“Subsidy” is a Loaded Word

In a post yesterday, I asserted that Seattle bus service is subsidized by King County instead of the opposite. But I didn’t exactly prove it which helped launch a very lively comments thread. With the help of Matt from Orphan Road and commenters here (AJ and Multimodal Man in particular), I was able to get some numbers which I’ll keep below the jump.

Here’s the conclusion: Seattle provides 42% of Metro’s revenue, and receives 58% of Metro’s service hours.

Is there anything wrong with this picture? No. Urban areas have good reasons to receive strong transit subsidies. We’re simply exploring this issue because two high-profile (and smart) blogs implied the opposite — that Seattle is subsidizing the rest of King County. I wanted to correct this misconception, since knowing where things stand from an analytical point of view is always a good thing. Read on for why these “subsidies” are a good thing, why Seattle vs. King County debates always come up, and the raw numbers.

King County Metro is smart to focus its bus service on the densest area of the region which has the most employers, the most money, and typically the most congestion. All bus service is subsidized — and of course we’ve all heard how highways and other modes of transportation are subsidized, too! — so it’s not crazy that Seattle has subsidized bus service. Indeed, it would be crazy if King County’s service was subsidized by Seattle since we are the dominant urban area most effectively serviced by transit.

And Matt’s point very much stands. Running a bus in Seattle, in general, is more cost-effective than running it in another part of the county. We have more riders and more destinations, simply put. If you had a thousand transit dollars, they’re most effectively spent in Seattle from a purely analytical sense and not counting where those dollars come from. It is a separate debate whether cost-effectiveness is the only measure of a good transit route.

There are two big, yet conflicting ideologies that guide Metro Transit. I should state that both ideologies are noble and pro-transit. One ideology is to provide service where demand is the highest (i.e. downtown Seattle). The other is to apply the “build it and they will come” strategy, and provide more bus service on the Eastside which people will eventually start to use it. It’s worth having a debate about how far in which direction we should lean. From the 40-40-20 allocation of new service, it’s clear that Metro is focusing a lot on “build it…” On the other hand, RapidRide is not bound by these allocation rules and the City of Seattle has funded improved service on some routes — like the 8 that I ride daily. And given the service surplus we have already, is Seattle truly in a position to feel victimized? I don’t feel that way, but I’ve only been passed up by a full bus once in the past year. I’m sure other people feel very strongly that we need to focus solely on Seattle bus service improvements.

However, what’s really underlying this entire discussion — one brought on by the phased in 50-cent fare increase we’re going to be dealing — is the massive budget shortfall that Metro is facing. It remains unclear how they can get out of this hole with cutting service and delaying or canceling RapidRide. So we can’t talk about where to grow service and be based in our current reality. The first problem is this budget crisis. The second might be where to cut service. If it gets to service cuts, it will have to be cut county-wide (including in the city), but obviously we should target the least cost-effective routes. With problems like these, Metro clearly needed to raise fares and generate revenue. We’ll continue to cover Metro’s financial problems in the coming weeks.

Here are the numbers:

Revenue

From all of Metro King County
2007 tax receipts for Metro total: $427,579,378.18
2007 fare revenue for Metro total: $85,369,399.00
Metro total: ~$512.9m

From the West/North Subarea (Seattle, Shoreline, Lake Forest Park)
2007 tax receipts for West Subarea: $160,724,889.57
2007 fare revenue for West Subarea: $55,635,201.00
West Subarea total: ~$216.4m

West Subarea share of Metro Revenue
42.2%

Service Hours
Metro total service hours: 2,194,542
West Subarea service hours: 1,273,461

West Subarea share of Metro Service
58.0% (It’s worth noting that this 58% of service doesn’t include routes like the 194, which are of obvious utility to Seattle residents but classified under the South King County subarea.)

Note: The revenue figures apparently include capital programs, and I’m not sure how those dollars are distributed. I’m not sure it’d skew things that much.

