A Fare Look: Funding Urban Public Transport Operations

Working Paper

This Working Paper is part of Urban Mobility and Reimagining Public Transport within WRI Ross Center for Sustainable Cities. Reach out to Anna Kustar for more information.

This paper investigates the financial challenges urban public transit systems faced during the COVID-19 pandemic, focusing on operational funding sources across 12 global cities. We highlight how fare revenues, a primary income source, sharply declined during the pandemic, and compare how transit agencies from various geographies filled the funding gap via government subsidies, taxes, or alternative revenue streams. The study categorizes funding instruments as direct, indirect, or general, offering a "toolbox" of options to enhance financial resilience. Using case studies, we exemplify the need for sustainable, context-specific solutions to diversify revenue sources and ensure transit systems' resilience in the face of future disruptions.

Key Findings:

• As ridership fell as much as 90 percent, public transport agencies faced unparalleled financial hurdles from a decline in fare revenue.
• On average, transit agencies in the United States and Europe have more revenue sources than those in Latin America and Africa, and with additional subsidies, were better able to stabilize total revenue throughout the pandemic.
• Most agencies observed had connected some form of non-fare revenue to their transit systems and received subsidies or grants during the pandemic.
• When considering which funding sources to implement, transit agencies, cities, and state and national governments should work together to select the right taxes and revenue opportunities for their local contexts from a mix of direct, indirect, and general sources.

Executive Summary:

As the COVID-19 pandemic disrupted daily commuting patterns and restricted use of shared mobility systems, transit agencies faced falling revenue and unprecedented financial challenges. Case studies from Addis Ababa, Ethiopia; Bengaluru, India; Chicago, Houston, and Washington, DC, United States; Copenhagen, Denmark; Jakarta, Indonesia; Mexico City, Mexico; Paris, France; and Rio de Janeiro and São Paulo, Brazil, reveal the impact of lost fare revenue and how various transit agencies were able to cope. In most cities, farebox revenue alone is insufficient to fund the public transport services needed, especially when fares are set low to ensure affordable mobility for all users. Additionally, since public transit generates a wide array of benefits that impact riders and non-riders alike, transit agencies should identify the revenue-generating opportunities available in their local contexts. These opportunities can connect to direct funding (costs and fees incurred for transport), indirect funding (generated from economic activity supported by transport), or general funding (broad or unrelated revenue sources), thereby enabling more sustainable financing.

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