Originally posted March 24, 2014. Time for an update.
Update Introduction: This is the first time in my long career in the non profit sector that I actually believe a Task Force will make a big difference. I am talking about the Mayor of Edmonton’s Task Force to Eliminate Poverty. Because of Mayor Iveson’s consistent leadership and voice on this matter and because of the integrity he brings to his office, I hope to be walking along side of him and many others to do exactly that: end poverty. I mention this because I am taking a position on free public transporation that is not shared by many other bright minds who sit on the task force with me.
I believe to take a position one must be certain enough of one’s rationale to do so while also being open to being wrong. Maybe I am wrong. But right now, I don’t think anyone is really looking at free public transportation as a real possibility. That’s really my purpose here: to create more interest in looking into this before we just write it off.
What would it take to make public transit a universal benefit to Edmontonians? The cost of a bus or train ride or a monthly pass has become an obstacle for too many people and families. If you are making the minimum wage in Alberta, a monthly pass, currently $89.00, is more than a day’s pay.
Imagine if that worker had two kids and a spouse who needed monthly passes. Each adult pays $89.00 and each child pays $69.00 for a grand total of $316.00. At the minimum wage of $9.95 per hour, it would take one of the earners in that family spending a week’s wages for the monthly cost of the family using public transit.
With more than 100,000 people living in poverty in Edmonton and an even larger number living pay check to pay check, we cannot allow public transportation to become a barrier to employment, health care, shopping for basic needs, and participating in community life.
Good News Action by the City
Recently, the City of Edmonton announced it will pilot a low income transit pass, starting early next year. The subsidy knocks off 60% of the standard monthly fare of $89.00, bringing it down to $35.00 per month.
It’s a very good move and also encouraging to see Council take action even before receiving the recommendations that will be coming to it in September from the Mayor’s Task Force to Eliminate Poverty.
What the New Program Costs
The subsidy program is estimated to cost the city about $7.5 million per year in lost revenues and administration costs.. The first year will cost an additional $1 million for set up (software, business process, etc.). It’s a hefty amount and it currently will be funded out of property taxes, which will I imagine be a contentious way of paying for it – especially from those who never use public transit.
City administration provided cost estimates to City Council for administering the pass. Here’s the details in a nutshell:
1. Application processing: $330,000 for 5 FTEs, plus $30,000 postage, and $50,000 in one time expenses for office set up. That’s $66,000 salary per full time staff person by the way, significantly above, for example, what is paid to a Housing First worker who finds housing for the homeless and supports each client for approximately one year. I suggest the latter requires far more knowledge, experience, and skill than processing applications.
2. Monthly pass sales will cost more as follows:
- Six (6) FTEs at $66,000 each, total: $396,000
- Two (2) FTEs at $$75,000 each, total: $150,000
- $60,000 (one-time) for software.
- Up to $300,000 for “site accommodation” at Clareview Community Recreation Centre and the Millwoods Recreation Centre.
Total Ongoing costs: $906,000
- Staffing (13 FTEs): $876,000 per year.
- Postage: $30,000
The costs will be higher no doubt, though I didn’t find any data on this, but I imagine annual costs will include utilities, building occupancy costs, accounting, HR, and the host of other expense any organization experiences in the deliver of a service or program. I suggest adding another $150,000 per year to the total is a reasonable projection. This would raise the annual cost to $1,056,000. This equates to $52.80 for each of the anticipated 20,000 people who will be taking advantage of the program monthly.
If a low income individual accesses the subsidy monthly, she will spend $420 per year on a pass. Administration will cost $12.6% per individual annually.
The total of one-time costs for start up are $410,000. I don’t know what you think of the annual ongoing costs above or the one-time costs. I suggest, however, that the overall costs could be lower if the program were decentralized across non-profit organizations, libraries, and so forth. I can tell you that no funder would provide a non-profit organization $410,000 in one time startup costs for a million dollar a year program. Not saying that would be the right thing to do; just making the comparison.
Problem: LICO is the Measure Being Used
Costs aside, here’s a substantive drawback to the current plan. It is based on LICO, which just about everybody knows is a substandard measure for poverty. It’s a hard cut-off too, meaning if you make a dollar more, you lose out because suddenly you aren’t poor anymore because of that one dollar. This is not lost on our Mayor who has acknowledged this is an unfortunate problem.