Sources
Metro Revenue: http://dor.wa.gov/docs/reports/2007/ltd2007/Table3-2007.pdf
Seattle/Shoreline/Lake Forest Park Revenue: http://dor.wa.gov/docs/reports/Local_Retail_Sales/allcy07.pdf
Service Hours & Fare Receipts: http://transit.metrokc.gov/am/reports/2007/2007-RtPerf-PeerComp.pdf

Comments

  1. Matt the Engineer says

    Hmmm… I’m not sure at the end how you jump to “Metro clearly needed to raise fares and generate revenue.” I’m not sure it’s clear at all. Despite the spin that Sims has been trying to put on the issue, there is no way this crisis should have been unexpected, or caused by the bump up in gas prices. The issue is that Metro is spending more than it takes in.

    Of course our first inclination around here is to push for more transit, all the time. But King County has put more buses on the road than it can pay for. That’s just bad business.

    So what are our options? 1. Raise fares high enough to make up the difference. 2. Cut service. 3. Raise taxes.

    1. Will definitely cut ridership, in a very regressive way. To be able to cover all of the budget shortage, we’d have to raise fares to a much higher level. Then we’ll have to raise fares again, as reduced ridership decreases farebox recovery. Rinse and repeat.

    2. Will definitely cut ridership. But only once, and in a less regressive way. One might say that we’re just fixing Sims’ overzealous bus buying.

    3. Is the only option that will not cut ridership. Is by far the most palatable to me. I know there are political hurdles, but we’re in a great period to be starting such a debate. Our region clearly wants more transit and is willing to pay for it.

    • John Jensen says

      I think the missing option, “4. All of the above”, is where we’ll be in a few months. I think if we’re asking the public for more tax revenue and we’re asking transit riders (likely) to accept some service cuts, then it’s fair that Metro raises its fares to keep pace. I am not against the fare increase as it seems you vocally are — it just seems necessary without a huge political re-alignment that would accept massive service cuts. While Metro isn’t entitled to our admiration, they did keep their first reaction from being “cut service!” In fact, their inclination all along has been to keep current service and even continue to deliver Transit Now service improvements.

      However, I think it’s becoming clear that Metro had some seriously questionable assumptions and not just that diesel prices and sales tax receipts have been erratic. That Metro can have a shortfall nearly as large as the entire county is truly bizarre. I am not sure why this happened and I think the local media should investigate things. Especially since it’s not clear of RapidRide will materialize.

      • reality based commute says

        Metro has a huge deficit because of three big reasons.

        1)Sales tax–all governments are hurting on sales tax projections. Nobody thought the economy would fall so far, so fast. The difference is that governments have other taxes they can levy, but Metro is heavily dependent on sales tax as a funding source. The legislature decides what taxes governments can levy. Cities have many tools–sales taxes, property taxes, utility taxes, and business taxes–and they tend to balance their revenues to not make them too dependent on one. Counties are in far worse shape because they get less sales tax and property tax revenue because cities have grabbed all the revenue generating areas. Mr. Eyman has further reduced property taxes. And counties have no business or utility taxes by law. The sales tax projections for the next year are truly horrific.

        2) Fuel–here is where Metro catches a break. Fuel is the second largest cost driver in the system. This year Metro was hit hard by fuel costs when diesel was over $4.00 and they had budgeted a little more than half that. But now diesel is back to $2.20 and big buyers like Metro can buy futures and lock in a price. This will save tens of millions, but the sales tax numbers are still getting worse.

        3) Labor–every bus requires a driver whether it is full or empty. Health costs and cost of living increases are affecting Metro just like all businesses. But Metro is very labor dependent. This is by far the biggest cost driver for Metro and contributes to the first two reasons to put Metro in a bind.

        We can’t do anything about the first reason. But we are doing the right thing to meet the challenges of the second two. A light rail train to the UW can carry 800 riders with ONE driver on electric fuel. To carry the same amount on buses you would need SIXTEEN drivers and a lot of non-renewable diesel.

        As for Rapid Ride, I wouldn’t be so pessimistic, John. I believe there is more pressure to complete that program than many other elements of Transit Now. The routes in West Seattle and Ballard also have the potential to capture state money in viaduct mitigation.

