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Public transit fare and subsidy policy in Greater Vancouver, 1970-1983 : efficiency and equity implications Brown, Michael Roland 1983

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PUBLIC TRANSIT FARE AND SUBSIDY POLICY IN GREATER VANCOUVER, 1970-1983: EFFICIENCY AND EQUITY IMPLICATIONS By MICHAEL ROLAND BROWN B.A., University of Oxford, 1980 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS in THE FACULTY OF GRADUATE STUDIES (School of Community and Regional Planning) We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA October, 1983 © Michael Roland Brown, 1983 In presenting t h i s thesis i n p a r t i a l f u l f i l m e n t of the requirements for an advanced degree at the University of B r i t i s h Columbia, I agree that the Library s h a l l make i t f r e e l y a v a i l a b l e for reference and study. I further agree that permission for extensive copying of t h i s t h e s i s f o r s c h o l a r l y purposes may be granted by the head of my department or by h i s or her representatives. I t i s understood that copying or pub l i c a t i o n of t h i s thesis for f i n a n c i a l gain s h a l l not be allowed without my written permission. Department of C^ ) V A A A A M > V ^ ' ^ M ^ Cv-V i^ QjLe^byc&oA. ^  ^  Su^y%^u^ The University of B r i t i s h Columbia 1956 Main Mall Vancouver, Canada V6T 1Y3 Date •E-6 (3/81) ABSTRACT This thesis studies the consequences for e f f i c i e n c y and equity of the fare and subsidy p o l i c i e s for public t r a n s i t i n Greater Vancouver from 1970 to 1983. E f f i c i e n c y i s defined as revenue passengers carried per revenue vehicle kilometre and equity i s defined i n terms of progressive, proportional and regressive net incidences of subsidies. By analysing revenue and cost data from suburban and inner c i t y t r a n s i t depots, i t i s shown that the net incidence of operating subsidies i n 1980 tended to be regressive on a per capita basis. It i s shown that the e f f i c i e n c y of t r a n s i t i n Greater Vancouver could be increased by adopting a d i f f e r e n -tiated fare structure. LIST OF TABLES Page 1. TRANSIT PHILOSOPHIES 5 2. FORMS OF FARE DIFFERENTIATION 7 3. EXPECTED ELASTICITIES OF DEMAND BY TRIP PURPOSE 10 4. RATIONALES FOR FARE DIFFERENTIATION 12 5. USER, OPERATOR AND COMMUNITY VIEWS ON DIFFERENT 15 FARE STRUCTURES 6. TRANSIT OPERATING CRITERIA AND OPTIMAL SUBSIDY 18 FORMULAE •7. EVOLUTION OF TRANSIT FARE AND SUBSIDY POLICY 27 1970-1983 8. OPERATING CENTRE SERVICE AREA CHARACTERISTICS, 35 1981 9. POPULATION DENSITY, REVENUE-COST RATIOS AND 36 PRODUCTIVITY BY OPERATING CENTRE, 1980-81 10. CHANGE IN FARE LEVEL BY TRIP LENGTH, 1975-1982 37 11. SUBSIDIES PER REVENUE PASSENGER BY OPERATING 38 CENTRE, 1980-81 12. SUBSIDIES PER CAPITA AND AVERAGE INCOME BY 39 OPERATING CENTRE, 1980-81 13. REVENUE, RIDERSHIP AND PRODUCTIVITY IMPLICATIONS 41 OF DIFFERENT FARE STRUCTURES IN GREATER VANCOUVER UP TO 1990 i i i LIST OF FIGURES Page 1. FARE DIFFERENTIATION BY DISTANCE 8 2. NET INCIDENCE OF A SUBSIDY ' 19 3. OAKRIDGE OPERATING CENTRE SERVICE AREA 30 4. NORTH VANCOUVER OPERATING CENTRE SERVICE AREA 31 5. KENSINGTON OPERATING CENTRE SERVICE AREA 32 6. PORT COQUITLAM OPERATING CENTRE SERVICE AREA 33 7. SURREY OPERATING CENTRE SERVICE AREA 34 i v ACKNOWLEDGEMENTS My thanks go to Drs. Setty Pendakur, Frank Navin and Ron Rice for the help and encouragement that they have given me, and to Transport Canada for their f i n a n c i a l support. v CHAPTER 1 INTRODUCTION This thesis is prompted by concerns about pro-ductivity and income distribution in financing the operation of public transit in Greater Vancouver. The period analysed will be 1970 to 1983. Productivity is defined as the number of revenue 1 2 3 passengers carried per revenue vehicle kilometre 5 and income distribution is defined in terms of progressive, proportional or regressive net incidences of subsidies. It is argued that productivity and income d i s t r i -bution are functions of the operational c r i t e r i a and the organisational structure of a transit system (Gwilliam: 1978) The operational c r i t e r i a can be influenced by the provincial operating subsidy formula. For example, a subsidy formula that is based on the number of revenue passengers carried carries an explicit message to the operator to maximise revenue passengers. The organisational structure refers to the government bodies responsible for transit planning and the balance of p o l i t i c a l power within them. For example, a regional government with a large suburban representation can introduce fare and subsidy policies that benefit the suburbs over the inner city. Therefore, both the operational c r i t e r i a -2-and the organisational structure will determine the choice of transit system provided, i t s productivity and the distribution of income associated with financing i t . The majority of the work undertaken on the impacts of operating subsidies on transit system productivity and income distribution (Frankena: 1973, 1981 and Nash: 1978, 1982) completely neglects organisational issues. This thesis represents a small attempt to consider economic and p o l i t i c a l determinants of transit productivity and income distribution. Between 1970 and 1983, transit operating deficits were covered i n i t i a l l y by B.C. Hydro's profits from the sale of electricity and then from provincial general revenues and fina l l y , by the province and Greater Vancouver Regional District jointly. Transit planning was variously the responsi-b i l i t y of B.C. Hydro, the Bureau of Transit Services in the Ministry of Municipal Affairs and the Greater Vancouver Regional District. It is hypothesised that the operational c r i t e r i a and the organisational structure of transit in Greater Vancouver from 1970 to 1983 led to: - a decline in the level of system productivity - an economically sub-optimal fare structure - a regressive distribution of income. Chapter 2 will discuss some concepts relating to fare and subsidy policy. It will be shown that different subsidy formula produce different types of transit systems and that the f l a t fare structure is sub-optimal on revenue raising, -3-marginal cost p r i c i n g and soc i a l policy grounds. Chapter 3 traces the evolution of fare and subsidy policy i n Greater Vancouver from 1970 to 1980. Over this period, system productivity f e l l , the fare structure became gradually undifferentiated and subsidies led to a regressive d i s t r i b u t i o n of income. It i s shown that by re-adopting a di f f e r e n t i a t e d fare structure the productivity of the Greater Vancouver Transit System would increase. Chapter 4 sets out the conclusions of the study. NOTES TO CHAPTER 1 """A revenue passenger i s a single passenger who rides a tr a n s i t vehicle and has paid a fare, either by cash, t i c k e t , token or pass for that t r i p . (excludes transfers or non-revenue r i d e s ) . 