Tuesday, November 3, 2009

How Much Do Those Freeloading Seniors Really Cost Us?

Posted by Michael Miner on Tue, Nov 3, 2009 at 12:20 PM

"The region's bus and rail systems are providing an average of 3.1 million free rides a month at a cost of at least $49 million a year." — Chicago Tribune, October 30.

"The least the three transit agencies [the CTA, Metra, and Pace] wanted last week was a lifting of the free rides for senior citizens, a move that would have saved them up to $37 million." — Chicago Tribune, November 1.

When the same newspaper can report in a span of three days that the Rod Blagojevich free-rides-for-seniors program is costing the region's transit agencies a minimum of $49 million and a maximum of $37 million, then we can be pretty sure nobody has any idea.

Nobody does. In September the Regional Transportation Authority received a preliminary draft of an analysis done by the University of Illinois at Chicago's Urban Transportation Center of the financial impact of the Senior Ride Free and the Disabled Ride Free programs. "Based on currently available year to date data," said the report, "an annualized loss for 2009 is projected to range from $35.7 - $112.6 million for both programs, with the senior ride free program accounting for $25.1 - $76.3 million of the loss."

Those widely differing projections — minimum $25.1 million loss , maximum $76.3 million loss — come from differing assumptions. The first assumes the free riders were all previously paying reduced fares; the second assumes they were all paying full fares.

Neither assumes that some free riders weren't paying any fares because when the train or bus cost them money they weren't riding.

Professor Joseph DiJohn, who heads UIC's Metropolitan Transportation Support Initiative, tells me his team estimates that the number of senior rides on Pace, Metra, and the CTA more than doubled when those rides became free last year. It can't be sure, because those agencies previously lumped senior riders together with other reduced-fare riders such as children and students.

This estimate invites the reasonable assumption that if senior rides hadn't become free, senior ridership wouldn't have doubled. If this assumption is true, then as many as half the free rides on which these transit agencies are supposedly losing millions of dollars in lost fares were taken only because they were free.

An assumption predicated on an estimate is one that DiJohn says his team does not intend to make. But when his team submits its final report, with its much more closely focused estimate of what the free ride program is costing, newspapers should keep in mind what's distorting the estimate — the unknown number of grateful new riders who are benefiting.

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Not only does no one know what the free-riding seniors cost, but no one at the Tribune apparently knew what the Tribune said it cost.

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Posted by Pelham on November 3, 2009 at 2:41 PM

You are absolutely correct that we do not know the exact cost of the free rides. But I will guarantee you that senior ridership did not come close to doubling after the program was initiated. That is a completely ridiculous conclusion and it really blows my mind how it could be reached.

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Posted by The original IAC on November 3, 2009 at 3:22 PM

I know several wealthy seniors who appreciate their free rides at the expense of the working poor.

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Posted by Sumduby on November 3, 2009 at 5:54 PM

I believe the difference between the two statements from the Trib is that $37million would be saved if it stopped because many seniors would stop riding or ride less often... in other words, it takes elasticity into account, unlike the first statement, which simply put forth the revenue losses currently incurred.

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Posted by Charlie on November 4, 2009 at 6:33 AM

I'm not sure I follow that difference. We're not really talking about savings; we're talking about lost fare box revenues. If discontinuation of the free senior passes returns revenues to the status quo ante, I don't understand how that could raise revenues by up to $37 million after they dropped by at least $49 million. The $49 million figure shows up on page 8 of the preliminary draft (link above) and seems particularly speculative. After explaining that depending on how it's calculated, the hypothetical loss could be as much as $76.3 million, the draft says it's "narrowed to $49.4 million by applying the simple assumption that current ridership activity is based on the distribution of seniors who previously held reduced fare cards to those who did not, 53% and 47% respectively." But the draft doesn't defend this assumption as surely right, and it goes on to say that "other variables" that could be taken into account "suggest that the loss would be somewhat less." (When the Tribune called $49 million a minimum figure, it must have misread the report.) The report then goes on (on page 9) to make a key admission: "Furthermore, some of the losses may be stemming from riders who would not be riding if the Senior Ride Free program were not in effect, and therefore the loss from these passengers could be considered hypothetical." Well, losses from riders who would not have been riders if they'd had to pay are worse than hypothetical -- they're imaginary. The unanswered question is: How many of those riders are there and how often do they ride? As for the $37 million figure, a CTA spokesperson told me someone at the last RTA board meeting asked for a "best estimate" of the loss and an RTA official said $37 million would be in the "upper range." So far as I can make out, this number's based on the same assumption of the distribution of seniors as the $49 million is, so I don't understand the difference. My point is that the media have been as imprecise in quantifying the revenue loss to the Seniors Ride Free program as they have been in quantifying the social gain to the riding seniors. But with the former they have some numbers to sling around, so they may not realize it.

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Posted by Michael Miner on November 4, 2009 at 5:13 PM

I'd really love to know how in the world the UIC group came to the conclusion that senior ridership more than doubled after the free rides were introduced. Based on the way this was described it seems to me that they were using data based on the total ridership from people using senior cards issued by the RTA (or reduced fare cards or whatever they call them) and simply coming to the conclusion that whatever the increase has been in the ridership using the cards is essentually the result of increased ridership from the age group. I would guess they are not taking into account, or at least enormously underestimating, the amount of seniors who never bothered to get those cards when the fare was half price. So they were paying full price. It is common sense that the bigger the discount offered the more people who will take advantage of it. If there is a coupon in the newspaper for $3.00 off a particular product there will be far more people who go through the trouble of cutting it and bringing it to the store than if it offered $1.00 off. I would guess that the failure to understand this is where the bizarre numbers from the UIC study comes from. The idea is rather ludicrous that a reduction of the fare from less than $1.00 (or about $1.50 or $1.75 if riding from the suburbs) to nothing has caused a doubling in senior ridership on the entire RTA system. I would suggest that Dijohn and his team reconsider the conclusion before the study gets released. Otherwise it will likely be used by people to make incorrect assumptions about the cost of the free ride program. And eventually a more accurate study might come out that will severly embarrass the researchers involved in this one.

