As Halifax Transit staff start to pick away at the long list of council-requested changes to the transit plan, it’s a good time to mull over how we pay for transit services.

By specifically asking for the financial implications of their 23 items, councillors have brought money to the fore of how we plan for transit. Councillor Stephen Adams further highlighted it by introducing the route cost and revenue breakdown of the 402 Sambro when making his case for continuing the service.

What and how we pay for transit is going to figure strongly in what we change about our transit plan.

So, how do we pay for it?

There’s the obvious: fares. Unlike most municipal services, a substantial part of the transit budget is covered by user fees: $2.50 per ride for an adult, or $78 for a monthly pass. Halifax Transit took in $33,141,897 in user fees in 2014-15, up 2 per cent from the previous year, even though the number of riders actually went down by 1.5 per cent. When last reported in the 2015-16 annual service plan, Halifax Transit’s “cost recovery” was clocking in at 37 per cent of revenues.

And then there are taxes. Again, Halifax Transit is unlike other HRM departments when it comes to tax revenue.

We pay two dedicated taxes for transit, both delineated on our tax bills, which put just over $43 million into the Halifax Transit budget last year.

The lower rate, about 5 cents per $100 in assessment, is the “regional transportation tax,” levied on everyone but our more remote eastern rural communities (think East Jeddore and beyond.) That means 137,785 properties, or 184,880 dwelling units. Last year, this tax brought in $16,586,700.

Regional Transportation tax area
Most of municipality pays the regional transportation tax. Click for the full pdf.

The higher tax is the “local transit area rate (about 10 cents per $100 in assessment) levied on dwellings within 1km of a bus stop. The local rate makes for a strange looking map with small gaps buried in suburbs, where the odd cul-de-sac is out of reach of transit routes. This tax was paid on 97,580 properties last year (or 154,008 dwelling units) and brought in $26,722,200

The local transit area rate is levied on properties within 1 km of a bus stop.
The local transit area rate is levied on properties within 1 km of a bus stop. Click for full pdf.

With the local area transit rate, Halifax Transit could theoretically grow its revenue by expanding its area of service. And as it cuts its area of service, it stands to lose revenue.

This is the picture presented by Stephen Adams around the 402 Sambro. The taxation brought in by the approximately 2,000 homes along the loop roughly equals the route costs. If we cut it, Halifax Transit saves $300,000 in expenses, but loses $300,000 in tax revenues. The route appears to break even, or “pay for itself.”

So why not extend service to every part of the municipality where the taxes brought in would cover the cost of the service? That’s a tough nut to crack.

First of all, whether you think the Sambro loop or any other route in the system “pays for itself” is a matter of perspective.

“Does the police department pay for itself because it’s got tax money?” asks Bruce Fisher, HRM’s manager of fiscal and tax policy. “Well, Halifax Transit is self-supporting by that definition: It has tax money, so it pays for itself. Really what happens is the taxpayers are paying for it, not the users.”

“When I look at a route and think does it pay for itself, I think about the fares,” says Fisher. “Very few routes, if any, pay for themselves through the fares.”

Only $17,000 in fare revenue is coming from the Sambro loop, because it is averaging only 25 riders a day. That’s about 5 per cent cost recovery, compared to Halifax Transit’s overall 37 per cent.

Halifax Transit is not looking for the best tax revenue when planning routes, says Fisher. Instead, “they are trying to look at the service first. Where does the service need to be? They are thinking about modal split. They’re thinking about high volumes. They are thinking about taking cars off the road. They’re not saying, oh, we get enough tax off this to pay for it, so let’s just do it anyway, who cares? We think about the taxpayers being very significant.”

“You can always tax people more,” says Fisher, “but that’s not the way we look at it. We try to make sure that people get good value for their money and that we’re not casual about how we levy taxes. That’s the debate they should have, really, is whether they are getting good value for their tax money. Very clearly, it’s subsidized. All of transit is subsidized by the taxpayer whether it’s Sambro Loop or somewhere else.”

The whole Sambro Loop cost vs. revenue conundrum is created by the way transit taxes are applied. In the local transit area rate, my taxes are attached directly to my access to service, thereby creating the impression that I am buying that service. Local transit area rates read more like fees for service than taxes.

If all of our transit taxes were funded by something like our regional transportation tax, then tying individual route costs to tax revenue would no longer be possible. Then, we would be funding a major piece of public infrastructure, acknowledging that its benefits go beyond the ability to walk a kilometre to a bus stop.

“The benefit of the bus service is not just the fact that you can ride on it,” says Bruce Fisher, “it’s that there’s less congestion on the road and there are environmental benefits… We don’t need to build bigger roads if people are taking buses.”