2 Revenue vehicle km i s the movement of a t r a n s i t vehicle a distance of one kilometre i n a regular passenger service. 3 Ideally, the measure would be revenue passenger kms. per revenue vehicle km. but r e l i a b l e data on t r a n s i t t r i p lengths are not available. -4-CHAPTER 2 FARES AND SUBSIDIES - CONCEPTS There are as many ways of f i n a n c i n g t r a n s i t as there are views on what t r a n s i t i s , i t could be free"*" or i t could be completely unsubsidied, even p r o f i t making. I t i s rare to f i n d a p u b l i c t r a n s i t system, i n the developed world, that r e l i e s e x c l u s i v e l y on e i t h e r fares or subsidies f o r i t s 2 revenue. Instead, they r e l y on a combination of fares and s u b s i d i e s , although the mix v a r i e s g r e a t l y . TABLE 1: TRANSIT PHILOSOPHIES I m p l i c i t view of t r a n s i t U t i l i t y S o c i a l Service Subsidised business Business Ethos " T r a n s i t as a r i g h t " "A l o s s i s no s i n " "Try and break even" "Make a p r o f i t " Urban Area Greater Vancouver 7o costs covered by far e s 0 35(1982) Greater London, U.K. 65(1975) Bogota 100 I f t r a n s i t i s fre e then i t i s a p u b l i c u t i l i t y w i t h no user charges and, l i k e sewerage d i s p o s a l , i t i s e n t i r e l y funded out of tax revenue. T r a n s i t i s defined as a -5-- 6 -s o c i a l s e r v i c e i f the system i s not expected to break even or make a p r o f i t . An example of t h i s i s the f l a t f a r e charged i n Greater Vancouver. London, England i s an example of t r a n s i t as a subsidised business because London Transport i s expected to at l e a s t t r y and break even. F i n a l l y , t r a n s i t i s a p r i v a t e business when i t receives no government subsidy, and makes a p r o f i t . I t i s necessary to d i s t i n g u i s h between the fare l e v e l and the fare s t r u c t u r e (Grey: 1975). The fare l e v e l i s the monetary cost of a t r i p , the f a r e s t r u c t u r e i s the way, i f any, that the monetary cost of a t r i p v a r i e s . For example, the f a r e may vary by distance t r a v e l l e d , by time of day, type of s e r v i c e , by the user or day of the week. Another way of e x p l a i n i n g the far e s t r u c t u r e i s i n terms of the degree of fare d i f f e r e n t i a t i o n - some systems' s t r u c t u r e s are h i g h l y d i f f e r e n t i a t e d , others are not. A t r a n s i t system may d i f f e r e n t i a t e f ares i n none, some, or a l l of the ways shown i n Table 2 but, g e n e r a l l y , the amount of d i f f e r e n t i a t i o n tends to increase as the percentage of costs that must be covered from fares i n c r e a s e s . ^ Fare d i f f e r e n t i a t i o n i s j u s t i f i e d on three grounds: i n c r e a s i n g revenue, e f f i c i e n t p r i c i n g and s o c i a l policy."' As a way of r a i s i n g revenue, i t i s p o s s i b l e because of the heterogeneous nature of the t r a n s i t market. There are two basic markets: the captive user and the choice user, the former has no op t i o n but to use t r a n s i t (the captive can, of course, walk or not make the t r i p at a l l ) . The choice r i d e r could use a car.*3 The transit market may be further disaggregated by age, sex, income, tri p length, and tr i p purpose, each with a particular aversion to or predilection for using transit, measured in terms of their elasticity of demand. The effectiveness of fare differentiation depends on the degree to which these markets can be isolated given the operational constraints. The majority of fares are collected 'on-board' therefore an upper limit on the amount of differentiation exists otherwise unacceptably long boarding times result.^ TABLE 2: FORMS OF FARE DIFFERENTIATION Form of differentiation Distance 1 Time of day Service User Intensity of use Day of the week Examples Zones distance taper^ Peak/Off-Peak Express/Local Subway/Bus Senior citizen School student Farecard Sunday Cities Greater Vancouver Pre-1981 London, England West Vancouver Ottawa Greater Vancouver (Proposed in 1982) London, England Greater Vancouver Greater Vancouver Greater Vancouver 1. 2. A graphical representation is given in Figure 1. For a definition, see figure 1 overleaf. -8-FIGURE 1: FARE DIFFERENTIATION BY DISTANCE Distance taper Zone _ F l a t Distance 1. Distance taper: the cost per km. d e c l i n e s as the length of t r i p i n creases. This f a r e s t r u c t u r e i s common i n t r a n s i t systems i n the U.K. 2. Zone f a r e s t r u c t u r e s may be 'coarse' or ' f i n e ' , i . e . few or many zones, r e s p e c t i v e l y . Greater Vancouver moved from a f i n e to a coarse zone s t r u c t u r e i n 1976. 3. F l a t f a r e s t r u c t u r e : no f a r e d i f f e r e n t i a t i o n by distance. -9-The concept of elasticity refers to the sensitivity of a dependent variable (ridership) to changes in an indepen-dent variable (fare and service level). Demand is elastic i f the percentage change in the dependent variable is greater than the percentage change in the independent variable. Demand is inelastic i f the percentage change in the dependent variable is smaller than the percentage change in the independent variable. The concept of fare elasticity is important because i t shows the impact of changes in fare on revenue. When demand is elastic, a percentage rise in fare produces so large a percentage f a l l in ridership that total revenue f a l l s . When demand is inelastic, a percentage rise in fare produces so small a percentage f a l l in ridership that total revenue increases (Samuelson and Scott: 1980). The concept of elasticity must, however, be treated with circumspection. It assumes the shape of the demand curve and that everything except the two variables remain constant, but, as Kemp (1973) states: as long as one is prepared to talk in very approximate terms, one often finds sufficient pattern or 'constancy' in empirically determined values of elasticity to be able at least to distinguish between high and low elasticity commodities." (pp. 27-28) The elasticity of demand for transit is a function of the desire to travel and the desire to use transit. As a general rule, the more discretionary the trip, and the greater -10-the choice of mode, the more elastic the demand wi l l be. Table 3 gives an idea of the likely e l a s t i c i t i e s for various trips. TABLE 3: EXPECTED ELASTICITIES OF DEMAND BY TRIP PURPOSE Trip purpose Work Personal business Sports Convenience shopping Desire to travel Strong Medium Medium Weak Desire to use transit Strong Medium Weak Expected