Could free bus fares be the economic salvation of Bay Area cities?
By Jim Balderston

The prognosis for California cities isn't terribly bright these days. With unemployment pushing 10 percent, housing costs driving thousands of people onto the streets, violent crime rising, and the quality of life deteriorating, it sometimes seems as if nothing local government can do is ever going to make a difference. Progressives are constantly on the defensive, trying to save a status quo that nobody really believes is working.

So maybe it's time for cities like San Francisco and Oakland to try something totally different - to give a new hearing to an old idea that sounds crazy, but makes a surprising amount of good, practical sense in these hard economic times.

Maybe it's time to abolish all local bus fares and let everyone ride for free.

It works in downtown Seattle. It's worked in pilot programs in Austin and Denver. And a detailed Bay Guardian investigation suggests that it might be exactly the sort of economic miracle the Bay Area so desperately needs.

Even conservative estimates make the concept look highly attractive:

n Eliminating bus fares would immediately pump at least $170 million a year into the San Francisco economy and as much as $60 million a year into Alameda County - far more, for example, than a new downtown baseball stadium.

n Free transit would speed up service, allowing buses to take more riders to more places faster at no additional cost.

n Better service and increased ridership would almost certainly reduce the number of private cars in crowded cities, cutting traffic congestion, pollution, and accident-related injuries - and potentially pouring millions more into the local economy.

n Reduced demand for private cars could allow cities to relax strict requirements for off-street parking - which add hundreds of thousands of dollars to the cost of new housing - thus encouraging the construction of more low-income units. By one estimate, eliminating the need for off-street parking could cut as much as $135 a month from the average rent on a privately built apartment in a high-priced San Francisco neighborhood.

And all of that could happen at no extra cost to the vast majority of local taxpayers.

A better way

San Francisco's Muni system is a classic case study in the failure of traditional fare-box-based financing for urban public transit. In the past 13 years, Muni fares have risen more than 400 percent, and taxpayers have still been paying more each year to subsidize the system's losses. (Between 1983 and 1993, the general fund payments to Muni rose from $74 million to $105 million.) And service is worse than ever.

The system also has fewer riders: Over time, residents of San Francisco have decided they'd rather walk, take taxis - or buy cars - than pay higher prices for slower, more-crowded buses (see chart, page TK). Just last week, Muni officials reported that revenues for the month of October - the first month Muni eliminated transfers - were $600,000 below projections. To date, Muni has no October ridership figures. The Public Utilities Commission has responded by hinting that Muni fares may go up again, from $1 to $1.25, to make up for the revenue shortfall - which, if current patterns hold, may only make the problem worse.

It's a very different story in Seattle.

Twenty years ago, Seattle's Metro bus system began offering free rides anywhere in the central business district. Ridership increases were nothing less than stunning.

In 1973, the Seattle Metro carried 460,000 passengers in the downtown area that was to become the free-ride zone. Fifteen years later, in 1989, that number had exploded to 5.7 million.

Metro surveys show that the vast majority of riders are happy with the service. A 1987 survey showed that 65.4 percent were "very satisfied," 28.4 percent were "satisfied," and only 6.2 percent were "not very satisfied."

Austin, Texas, had similar results during a 15-month free-ride experiment that began in October 1989. In the first four months, Capitol Metro ridership increased by 72.4 percent.

More importantly, a year into the experiment, ridership was still increasing. Capitol Metro figures show that ridership increased by an additional 13 percent in the final three months of the pilot program.

The most remarkable fact of all: According to a survey conducted by Capitol Metro, eight out of nine new riders of the system had one or more cars in their household - indicating that, in a sharp divergence from national trends, large numbers of car owners were being drawn out of private vehicles and into public transit.

The bottom line

Environmentalists and transit planners all over America are struggling to persuade car-happy shoppers, commuters, and business travelers to leave the traffic jams behind and give buses a chance. That would mean cleaner air, lower highway-maintenance and construction costs, fewer accidents, and a lower national reliance on fossil fuels - all highly laudable goals.

