On October 1, 2014, the single-ride fare for the Port Authority Trans-Hudson (PATH)—the rail system connecting Newark, Harrison, Jersey City, and Hoboken to Midtown and Lower Manhattan—will increase by 25 cents.[1] This is the third in a series of three annual increases approved in September 2011 that bring PATH’s single-ride fare from $2.00 to $2.75.

Many riders will complain, but the simple truth is that the higher fare is a fairer fare. The fare hike is warranted for three reasons:

1. PATH fare is less than other options for crossing the Hudson River. PATH is a significant value compared to other methods of commuting between New York and New Jersey. New Jersey Transit (NJTransit) serves the same municipalities in New Jersey, and in most cases, its fares for bus and rail services are more expensive than PATH.[2] (See Figure 1.) Comparable trips on NJTransit buses and commuter rail lines cost between $3.20 and $5.55.[3] PATH is also cheaper than commuting by car, which requires drivers to pay an E-ZPass round-trip peak-hour toll of $11 on Port Authority bridges and tunnels.[4]

    

   It is also worth noting PATH fares are generally below those on the New York Metropolitan Transportation Authority’s commuter railroads and similar to those for the MTA’s subways. Until October 1, 2014 both systems’ single-ride fare was $2.50; PATH’s increase to $2.75 likely will be matched by a fare increase scheduled for the MTA services in March 2015.[5]

2. Typical PATH fares actually paid by riders are lower and increasing more slowly than the single-ride fare. Most PATH riders do not pay the single-ride fare. Unlimited ride cards and other discounts bring average fares well below the nominal fare. In 2013 PATH’s average fare revenue per ride was $1.94 or just 78 percent of the end-of-year nominal fare.[6] (See Figure 2.) As the single-ride fare increased from $1.50 in 2004 to $2.50 in 2013, the average fare revenue per ride as a share of the nominal fare fell from 93 percent to 78 percent. The result is a smaller increase in fares passengers actually pay. Over the past decade the nominal fare has grown 67 percent, while the average fare revenue per ride has grown only 39 percent in current dollars and 11 percent in constant dollars.

 



 

3. PATH’s fare revenue covers an unusually small share of its total expenses and requires PATH to absorb substantial revenues earned by other Port Authority business lines. In 2013 PATH’s fare revenue was $142 million, just 27 percent of its total expenses; the remaining costs are covered by a cross-subsidy from more profitable activities such as bridge and tunnel tolls. This 27 percent figure is well below that for most other large transit systems and below the 38 percent figure for the MTA’s subways and buses. (See Figure 3.)

    

An Even Fairer Fare Would Be Notably Higher

The Citizens Budget Commission (CBC) studied PATH’s fiscal dilemma and recommended a new business model to reduce the system’s deficit. By advocating for a balance of three revenue sources—passenger fares, motorist user fees (notably the current bridge and tunnel tolls), and a general tax subsidy—CBC illustrated how PATH could eliminate its deficit by 2018.[7] The new balance would reduce reliance on the cross-subsidy from vehicle tolls, add a tax subsidy from state or local governments, and earn more from higher fares. Table 1 illustrates two options: a mix of 50 percent of total revenue from fares with 25 percent from the two other sources, and a mix of equal shares from all three sources. Based on ridership projections, covering half of PATH’s total cost with fares would require a single-ride fare of $4.50, with an automobile cross-subsidy and general tax subsidy of $175 million each. Covering one-third of PATH’s total cost with fares would require a single-ride fare of $3.00, with an automobile cross-subsidy and general tax subsidy of $233 million each.

If PATH achieves cost savings, the system will rely less on fares and other revenues. The system could achieve savings by shutting down for maintenance for longer periods of time similar to the MTA’s FASTRACK program.[8] Improvements to the signal system and the installation of communications-based train control may, in the future, allow for fewer operators. PATH also might reduce costs by petitioning the Federal Railroad Administration (FRA) to alter PATH’s status as a railroad subject to FRA regulations, which imposes expensive standards and labor requirements not necessarily appropriate to this mass transit operation. This includes the hiring of federal locomotive engineers and the inspection of all rolling stock every 90 days, examining everything from brakes to communications systems to air conditioning systems.[9]

As PATH riders begin to pay more for their commute, they should recognize they are still getting a bargain. This increase should not be the last, but future fare hikes should be accompanied by other policy changes that provide a general tax subsidy to the system and lower its operating costs.

