In my wallet I have a transit pass. By sliding this pass through the farebox card reader aboard any Ann Arbor Transportation Authority bus, I get access to a public transportation system that served our community with 6.3 million rides this past fiscal year.
If I rode the AATA buses to and from work every day and paid the full $1.50 fare each way, the cash value of that card would be about $750 per year. Of course if I were actually riding the bus that frequently, I’d be somewhat better off purchasing a 30-day pass for $58 a month, which would come out to just a bit under $700 annually.
What I actually paid for that card this year was $10 – just a bit over 1% of its potential cash value.
So what sort of dark magic subsidizes my potential rides on AATA buses? And why do I have access to this magical go!pass card, when you, dear Chronicle reader, likely do not?
Along the road to answering these questions, I’d also like to make a proposal. It’s a vision for broadening the program, getting more transit passes into the hands of Ann Arbor residents, and expanding the possible uses for the go!pass – including (shudder) the ability to use a transit pass to pay for parking.
Policy Choices Already Made: Charge More for Parking
A cynical explanation of my public transportation subsidy would go like this: On average, the unwitting motorists who park their cars in Ann Arbor’s public parking system pay prices set 3% higher than necessary; and this 3% “surcharge” is used to subsidize the bus rides of go!pass holders.
The percentage is basically right – because Ann Arbor’s public parking system generates about $15 million in revenue annually, and the annual subsidy required to pay for the rides taken by go!pass holders is about $500,000. And that $500,000 is, in fact, allocated from the fund that receives parking revenues.
But before you conclude that bus riders are benefiting at the expense of motorists, it’s worth considering the benefit to motorists from this subsidy: fewer cars on the road, which means better traffic flow for motorists; less competition among motorists for parking spaces; and reduced need to reserve for capital replacement and new construction of parking structures, which relieves some upward pressure on parking prices.
And if you’d like to argue against the go!pass transportation subsidy on the grounds that this “surcharge” on parking prices is effectively a tax – one that we voters never approved – then it’s worth considering that the total “surcharge” applied by the Ann Arbor public parking system is actually closer to 20%, of which only 3% goes to subsidize transportation. The other 17% is baked right into the contract with the city of Ann Arbor, under which the Ann Arbor Downtown Development Authority operates the city’s public parking system.
Under the terms of that contract, the city receives 17% of gross parking revenues, which the city uses to “subsidize” various general fund activities – like the salaries of police officers, firefighters, city planners, and allocations to human services nonprofits.
So when mayor John Hieftje talks about how he wouldn’t trade Ann Arbor’s budget situation for that of any other city in Michigan, it’s easy to understand why: Dealing with tight financial times is easier when you can cover the first 2% or so of your general fund budget with revenues from your public parking system. Other cities in Michigan don’t necessarily have the option to cover a general fund budget gap through increased parking prices.
In any case, I think it’s sound public policy to analyze the subsidy provided for go!passes as an investment in the city’s transportation infrastructure. I think it’s less sound to treat the public parking system as a way to backstop the general fund.
But my point in writing is not to argue the merits of either policy choice. Those policy choices are already currently in place. What I’m suggesting is that now is a good time to reflect on the specifics of how the transportation subsidy is allocated.
How Is the Transportation Subsidy Allocated?
The go!pass program is administered by getDowntown, but the entity that makes the policy choice on allocation of the go!pass subsidy is the board of the Ann Arbor DDA. That’s a function of the fact that the DDA manages Ann Arbor’s public parking system under contract with the city. And in broad strokes, as long as the city gets its contractually obligated 17% of gross revenues, the DDA has latitude to expend parking system revenues according to the collective wisdom of its board.
For around 10 years, a transportation subsidy has supported the go!pass program, which is available only to Ann Arbor downtown employees. I get my go!pass card through the Workantile, a downtown coworking community.
At its June 2, 2010 meeting, the DDA board made a three-year allocation from the parking fund for the go!pass subsidy: $445,672 for FY 2011; $488,054 for FY 2012; and $540,060 for FY 2013, the current year. This money is paid to the AATA to cover the cost of rides that go!pass holders take. The size of that subsidy is a function of at least two factors.
First, go!pass holders take a lot of rides on AATA buses. During the 12 months between Oct 1, 2011 and Sept. 30, 2012, they took about 604,000 rides. That reflected a slight dip in go!pass ridership, down from 634,000 rides in the previous year.
The size of the needed subsidy is also partly a function of AATA policy. At its Aug. 24, 2011 meeting, the AATA board voted essentially to calibrate the cost of the go!pass rides to the amount of money the DDA had already allocated, instead of calculating the actual cost, which would likely have been more.
