The Metropolitan Transit Authority (MTA) is the San Francisco city department that handles parking and transportation. It’s all municipal stuff – buses, light rail, parking enforcement, with one curious private sector exception – taxis.

Take a look at this screen grab from its website:

A “taxi town”?

What?!

But the city’s relationship with taxis goes much deeper. Taxis enjoy benefits their competitors, such as Uber and Lyft, can’t partake in, like dedicated stands, special airport access and, most importantly, exclusive lanes on streets shared only with buses.

In fact, city money – your tax dollars – seem to be single-handedly keeping the taxi industry afloat. The MTA’s 2020 operating budget spends $39,300,000 on them.

SF funnels this money to the cab companies through reimbursable rides for city employees and even free rides for citizens:

And city leaders clearly favor taxis over competitors. Consider this article, written by Supervisor Matt Haney, attacking Uber and Lyft for hiring drivers as independent contractors. Notice that taxis aren’t mentioned, despite many having been ICs for decades. Or this one by Mayor London Breed, defending taxis and suggesting competitors face higher taxes.

It gets weirder. Luxor Cab has been hailed (no pun intended) a “legacy business“, meaning it gets 500 of your tax dollars per year for every person it employs, just for being awesome.

Despite all the favoritism, taxi industry in SF is a big, corrupt mess, thanks to both its own practices, and those of the city. Let’s take a look at what’s broken, and how to fix it.

A new way to get around town changes everything

Call it the Revolution of ’09. A few years into the new century, a better type of shared transport swept into San Francisco, seemingly overnight. Instead of waiting for Muni, residents now could cheaply be driven in private vehicles wherever they wanted to go. And they could summon these cars with their finger. The public loved it.

I’m talking, of course, about the taxi revolution of 1909. That was the year taxis arrived in SF and exploded in popularity. Here’s how Fay Beal, an early taxi entrepreneur, described them:

There are no longer any such things as lost trains and lateness at appointments. There are taxicabs everywhere, and the raising of a finger brings one of them to one’s side. Their charges are so reasonable that they can be used by almost anyone…

SF Chronicle, April 4, 1909

As much as people loved this new means of transport, problems quickly arose. Cabbies drove like mad men, and the papers contained almost daily stories of accidents. An especially fun one, from the Oct 1, 1909 Chron:

Beyond erratic driving, cabbies were a rough and tumble lot, and were accused of overcharging customers and other shady activities. So, in the same year they arrived in SF, city leaders began regulating them.

Before we go on, you should know that cities, as a rule, are really bad at regulating taxis. For example, this white paper analyzing America’s largest taxi markets found that:

All 44 cities studied regulate taxis tightly, adopting five of 10 major regulatory provisions on average, but the specific regulations they use vary widely. This suggests cities are making taxi policy absent a common understanding of what regulatory provisions, if any, are necessary to protect consumers.

Regulatory Overdrive – Taxi Regulations, Market Concentration and Service Availability, 2018

SF’s attempt at regulation was even messier, because it mixed laws to protect riders with labor demands (like setting taxi meter rates and maximum hours worked) and traffic law enforcement generally, which hadn’t been addressed before taxis came along.

Around 1930 SF began issuing a fixed number of taxi permits, or “medallions”, which allowed a taxi to operate. Medallions were issued to taxi companies, and could be bought and sold. These medallions are at the center of today’s tale.

Regulation didn’t do much to clean up the taxi trade. An example from this excellent page on local history:

Between 1934 and 1936, the [taxi] drivers’ union underwent a period of internal strife marked by beatings, shootings and the burning of vehicles.

What regulation – allowing the government to largely determine the revenues and profits of the industry – did do was invite corruption. For much of the 20th century, a single company, Yellow Cab had a virtual taxi monopoly. It purchased and hoarded medallions to limit competition, and kept city leaders in its glove box:

Yellow dominated the local taxi business for the last 44 years, not only by providing the most taxi service, but by continued munificence to public officials: Campaign donations, Christmas gifts of taxi scrip and other favors.

SF Examiner, Dec 7, 1976

And Yellow got some sweet perks for its troubles. It had a monopoly on airport access, and many prime taxi stands in the city were Yellow-only. The result:

San Francisco taxi rates are already the highest in the world. And with taxi permits sharply limited in number, cab licenses here are worth $20,000 and upward. But only – be it added – so long as Big Yellow clings to it 503 transferable permits and does not bottom the market by dumping same.