elasticity Low Medium High Medium High Source: Kemp (1973) The fare elasticity of demand for transit is generally inelastic because, by and large, people do not use transit unless they have to. Most empirical work puts the fare elasticity of demand at between -0.1 and -0.5 (Nash: Q 1982). Canadian estimates are -0.33 (Frankena: 1978) and 10 -0.44 (Gaudry: 1975). Service elasticities of demand are also inelastic but less so than the fare e l a s t i c i t i e s . Lago et a l . (1981a) estimate the average bus and commuter r a i l 11 12 headway elasticity ( a l l hours) to be -0.47. ' The demand for peak trips is more inelastic than for off peak trips. Kraft and Domencich (1972) put them at 13 -0.19 and -0.32 respectively providing a rationale for a higher peak fare. The demand for short trips is more elastic than for long trips because walking is an option. Fairhurst -11-and Morris (1975) estimate the fare elasticity of demand for trips of less than one mile to be -0.55 and -0.29 for trips of between one and three miles. There is rationale for a lower fare for short trips. The second rationale for fare differentiation is efficient pricing, which requires that the fare equal the marginal cost of carrying the rider. If fares are set below marginal cost, an inefficient number of riders are carried because riders who do not value their trips at their marginal 15 cost are using the system. Resources are being wasted on them. Fares set above marginal cost are also inefficient because riders who are prepared to pay the marginal cost of their trips, but not more, are lost. The application of efficient pricing to transit is 16 necessary because of the nature of i t s output. Transit's output is not storable - i f there are empty seats on a bus but there are not riders to f i l l them, the seats cannot be stored until the demand is there (Nash: 1982). Secondly, transit's output is indivisible. When the bus is f u l l and a rider is l e f t at the stop, a l l the rider wants is a seat but since seats do not come along individually, another bus must be provided. Therefore, the marginal cost is either zero (when the bus is not full) or very high (when the bus is f u l l ) . Pure marginal cost pricing is not possible because the fare structure cannot change momentarily, but the 17 principles are important. Since the marginal cost of carrying a rider on a bus that is not f u l l is zero (in the TABLE 4: RATIONALES FOR Form of D i f f e r e n t i a t i o n Distance e.g. higher fare for longer t r i p s Time of day e.g. lower fare i n off peak Service e.g. higher fare for express services User e.g. reduced fares for senior c i t i z e n s Intensity of use e.g. farecard Day of week e.g. lower fare on Sundays Increasing Revenue Short t r i p s are more e l a s t i c than long t r i p s Off-peak t r i p s are more e l a s t i c than peak t r i p s Demand for express service i s i n e l a s t i c especially during peak Off-peak only Guaranteed revenue i n advance Sunday t r i p s are e l a s t i c FARE DIFFERENTIATION E f f i c i e n t P r i c i n g Social Policy Short t r i p s use capacity i n e f f i c i e n t during peak MC i n off-peak i s zero, MC i n peak i s high MC for peak express service i s high Higher income groups more l i k e l y to make longer t r i p s Off peak users less l i k e l y to be i n the labour force Higher income groups more l i k e l y to use premium services Off-peak only Senior c i t i z e n s have lower than average incomes Encourages off-peak t r i p s Users making many t r i p s e.g. captives, pay a lower average fare per t r i p MC i s zero on Sunday Sunday riders are more l i k e l y to be captives -13-off-peak for example), fares should be reduced. This policy is consistent with the evidence that the fare elasticity of demand is more elastic in the off-peak. Since off-peak services should be provided (to provide a minimum level of service and to u t i l i s e the buses efficiently i.e. not have them idle between the peaks) any revenue that does not add to costs should be sought. A higher peak fare is justified because the marginal cost of carrying peak trips w i l l be higher. Buses may only make one trip carrying a small number of riders who were crowded off other buses. A higher peak fare is also supported by the elasticity evidence, in addition to reflecting, crudely, the externalities riders impose on other riders during congested periods (Mohring and Turvey: 1975). The third and final rationale for fare differen-tiation is on social policy grounds, the most common examples being reduced fares for senior citizens and school students. The limitation on this form of differentiation (i.e. by user) is that the beneficiary must be clearly identifiable (Nash: 1982). Short of issuing passes to everyone l i s t i n g age, sex, income, and car ownership, thereby incurring long boarding delays and massive administrative costs, the potential for this form of differentiation is low. In conclusion, fare differentiation is justified because i t increases revenue, the marginal costs of trips vary and, certain groups are worthy of subsidy. The degree of fare differentiation is a function of the community's -14-policy toward t r a n s i t , operational constraints i . e . the a b i l i t y to distinguish between the markets that exist for t r a n s i t . Each fare structure favours c e r t a i n users and disfavours others, for example, the f l a t fare structure favours long distance riders over short distance r i d e r s . Each fare structure i s a trade-off between three groups: the user, the operator, and the community and w i l l , s i m i l a r l y , favour or disfavour them as the case may be. The user i s concerned about the cost of the t r i p being made and the quality of service. The operator i s concerned about the amount of work and p o l i c i n g involved i n any fare structure. The community i s concerned about the tax burden of the system subject to certain s o c i a l policy considerations e.g. cheap fares for seniors. Using these assumptions Table 6 shows the three perspectives on common forms of fare d i f f e r e n t i a t i o n . For example, the distance taper structure i s good for short distance riders because the fare i s i n rough proportion to 18 the distance t r a v e l l e d . From the operator's point of view i t i s bad because i t involves more work and more p o l i c i n g . 