But for recession-weary Bay Area residents, there's another, perhaps more appealing reason to consider free public transit: It's good for the local economy.

The cold, hard numbers tell a fascinating story. San Francisco riders are projected to spend roughly $100 million on Muni fares this fiscal year. AC Transit riders are expected to spend $35 million in Alameda and Contra Costa Counties. A commuter who lives and works in San Francisco and takes the bus five days a week would save between $420 a year (the cost of a Fast Pass) and $520 (full fare) - or more if the daily trip involves a transfer.

Eliminate the cost of local travel, and that money becomes available to thousands of consumers. It's pocket money - not the sort of windfall that winds up in stock-market investments or real estate speculation. Instead, all those millions of dollars would probably go where they're most needed - to local merchants. For low-income people, the money would pay for shoes, coats, food, and other essentials. For more-affluent commuters, it would go for theater tickets, restaurant meals, and other discretionary spending. In every case, it would do wonders for the small businesses that are the backbone of the Bay Area economy.

And the actual savings would just be the start. Every dollar spent in the local economy has a ripple effect, what economists call a "multiplier": When a consumer spends money with a local merchant, the merchant takes the money and spends it again, creating more economic activity. Most economists put the multiplier effect for spending in an urban community at somewhere between 1.7 and 2.3 - meaning every new dollar injected into the economy creates at least $1.70 in actual consumer spending.

By that measure, the $100 million spent on Muni fares would amount to a $170 million bonus for the San Francisco economy. The $35 million spent on AC Transit fares would translate into $60 million in the East Bay.

Community activist Calvin Welch argued that making Muni free would have better long-term economic benefits than many other municipal schemes. "The city was ready to spend a lot of money for a downtown baseball stadium promising a return of $20 million a year for 20 years as the benefit to the local economy," he said. "The benefits of going to a free Muni [system] would pay 50 times the benefits of a stadium."

Cash and cars

The economic impact would be even more dramatic if free buses persuaded even a small percentage of Bay Area residents to give up their private cars.

Automobiles are an expensive prospect in this part of the country. The California State Automobile Association estimates that it costs an average of $4,500 a year to own and maintain a new car in the Bay Area. If you eliminate "depreciation" - $2,800 a year, by CSAA figures - the out-of-pocket annual expense for registration, maintenance, fuel, and other costs still comes to $1,700. And that doesn't include parking, garage rent, and tickets, which in many neighborhoods can add an additional $1,000 annually.

According to the Department of Parking and Traffic, there are 424,900 cars, trucks, and motorcycles registered to addresses in San Francisco. That translates into 8,671 vehicles for each square mile of the city.

Even a fairly minor reduction in private car ownership would have a dramatic impact on the local economy. Five percent fewer cars would mean at least $36 million in annual savings to local residents, money that wasn't going to Exxon, Chevron, and Allstate. With the multiplier, that would translate into a $61 million impact.

It would also mean 21,245 fewer cars and trucks on city streets - and fewer problems, including congestion, that harm neighborhood businesses and damage the quality of life for every resident.

Former S.F. public utilities commissioner Jim Jefferson said that he supports the concept of a free bus system. But he added that eliminating fares alone would not be enough. "There's more to it than simply making it a free system," he told the Bay Guardian. "It has to be clean, safe, and reliable."

But a free-fare system by itself would improve service by decreasing travel time. Instead of being forced to wait at the front of a bus or train while coins and bills are dropped into a fare box, riders could board through all doors and take their seats without delay.

In Seattle, bus travel time decreased markedly under the no- fare policy. According to a 1989 Seattle Metro study, boardings in free-fare zones take 18 percent less time than in full-fare zones. And drivers who don't have to worry about watching for fare cheaters can pay more attention to their real jobs - taking passengers safely around town.

The housing benefits

Increased public transit use and decreased automobile ownership could also have a significant effect on housing prices. According to Tom Jones, director of Asian Neighborhood Design and the former head of the S.F. Mayor's Office of Housing, accommodating automobile use with parking spaces uses up a great deal of space that could otherwise go to housing.

