one should typically anticipate $1000 in pure maintenance costs alone. Clearly as the car gets older this cost will skyrocket annually, but since most only hold a car between 3 to 5 years this is a good conservative cost. Divided into an annual pattern of 30,000 miles, this becomes $0.03, and a total of $0.18 per mile of real cost. Now consider that a typical cars worth goes from $25,000 to $5,000 over the course of 150,000 miles. This depreciation cost is $0.13, a significant cost that most people ignore, but is real. We now see that the typical driver actually uses approximately $0.31 per mile, and this assumes you do not drive a gas guzzler (based on a 25 mpg at $3.50).

So what does all of this have to do with WMATAs fare structure. By creating a metric to determine current and future fares, we must replicate current fares by tying them to cost and time savings for commuters to make them equivalent or better than vehicular travel.

Here’s our concept for a line by line change to Rail Fares.

Firstly, lets remove the concept of the minimum cost to ride. This $1.60 cost is reducing the accessibility of metro for off-peak city travel, something that systems like NYC and Chicago attain in far greater numbers than Washington. This is important because the cost for metro for these off peak hours and short distances is far less, and therefore any additional riders gained make far greater impact to revenue. Metro to date has really been designed as a system for commuters, but it is time to provide a more comprehensive system. How do we encourage in city travel?

The creation of two TOD pricing districts based on the most popular and dense sections of the network, Arlington and DC proper. For these regions a commuter will be charged simply a flat fee for any travel, no matter to where, $0.25 for Arlington TOD, and $0.50 for DC TOD. In our computations we have not included any additional riders from the reduction of this cost, however it is fairly obvious that with a much smaller fee, DC and Arlington residents will be far more likely to use metro even during non-peak hours. For commuters, the $1.60 minimum is also removed, and we have tied the cost to 3 scenarios. The current gas only cost of travel, based on 25mpg and $3.50 gas. With the removal of the $1.60 minimum and this reduction of ticket fare in almost ever segment, we see annual revenue short nearly $190 million in comparison to current revenue. Look at the price reductions for most typical fares, 40-70% less than what most people pay now. Hold your horses cheap transit hopefuls, while this would be great for your pocketbook, it would essentially shut down WMATA forcing far fewer trains to operate, and far more restrictive hours.

In our Scenario 2, we now include the cost of lost time for the commuter. This is provided as a multiplier based on the time savings by train instead of taking a vehicle. The average per mile cost through this scenario is equivalent to $0.25-0.35 per mile. This cost is equal to the real vehicular costs as we discussed above which include depreciation and maintenance, and is a fair method and metric that ensures that metro will maintain rail schedules and dynamically shift fare structure in areas where road improvements are competitive with transit. This modification to the fare structure provides an equal (a few million dollars more) revenue as Metro currently attains from rail service. Additionally, it continues to encourage city travel in off-peak hours which will create a healthier network. Fares from major destinations remain essentially the same, and remember, no more $1.60 minimum fare.

In our final scenario we want to see what happens if gas prices continue their trend upwards to the inevitable result of $5.00 which most analysts believe is the new reality of the 21st century. This analysis again assumes that overall the number of riders remains the same, something that with higher gas prices might not be true. Conversely, any increase in metro riders, would mean less traffic on area roads and therefore any gain in revenue from this addition would be offset by fare reductions from the travel time multiplier. This calculation shows the time/gas metric with $5 gas will rise revenue to $637 million ($100 million increase).

Some would argue this is unfair to raise prices based on energy cost increases, but that additional revenue means more capability in improving the network as a whole. As long as these revenues are not used to provide the same pay benefits that are currently riddling WMATA it will mean that the commuter will see direct upside from a healthier WMATA budget. Also, this fare rate will be equivalent to $0.40 to $0.55 per mile, in line with current expense standards for vehicle miles (and includes a rise in TOD fare prices for Arlington and DC of $0.10 and $0.20). With this structure, we see an increase in fares compared to today’s costs, but it is not going to be the end of the world, with most cost increases from $1 to $3 ($50 to $150 per month), comparable to what many people will experience in monthly cost increases for driving with $5 gas.

The goal of this restructuring is not to gauge riders because the cost of gas is rising, it is to create a fair metric to distribute the reality of higher energy costs around the network. Without operation cost reductions by WMATA to readdress their out of whack benefits we would argue that any increase in fares will spark public and political outrage. However, if costs are reduced appropriately, then an equal rise in fare makes sense when the end goal is less dependence on political climates and more opportunities for a better network.