19 It i s good for the community because i t raises revenue. Each fare structure implies a subsidy structure -they are two sides of the same 'revenue coin'. Two categories of subsidy exist: exogenous and endogenous. Exogenous subsidies are paid by the government to the user, the 20 21 operator or both. ' Endogenous subsidies are the cross-TABLE 5: USER, OPERATOR AND COMMUNITY VIEWS ON DIFFERENT FARE STRUCTURES Fare Structure Zones Distance taper F l a t Peak/Off-peak Express/Local Senior c i t i z e n discount Amount of use User Perspective Short distance, one zone: GOOD Short distance, two zone: Long distance: ACCEPTABLE Short distance: GOOD Long distance: ACCEPTABLE Short distance: BAD Long distance: GOOD Peak user: BAD Off-peak user: GOOD Express user: ACCEPTABLE1 Local user: GOOD GOOD GOOD BAD Operator . Perspective ACCEPTABLE BAD GOOD BAD r ACCEPTABLE' ACCEPTABLE GOOD Community Perspective ACCEPTABLE GOOD BAD ACCEPTABLE ACCEPTABLE GOOD ACCEPTABLE Depends on the degree to which the user perceives the service to be worth the extra fare. Depends on the degree of separation between the two services e.g. a service which i s part express and part l o c a l w i l l require more p o l i c i n g and, therefore, be bad. -16-subsidies that exist in any fare structure and are 'paid' from user to user. Table 5 above gave an impression of which riders benefit and lose under the types of fare differen-tiation shown. Exogenous subsidies are justified on social policy grounds. The riders with the lowest elasticities of demand are the captives, e.g. senior citizens and low income groups. If fares were set according to e l a s t i c i t i e s , (i.e. maximising revenue generation) those least able to pay would be charged the highest fares (assuming that the transit system is a monopoly). This has proved to be unacceptable. Exogenous subsidies are also justified on marginal cost pricing and social policy grounds. The long run 22 marginal costs of a trip to the operator f a l l s as the total number of trips on the system increases i.e. economies of 23 scale with respect to ridership volume exist. If marginal cost pricing is employed, revenue will never cover costs because the long run average cost curve will always be above the long run marginal cost curve. Why do long run marginal costs f a l l ? Mainly because higher ridership volumes allow 24 larger vehicles to be used (articulated buses for example). Economies of scale with respect to ridership volume accrue to riders because as ridership increases so w i l l headways and route coverage, therefore, average walking and waiting 25 time wi l l be reduced. Each combination of subsidies that the government chooses (i.e. user-side vs. operator-side, proportions of -17-c a p i t a l and operating costs covered) w i l l produce a diffe r e n t 2 6 type of t r a n s i t system. This, i n turn, i s a matter of public policy, therefore i t i s essential that the objectives of the t r a n s i t system be chosen and then the appropriate subsidy 'tools' be selected. Nash (1978) argues that there are two feasible objectives for a t r a n s i t system - maximising vehicle k i l o -metres or maximising passenger miles/ridership both subject to a budget constraint. The problem with maximising vehicle kilometres i s that the ri d e r does not demand vehicle k i l o -metres. A t r a n s i t system with this objective w i l l have a large service area and a higher average fare l e v e l . I t i s a supply-side objective because the operator i s not so much required to carry riders as to run buses. The alternative i s to maximise ridership but the problem with t h i s approach i s that low ridership areas w i l l receive a low, i f any, l e v e l of service. I t does make the operator consider demand however and provides a superior performance incentive i . e . 'carry r i d e r s ' . Frankena (1981) analyses three subsidy formulae (lump sum, cost, and ridership) to determine the i r appropri-ateness for a given objective. He shows that i f the objective i s to maximise ridership then a lump sum and a ridership subsidy w i l l have the same effect. A cost subsidy, at the same cost to taxpayers, w i l l produce a smaller reduction i n fares, more service but lower ridership. Given that the choice i s between these two objectives,^' there are three operating subsidy formulae which are consistent or inconsistent with each of the objectives. Operating costs may be subsidised on a percentage 28 29 basis, a fixed amount per rider basis or a fixed lump-sum amount. If the objective is to maximise vehicle kilometres, the lump sum and the percentage cost formulae are equally effective. If the objective is to maximise ridership, then the lump sum and the 'per rider' formulae are equally effective (Frankena: 1981). Each subsidy formula is of equal cost to the taxpayer. TABLE 6: TRANSIT OPERATING CRITERIA AND OPTIMAL SUBSIDY FORMULAE  OPERATING SUBSIDY FORMULA Fare and service Objective Lump sum "L Per rider level Max. vehicle Effective Effective Ineffective High km. Max. ridership Effective Ineffective Effective Low Source: derived from Frankena (1981) Exogenous subsidies must be paid for and there are four sources of revenue from which they come: general provincial revenues, property taxes, gasoline taxes and hydro 30 31 surcharges. ' Each source of revenue will favour or disfavour certain groups. In other words, taxes and subsidies exhibit distributional characteristics. The net incidence of a subsidy (the average subsidy received minus the average tax -19-burden as percentages of income) i s either progressive, proportional, or regressive (Frankena: 1973). Exogenous subsidies redistribute income from the community to the user. Frankena (1973) shows that i n Ontario, the largest subsidies go to tr a n s i t systems used by higher income groups i . e . commuter r a i l and di a l - a - r i d e systems. Cevero (1982) argues that i n the U.S. exogenous subsidies i i . 3 2 are, o v e r a l l , progressive. Endogenous subsidies r e d i s t r i b u t e income from user to user. Cevero (1982) concludes that the incidence of these subsidies are mildly regressive because, under the f l a t fare structure, low income captive riders subsidise higher income choice r i d e r s . FIGURE 2: NET INCIDENCE OF A SUBSIDY Income -20-In the past, public transit deficits have been financed from profits on public u t i l i t i e s (this was the case in Greater Vancouver until 1976). Frankena (1973) states that this is very regressive because the demand for electricity is inelastic with respect to income. Statistics Canada's Urban Family Expenditure Survey in 1978 shows that families in the $6000 - $7999 bracket spend 2.2% of their income on electricity while families in the $25,000 - $29,999 bracket spend 1.1% of their income on electricity. In conclusion, fare differentiation can increase revenue, lead to a better u t i l i s a t i o n of capacity and meet social policy objectives. The characteristics and performance of a transit system is a function of the subsidy formula which, in turn, is a question of public policy. Subsidies have distributional characteristics which may be progressive, proportional or regressive. The next chapter will analyse the evolution of