"Parking can easily eat up an entire floor," he said. "It can amount to 30 to 36 percent of the volume of the entire space." Which drives up costs.

"On a wood-frame building of three to four stories, it costs between $9,000 and $12,000 per parking space," Jones said. "That translates into $100 to $135 per month in higher rents for those units."

With so many cars in the city, and neighborhood parking so tight, San Francisco has little choice but to require off-street parking for new housing. But if a reduction in car ownership eased the pressure, the results could be dramatic.

Affordable housing is one of San Francisco's most pressing needs. According to the 1992 Annual Evaluation Report of the Residence Element of the city's master plan: "There are critical deficiencies between supply and demand in several distinct categories. Most pronounced is the shortage of low-cost family units and low-cost single-person units."

Howard Strassner, chair of the transit committees for both the Coalition for San Francisco Neighborhoods and the Sierra Club, said free buses are an idea whose time has come. "It may be a funny time to do it," given budget constraints, he said. "But it's the right thing to do."

San Francisco real estate broker John Barry, who sits on the city's Commission on the Environment, also supports a no-fare Muni.

"Muni has no less an impact on the quality of life in San Francisco than the libraries or the parks," he said. Barry argues that a free-fare system would unclog city streets while providing an economic boost for local businesses.

But liberal environmentalists aren't the only ones behind the concept. State Sen. Quentin Kopp (I-S.F.) also supports a free transit system in San Francisco. "I have always argued that Muni is like police and fire services," he said. "It's a necessity, and it should be free."

San Francisco supervisor Kevin Shelley is working on plans to establish a no-fare Muni, according to his aide, Larry Florin. But Florin, like many advocates, points to the obvious drawback: "We have to find a way to fund it."

A closer look

At first, that seems to be a critical problem. Bus fares provide major revenue for local transit agencies; on the surface, a loss of $100 million a year would seemingly devastate the Muni budget.

But when you examine the situation more closely, the numbers look a lot less alarming. For starters, Muni spends roughly $5 million a year just collecting, counting, and depositing its cash. That means the net revenue (or net loss) from free fares would amount to $95 million.

And of course, an extra $170 million in local spending would create jobs and generate new sales and payroll taxes.

In the meantime, S.F. supervisor Sue Bierman is pursuing another approach: a downtown special assessment district that would charge property owners in the Financial District an annual fee to support Muni service. It's not a new idea: A similar proposal was rejected by Mayor Dianne Feinstein back in 1981. But according to a study prepared that year by Gruen Gruen + Associates, an economic research and consulting firm, the city was spending roughly $20 million a year to fund the increased transit needs of the growing downtown high-rise center.

Board of Supervisors budget analyst Harvey Rose updated those figures in 1993. By using the same conservative formula as the 1981 report, Rose calculated that downtown Muni service is now worth about $54 million a year. An assessment district that charged high-rise owners for the costs of providing them with a public service - the same way the city charges property owners for the cost of water and sewerage - could bring in enough money to make free Muni service financially feasible from the start.

In Seattle, one of the strongest supporters of the free-fare zone is the Downtown Seattle Association. In a 1989 letter to Seattle Metro, the DSA indicated it was against any decrease in free-fare availability, noting that the "Ride Free Area has become an integral part of Seattle's 'liveability.'

Four years later, DSA president John Gilmore says his organization and the members he represents still strongly support the free-ride area. "There are certainly economic benefits," he said. "It's easier to shop, to eat, and to get around. The free-ride zone makes it easier."

Transit Committee chair Strassner predicted a similar response from downtown interests if a free-fare system were instituted in the Bay Area. "After we put it in, and then if we decided to take it away, they would be the first to line up and say it was wonderful," he said.

Activist Welch said the impact could go far beyond just improving the bus system; it would boost public morale. "This city needs a psychological shot in the arm," he said. "People really reacted positively when the city tore down the Embarcadero freeway.

"San Francisco's people are what make this city go. It would be an incredible, unbelievable act of good faith for the city to make Muni free, which would pay off for years to come."