Our local public transit system spends more than a year of revenue on cash registers

Our local transit system wants to spend $723 million on a “fare collection system” (i.e., cash registers): “The MBTA has a $723m plan to change the way you pay for rides” (Boston Globe).

What’s interesting about spending three quarters of a billion dollars of taxpayer money? The system’s annual revenue was $577 million in 2014 (dot.gov).

In other words, in the best case scenario in which there are no cost overruns, the MBTA will spend more than a year of revenue on hardware, software, and maintenance to collect revenue.

[The system being discarded in favor of this new $723 million one is the CharlieCard, launched 11 years ago. How broken is the old system? The Globe article says

The 36 MBTA union electricians who service the fare system would no longer be needed once Cubic takes over. But Ramirez said none would be laid off and could take on new jobs working on improving the T’s signals and other electric work that would improve the system.

If we figure that each union worker costs $400,000 per year, including pension and health care benefits, that’s about $14.4 million per year to maintain the old system. (separately, I think it is interesting that these guys who are experts at tinkering with vending machines will now be monkeying with the mission-critical signals!)]

My local Facebook friends were discussing this. Here’s an exchange:

  • Me: If only someone could invent a lightweight plastic card that could be used for payment in a whole bunch of different stores and service providers.
  • Friend: I made a startup years ago that tried to address this very thing. It’s not easy…
  • Me: you invented the Visa card? That’s awesome !
  • Friend: hahaha – I didn’t read super-closely… but – I made a system that would be able to handle use-cases like payment, check-ins (like getting on the subway or at the airport), getting points, etc. – all with one card.

Given the horrific congestion that we have on our streets daily I do wonder why we don’t make the subway free and/or give each rider a free cup of coffee and donut (raise driving tolls at peak hours to support this!). But if we must charge a fare, why not strike a deal with Visa and have everyone use a Visa or EBT card? (sell Visa cash cards in the station for those who neither have credit nor welfare)

13 Comments »

  1. Joe Shipman

    January 9, 2018 @ 12:38 pm

    1

    You’re blatantly refusing to suggest the obvious reason they won’t stick with the old system, which Glenn Reynolds uses as an all-purpose explanation for why a government won’t do something more efficiently: insufficient opportunities for graft.

    You care about this, but most voters can’t stand to contemplate the idea that they voted for people who want to victimize them, and the press long ago abdicated from its “watchdog” duties although they still claim that title.

  2. Ralph

    January 9, 2018 @ 1:31 pm

    2

    Have you forwarded this to the Boston Globe?

  3. John R. Klein

    January 9, 2018 @ 2:39 pm

    3

    Philg,

    Just curious, what is your source for:

    “If we figure that each union worker costs $400,000 per year, including pension and health care benefits” ?

    John

  4. bobbybobbob

    January 9, 2018 @ 2:44 pm

    4

    I’m increasingly annoyed by our cashless society. More and more we’re forced to deal with machines and services that refuse to take cash or make change.

    No, I don’t want an account with your service or to give you my credit card information. I want to hand you $5 and get my $2.34 in change, anonymously. I have metro cards from four different systems with a couple dollars on them that I’ll probably never get to use.

    You would think modern tech could make cash handling machines very fast and efficient. Toss the money in a slot, machine spits out change in 1 second. Thus obviating tokens/cards for people who don’t want them.

  5. philg

    January 9, 2018 @ 3:02 pm

    5

    John: What’s a good way to estimate what these specific workers cost? https://www.bostonglobe.com/metro/2016/01/27/nearly-mbta-employees-made-more-than/UAZ1tQmWzK5fjFjTYPMj0N/story.html shows that the higher-paid electrical workers at the T get roughly $180,000 per year in cash compensation (base salary plus the ubiquitous overtime and other supplements). Then there is the gold-plated health insurance, which isn’t cheap. Then there is the pension, which a T worker could collect at full value as young as age 41 (assume that they started work at age 18; I think they’ve changed this recently, though, but probably the old 23-year system applies to many existing workers). It is tough to value the pension because you can’t buy anything like it the market. A government-guaranteed commitment to pay someone from 41 until death at 100 or 120 years of old and adjust those payments for inflation? The only way to finance something like privately that would be with TIPS.

  6. philg

    January 9, 2018 @ 3:16 pm

    6

    http://www.masslive.com/politics/index.ssf/2016/03/mbta_payroll_database_why_are.html is kind of fun:

    For example, as reported by WCVB Channel 5, the MBTA has a policy that drivers must have 10 hours of rest between shifts. But nothing stops a driver from signing up for two shifts that are less than 10 hours apart. When that happens, the driver is paid to stay home and rest during the early portion of his shift – and another driver is paid overtime to pick up the portion of his shift that he can’t work.

    Another policy that has led to significant overtime is the MBTA’s practice of giving overtime pay even when a worker has worked less than 40 hours a week.

    https://pioneerinstitute.org/better_government/study-finds-mbta-nations-highest-bus-maintenance-costs-2015/

    says “MBTA vehicle maintenance costs per hour of bus operations in 2015 were 70.6 percent higher than the average of the five U.S. transit agencies most similar to the T.”