fare and subsidy policy with respect to public transit in Greater Vancouver between 1970 and 1980. It will be shown that by 1980 transit in Greater Vancouver had an undifferentiated fare structure compared to the structure in 1970, operated under a percentage costs subsidy formula, and that this produced: - a greater percentage increase in inner city fare levels compared to suburban fare levels, -21-- high subsidies per passenger i n low ridership areas, and - higher subsidies per capita i n higher average income areas, producing a regressive net incidence of subsidy. F i n a l l y , i t Is shown that the re-introduction of d i f f e r e n -tiated fares would increase ridership, revenues and productivity. NOTES TO CHAPTER 2 """As an idea, free transit enjoyed some popularity in the 1970's but i t has never been systematically implemented for a long period of time. It was rejected because the absolute cost and the opportunity cost is high (Nash: 1978). If the objective is primarily to help low income groups, free transit is clumsy because higher income groups would also be subsidised. If the objective is to reduce auto congestion, free transit is equally inappropriate as Lewis (1977) comments that "during peak periods .... service level changes are calculated to be twice as important as fares in determining mode choice." 2 Unsubsidised and/or profit-making transit is common in less developed countries. 3 Meaning the fare does not vary with distance travelled, time of day or quality of service. 4 Highly differentiated fare structures increase the costs of collecting the fares and the costs of policing the system and may outweigh the revenue gains from them. These costs f a l l to the operator and to the user in the form of longer boarding times leading to lower vehicle productivity and longer journey times. Quarmby (1973) shows that total bus journey time per mile (in seconds) rose from 334 under a 'no change' f l a t fare structure to 359 when the fares varied by distance and the driver made change. ^Table 4 summarises these three rationales by type of fare differentiation. Car ownership rates per household are not particularly good indicators of the captive/choice market s p l i t . House-holds with more members than cars contain captives. ^Inter city travel operators are able to differentiate fares to a far greater degree because they are collected 'off-board'. g When the percentage change in both variables is equal, elasticity is unitary. -22--23-9 28 Canadian c i t i e s . "^Montreal ^67 c i t i e s , mainly in the U.S. 12 Choice riders are more sensitive to service levels than captive riders. Even 'dial-a-ride 1 services which eliminate walking and waiting time by picking up the passenger at home have not discouraged auto use. Button (1977) states that a dial-a-ride system in Harlow, England only diverted 27o of its riders from the car. Out of vehicle time elasti c i t i e s are -0.59 as opposed to -0.29 for in-vehicle time elast i c i t i e s (Lage et a l . : 1981a). 13 Reflecting the fact that most peak trips are to and from work. Data from Boston, Mass. 14 Both the distance taper and f l a t fare structures charge a higher rate per km. for short trips however. Operators may want to discourage short trips because they are an inefficient use of space, especially in peak periods. 15 When fares are below marginal cost, riders who would be prepared to pay a fare equal to marginal cost are enjoying consumer surplus, i.e. the difference between what they are paying and what they would be prepared to pay. The transit system is forsaking revenue therefore. 1 6 ' Frankena (1979) argues that since automobile use is not priced efficiently, then, on grounds of second-best, transit fares below marginal cost are justified. The theory of second best is that when efficient pricing cannot be achieved in a l l sectors of the economy, i t should be pursued in none. 17 If average cost pricing principles are followed, a lower fare w i l l be charged in the peak and a higher fare in the off-peak. Nash (1982) argues that this is incorrect but has "the superficial appearance of being more equitable and may as a result command p o l i t i c a l support." 18 In terms of cost per km. the distance taper structure is better for long distance riders, but i t is good for short distance riders relative to the f l a t fare. The ratings in the table are not absolute but relative to the other forms of differentiation listed. 1 9 Quarmby ( 1 9 7 3 ) showed that i f London Transport's distance taper structure was replaced by a f l a t fare structure, with no change i n average fare l e v e l , then an 8 7 o loss i n t r a f f i c and a 1 6 7 o loss i n revenue would occur. 2 0 User-side subsidies usually take the form of reduced rates for t r a n s i t by means of special passes and/or discounts on t r a n s i t t i c k e t s . 21 Kirby and McGillivray ( 1 9 7 6 ) argue that user-side subsidies are more f l e x i b l e and e f f e c t i v e i f the objective i s to help c e r t a i n targeted groups. 2 2 The discussion of marginal cost p r i c i n g e a r l i e r referred to short run marginal costs, i . e . inputs are fixed, i n the long run they are variable. 2 3 Increasing the revenue per unit cost. 2 4 When the marginal cost i s defined to include the fare and the monetary value of walking and waiting time. 2 5 Frankena ( 1 9 7 9 ) comments that i f c a p i t a l costs are subsidised to a greater percentage than other costs then operators w i l l be encouraged to provide a c a p i t a l intensive system. 2 6 The potential for economies of scale with respect to f l e e t size are very limited because labour costs are the largest component of t o t a l costs - 6 0 7 , 2 7 The choice i s not l i k e l y to be mutually exclusive. The 'kilometres' objective w i l l usually be accompanied by a requirement to raise a certain amount of fare revenue. The 'ridership' objective w i l l probably have a clause s t i p u l a t i n g a basic l e v e l of service i n a l l areas. Pucher ( 1 9 8 2 ) comments: "... most t r a n s i t subsidy programs i n the U.S. simply cover costs - whatever they happen to be - without regard to any index of goal achievement, (so) there i s not much incentive for t r a n s i t systems to use subsidies e f f i c i e n t l y . " Saskatchewan uses this formula. -25-Frankena (1973) shows that the incidence of provincial taxes are proportional and the incidence of property taxes is very regressive. Gasoline taxes and hydro surcharges were not studied. """""There are also many other types of special assessment. 