Many argue that LICO should actually be 50% above current LICO rates. I am hoping the City takes some future actions to have a more realistic cut-off.
How Many Will (Really) Access the Pass?
It is estimated that 20,000 low income people will access the pass – that’s 20% of those Edmontonians known to live in poverty. It’s unknown how that estimate was arrived at; surely it is true that a good number of low income individuals have an automobile, but I am not sure of the percentage. I will estimate, however, that a good number of low income folks, without vehicles, will not get this subsidy, for a number of reasons:
1. The current plan appears to call for a centralized office where persons with low income must go, with the appropriate tax forms in hand, to apply. This will be a hardship on many who may have small children, no child care, and face travelling across the city to access the pass.
2. While the subsidy will make the pass more affordable for many, a good number of people, especially parents, may not be able to afford the reduced rate.
3. Homeless individuals will not access the pass. They tend not to have tax forms, much less identification, and have no money to buy a monthly pass.
Is Free Transit the Opinion of a few Outliers?
As mentioned before, I sit on the Mayor’s Task Force. I also co-chaired the Housing and Transportation Working Group. My working group has recommended to the Task Force that public transit be free by 2021 and we provided suggestions on changes that could made over those five years to get there. We also shared some ideas about how to finance the costs, which I will address latter.
Other working groups identified free public transportation as part of their recommendations. Generally making transit free would ensure optimal public access to basic needs, health services, jobs, recreation centre, the library, and so forth. It would be a great “equalizer” in terms of advancing social inclusion, not to mention allow low income Edmontonians to spend more money on other needs, thus increasing their own consumerism, which would have some positive impact on business and their profits.
Integrating Community Goals
Maybe we need tie together some of our other community goals. Our city and our province are developing strategies and already taking actions to eliminate poverty and have identified transportation as a critical contributor to perpetuating poverty. We also have environmental concerns and interests and we all know public transportation is better for the environment than automobiles. As a community we have mutual interest in optimizing expendable income among our citizens so that consumerism is healthy and our economy is strong. And the costs of maintaining our roads is largely attributed to the wear and tear caused by automobiles. If we want our taxes low, perhaps we need to decrease the number of automobiles eating up our roads.
A few years back the Clean Air Strategic Alliance undertook a report, which told us that in 2008 “more cars and trucks on Alberta’s roads in the last nine years are offsetting the fact the vehicles are spewing fewer emissions per trip compared to 10 years ago, says a
new study.”  In other words our advances in emissions controls are being outdone by an increasing number of vehicles, most of which, according to the Clean Air Strategic Alliance, carry only the driver.
Our use of automobiles not just used for transport from home to work and back again. We use it for recreational purposes, to go shopping for the best deal, visiting friends and family and so on. According to the same CBC report, a quarter of a million cars “[drive] through Hawrelak Park to enjoy lit-up holiday displays in December. Admission fees fund school lunch programs and donations of canned goods are collected for the food bank.” Supporting those charitable efforts is of course a great thing, but what about also tying the heavy traffic of automobiles and their corresponding emissions to a fee to support public transportation?
We celebrate the automobile by holding races all over our country, and we spend millions and millions on roads – both on their creation and their constant maintenance. I know our governments also are investing in public transportation using tax dollars, but here’s one fundamental difference in how these tax paid “services” are accessed. Our taxes paid for roads allow our daily use of roads to be free. Use of public transportation is not. How come?
603,000 Motorized Vehicles in Edmonton
That’s right. Nearly 603,000 motorized vehicles were registered in Edmonton in 2012, a nine percent increase when compared to 2008 (Source: Alberta Transportation, Vehicle Geographical Reports [SDGEO030]).
Ridership for public transit has increased from 66,000 to nearly 83,000 in the same time frame, an increase of 25%, which is a good sign, although the stats reported are, from what I can glean, for rides not unique riders. This suggests that the use of public transportation has a ways to go before being more accessible and an attractive alternative to driving a car.
The City of Edmonton’s plans to expand the LRT is a good sign and should help increase citizen ridership, though the cost of riding, if it continues to escalate, will likely become a greater barrier for low income people and others who are economically vulnerable. In an aging society, isn’t public transportation even more critical to the health and viability of our community?
While there is a lot of debate about how high taxes are or should be on gasoline, it appears to be expected that such taxes in large part be used to support road development and maintenance. In 2013, the Canadian Tax Payers Federation indicated one of its principles was that “Governments should dedicate gasoline and diesel tax revenues to roads and road-related infrastructure and maintenance or reduce taxes.”