    • says

      We do have a lot of county roads, but in theory our growth management act would limit the number of new roads that we will subsidize. Look further down in the article my name is linked to for an idea of what happens when the county does not subsidize roads for suburbanites…

  2. Multimodal Man says

    John,

    Your numbers look good. Yes, it’s difficult to ascertain the percentage of sales tax that goes toward capital instead of operating, but it is not required for very useful analysis and discussion.
    Next step is to look at the boardings per sub area. The West will show up stronger than the service hour proportion, meaning the hours are more productive in Seattle-Shoreline-Lake Forest Park. Now, as for passenger miles per boarding, the west subarea will be naturally shorter, since density drives shorter trips, but that means that cost per user is also lower.
    Ultimately, I would argue that the local trip making that transit facilitates in Seattle is critical to supporting good densities and urban form. If transit were about maximizing passenger miles, then sending more trips to North Bend may be more important. But then transit would serve less people (because seats are consumed for longer distances) and would not help support urban densities.
    I agree with John, subsidizing transit in Seattle is good for the region. However, I think Seattle deserves more transit than the region is willing to provide and therefore must turn inward to a local tax for transit. Maybe the Surface + Transit alternatives to the viaduct could prompt this change?

    • John Jensen says

      What are you envisioning? A tax in Seattle that funds more Metro service, like the partnerships under Transit Now? Streetcars? A new Seattle transit agency?

      • Multimodal Man says

        I’m envisioning a tax like the monorail’s MVET but that could go towards Metro or Sound Transit or streetcars. I’m not sure if it is the MVET, but given that 1) Seattle voters are more willing than the region as a whole to tax themselves, 2) There is a great transit need in Seattle than the region as a whole and 3) Subarea equities will exist in some form or other, Seattle needs to pony up more money. It could be administered by the City Council or some other arrangement that doesn’t create a new transit agency, it’s a pass-through fund.

    • five toed sloth says

      I wonder about passes as well. If an Eastside resident gets a pass through work at a downtown office (or buys it at the downtown transit center), where is the revenue allocated? What about U-passes bought through UW, which are used by students and staff who commute from all over?

    • John Jensen says

      I could have sworn I had seen this information somewhere…

      But as far as I can tell the pass numbers are included in the fare collections. I have no idea how it is distributed. The fact that the passes are often PugetPasses might complicate things slightly.

      • Matt the Engineer says

        Pass numbers are included in the fare number ($48.7M for pases vs. $29.4M in cash and tickets and $9.7 in “other”). Although I have no idea where and how they allocate this revenue.

        Other interesting facts: they collected $67M from “grants”, though the source isn’t mentioned. Sound Transit kicked in $56M. Wow, the SLUS alone collected $.7M last year (not included in the fare number above). Not bad for a 1.3 mile route. (see p. 10 of the QMRyearend PDF)

  3. Rob Fellows says

    This is a good and thoughtful discussion – thanks.

    Here are a few other random observations that bear on this topic.

    There is a lot of concern about the 40-40-20 policy, which allocates 80% of new service hours to the suburbs in order to get closer to parity countywide. But that policy only applies to service increases. If there is a service reduction, a different policy applies. In service reductions, service must be cut in proportion to the existing portion of service in each subarea. So if Seattle has 60% of the service, then 60% of the cuts must be made in Seattle. Then, when the economy recovers, you can’t just add those hours back — new hours would be service increases, which need to be allocated 80% to the suburbs. So hours cut in Seattle during hard times would not come back when times improve. I have a hard time with that.

    I have some sympathy for the concern of suburbanites, who pay an equal share of taxes but get less service per capita. At the same time, I have a hard time with the notion that public services should be allocated with total disregard for need, just to satisfy political distribution requirements. We are at one extreme end of a spectrum balancing technical need against political distribution, when we ought to be seeking a position that tries to strike a balance.

    When we get to the point that we don’t care that people are being turned away on transit routes in Seattle because we have a political need to distribute money regardless of need, I think that government is on the wrong track. And when we focus only on service hours and not on the quality of service – including reliability, speed and loading – we are missing part of the equity equation.

    A different way of thinking about equity would result if we had standards that defined what “need” is, based on performance as well as factors that influence ridership, like density and pedestrian access. If we agreed on a consistent basis to define transit needs, including both quantity and quality of service, then equity would be measured based on how well needs are met.