32 This is mainly because the U.S. Government plays a far larger role in funding transit than the Government of Canada. The Government of Canada's role in transit is limited by the Constitution Act to transfers to the Provinces for capital improvements under the Urban Transportation Assistance Act of 1977. CHAPTER 3 FARE AND SUBSIDY POLICY IN GREATER VANCOUVER 1 9 7 0 - 1 9 8 0 From 1 9 7 0 - 1 9 8 0 , the t r a n s i t system i n Greater Vancouver was operated by a p r o v i n c i a l crown corporation,„ B.C. Hydro. In 1 9 7 0 , there was a four zone fare structure, the system served the inner municipalities and 7 7 7 , of costs were covered by fare revenue (including a $ 2 m i l l i o n p.a. lump sum subsidy from the provincial government to cover reduced fares for senior c i t i z e n s ) . The remaining 2 3 7 , of costs were paid for out of p r o f i t s from B.C. Hydro's other a c t i v i t i e s . With limited subsidies available, a high percentage of costs had to be covered by fares, therefore service was confined to high ridership areas of the GVRD with: a fare structure that increased revenue. Between 1 9 7 3 and 1 9 7 6 , B.C. Hydro expanded the service area under the d i r e c t i o n of the Ministry of Municipal A f f a i r s . The number of revenue vehicle km. supplied increased by 7 2 7 o between 1 9 7 0 and 1 9 8 0 . The number of revenue passengers only increased by 4 0 7 o over the same period r e s u l t i n g i n a drop i n productivity from 2 . 3 revenue passengers per revenue vehicle km. i n 1 9 7 0 to 1 . 8 i n 1 9 8 0 . In addition, the cost per revenue passenger increased by - 2 6 -TABLE 7: EVOLUTION OF TRANSIT FARE AND SUBSIDY POLICY, 1970 TO 1983 DATE 1970-1973 1973-1976 1976-1980 TRANSIT TRANSIT % COSTS SUBSIDY SUBSIDY SUBSIDY PLANNING OPERATING COVERED SOURCE FORMULA AMOUNT AGENCY AGENCY BY FARES B.C.Hydro B.C.Hydro 77% Province B.C.Hydro 50% B.C.Hydro B.C.Hydro 36% Province lump sum $2M p.a, cross subsidy from B.C. Hydro operations Province % costs 100% of deficit FARE STRUCTURE 4 zones 12 zones 2 zones FARE LEVEL. $ A.0.25 B:0.40 Crl.OO A:0.50 B. 0.50 C. 1.00 REV.PASS /REV. VEH. KM. A:0.25 2.3 2.1 1980- A:0..75 1'.8 Province/ M.T.O.C. 35% Province/ % costs 65%/35%i Flat fare B:0.75 1983 GVRD GVRD of C:0.75 deficit 1983 - Province ? ? ? ? ? ? ? ? A = Within City of Vancouver B = Coquitlam to Downtown Vancouver C = White Rock to Downtown Vancouver ^"This ratio varied over the period 1980-83. -28-3 5 2 % over the same period while the revenue per revenue passenger only increased by 1 0 6 % . By 1 9 8 0 , 35%, of costs were covered by fare revenue. It was decided that subsidies should be paid on a percentage costs basis. From 1 9 7 6 to 1 9 8 0 , the province paid for the operating d e f i c i t i n f u l l , and from 1 9 8 0 to 1 9 8 3 , the d e f i c i t was shared by the province and the GVRD with 35%, of costs to be raised from fare revenue. Since the subsidy formula was based on percentages of costs there was l i t t l e incentive for B.C. Hydro to minimise costs or to maximise ridership. For example, i n 1 9 7 0 , the cost per revenue vehicle kilometre was $ 0 . 5 8 while i n 1 9 8 0 i t was $ 1 . 9 2 - a 2 3 . 1 7 o p. a. increase compared to a 8 . 2 % , p. a. i n f l a t i o n rate, and productivity, with no change i n service a r e a ^ f e l l from y 2 . 1 revenue passengers per revenue vehicle km. i n 1 9 7 6 to 1.8 i n 1 9 8 0 . The decision to finance t r a n s i t primarily from subsidies, and the subsidy formula that was adopted, removed the need for a d i f f e r e n t i a t e d fare structure on revenue r a i s i n g grounds. In 1 9 7 6 , a twelve zone fare structure that had evolved along with the service area expansion was replaced by a two zone structure. Since only 2%, of a l l t r i p s crossed the zone boundary, i t was, i n e f f e c t , a f l a t fare structure. It was decided that there should be no v a r i a t i o n i n fare by distance t r a v e l l e d although the distance that i t was possible to travel had increased greatly. It was further -29-decided that the fare should not vary by the quality of service consumed although between 1970 and 1980 there was a widening differential in service quality. For example, a network of suburban express routes and a ferry service across the Burrard Inlet were inaugurated. The reason behind the deteriorating system and f i s c a l performance of the Greater Vancouver Transit System was because the service expansion of the 1970's was into low density, suburban areas with a progressively undifferentiated fare structure. The expansion would not have been possible without a subsidy formula that is only indirectly related to ridership. Table 10 shows the lower patronage and productivity levels of suburban services. It is possible to distinguish them from inner city services because data on costs, revenues and revenue vehicle km. operated are avail-able by transit operating centre, of which there are five, each serving a well defined part of the region. Figures 3 through 7 show the services operated out of each centre, and i t may be said that the service areas of each centre are as follows: -30-FIGURE 3: OAKRIDGE OPERATING CENTRE SERVICE AREA -31-FIGURE 4: NORTH VANCOUVER OPERATING CENTRE SERVICE AREA -32-FIGURE 5: KENSINGTON OPERATING CENTRE SERVICE AREA - 3 3 -FIGURE PORT COQUITLAM OPERATING 6: CENTRE SERVICE AREA -34-FIGURE 7: SURREY OPERATING CENTRE SERVICE AREA -35-TABLE 8 OPERATING CENTRE SERVICE AREA CHARACTERISTICS, 1981 OPERATING CENTRE Oakridge North Vancouver Kensington Port Coquitlam Surrey SERVICE AREA City of Vancouver. Richmond, South Delta City of North Vancouver, District of North Vancouver Burnaby, New Westminster Port Coquitlam, Coquitlam, Port Moody Surrey, North Delta, White Rock POPULATION 1981 540,391 99,319 175,044 103,526 205,424 POPULATION PER RESIDENTIAL HA. 1981 :  54.9 49.3 57.9 36.8 14.8 Notes: Population data are from the 1981 Census of Canada. Residential density data are from the GVRD. Figures 3 through 7 show that North Vancouver, Kensington, Port Coquitlam and Surrey Centres operate services to and from the City of Vancouver. Since these services do not permit trips entirely within the City to be made on them, i t is unnecessary to include the City's population in their service areas. -36-TABLE 9 POPULATION DENSITY, REVENUE-COST RATIOS AND  PRODUCTIVITY BY OPERATING CENTRE, 1980-81 Operating centre Oakridge North Vancouver Kensington Port Coquitlam Surrey Pop. per residential ha. 1981 54.9 49.3 57.9 36.8 14.8 Rev. pass. per rev. veh. km. 1980-81  2.3 1.8 1.5 1.0 0.8 Revenue-cost ratio, 1980-81 0.40 0.24 0.26 0.20 0.17 Sources: Census of Canada, GVRD Planning Dept. 1981 Land Use Map and Metro Transit Operating Co. Annual Operating Agreement, 1980-81. Notes: Revenue passengers per centre is obtained by dividing total revenue by the average fare in 1980-81 ($0.40). Cash fares and pass revenue is between 9470 and 9670 of total revenue. This assumes that the ridership profile is the same in a l l centres. It is unlikely that this is the case