Dick Nolan, SF Examiner, Feb 7, 1972

Until 1976, everything was humming along in true SF style – “Big Yellow” made a lot of money, politicians got their share, and citizens were left holding the bag. Then the system hit a speed bump – Yellow Cab turned out to be run by criminals. When it was abruptly shut down, the city found itself with a serious taxi shortage. The result was 1978’s Prop K, which began allocating non-transferrable medallions directly to drivers, not taxi firms.

Today, the industry is still prone to fraud. Hop in a cab at Fisherman’s Wharf, ask to be taken to your hotel, and risk a circuitous tour of the city. And while there are plenty of honest drivers, many aren’t the kind of folks you’d take home to mom.

Spend some time scrutinizing San Francisco’s taxi trade, where thousands of drivers toiling for 34 companies compete for cash, and you’ll find a business where laws are routinely flouted and dubious behavior abounds.

SF Weekly, 2/14/07

So, arguably, the industry continues to require some type of regulation. And by 2006, SF had plenty of that:

Regulating the San Francisco taxi industry currently involves no fewer than 11 separate city departments, and further subdivision within department divisions for a total of 17 total entities.

5/6/06 SFMTA report

Some of this regulation was good (checking meters for fairness), and some probably bad (setting prices and limiting the number of drivers). This is as true today as it was in 1984, when the Federal Trade Commission reported:

The taxicab industry is heavily regulated, mainly by local governments. Entry, fares, services, and quality are restricted in a substantial majority of large urban areas…

The principal conclusion of this report is that no persuasive economic rationale is available for some of the most important regulations. Restrictions on the total number of firms and vehicles and on minimum fares waste resources and impose a disproportionate burden on low income people.

With the city constricting the supply of taxis, the wait for new medallions was in the decades. This created a chronic shortage of drivers, which is just how the existing ones liked it. As long-time Bay Area journalist C.W. Nevius put it in 2008:

Who hasn’t experienced the problem of trying to find a cab on a Saturday night? If the cabbies hadn’t bitterly fought all efforts to increase the number of taxi permits – known as medallions – this wouldn’t be a problem.

Excessive regulation also meant that competition and innovation – the stuff that keeps industries efficient and healthy – were stifled. For example, with too few taxis to serve the city, airport shuttles and town cars rolled in to fill the void. But SF’s regulatory maze couldn’t accommodate them. According to a member of the city’s own regulatory staff:

“In other cities,” Heinicke said, “town cars and cabs are regulated by the same entity, which makes a lot more sense. I think we could also streamline enforcement so it was more administrative than courtroom.”

And as the city over-regulated, it also under-enforced. For example, Prop K specified that medallions could only be used by their owners, who were supposed to be full time cabbies. In practice, owners sold or rented medallions to unlicensed drivers, who forged the signatures of the actual owners on their “waybills”, or road logs. And the city looked the other way.

Consider this man, who made a lot of money off both our city and its regulator:

Then there’s Eugene Shu, an engineer with the city Water Department, who earns a $71,000 yearly salary and owns an $850,000 home and roughly $30,000 in securities, according to public records. Shu also claims to be a full-time cabbie.

SF Weekly, 2/14/02

By 2008, the system was unfair to most drivers:

Currently, cab companies, medallion holders, and rank and file drivers essentially function as a feudal system, with the serfs driving San Franciscans around in vehicles usually owned by the lording cab companies and permitted by older drivers who hold the coveted medallions.

SF Bay Guardian, 11/19/2008

As the guy making all that money off Luxor’s “legacy business” status noted regarding the SF taxi racket:

There’s corruption all over the place.

Luxor Cab President John Lazar, 2/14/2007

Nobody at City Hall wanted to deal with it. A 2005 editorial in the Chronicle described taxi permitting as a “failed” system, opening the piece with:

Approach any City Hall denizen and mention taxi permit reform and you’re likely to witness a grimace and a hasty retreat.

SF Chronicle, 3/29/2005

And all this takes us back to that website image at top. In 2008, the city hatched a plan to fold taxi regulation into the MTA. But there was a problem. The MTA, which also included our public transit (Muni) budget, was starved for cash.

Taxi drivers, the serfs of the industry, do not have high hopes about the merger. “If the merger happens, the MTA [officials] will be able to do whatever they please,” Williams said. “Everyone knows MTA is always in need of money … they don’t care about drivers or improving industry, only their budget.”

