Findings from Toronto: Sticks and carrots for TNCs

By Eric Sundquist

We have a lot of evidence that venture capital-subsidized transportation network companies (TNC) are cannibalizing transit and driving up VMT. Now a new study of this phenomenon from the University of Toronto examines the patterns of TNC trip making and suggests a system of taxes and subsidies in response.

The paper, which employs data from a 2016 personal transportation survey, finds that TNC trips that could reasonably be taken on transit tend to occur during peak hours and for non-work trip purposes. Overall, a third of all TNC trips could have been taken on transit with a less-than-15-minute time penalty. Given policy concerns for maintaining transit ridership and reducing auto congestion and emissions, the authors suggest penalizing such trip making:

Given the high percentage of [TNC] trips that directly compete with transit, we recommend that governments should introduce an additional tax to reduce the occurrence of [TNC] trips that can easily be replaced by transit (Type A). More specifically, our recommendation is to impose an additional tax upon Type A trips, as these, we argue, should be discouraged since they have viable transit alternatives and compete directly with trips that fall within reasonable transit service expectations. Our intention is not to eliminate or prevent such trips from happening, but rather to impose a slight additional burden upon users to nudge them back towards transit when possible and to account for a portion of the transit agency’s lost revenue when impossible or unreasonable.

On the other hand, for TNC use associated with greater time savings—in areas where transit service and/or first- and last-mile connections are poorer—governments should consider subsidies, the authors argue:

We also recommend that cities carefully consider subsidizing [TNC] trips that fill a gap in poor transit service, but acknowledge that this may interfere with existing sustainable transport objectives. Discouraging single-occupant vehicle (SOV) trips should be a priority, but not at the expense of suppressed participation rates among the transport poor (Lucas et al., 2016). For the transport poor, [TNC] may be one of the only viable travel options to reach important activity destinations. From a sustainability perspective, subsidizing [TNC] trips in areas with low transit demand may make more sense than running buses with low occupancy, and while subsidizing [TNC] trips may contribute to more driving, it may also, as suggested by Rayle et al. (2016), facilitate not owning a private vehicle by providing a suitable alternative to transit when it does not provide a high level of service.

Chicago, a pioneer in the practice of assessing TNC taxes, has just enacted a similar system of incentives. Streetsblog gave this account of the new policy when City Council approved it in November:

Currently Chicago has a flat total tax of $0.72 per Uber or Lyft trip, whether it’s a blue-collar worker taking an Uber Pool ride home from their local ‘L’ station at 3 a.m., or a CEO taking a traffic-clogging private trip many miles downtown during the morning rush. Under the new system, the tax on a shared ride in the neighborhoods drops to $0.65, while the fee on a private one goes up to $1.25. Downtown shared trips during peak hours (weekdays from 6 a.m. to 10 p.m.) will be taxed at $1.25, while private downtown peak-hour trips will be assigned a full $3 fee.

The new structure should encourage more people to take advantage of already-cheaper Uber Pool and Lyft Line rates instead of taking private trips by providing a $0.60 tax savings in the neighborhoods. It should also make many people think twice about ride hailing downtown, where there are plentiful transit options. That should ease congestion, speed up bus service, boost CTA ridership, and help prevent service cuts and fare hikes due to ride hailing cannibalizing transit use. The new tax is projected to raise $40 million a year, with most of that going to plug Chicago’s $838 million budget hole, but with $2 million earmarked for projects to improve bus service, such as dedicated lanes.

The new tax structure took effect Jan. 6.

Eric Sundquist is Director of SSTI.