We need to rethink rideshare fees

They need to go up, particularly in ‘congestion zones’

BOSTON-AREA COMMUTERS average 60 hours per year stuck in traffic and it’s only getting worse. Over the summer, a study by transportation planner Bruce Schaller confirmed what many in Boston have long suspected: rideshare companies such as Uber and Lyft are adding to urban traffic congestion. Schaller estimated that rideshare adds an extra 164 million vehicle miles each year in the city of Boston alone. As our region looks for ways to reduce gridlock and cut greenhouse gas emissions, it’s time to rethink the fees we charge rideshare companies.

Despite their congestion impacts, rideshare services have positive benefits. They make it easier for people to live without owning a car or to have fewer cars in a household. They reduce the demand for parking at popular destinations. Carpooling services such as UberPOOL and Lyft Line can make more efficient use of the road than people driving alone. Some studies have shown that rideshare contributes to a reduction in drunk driving; in suburbia, rideshare serves as a last-mile connector to public transit.

Today, the Commonwealth assesses a fee of 20 cents on every rideshare trip, a charge that generated $12.9 million in revenue in 2017, a sum split between the state’s transportation fund and the municipalities in which the rides originated. Not every rideshare trip has the same impact, yet the fee is the same no matter when or where the trip takes place, its distance, or the number of passengers in the vehicle. Given the mixed impacts of ridesharing, we have an opportunity to rethink the fee structure to minimize negative consequences, while incentivizing more positive behavior from rideshare companies. A new fee structure could also raise additional revenue to fund investment in congestion-reduction programs and public transit.

A new fee structure should start by allowing municipalities to designate congestion zones – central business districts that meet objective criteria for high transit availability and high levels of congestion. These are places where the negative impacts of rideshare are most acutely felt. In these places, a per-ride fee of a dollar or more should be assessed to encourage consumers to choose alternatives like transit or bikeshare. At Logan Airport, a congestion zone fee would be collected and used to fund much needed improvements to public transit connecting to the airport.

Congestion zone fees should only apply during times of day when traffic is most troublesome. Fees should not discourage a bar-goer from hopping in an Uber at 1 a.m. or a shift worker from using Lyft to get to work before the T starts running. Car commuters contribute to congestion just as rideshare riders do. As a matter of fairness and to avoid incentivizing people to drive, municipalities should be required to assess an equivalent per-car fee on commuter parking lots within any congestion zone.

Beyond congestion zones, the state should move towards a per-mile charge instead of a flat per-ride charge. According to Schaller’s study, 37 percent of rideshare miles are passengerless “deadhead” miles – empty vehicles circling while awaiting a fare. A fee structure that factors in both distance driven and vehicle occupancy would help curb empty or low-occupancy rideshare miles, along with reducing traffic and pollution. While rideshare companies don’t own their vehicles, paying fees linked to public outcomes should push companies to create financial incentives that change driver behavior.

To calculate this new fee, rideshare companies should be required to report both the total number of vehicle miles driven (including deadhead miles) and the number of passenger miles. If three passengers share a ride for two miles of driving, this would count as six passenger miles. The ratio of vehicle miles to passenger miles produces an occupancy factor. Each year companies sould be charged a 3 to 5 cent fee for every vehicle mile driven, which would be adjusted based on the occupancy factor. A company with many empty or single passenger miles would pay more than it does today, while one with a large number of shared rides and low number of empty miles could pay less. Even if total revenues remain the same, this structure would incentivize companies to use their vehicles more efficiently and penalize them for operating in ways that increase congestion and emissions.

A complex fee scheme might seem to require an equally complex bureaucracy to manage it. But rideshare platforms are fully digital, and the companies already possess the GPS and ride data necessary to self-report this calculation. Coupled with a requirement for independent audits, a new fee structure could be accomplished with little new administrative overhead.

Meet the Author

Jascha Franklin-Hodge

Visiting fellow, Harvard Kennedy School
As Boston’s transportation system labors under the weight of our region’s growth, it’s time to get smarter with our policies. By rethinking fees we can push the rideshare industry to reduce congestion impacts. And by passing some of the costs of congestion on to rideshare passengers and car commuters, we can incentivize different travel choices and raise badly needed investment dollars for transit. By connecting policy goals with pricing, we can be a region that welcomes innovative new modes of transportation while also upholding our responsibilities to make the larger system work better for everyone.

Jascha Franklin-Hodge is a visiting fellow at the Harvard Kennedy School and is the former chief information officer of the city of Boston.