    We still might find that Seattle has more than their share of service in that case, but we wouldn’t turn a blind eye to flagrant violation of service standards. Seattle residents may want a higher service level than the baseline the rest of the county is willing to pay for – and if so, there should be some way for Seattle to pay more for the premium service we need. But any measure of equity will be arbitrary. How do you decide what route is “in” each subarea? Is the residential end more important than the business end? Should we be looking only at transit, or at the distribution of all transportation? Should we only look at the physical location of capital facilities, like ST, or only at the distribution of hours without regard to quality like Metro?

    I think so-called equity is overblown, and we should start talking about good government again. We should plan based at least partially based on need. That means we should have service standards that define appropriate service level needs based on performance and land use, and monitor how well we achieve them.

  4. says

    John,

    Excellent post and I think you’ve made some great points. However, I still argue that you can look at the numbers several different ways. Why compare Revenue to Service Hours? Why not Passenger Miles, as we did for Proposition 1? Using Service Hours favors long routes in the suburbs and penalizes heavily used express service like the 71/72/73/74 from the U-District. This is what Matt was saying, I believe.

    Personally I don’t think either comparison is “fair” as such, and I hope that by the time Central Link opens next year money for transit will be already coming from Congress. I also have no problem subsidizing (or being subsidized by) suburbs during good times.

    • John Jensen says

      We’re not measuring the effectiveness of the service — just that it exists. So, if we have a certain number of service hours in Seattle vs. East King, I’m assuming those hours are used efficiently. For the purposes of comparing the revenue to the service provided, I’m not sure if any other metric besides hours can accurately portray “service.”

      It’s not really penalizing the 70’s, since those buses are going to turn around and run another route a lot faster than some meandering bus from Snoqualmie will — right? But you make good points.

  5. says

    Has anyone looked not just at where people live and the share but rather where they work and the share? Seems to me that the population of Seattle swells in the daytime work hours and probably retracts at night. is this calculated in any way into the “equity”?

    • John Jensen says

      Interesting question. I’m sure at least the downtown Seattle population swells, but we’re looking mostly at revenue distribution. It could be a lot of people who live outside of Seattle spend a lot of their money in Seattle and raise revenue in our subarea. However, all of this analysis is pretty agnostic of population — except the fact that Seattle is the urban core of the region.

  6. Tony says

    Well, I’m so far down on the comment thread I doubt anyone will read this far, but here is a different way of looking at those same numbers:

    Total Metro Revenue (tax + farebox) / Total Metro service hours = Gross cost per service hour.

    $513 M / 2.19 M = $233.74 / hour

    Seattle farebox revenue / Seattle service hours = farebox revenue per service hour in Seattle.

    $55.6 M / 1.27 M = $43.69 / hour

    Suburban farebox revenue / suburban service hours = farebox revenue per service hour in the suburbs:

    $29.7 M / 921 K = $32.28 / hour

    Taxpayer subsidy per service hour = total cost per hour – farebox revenue per hour.

    Seattle: $190.05
    Suburbs: $201.46

    Percent subsidy by area = Subsidy per hour / total cost per hour

    Seattle: 81.3%
    Suburbs: 86.2%

    So there you have it, the suburban routes are more heavily subsidized than urban routes by about 5%.

    In order to equalize this subsidy, 156,539 hours would have to be shifted from the suburbs to Seattle. By your own numbers.

    :-)

    The real question is, how do you want to define equality? Does transit serve land or people?

    Of course one can slice numbers however one wants to, but think about this: the vast majority of suburban residents in this county never ride the bus, yet they pay taxes, and often they vote for transit service even though they themselves never use it.

    So one has to wonder, what deployment of service best fulfills the wishes of this kind of taxpayer, the kind of taxpayer than gets no private bennefit, the kind who really is subsidizing the rest of us, city or suburban.

    What is the priority for the non-transit using suburbanite:

    1.) Get the most cars off the road, cut the most congestion, create the largest reduction in pollution, help the most people, or…

    2.) Provide service disproportionately to transit riders that live closer to him/her as opposed to transit riders who live farther away.

    I would hazard that the non-riding taxpayers of this county, no matter where they live, want to see their dollars being spent in the most cost effective way.

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