Michigan State Rep. David Agema, R-Grandville, has introduced
legislation that would require local bus systems subsidized by state road tax
dollars to generate at least 20 percent of their operating expenses from fares
paid by riders. Given that few taxpayers know much about the finances of
Michigan’s public bus systems, most might consider this proposal, House Bill
4928, to be a paltry and superfluous requirement. "Surely," they may think,
"Michigan’s public transit users pay that much and more of their own way,
right?"
Wrong.
As of 2005, the latest year that reports are available from the
Federal Transit Administration for Michigan’s largest urban bus systems, not one
of them raised as much as 20 percent of their operating expenses from fare
revenues. The largest systems, those responsible for carrying the majority of
Michigan’s public bus passengers, fell well short.
For example, fares as a share of operating expenses for SMART,
the system for the Detroit suburbs, and DDOT, the city of Detroit’s system, were
less than 12 percent. The figure for the Lansing area’s Capital Area
Transportation Authority was less than 15 percent. "The Rapid," serving Grand
Rapids, was less than 15 percent; the Flint Mass Transportation Authority was
less than 16 percent; and the Ann Arbor Transportation Authority was less than
14 percent.
If riders pay less than 20 percent of the operating costs, then
who pays the rest? Ahem — got a mirror?
About one-third of these total public bus operating expenses
came from the state’s Comprehensive Transportation Fund — a mass transit subsidy
carved out of the state’s annual road budget. Like the rest of this budget,
nearly all CTF funding comes from federal and state motor fuel taxes and state
vehicle registration fees. The money for the CTF that’s taken from this pool of
transportation dollars is a redistribution of wealth from the state’s car and
truck drivers to its transit agencies. Vehicle owners and drivers pay
substantially more for rides they may never take on public buses than do the
riders themselves.
The state constitution caps this diversion at no more than 10
percent, meaning that at least 90 percent of annual transportation revenues must
be spent on roads. But even with this restriction, Michigan lawmakers in Fiscal
Year 2005 allocated more than $161 million for local bus operating subsidies,
$16.3 million for bus capital improvements, $7.2 million for passenger train
subsidies, and more for various other public bus and transportation-related
spending.
It is also noteworthy that FTA reports indicate that virtually
all of the fare revenue for Michigan’s largest fixed route bus systems is
dedicated for operating expenses only. The overwhelming majority of the
operating costs, and virtually all of the capital costs, come from a combination
of the CTF revenue diversion, local tax revenue and federal grants. (The
requirements of House Bill 4928 and the calculations above apply only to
fixed-route bus systems and not dial-a-ride or other "on demand" public transit
service.)
Notwithstanding the figures cited above, the 20 percent
requirement of HB 4928 is not beyond the reach of public bus agencies. DDOT, by
far the state’s largest public transit service, covered more than 20 percent of
its fixed-route operating costs with fares as recently as 1999. Elsewhere, in
New York City’s massive bus system, operating costs were 42.4 percent
fare-supported in 2005; Chicago riders covered 34.2 percent; Toledo’s paid 20.7
percent; and Indianapolis patrons contributed 22.2 percent. It’s neither
unreasonable nor unprecedented to expect the people using the service to pay
more of the cost.
Yet testifying in favor of more taxpayer support, the executive
director of The Rapid in 2007 told state legislators that his system covered
only 18 percent of its 2006 operating costs with fares. He said increasing fares
would mean a loss of customers. His remark reveals a skewed perception in the
collective mind of Michigan’s mass transit chiefs: The people forking over the
vast majority of the money are not considered the real customers, while those
considered the customers are expected to pay very little of the cost.
House Bill 4928 represents a helpful turn toward clearing up
this confusion.
Kenneth M. Braun is the senior managing editor of Michigan
Capitol Confidential. Are Bus Fares Fair was originally published on Oct. 5, 2007.