The Alberta Government has been reluctant to impose a provincial sales tax on its citizens, must less increase income taxes. Perhaps the rationale for this position is warranted to help ensure the competitiveness of Alberta in terms of attracting business and people to our province. That said, as the numbers of poor and economically vulnerable Albertans increase, one can reasonable argue that increasing spending on public transit is also a critical strategy to ensure optimal participation by Albertans in the economy and community life, as well as in terms of accessing health care, among other basic services.
Some say free public transit will cost too much
Not everyone on the task force agrees with the free public transit recommendation of my working group. We expected that of course and expect that many Edmontonians will feel the same way.
One of my task force colleagues asked me why he should ride free when he can afford to pay. It’s a good question. Why subsidize those who can pay? Though I didn’t ask him how he gets around, I suggest that the large majority of people who can afford public transit have opted to afford a car or two. It might be interesting and helpful to understand more about the demographics of ridership. My thesis is that the majority of riders earn less, often a lot less, than the average wage.
We have tax-funded health care – albeit now with a progressive fee charged to Albertans which covers a small percentage of health care costs. I wonder if those who can afford the hefty health care premiums experienced in the United States think they should pay their full way. When I lived there I paid $1,600 per month for a plan that was the middle of the road plan.
Every property owner and fee payer in Edmonton is paying for the new Arena. The large majority of those citizens will never attend a hockey game or an event there because they cannot afford the price of admission. If one argument against free public transit it that it benefits those who can afford to pay, why doesn’t the reverse stand true. Why should a citizen who will never benefit from the Arena pay for the arena through his or her taxes?
Yes, I know some of the answer to that. It will be good for business. It will revitalize the down town area and attract tourism. Some believe the benefits will trickle down to those for whom the arena is a beautiful reminder of their lack of income. I am not sure trickle down benefits will end poverty. If they could, poverty would have trickled away by now.
If we are serious about advancing public transit as an effective alternative to the high societal expense of driving an automobile, we will need to spend more money. Those who might protest more user fees or taxes are, more likely than not, those who drive cars, and who have the means to contribute to the costs of ensuring equitable community access to jobs, health care, schools, and other needed public services and all the other things so many of us are able to do for ourselves.
How We Could Pay for Free Public Transit
The City of Edmonton report cited earlier indicates that in 2010, the total operating expenses for the transit system was nearly $226 million and that ridership paid for $102 million. My inference is that the remaining $124 million in expenses came out of city coffers. If true, to make public transit free would require coming up that $124 million through other means.
My understanding is that funding this solely out of property taxes would effectively raise those taxes by over 7%. Given other factors push taxes up as well, I agree such a bump would, at the very least, be a hard sell.
Some are quick to write off free public transportation by simply concluding that it would cost too much. Maybe. However, I do wonder what work such critiques have put into their opinion and if they have mustered up any innovative approaches to paying for it, other than property taxes.
Increase Current Gasoline Taxes
At the pump taxes on gasoline put a lot of money in the coffers of the Federal and Provincial Governments. In Alberta the total taxes on gasoline are one of the lowest in Canada, due in part from the absence of a provincial sales tax. This also results in Albertans paying the lowest at the pump prices for gasoline.
What if Alberta raised taxes on gasoline (which really are user fees as opposed to taxes) and dedicated them by legislation to public transit in its major cities. Its ability to use taxes to do that is impeded by the lack of a provincial sales tax. For example, Ontario and Quebec respectively generate $308.5 million and $244.2 million each year from their sales tax on gasoline. One could reasonably argue that transportation via cars is highly inefficient and damaging in terms of environmental impacts. Besides, much more of our taxes go to subsidizing automobiles than public transport.
What if Alberta, instead of rolling out a full scale provincial sales tax, had one that focused only on the purchase of vehicles (a progressive tax based on sale price) and on gasoline that generated income in similar amounts that were used to offset the operations of public transit throughout major urban centres? If the province won’t act, what if the City of Edmonton imposed a user fee on gasoline that was also used for to offset free public transit? My guess is such ability to tax is outside of current legislation, but I do believe legislation can be changed.