The collective benefits to the municipality are hard to ignore. Besides saving on road infrastructure costs (which are not subject to any user fees in Halifax) there’s the strong argument that transit is a public service because it helps us collectively reduce our impact on our environment.

For some of us, public transit means access to a bus. For others, it means less traffic on our drive to the city. For all of us, it means reduced greenhouse gases.

Why tax it like a service for some, when it’s a necessary reality of the world we live in?

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  1. As a strong transit advocate I am absolutely AGAINST free fares. Fares bring in $33 million every year, which is money spent to provide transit service. There would need to be an additional $33 million in taxes raised to pay for this lost revenue, or cuts to other municipal services. Or, the most likely situation, a massive reduction in transit services to make up for the lost fares.

    Why don’t people choose transit? Likely because it is not convenient, and they can choose another travel option, usually the car. The really important way to get more people to choose transit is to make it much more convenient and a better alternative to driving. This means it has to be much faster, much more reliable and come frequently on major corridors.

    Some people may not choose transit because it is too expensive, or they don’t feel the cost savings justify the inconvenience. Free fares would do little to attract riders who can’t afford transit (since this is a small number of people) and nothing to make transit more convenient, beyond quicker boarding and the elimination of tickets. But both of these things will be achieved by new fare-box technology and tap cards that Halifax Transit is in the process of acquiring.

    High quality transit makes reducing car use an easier proposition. That takes resources, so we need that fare money.

    1. Tim & Sean,

      I see arguments on both sides of the free transit question, although in general I’m in favour. We don’t charge people to use roads and yet we still have them, and I believe the costs per user for road infrastructure is much higher than for transit. I would like to see data on the costs of maintaining the fare structure (printing, distribution, collection etc.) as Tim says, to see what the true costs of removing fares would be.

      To encourage car-owners to use transit it should be either faster or cheaper than driving, preferably both. Right now it’s neither. (And I say this as a car-owning daily transit user.)

      As a partial (or possibly interim) step, I’d like to see fares removed for seniors and youth. Youth in particular are important, because if we can get people using transit early they’re more likely to keep using it. For families and teenagers, cost does matter, as well as the convenience of not needing change or tickets.

      My sons grew up using buses because I did, and so they’re very comfortable going anywhere they need by bus. Most of their friends rarely if ever take a bus. Guess which ones will be buying cars soon?

  2. Taxing everyone makes sense, since everyone benefits. I’d also like to see the city be BOLD and make transit free to ride. This is not as expensive as it sounds, because it saves all the costs associated with printing and issuing passes, tickets, and transfers, as well as collecting the coins. It also improves service, by speeding loading times and allowing rear door boarding at busy locations. Fare disputes are eliminated, and there’s even less litter from discarded transfers. Tourists benefit from the ability to simply hop on a bus without having to buy tickets or get change.

    The biggest benefit is increased ridership, with all the associated environmental and infrastructure benefits. So long as people pay for transit, transit versus owning a car is an either/or proposition. You may only need a car a few times a week, but once you’ve invested in one, it makes no financial sense to leave it at home at times when you could take the bus. Free transit makes reducing car use an easier proposition.

  3. The Moving Forward Plan cuts link routes which are taxed at the Regional Rate. There is a new metro x proposed out of middle Sackville in year 3/4 this will still leave a loss of 1 regional taxed bus. The plan does increase the express routes substantially leaving the unanswered question of what tax rate will the new express routes fall under? routes that are new will be taxed at the area rate. Time will tell, but it appears some residents will be paying more

    1. Well, some residents will be paying more only if they are getting new service which puts them in the local transit area rate. Others will pay less, because they’re now out of it.

      As far as I am aware, the number of MetroLink or MetroX routes doesn’t affect how much we pay in regional transportation tax. The cost of those routes are covered by that tax, but the tax is not tied to service. It’s a general tax for the region. (Unlike the local transit area tax, which is only applied according to proximity of service.)

      Excellent question about which route types will now trigger the local transit area rate under the new plan. I’ve asked it and will post here once I hear back.

    2. I’ve heard back… It’s not finalized yet, but the intention is for the Corridor, Local, Express, and Rural routes to trigger the Local Transit Tax rate.

  4. “Besides saving on road infrastructure costs (which are not subject to any user fees in Halifax)”

    There is the crux right there. Let’s talk about the true cost of our car culture.

    1. Imagine what could be accomplished if we levied a $0.10/L tax on gas and diesel sold to non-commercial and non-government users in HRM…

      1. Those are collected by the province, not the municipality. But yes, they do go to maintain and build provincial roads (some of which are in HRM).