The size of the subsidy that’s needed to support bus rides taken through the go!pass program is also reduced somewhat by the $10 cost that’s charged to a company for each employee’s go!pass. And a go!pass program rule further amplifies the effect of the $10 cost per go!pass. That rule requires participating downtown employers to purchase passes for all their employees – at a cost of $10 a year. So companies are required to be “all-in” with the go!pass program.
Say a 20-person company participates in the program, but only five employees think they’ll ever want to ride the bus, for whatever reason. That 20-person company is still required to purchase 20 go!passes at $10 apiece. The $150 collected for those 15 go!passes – which will likely never be used – helps offset the cost of the rides taken with the five other cards, which could be heavily used.
From presentations I’ve seen getDowntown executive director Nancy Shore give, the Workantile’s pattern of go!pass usage is typical. A few card holders take a relative large number of rides, while the “long tail” of cards shows relatively little use:
So the financial effect of the “all-in” requirement is to reduce somewhat the amount of additional subsidy that is needed, with the cost of little-used cards partly offsetting the cost of the rides taken with heavily-used cards.
But the “all-in” requirement is not financially motivated. Instead, it’s seen mainly as a way to put a bus pass in the hand of someone who might otherwise never even consider using the bus to get somewhere. And that person might wind up taking a couple rides, and might even add the bus as an occasional option to satisfy their travel needs.
That makes sense to me – putting a convenient, economical tool for accessing public transportation in as many hands as possible, on the theory that it might help win some converts. Some of those converts might add to the nice meaty head of the “long tail,” but others might help shorten and thicken up that tail.
With that in mind, why do those hands we’re putting these bus passes in have to be attached the ends of arms belonging to downtown employees?
Bus Passes for Everyone
I would make two observations. First, the go!pass program is a success measured in terms of participation and ridership. But I think the subsidy is greater than it needs to be to achieve the goals of the program. I think there’s a lot of room to increase the $10-per-card cost, without diminishing the fact that these go!passes would still be an incredible bargain to a cardholder or to a company. But some revision to the “all-in” requirement for downtown businesses might be required.
Second, ordinary Ann Arbor folks who own property and pay the 2 mill transit tax are susceptible to the same incentives and influences that downtown employees are. If you put a convenient, economical tool for accessing public transportation in all of their hands, you might make converts to public transportation out of them as well.
The DDA board will, between now and April 2012, weigh the question of continuing to support the go!pass program – because the three-year allocation goes only through this fiscal year, which ends on June 30, 2013. If the board were to maintain the public transportation go!pass subsidy at roughly current levels – around a half million dollars a year – but reduce the public transportation subsidy just for downtown employees, that subsidy could be extended to a broader group of people.
So here’s what I’d like the DDA board to consider: Begin a transition from the DDA’s historical approach to the go!pass subsidy, which is downtown-employee centric, to one that is more broadly inclusive of Ann Arbor. I’m not suggesting that we pull the rug out from under the go!pass program all in one go. But eventually, I’d like to see the following kind of program replace the current go!pass.
- A physical swipe-able transportation card would be sent to every Ann Arbor address that pays property taxes – because the card would be included in the tax bill. Any registered voters who were missed in that mailing would also receive a card. Having such a card would simply be part and parcel of living in Ann Arbor. They’d be as ubiquitous as library cards. Such cards could also be obtained by any non-resident for, say $10.
- The transportation cards would be issued in a “pre-loaded” state with, for example, 20 bus rides or 10 hours of parking. You could swipe it to board a bus, or to pay for your downtown parking. So this subsidy would be available broadly, not just to downtown employees. But it wouldn’t be as generous as the current subsidy to downtown employees.
- Additional value could be loaded onto the cards though online purchase or at automated kiosks at the downtown AATA transit center, which is being rebuilt. To make the kiosks a reality, though, the AATA would need to re-think some choices on that new transit center building it’s starting to build. At its Oct. 18, 2012 meeting, the AATA board opted to add the cost of LEED certification to the budget of the new transit station, but not to include the cost of automated ticketing kiosks.
The DDA board will be holding a retreat on Nov. 16. That would be a good occasion to engage in the higher-level policy discussion that could lead to such a transit pass program, funded with public parking revenues.
Though it’s unrelated to my specific proposal, this column seems like a good repository for some additional data on other subsets of AATA ridership (University of Michigan affiliates) and other modes of transportation (Amtrak). So here it is:
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