In Chicago, the city imposes a city license for vehicles in the amount of $90 per year. Seniors get a discounted rate. I imagine low income earners could too. Such a license in Edmonton would generate $54,000,000 in revenue which could be turned around and used offset the aforementioned $124 million. Add transfers from the provincial government if it increased gasoline taxes for this purpose and we could fund free public transit in our community. Again, this may be beyond the city’s current ability to do, but why not negotiate for this?
Provincial Sales Tax
A PST is a pariah to Albertans. Proponents of the status quo cite doom and gloom for our economy as the primary reason. There is a notion that what is good for business is good for the rest of us, as if it’s just automatic and therefor fitting rationale for low taxes, corporate taxes that is. Many say the additional costs to consumers will hurt consumerism, which tends really mean sales and resultant profits.
As I have said before, no one hugs the tax collector. I am no different from most folks. I benefit from lower personal taxes and the absence of a PST. More money in my pocket I can spend on myself and my family. Nevertheless, what is good for me is not automatically good for our community. In fact, I suggest that the more focused we become on ourselves as individuals, the more likely our communities will become less important and unhealthy.
We’d have to raise taxes by more than $12 billion per year to relinquish our ranking as the lowest tax province in Canada. That’s a 12 followed by 9 zeros. In other words, we could have a PST set that raises $6 billion per year and still be $6 billion lower than British Columbia, the second least taxed province.
There just might be more public support for an increase here. Back in the Peter Lougheed days, a leader beloved by conservatives, the oil royalty was 26 cents on the dollar. Today it’s 10 cents on the dollar. There’s some room there for some financial help with free public transportation.
At the very least we could introduce a fee for low income families equal to the fee charged to seniors in Edmonton, which is $125 for an annual pass and considerable less for low income seniors.
I realize that imposing increased user fees or taxation is not a popular position to take, but I suggest we need multiple strategies to increase the quality and relevance of, as well as access to, public transit if we are to increase the expendable income of low income people, address environmental concerns, and increase consumerism.
New Vehicle Free Transit Tax
In 2012, new car sales in Alberta totaled 263,000, compared to 187,000 in 2009, an increase of 40%, according to Statistics Canada. A transit tax on new cars totaling $40 per vehicle would generate more than $100 million that could be used across the province for public transit.
Paid Parking Free Transit Fee
The City of Edmonton itself operates 2,500 parking spaces that the public pays to use. For the sake of argument let’s agree that 2,000 are filled per day on average for 8 hours. Over the course of the year (365 days), that’s a total of 5.84 million parking hours that are being paid for by the hour. Add a 25 cents per hour transit fee to the parking fee and the city could generate nearly $3,000,000 for public transit per year from its four parking lots. Imagine the revenue if that surcharge were applied to all parking lots.
I was unable to discern how many paid parking spots there are, all in. My sense is a far greater number than 2,500.
Property Tax Levy
Not being for a 7% property tax increase to fund free public transit does not mean no such tax can be levied. Property tax revenues in Edmonton are estimated at $1.4 billion per year. What if a levy were imposed that raised those revenues to $1.42 billion and the resultant $20 million was used for public transit. That’s a 1.4% increase.
I was not able to identify what revenues are generated through hotel taxes, but a portion could be levied to help fund free public transit. A portion of our provincial vehicle registration, a 10% levy on parking tickets and moving violations might be worth a look. Perhaps there could be some private-public partnerships with respect to increasing public transit access to work sites.
Along the Way to Free Public Transit
The Working Group on Housing and Public Transportation’s recommendation has a target date of 2021. That’s because we recognize it will take time to get there, if we choose to. While we are investigating different cost-benefit scenarios and administrative options, we will also be evaluating the upcoming pilot. I suggest that evaluation not just look back but also use learnings to inform future strategies and ask some key questions:
- Are there other options for increasing access to public transportation, such as an a no cost annual pass to low income individuals?
- What is the most economical and accessible system that will optimize access to the subsidized (or free) pass?
Final Remarks (for now)
I don’t pretend to have all the ideas and I am prepared to hear why they may not be feasible; however, we need some transformational change in our community that benefits the community in ways that advance social inclusion, increase health and well-being, and holds as a high principle that our public institutions should have a focus on what is best for the majority of its citizens, not the minority with means and influence.
What do you think about all of this?
Your comments below are welcome. I moderate comments only to manage profanity, hate messages, and other distasteful communications. I do not moderate to restrict other points of view.