SF Bay Guardian, 11/19/2008

But the city assured everyone that no such plan was in play:

MTA spokesperson Judson True told us, “We have no intention of looking to taxi revenue to supplement existing Muni operations.”

SF Bay Guardian, 11/19/2008

Trust us.

2009 – the city breaks the industry (and ride sharing fixes it)

In 2009, to fill a gaping hole in Muni’s budget, the MTA began selling formerly free taxi medallions for $250k each. But only for new drivers. Existing drivers didn’t have to pay.

By 2018, about 40% of drivers had purchased the medallions, often going deep into debt to come up with the funds. This created at least six classes of taxi drivers making wildly varying amounts of money, according to this 2017 study:

As you can see, only a minority of medallion owners are actual drivers. This is, again, illegal, but the MTA does not enforce the laws.

The city attempted to give drivers with purchased medallions a break, with yet more rules – it created a scheme of preferential treatment for post-2010 drivers for airport pickups. The other drivers naturally sued. The value of the medallions dropped in value. More lawsuits. No new medallions have been purchased since 2016, and many drivers have defaulted on their loans, leading to, you guessed it, more litigation. There’s a reason our city requires armies of lawyers.

If fairly regulating taxi competitors was tough before, it was impossible now that the city had handicapped some drivers with $250k of debt. But there really wasn’t much competition, was there?

Enter ride sharing in 2010.

Companies like Uber and Lyft eliminated the deceptive practices and need for heavy regulation of the taxi industry. With a corporate backer and phone app, there was no way for fraudulent drivers to participate. With fixed rates and predefined routes, there was no incentive for overcharging. There weren’t even any meters to check. Seemingly overnight, a dirty industry had found a clean solution.

People loved it. I could get across town for $10 less, or to the airport for $20.

So did drivers, who came from all over California to make big money in SF. I sat next to a woman at lunch in Chinatown in 2017 who said she made $300 per day driving. The deficiencies of the taxi game were lain bare. Some studies show app based ride sharing even saves lives.

None of this is to say ridesharing is perfect, or that it doesn’t need some regulation, for example around paratransit (making sure rides are available to disabled people). But the opportunities for fraud are much lower. People quickly switched from taxis to ridesharing for some very good reasons.

As ridesharing exploded, SF’s elected officials stood around awkwardly and wondered what to do. Both Uber and Lyft had been founded in SF and employed hundreds of people here. Mayor Ed Lee, a political moderate, even proclaimed July 13th “Lyft Day” in 2013.

Mostly though, the city’s current crop of anti-corporate leaders has taken an critical stance toward taxi competitors, chipping away at ride sharing at every turn. I guess they feel bad for making such a mess of the taxi trade. Maybe that’s why they’ve dubbed us “A Taxi Town”.

How do we solve this mess? First, our city needs to give up on the $250k medallion scheme, and refund money to drivers who’ve purchased them on a depreciating basis. There are only a few hundred, and the medallion game is dead – a medallion worth $700k in Boston in 2014, for example, was worth $40k in 2018.

Most importantly, taxis, town cars, and ride sharing companies need to compete, as closely as possible with the same rules, in the same lanes, and with the same taxes and fees. In 2016, California attempted just this, with bill AB 650, which would have moved taxi regulation from cities to the same state agency that regulates ride sharing companies. The bill passed both houses of the state legislature, but Gov. Jerry Brown vetoed it. Ironically, the bill would have reformed taxi regulation in all cities and towns in California except one, which they decided was too big a mess to touch. Can you guess which one?

Even if taxi regulation remains at the local level, we must push for the type of deregulation that’s happening in other cities.

While price regulation was relevant in the days when taxis had a virtual monopoly over private car transportation, technology has changed this market. As has occurred in a variety of markets including airlines and telecommunications, it’s time for governments to deregulate the prices of taxis to generate fair competition and truly allow the best service win.

Rafi Mohammad, Harvard Business Review, 7/9/2014

Finally, no for-profit company should receive cash payments from taxpayers, or free advertising on the city websites, especially those of regulatory agencies. That just invites corruption. We’re not a “taxi town”, or an “Uber town”, we’re a citizen town, and city policies should reflect that.

On a more general note, as San Francisco’s far-left leaders expand further into the private sector with, for example, a public bank, the taxi mess provides a fair warning of why local government should probably stick to traditional services like public safety.

