Last year, the Boston subway and bus system (MBTA) used tokens and cost $1.25 per ride. Today, with my car as frozen solid as a JetBlue Airbus at JFK, I decided to take the subway up to Davis Square. They have bought fancy new magnetic debit card machines. You don’t have to carry metal tokens anymore. The cost of a ride, however, has gone up to $2. This illustrates nicely one of the problems with user fees for government services. The government agency starts out by being spectacularly inefficient (MBTA bus drivers, for example, got paid an average of $55,000 in 2004, plus free health insurance and a pension plan vastly superior to anything in private industry). Then they decide that they need to collect user fees of $X. Then they come up with a system for collecting those user fees that turns out to be surprisingly expensive. Then the usage of the system falls due to the higher price. So it turns out that the fee collected per use ends up needing to be double what was originally planned, just to yield the same net revenue.
The deeper question for me is why the subway and bus system in congested Boston charges riders at all. Anyone who rides the subway instead of driving is doing the rest of society a huge favor by reducing pollution, global warming, and traffic congestion. The total revenues from bus and subway riders in FY2005 was roughly $240 million. We have at least 1 million cars that operate in Boston for 250 working days per year. If we charged drivers $5 per day per car as a congestion reduction fee, or about 1/4 the fee charged in London, that would yield revenue roughly 3X the MBTA token/card sales (assuming that the congestion fee and free MBTA reduced car usage by 40 percent).
If we paid the true costs of our transportation lifestyle, car owners would pay at least $5 per day for driving in the city and T riders would get free coffee and donuts as a thank-you.