since some centres may have a higher proportion of senior citizens or school students in their service areas. Revenue vehicle km. are obtained by multiplying the total revenue vehicle km. per weekday, Saturday, Sunday/Holiday as set out in the Annual Operating Agreement and multiplying them by the number of such days in a year (250 weekdays, 52 Saturdays and 62 Sundays and Holidays). Revenue-cost ratio is total centre operating cost plus the percentage of system overhead costs equal to the percentage of system revenue vehicle km. operated by the centre divided by total revenue. The revenue passengers per revenue vehicle kilometre measure is biased against those centres that operate long hour routes (e.g. Surrey) since there is no distance component in the numerator. -37-It is clear that productivity and revenue-cost ratios are directly related to population density. A percentage costs subsidy formula, because i t is unrelated to ridership, allows the expansion of service into low ridership areas therefore increasing system costs. However the fare level from 1980 or had to be set so that 3570 of system costs are covered by fare revenue. Under a f l a t fare structure, this has resulted in greater percentage increase in the fare level for an inner city trip than for a suburban trip as shown in Table 10. TABLE 10 CHANGE IN FARE LEVEL BY TRIP LENGTH, 1975 TO 1982 7> change in fare level p.a.  Trip within the City of Vancouver +28 Trip from White Rock to Vancouver -3.5 Trip from Coquitlam to Vancouver +12 Under the f l a t fare costs subsidy formula the larg passenger go to the areas with structure and the percentage est subsidies per revenue the lowest revenue-cost ratio. -38-TABLE 11 SUBSIDIES PER REVENUE PASSENGER BY OPERATING CENTRE, : l9SQ_gl  Subsidy per 1 rev. Operating centre Revenue-cost ratio pass . $ Oakridge 0.40 0.59 North Vancouver 0.24 1.23 Kensington 0.26 1.15 Port Coquitlam 0.20 1.47 Surrey 0.17 1.79 Source: MTOC Annual Operating Agreement Notes: Subsidy per revenue passenger is derived by dividing total cost minus total revenue by total revenue divided by average fare. "*"GVRD and Provincial subsidies. If, on average, the income of transit riders is the same throughout the region, in other words, ignoring possible distributional consequences then i t i s much more expensive to carry riders in the suburbs than in the inner city. Policies such as service expansion and the f l a t fare which encourage a dispersal of transit users are costly. On a per capita basis, the largest subsidies go to the areas with the highest average incomes. The fare and subsidy policy in Greater Vancouver is therefore regressive. The variations in subsidy per capita is accounted for by variations in productivity and revenue-cost ratios which, in turn, are functions of population densities and -39-TABLE 12 SUBSIDIES PER CAPITA AND AVERAGE INCOMES Operating centre Oakridge North Vancouver Kensington Port Coquitlam Surrey BY OPERATING CENTRE, 1980-8T 1 Subsidy per capita $ 66.11 106.06 61.71 83.49 49.75 Average income, 1980 $ 14,316 16,194 14,797 15,664 14,885 Subsidy as a 7 o of av. income, 1980-81  0.046 0.065 0.041 0.053 0.033 Source: Census of Canada 1981, MTOC Annual Operating Agreement and Revenue Canada Taxation S t a t i s t i c s . Notes: Income data i n l i e u of Census data was obtained from Revenue Canada which i s i n the form of the number of a l l returns i n 1980 (taxable and non-taxable) by income group by municipality. Average incomes are mid-point averages. A return i s not synonymous with an individual since spouses with an income less than $3000 do not f i l e a separate return. However, since the r e l a t i v e differences i n average income between service areas are of interest, i t i s not important. According to Frankena's d e f i n i t i o n of net incidence, taxes should be deducted. This has not been done because the hydro surcharge and the gas tax are extremely small percentages of annual income and provincial income tax only varies by 0 . 2 7 o over the range of average incomes shown above. ''"GVRD and Pr o v i n c i a l subsidies. -40-monitoring device for the operator i n terms of cost minimisation and ridership maximisation. To what extent i s the poor condition of the Greater Vancouver Transit System a result of the fare p o l i c i e s that have been pursued over the l a s t ten years as opposed to the subsidy formula. Table 8 c l e a r l y shows that the fare structure of the Greater Vancouver System became progressively undifferentiated between 1 9 7 0 and 1 9 8 3 . Button and Navin ( 1 9 8 3 ) have developed a model to predict the impact of fare structure and fare l e v e l on the revenues and ridership of the Greater Vancouver Transit System. Assuming a VL p.a. increase i n population, a VL p.a. increase i n r e a l incomes, a 0 . 5 7 o increase i n car ownership and constant t r a n s i t service levels up to 1 9 9 0 , Table 1 4 summarises the implications of four fare structure and fare l e v e l changes, including retaining the f l a t fare. It i s clear that the re-adoption of a d i f f e r e n t i a t e d fare structure would improve productivity, ridership and revenues. The most s t r i k i n g comparisons are between retaining the f l a t fare structure and a peak/off-peak structure with off-peak fares held at $ 0 . 7 5 and between the f l a t fare structure and a distance based structure. In the f i r s t case, an extra 1 0 m i l l i o n rides would be generated and only $ 1 m i l l i o n i n revenue l o s t by 1 9 9 0 , with productivity r i s i n g to just under 2 . 0 revenue passengers per revenue vehicle km. In the second case, an extra 8 m i l l i o n rides would be - 4 1 -generated but revenues would icnrease by $ 4 m i l l i o n , i n addition to an increase i n productivity. TABLE 1 3 : REVENUE, RIDERSHIP AND PRODUCTIVITY  IMPLICATIONS OF DIFFERENT FARE STRUCTURES I FT GREATER VANCOUVER UP TO 1 9 9 0 Fare Structure Fare l e v e l increase 1 9 8 1 - 1 9 9 0 Riders ( 0 0 0 ) 1 9 9 0 Revenue ( $ 0 0 0 ) 1 9 9 0 Riders per rev veh. km.1 1 9 9 0 F l a t Fare 6 7 0 p. a. 9 4 , 3 3 2 7 9 , 7 8 5 1 . 7 7 Peak/Off Peak 1 0 7 o / 0 7 o p.a. 1 0 4 , 8 5 6 7 8 , 2 1 3 1 . 9 6 Peak/Off Peak 1 0 7 , / 5 7 , p.a. 9 6 , 4 4 6 8 6 , 0 7 8 1 . 8 1 Distance Short/Med/ Long 0 7 o / 5 7 o / 1 0 7 o p. a. 1 0 2 , 9 5 4 8 3 , 9 8 7 1 . 9 2 1 . 