I do agree that the Tribune should go a little more into detail about how these estimates were made and not act as if they are more certain than they are in reality. The most relevent question to ask when determining how much elimanating the free rides will save is how many seniors didn't take advantage of the reduced fares before but now that the free rides encouraged them to get the RTA card will end up paying the discounted fares if the program ended. That is really the only thing preventing a good estimate of the cost of the free rides based on the amount of senior ridership before (adjusted for other things like senior population growth). The level of current senior ridership that wouldn't be using the system if there was a cost isn't really relevent (unless one believes that the free rides caused a significant amount of these people to be attracted to the transit system and will now continue to regularly use it, which seems doubtful). In the long term, everything will pretty much level out to the way it was before because people new to the senior population will not have the artificial incentive to apply to an RTA card for the free rides. But of course, nobody in government really cares about the long term.

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Posted by The original IAC on November 4, 2009 at 7:30 PM

I made the decision to move into Chicago based upon my senior free ride. Without it, it will be cheaper for me to live in the same suburb where I work. This move will result in a greater loss of sales tax to the city than the gain seen if I continued.

There area many, many other seniors who are riding simply because it is free who would not otherwise ride. I still think that the difference between the board's $37 million and the actual gain should come out of their pocket. The estimate might get a little more realistic.

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Posted by ralph058 on November 5, 2009 at 2:37 PM

I just did some quick calculating. Looking at the demographics of Chicago (20% use mass transit twice a week and 8.5% of the population is over 65) and assuming RTA will gain two rides a week per old fellow, I come up with a gain from the cancellation of $1.8 million as being POSSIBLE! This doesn't include the 15% below the poverty line. What are those guys smoking? It must be good stuff.

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Posted by ralph058 on November 5, 2009 at 2:47 PM

"The level of current senior ridership that wouldn't be using the system if there was a cost isn't really relevent." But I think it is, for two reasons. You can't accurately measure the cost to the transit agencies in lost revenue without it. And you can't measure the non-economic gain that, while it may not justify the lost revenue when times are this tough, at least belongs in the picture. A senior riding for nothing who would otherwise be riding and paying is freeloading. A senior riding for nothing who would otherwise never venture a block from home is getting to live a considerably richer life.

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Posted by Michael Miner on November 5, 2009 at 5:43 PM

"You can't accurately measure the cost to the transit agencies in lost revenue without it."

Sure you can. In fact, I don't really see how it is significantelly relevant to any estimate. It seems to me that the best way to measure the cost of the program is to look at the level of revenue from seniors before the free ride program was enacted and then attempt to figure out what has changed since that time that might cause those numbers to be different from what will occur if the program were discontinued. Like every budget estimate, it isn't a perfect process that will provide an accurate exact number. For one thing, it isn't known how many seniors never bothered to get the RTA cards to receive half-price but now have done so to ride for free. But perhaps there is some data that could provide the CTA with the ability to make a rough estimate. Most of these people will end up paying the reduced fare in the event of the discontinuation of the program when they would likely have payed full-fare had it never existed. And there are other things that will need to be taken into account to make an estimate such as population changes. But it does seem that to determine the cost of the free rides the place to start would be the level of revenue from seniors before the program. The amount of senior ridership now wouldn't seem to me to be a major factor that should be used to predict the progam's cost. It may be marginally useful. It does cost something for the system to transport individuals who wouldn't otherwise have used it. It can cause longer boarding times for busses which increase gas costs. And if a bus is full when it otherwise wouldn't have been without these riders it may cause paying riders to be turned away and thus revenue to be lost. But the impact of this to the budget is, I'm sure, rather small.

" A senior riding for nothing who would otherwise never venture a block from home is getting to live a considerably richer life."

I find it very difficult to believe that there are very many seniors who would fall under that scenerio. It doesn't seem likely that a fare of 85 cents per ride (or whatever the reduced fare is) would cause many seniors to never venture a block from their home. In any case, the proposal that was discussed would keep the free rides for those with low-incomes. So if there are actually people like what you describe they would still be able to ride for free. It's not something I'm for. I think everybody should be paying something to use the service. But all the politicians in power have made it clear they want to keep the program for low-income seniors.

Ralph,

Knock it off. I find it simply unbelievable that not having to pay the $.75 to $2.00 per-ride in reduced-fare Metra tickets(its likely half-price the half-price of a regular ticket since you seem to commute to work everyday and would thus be using a reduced fare monthly ticket) has caused you to live the city. In any case, if we use your logic it actually would argue against your position. If people are deciding to live in the city despite a long commute to their work in the suburbs because of the fre-rides you can bet that there would be far more people for whom the program causes to live in the suburbs despite having to commute to work in the city. After all, the transit system is much more useful for city jobs. So under your logic, it would seem that the city would be losing tax revenue from what you describe. But of course, I think it is safe to say that the effect of not having to pay a tiny fare is minimal on where people decide to live and work. Besides, the RTA system is supposed to benefit the suburbs as well so your argument, even if it were supported by facts, isn't really persuasive. Your second post doesn't make sense so I will not respond to it.

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Posted by The original IAC on November 5, 2009 at 7:55 PM
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