As legendary SF journalist Phil Matier noted, regarding proposed taxes on ride shares:

it will probably be the passengers — not the companies — who pay the new tax.

SF Chronicle, 3/16/2019

And that’s the ultimate rub. It’s not city leaders who bear the cost of a disorganized local government that reshuffles its priorities with each election. It’s you and I, with higher costs and lower standards of living.

Appendix

If you’re not sick of taxis yet, this 1983 Examiner article is a greatest hits of taxi industry woes – corruption, misregulation, litigation, you name it.

My parents were all dedicated to fighting U.S. imperialism around the world. I’m dedicated to the same thing.”

Chesa Boudin, New York Times, 12/9/2002

I recognized there there are cases for where armed struggle is a legitimate tool for social and political change in the face of much greater, more highly organized force.

Chesa Boudin, Gringo, 2009

But far from avoiding the legacy of his parents, Boudin embraces it. It is impossible to understand him, the author says, without understanding the strong impression that their politics made on his own.

James Kirchick, The New Republic, Fall 2009

As members of the Weather Underground, San Francisco District Attorney Chesa Boudin’s biological parents bombed a number of buildings in an attempt to overthrow the United States. After killing a few innocent people, they were jailed in 1981, and a one-year-old Chesa was adopted.

You might have hoped that Chesa’s adoptive parents would have been less radical. No such luck. Not only were Bill Ayers and Bernadine Dorhn members of the Weather Underground – they were the founders of the movement. On the run from the government for years after committing a series of felonies, they only escaped serious jail time because some of the evidence against them turned out to have been illegally obtained.

Meet the parents:

Given these two fine sets of folks, it’s worth asking how much daylight there is between Chesa’s value system and those of his murderous moms and dads.

And we’ve got plenty of information here, thanks to Chesa’s 2009 autobiography “Gringo”, which, as the name implies, reflects mainly his experiences in Latin America. Reviewing the book, The New York Times rolled its eyes at Chesa’s insipid observations and stilted writing:

There is no wit in “Gringo,” no humor, no sharp observations, no strange or thrilling adventures. 

New York Times, 4/16/2009

No, there isn’t. But “Gringo” has plenty of a few other things, including a burning hatred for America, a desire for radical socialist revolution, and the promotion of Venezuela as a model civilization. Let’s move through each country Chesa visits, and learn about the man as we go.

The book begins with his trip to a Spanish immersion program in Guatemala during high school. Newly arrived in the country, he walks past a factory and logs:

The sweatshops I saw that day…were one of the faces of neoliberalism that defined the economic landscape I was travelling through. Guatemala, like many countries across the global south at the time, was part of the “Washington Consensus”, a partnership with American-based financial institutions like the World Bank and the International Monetary Fund…this resulted in such disastrous economic performance that the 1980s became known as the “lost decade” in Latin America.

A few points here. First, his views parrot exactly those of his terrorist parents. The Weather Underground was founded to fight against so called “American Imperialism“. The apple doesn’t fall far from the tree.

Second, as their names imply, the World Bank and International Monetary Fund are not American institutions, but global organizations with the majority of the world’s countries as members.

Third, the “disastrous economic performance” in Latin America in the 1980s was due mostly to local governments’ behavior in the 1970s. Here’s how former Chairman of the Federal Reserve Ben Bernanke, who has just slightly more economic expertise than Chesa, explains it:

[Latin American] Governments had run up large amounts of external debt in the 1970s in an attempt to maintain growth in the face of oil price shocks and macroeconomic mismanagement at home. But in 1982, during a period of high real interest rates and slow growth around the globe, Mexico briefly defaulted on its debt, an event that marked the beginning of the debt crisis of the 1980s. The crisis effectively closed off the region’s access to international credit.

In reality, bad luck, poor management, and too much debt lead to this “lost decade”. In Chesaworld, it was all the America’s fault.

What else in Guatemala is America to blame for? Well, pretty much everything.

You might find it a stretch to blame the bad teeth people in poor countries like Guatemala have on America, but Chesa finds away. The culprits? Pepsi and Coke. Chesa sees ads for these in the country, and surmises omnisciently that these imperialist companies have “left even young children’s teeth rotten, while adults had more metal caps than I’d seen anywhere outside rap videos.”

Chesa moves in with his host local family, and immediately begins indoctrinating them on the evils of the US, boring them to tears:

I regularly sought conversation about the tragic history that decades of brutal civil war, unleashed by a United State-supported coup, had visited on the country. But whenever I tried initiating a discussion about President Jacobo Arbenz and the role of the CIA in overthrowing him back in 1954, my host family and their friends seemed uninterested.