1 9 8 1 service l e v e l = 5 3 m i l l i o n rev. veh. km. For graphical representations of these data see Appendix A. Therefore i t can be concluded that the expansion of service into suburban areas caused a certain decline i n productivity but that this was exacerbated by abandoning the di f f e r e n t i a t e d fare structure. CHAPTER 4 CONCLUSIONS There is nothing wrong with the expansion of public transit services into suburban areas per se. What is wrong, in the case of Greater Vancouver, is that they are not charged for in a more efficient and equitable way. Not only would a differentiated fare structure improve the revenues of the Greater Vancouver Transit system but i t would also increase ridership. Why, then, was a differentiated fare structure abandoned. Between 1976 and 1980 i t would seem that the reason was the generosity of the subsidy, 1007o of the operating de f i c i t . While not quite a licence to print money such an open-ended formula would inevitably encourage a laxidaisical attitude towards raising revenue and encouraging productivity in any organisation. Secondly, but not analysed in this thesis, is the opposition of drivers to differentiated fare structures and the erosion of management's bargaining position when in receipt of a generous subsidy. It is d i f f i c u l t for them to claim that their resources are fi n i t e when the subsidy formula explicitly stakes that they are not. Between 1980 and 1983 the peculiar nature of the organisational structure responsible for transit can be held -42--43-to account for the introduction of the f l a t fare. Clearly, the f l a t fare was in the best interests of the suburban municipalities who had the majority voting strength on the GVRD board. Greater Vancouver was unique among Canadian metropolitan governments in having direct control over transit fare policy combined with regional government on a ward-system model. In 1983, the Greater Vancouver Regional District was relieved of i t s duties towards fare policy. The reasons for this are sufficient for another thesis but suffice i t to say that i t was not primarily because they adopted the f l a t fare. While there has been a loss of local p o l i t i c a l control over what is a local service to the provincial level, the balance of p o l i t i c a l power that perpetuated an undifferen-tiated fare structure has been removed and there is some hope that a more rational fare structure will now be put in place. A further reason for the abandonment of differen-tiated fares is the somewhat naive desire not to do anything that could possibly discourage a person from using transit. For some reason a simple fare structure is viewed, in some circles, as promoting ridership, by virtue of i t s simplicity. The proponents of this position forget that the same riders easily cope with differential rates for telephone calls, by time of day and distance. At a more fundamental level, i t suggests a misunderstanding of the role of public transit in the wider scheme of urban transportation policy since i t is premised on the belief that riders should be carried at any -44-cos t . It i s clear, then, that a d i f f e r e n t i a t e d fare structure w i l l raise revenues, i n a l l but one case, and ridership i n a l l cases examined. However, d i f f e r e n t i a t e d fares are necessary but not s u f f i c i e n t . The long term results of a t r a n s i t system i s dependent upon urban planning that encourages high density employment nodes and, where appro-priate, high r e s i d e n t i a l densities. BIBLIOGRAPHY Button, K.J. 1979. "The Economics of Urban Transport". Saxon House, Farnborough. Button, K.J. and F.D. Navin. 1983. "A Public Transport Demand Forecasting Model for Vancouver". Traffic  Engineering and Control. Vol. 24. pp. 27-31. Canadian Urban Transit Association. Unpublished data. Cevero, R. 1982. "Transit Cross Subsidies". Transportation  Quarterly. Vol. 36. pp. 377-389. Fairhurst, M.H. and P.J. Morris. 1975. "Variations in the Demand for Bus and Rail Transport up to 1974". Economic  Research Report R210, London Transport Executive, London. Frankena, M.W. 1973. "Income Distributional Effects of Urban Transit Subsidies". Journal of Transport Economics  and Policy. Vol. 7. pp. 215-230. Frankena, M.W. 1978. "The Demand for Urban Bus Transit in Canada". Journal of Transport Economics and Policy. Vol. 12. Frankena, M.W. 1979. "Urban Transportation Economics". Butterworths, Toronto. Frankena,, M.W. 1981. "The Effects of Alternative Urban Transit Subsidy Formulas". Journal of Public Economics. Vol. 15, pp. 337-349. Gaudry, M. 1975. "An Aggregate Time Series Analysis of Urban Transit Demand: The Montreal Case". Transportation  Research. Vol. 9. pp. 249-258. Germane, G.E. 1974. "Subsidy Mechanisms - The U.S. Experience" in K.M. Ruppenthal ed. "Transportation  Subsidies - Nature and Extent" Centre for Transportation Studies, UBC, Vancouver. Glaister, S. and D. Lewis. 1975. "An Integrated Fares Policy for Transport in London". Journal of Transport Economics  and Policy. Vol. 9. pp. 341-355. -46-Greater Vancouver Regional District 1983. "Land Use in Greater Vancouver" (Map), Vancouver. Grey, A. 1975. "Urban Fares Policy". Saxon House, Farn-borough. Gwilliam, K. 1979. "Institutions and Objectives in Transport Policy". Journal of Trans portV-Ec gnomics and  Policy. Vol. 13, pp. 11-27. Hazard, H. 1979. "Technocrates in Transition: The Changing Role of the Transportation Planner". Transportation  Paper 5, University of Toronto/York University Joint " Program in Transportation, Toronto. Kirby, R.F. and R.G. McGillivray. 1976. "Alternative Subsidy Techniques for Urban Public Transportation". Transportation Research Record 589, Transportation Research Board, Washington B.C. Kemp, M.A. 1973. "Some Evidence of Transit Demand Ela s t i c i t i e s " . Transportation. Vol. 2, pp. 25-52. Kraft, G. and T.A. Domencich. 1972. "Free Transit" in M. Edel and J. Rothenberg eds. "Readings in Urban  Economics". Collier-MacMillan, New York. Lago, A.M., P. Mayworm and J.M. McEnroe 1981. "Transit Service Elasticities - Evidence form Demonstration and Demand Models". Journal of Transport Economics and  Policy. Vol. 15. pp. 90-119. Metro Transit Operating Co. Annual Budget 1980-81. Unpublished. Lewis, D. 1977. "Estimating the Influence of Public Policy on Road Traffic Levels in Greater London". Journal of  Transport Economics and Policy. Vol. 11. pp~. 155-168. Nash, G.A. 1978. "Management Objectives, Fares, and Service Levels in Bus Transport". Journal of Transport Economics  and Policy. Vol. 12. pp. 70-85. Nash, CA. 1982. "Economics of Public Transport". Longman, New York. Navin, F.D. 1981. "Urban Public Transit Subsidies in Canada". Canadian Transportation Research Forum. Charlottetown, P.E.I. Pushkarev, B. and J.M. Zupan. 1977. "Public Transportation  and Land Use Policy". Indiana University Press, Bloomington. ~ -47-Pucher, J. 1982. "Effects of Subsidies on Transit Costs". Transportation Quarterly. Vol. 36. pp. 549-562. Quarmby, D.A. 1973. "Effects of Alternative Fare Systems on Operational Efficiency: The British Experience". Symposium on Public Transport Fare Structure. Transport Road and Research Laboratory Supplementary Report 37UC, Crowthorne, UK 

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