By Jamison Dague

Figure 1: Port Authority of New York and New Jersey, Financial Statements and Appended Notes for the Year ended December 31, 2013 (April 4, 2014), Schedule E and Schedule G, pp. 90 and 92, www.panynj.gov/corporate-information/pdf/financial-statement-2013.pdf; and U.S. Department of Transportation, Federal Transit Administration, National Transit Database (accessed September 2014), www.ntdprogram.gov/ntdprogram/pubs/dt/2012/excel/DataTables.htm.

Figure 2: Fares accessed from NJTransit’s website. See: NJTransit, “Advanced Trip Planner,” (accessed September 15, 2014), www.njtransit.com/sf/sf_servlet.srv?hdnPageAction=TripPlannerTo; Ferry service fares from NY Waterway, "Hudson River Ferries," (accessed September 15, 2014), http://www.nywaterway.com/GetTickets.aspx.

Figure 3: Recovery ratio is the ratio of fare revenue to total expenses—operating expenses, depreciation, interest expense, and annual Other Post-Employment Benefits (OPEB) costs. Calculated by CBC staff using data from fiscal year 2013 Comprehensive Annual Financial Reports of: Port Authority of New York and New Jersey, Metropolitan Transportation Authority, Washington Metropolitan Area Transportation Authority, Chicago Transit Authority, Massachusetts Bay Transportation Authority, Bay-Area Rapid Transit, and Southeastern Pennsylvania Transportation Authority. For further explanation of recovery ratio see: Citizens Budget Commission, "Getting the Facts Straight on Metropolitan Transportation Authority Fare Ratios" (November 2012), www.cbcny.org/cbc-blogs/blogs/getting-facts-straight-metropolitan-transportation-authority-fare-ratios.

Table 1: Citizens Budget Commission, "Financing PATH: Options for Deficit Reduction" (April 2014), p. 17, http://www.cbcny.org/sites/default/files/REPORT_PATH_04242014.pdf.

[1] Port Authority of New York and New Jersey, Focus Forward: 2013 Annual Report (August 2014), p. 55, www.panynj.gov/corporate-information/pdf/annual-report-2013.pdf.

[2] NJTransit does not connect New Jersey directly with Lower Manhattan. NJTransit buses serve Midtown via Port Authority Bus Terminal and NJTransit commuter rail serves Midtown via Penn Station.

[3] Fares accessed from NJTransit’s website. See: NJTransit, “Advanced Trip Planner,” (accessed September 15, 2014), www.njtransit.com/sf/sf_servlet.srv?hdnPageAction=TripPlannerTo.

[4] This does not include the cost of parking in Manhattan. Port Authority bridges and tunnels E-ZPass peak-hour toll is scheduled to increase to $11.75 in December 2014 and to $12.50 in December 2015. See: Port Authority of New York and New Jersey, “2012 to 2015 Toll Rate Table,” (accessed September 15, 2014), www.panynj.gov/bridges-tunnels/pdf/toll-table-2001-2015.pdf.

[5] The Metropolitan Transportation Authority approved fare increases of 4 percent in 2015 and 2017. See: Metropolitan Transportation Authority, MTA 2015 Preliminary Budget, July Financial Plan 2015-2018, vol. 1 (July 2014), p. I-3, http://web.mta.info/mta/budget/july2014/MTA_2015_Prelim_Budget_Financial_Plan2015-2018_Vol1.pdf.

[6] Average revenue per ride based estimated fare revenue of 94 percent share of total revenue divided by ridership in 2013 year-end financial statements. See: Port Authority of New York and New Jersey, Financial Statements and Appended Notes for the Year ended December 31, 2013 (April 2014), Schedule E and Schedule G, pp. 90 and 92, www.panynj.gov/corporate-information/pdf/financial-statement-2013.pdf.

[7] Citizens Budget Commission, Financing PATH: Options for Deficit Reduction (April 2014), www.cbcny.org/sites/default/files/REPORT_PATH_04242014.pdf.

[8] According to New York City Transit, FASTRACK offers dramatic benefits to the system. The total cost of running FASTRACK in its first year, 2012, was $16 million, as compared to a projected $32.8 million to do the same work under normal conditions.

[9] Martin Z. Braun, “PATH Train Less Efficient Than Subways as Cars Cover Loss,” Bloomberg News (August 22, 2014), www.bloomberg.com/news/2014-08-22/path-train-less-efficient-than-subways-as-cars-cover-loss.html.