Should our transportation systems be 100% paid for with direct user fees?

Every so often, I hear someone say that transit should be operated 100% off fares. In Canada, no transportation system is 100% paid for with user fees such as gas tax, tolls, or fares.

As an example, the Port Mann Bridge —operated by the provincially-owned Transportation Investment Corporation— needed $79.4 million in taxes for the year ending 2014. That's over and above the toll revenue it received.

In general, we want our transportation systems to be able to handle peak demand in the morning and evening, be available when we want to use it, and not cost a fortune whenever we want to uses it. This leads to inherent inefficiencies, and means that we have to pay for these systems with taxes.

I was reading the Canadian Urban Transit Association’s 2013 Canadian Transit Fact Book. CUTA gathers information from transit agencies throughout Canada. When I was reading the fact book, I came across the statistics for both AMT which operates commuter trains in the Montreal Region, and West Coast Express which operates commuter trains in Metro Vancouver.

AMT provides all-day commuter train service that runs from about 5:30am until about midnight with seven-day-a-week service. Bidirectional service is also provided all-day on most of their routes.

AMT’s average one-way fare in 2013 was $3.18. This covered 40% of the direct operating expenses of the service.

West Coast Express provides a premium transit service in Metro Vancouver and Mission. Within Metro Vancouver, you could take the SkyTrain and buses instead of the West Coast Express. West Coast Express operates trains that travel in the peak commuting direction to/from Downtown Vancouver. These trains only operate during peak commuting times, Monday through Friday.

West Coast Express’s average one-way fare in 2013 was $8.01, and covered 100% of the direct operating expenses of the services.

While West Coast Express is the model of efficiency, we couldn’t model the rest of the transit system off it. People require access to the system almost 24/7 at a reasonable price.

In the same way, people would not have been happy if the provincial government places a $5 one-way toll on the old Port Mann Bridge to cover the cost of the Highway 1 corridor. From a pure efficiency standpoint, the old six-lane Highway 1 corridor was better as its total temporally available capacity was more fully utilized.

There are certain benefits, like demand-management, in having a system that is paid for with both direct user fees and taxation. 100% taxation funded systems, or a 100% direct users fee funded systems, create major problems for people who need to get around a region.

Direct operating expenses includes all expenses minus debt service charges and depreciation.