Really, Chesa? Nobody cared about a rich teenager, lucky enough to have been born in the US, slumming it with a poor host family while espousing anti-American theories? No irony there. I bet you were fun at parties.

In Chesaworld, every shortcoming in Guatemala can be tied back to the US. Poor diet and environmental damage? Yup, America’s fault:

High-quality meat was being produced locally, often on land that had been cleared of jungle using slash-and-burn techniques, with all the attendant environmental problems. But this was too expensive for locals and was shipped to Guatemala City – or more often to the United States.

So, what do we know so far? That Chesa, just like his four parents, really doesn’t like the US.

Having diagnosed the ills of Guatemala, Chesa returns to Chicago, and heads off to college, where he does a study abroad program in Chile.

Terroist leanings in Chile

Chesa visits Chile in 2001. He spends his time there feeling guilty for being American:

Many Chilean military officials implicated in the [1973 Pinochet] coup, torture, and human rights abuses were trained the US….Even though I wasn’t born at the time of the atrocities, I felt connected to them, and somehow implicated.

And:

Pinochet’s coup and the downfall of Chile’s democratic socialist experiment had represented a victory for United States imperialism and corporate profits. It was hard not to feel a sense of shame for the role the US government and the CIA played in supporting the Pinochet dictatorship….

Here, stunningly, Chesa praises his parents’ terrorist activities in the US:

But I took solace in the fact that my family, unlike other study abroad students I knew in Chile, had taken action in support of Chilean democracy, against the coup and their own government’s disgraceful role in it.

What actions is Chesa praising here? It was around this time that his parents’ terrorist organization was bombing both the US Capitol and the Pentagon, Osama Bin Laden-style. And it’s here that he gives us the quote at the top of this post, about the benefits of armed struggle.

For the record, the US had no direct role in the Pinochet coup, though it did support elements against Marxist Salvadore Allende, after he joined forces with the USSR and threatened to nationalize US companies operating legally there.

What we learned: America does horrible things, and violent responses, like those of his parents, are probably ok.

Venezuela: The Promised Land

I’ll spare you quotes from Chesa’s travels through Argentina, but suffice to say the US, the CIA, and the IMF and really, really, bad actors responsible for every malady in the country.

In his next adventure, worthy of a brief mention, Chesa travels to Brazil in 2003, thrilled at the election of Socialist President Luiz Lula.

I was excited by the prospect of a country as powerful as Brazil having a progressive, working class president.

Unfortunately, Lula didn’t ultimately seem radical enough for Chesa’s tastes:

Lula would ultimately disappoint many of those on the traditional Brazil left with conservative economic policies and good relations with Washington…

Ask yourself: which parts of the global community see good relations with America as a bad thing? Yet these are the people Chesa aligns himself with repeatedly in the book.

Lula, incidentally, was later sentenced to 10 years in prison for corruption and money laundering.

Finally, in 2006, Chesa lands in Venezuela, then in the process of transforming its country from a market economy into the type of socialist paradise Chesa admires so much.

Chesa isn’t one to let ignorance stop him, as long as radical politics are on the menu:

I knew almost noting about the Chavez government except that it purported to represent power to the people, wealth redistribution, and anti-imperialist global south regionalism, which sounded like worthy goals to me.

What could possibly go wrong?

Chesa gets caught up in Chavez destructively unique brand of socialism:

One of Chavez’s central themes was that to end poverty, power had to be given to the poor. That simple concept made sense in a revolutionary kind of way, and I wondered why I hadn’t heard it articulated so concisely before.

Before long, he actually joins the Chavez administration as a translator. He realizes, to his delight, that he’s playing an active role in the type of socialist revolution his parents could only dream (or perhaps bomb) about:

I had heard plenty of of criticisms of export-oriented neoliberal economies before…rarely had they put forward alternative models on a national scale, and the had never, to my knowledge, been seriously debated within the inner circles of a head of state….Venezuela seemed like the perfect country to try and imagine and implement an alternative system.

These must have been heady times for our young radical:

I took to signing my emails to friends and family “in the belly of the revolution”

While the Chavez administration was typically suspicious of Americans, Chesa had the ultimate revolutionary pedigree.