    I don’t think that there is any way to know the true cost because the pension obligation is not fully funded and, without a letter from God saying how long each retired worker is going to live (also how much investments will return in the year 2050), cannot be estimated.

  7. superMike

    January 9, 2018 @ 4:03 pm

    7

    In Beijing and in San Francisco, they seem to have developed cards that can wirelessly communicate with the bus and some kind of accounting system that can get you checked in to public transit. In neither case did it seem like a billion dollar system.

  8. anon

    January 9, 2018 @ 6:53 pm

    8

    > I do wonder why we don’t make the subway free

    The Staten Island ferry is fare-free, and remains the only bargain in NYC. It’s a good way to see the Statue of Liberty and the south Manhattan skyline (especially at night).

  9. wally w

    January 9, 2018 @ 9:17 pm

    9

    Here in Austin a couple of decades ago they made transit free for a couple of years.

    Since you dont have to collect money the costs go down, e.g the 3/4 billion mentioned above.

    For buses at least it becomes more efficient since you dont have a bottleneck getting on and you can enter with the side door also.

    Ridership goes up.

    Assuming the system is subsidized, the average subsidy per rider goes down since costs are down and ridership is up. The fares that had been collected did not seem to be a significant part of the equation.

    For Austin the main drawback seemed to be that “those” people from the bad spots over there could now more easily get to “our” neighborhoods. The experiment was ended.

  10. none required

    January 9, 2018 @ 9:23 pm

    10

    philg,
    I am afraid you misspelled “fair”, and it does so feel Nazist.
    > “fare collection system”

    Let the billionaires pay their fare(!!!) share. Especially those who work for Goldman Sachs or any other greedy hedge fund on Wall Street.

    In Mother Russia, the metro fare was 3 kopecks! Oh wait, wrong channel…

  11. philg

    January 9, 2018 @ 11:10 pm

    11

    Wally: The entire Boston area served by the MBTA is becoming the preserve of the wealthy and those who’ve been favored by the public housing bureaucrats and live for free in wealthy areas (in “means-tested public housing”, oftentimes luxury apartments in brand new buildings where the developer was forced to hand out a percentage of the units). So it will soon be the case that the demographics of the people who live within walking distance of the various stations won’t vary that much. Maybe there will be bus routes to distant suburbs that are cheap enough for undesirables to live at market rates. So I don’t think the objections that killed this idea in Austin would apply here.

  12. GermanL

    January 10, 2018 @ 7:20 pm

    12

    Germany and Austria, one just simply goes to the station and hops on the U-bahn – no gates/turnstiles. You buy the ticket from the automat (sometimes need to stamp to validate it), or you have a monthly pass that you carry with you. Random checks for tickets are done by undercover workers who announce themselves on the train and if you get caught without a ticket you get fined. Simple as that. I myself have gotten caught on my very last day in Vienna while I was going to pickup a rental for my move to Germany (took a risk).

  13. philg

    January 10, 2018 @ 8:50 pm

    13

    GermanL: That’s a good point. A lot of places in Europe are like this. It would work with smartphones trivially and one of the reasons for this 3/4 billion dollar expenditure is that people should be able to pay with their phones. People who didn’t have the monthly pass or want to buy a physical ticket could touch a button on the app “I’m getting on the train/bus now” and the app would serve as proof of having paid (the app would show the time that the payment was made so that people didn’t cheat by clicking “getting on now” just as they inspector announced a round-up of the guilty).

    Maybe it isn’t practical, though, in the U.S. Breaking the law is a lot more common here, I think. Inspectors, with pension and benefits, are probably 5X the cost that the German government would pay. Every government official in the U.S. needs to be armed, it seems, so also budget for guns, payments after shootings, etc. And we have more than 20 percent of our population on welfare (see https://www.census.gov/newsroom/press-releases/2015/cb15-97.html ). How do you fine someone whose main source of income is government handouts?

    https://www.dnainfo.com/new-york/20160712/park-slope/arresting-fare-beaters-costs-city-too-much-community-board-manager-says

    and

    https://www.nytimes.com/2017/06/30/nyregion/subway-fare-beating-new-york.html

    say that it is not economically feasible in the U.S. to go after people who jump turnstiles in NYC. Also, it is immoral: ““For too long, prosecution of fare evasion as a crime has disproportionately impacted people of color…”

    http://www.lexciestuff.net/Papers/11-2016_Subway_Evasion_Paper_051A.pdf

    gives some history (also interesting because the MTA station employees’ estimates of fare evasion was only 1/6th the rate as counted by independent observers). If it is easy, e.g., at quiet locations at slow times, roughly half of New York riders will evade fares: “Dean St (Franklin Shuttle, between IND Franklin Av/BMT Park Place, Brooklyn) was closed in the 1990s due to rampant evasion; more evaders were recorded than revenue passengers.”

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