I had found one of the few places on the planet where having parents in prison in the United States for politically motivated crimes actually opened doors rather than closed them.

Tip: when you find yourself working for any organization that glorifies Americans in jail for murder, it may be time to seek other employment.

Chesa believed so deeply in the socialist revolution in Venezuela that he co-authored a book on the subject:

And translated another of Chavez’s speeches:

The results of Chesa and Chavez’s radical socialist policies were predictable and depressing. Paragraph 3 of his Wikipedia article says it all.

What we learned: Chesa loves the radical socialism of Chavez’s Venezuela.

Colombia, and wrapping up

A couple of years later, Chesa heads down to Colombia, to survey the awful damage the US has wrought on the country:

President Uribe, a darling of the US State Department, has a sordid history. His popularity in Washington as a conservative, pro-United States neoliberal….

That association with America, the Great Satan, is all Chesa needs to know to condemn him. In a meeting in Colombia, Chesa condemns the US in sweeping terms:

I was self-conscious of our position as the only two representatives from the United States, a country that, directly or indirectly, had fueled the violence in all of the Latin American countries represented in our solemn gathering.

Who makes such statements, besides terrorists and deeply misguided radicals? Chesa is one of the two.

The book continues in the same way. His next trip is to Ecuador, where, of course:

United States oriented economic policies, particularity the dollarization of the economy, had totally undermined the area’s traditional sustenance farming economy.

Probably not a bad thing – “sustenance farming” doesn’t seem like much of a life. But Chesa can’t resist a dig at the US.

Back in Venezuela in 2006, Chesa continues with his now-familiar tirades against the US. Just one example, which succinctly sums up Chesa’s world view:

Maybe if we “estadounidenses” [Americans] did a better job of making sure our tax dollars didn’t go toward undermining democratic experiments or overthrowing or destabilizing governments unwilling to adhere to US policy imperatives, people in countries like Venezuela could do a better job resolving their own internal problems.

You get the idea. No shortcoming of any country is anyone’s fault but ours.

At the end of the book, a 28 year old Chesa is living in New York City, but keeps a close eye on his hero down south:

I followed from afar as Chavez introduced a new currency, removed price controls on milk, and successfully brokered the release of hostages held for years in Columbia.

What we learned: The usual. America, Bad. Venezuela, Good.

“Gringo” gives us plenty of insights into the mind of a young, revolutionary radical. Will Chesa take up bombing government buildings in the hopes of destroying the “Imperialist America” he despises? It’s hard to say, but the fact that we even have to consider the question makes you wonder if Chesa Boudin is the right person to head criminal prosecutions, acting on behalf of the government, in San Francisco.

Each day, a shrinking (see below) number of Bay Area workers endure two-plus hour daily commutes to and from San Francisco on Caltrain. A typical commute involves driving to a train station, parking, waiting for the train, riding, then walking from the Caltrain terminal to their jobs. After work, they perform this same lengthy maneuver in reverse.

But Caltrain isn’t just unpleasant for its riders. The tax subsidies required to keep the line afloat, especially after the passage of Measure RR in November 2020, place an enormous financial burden on society, far in excess of any reasonable benefit the small number of mostly wealthy Caltrain riders receive from being able to work far from their homes.

A system of bottomless subsidies

A round trip ticket on Caltrain between, say, Santa Clara and San Francisco costs $20. If you buy a monthly pass, that amount drops to $15, assuming 20 days of commuting per month. That’s not to say commuters actually pay that much, but we’ll get to that later. Let’s first answer the question: how much does a single daily commute actually cost society?

Public transit, like most organizations, has two types of expenses, operating and capital. Operating expenses are the daily cost of running the train – salaries, utilities, etc. Capital expenses are fixed, long term outlays, like a new train car, or upgrades to existing systems, like the electrification of the Caltrain track.

Public transit advocates like to ignore capital expenses when looking at the true cost of transit. Their favored metric is the “farebox recovery ratio“, the percentage of operating expenses met by fares paid. But it’s an irrelevant number, as it only includes one of the two expense types.

Note: Caltrain’s fiscal or reporting year is from June to June, so “FY 2020” below, for example, refers to July 1, 2019 through June 30, 2020.

In FY 2019, Caltrain collected $112M in fares (and other things like parking), and had $147M in operating expenses. Looking at operating expenses alone, it appears taxpayers only have to cover 35% of the total Caltrain fare, meaning that that a $15 round trip actually costs about $21, with tax payers picking up the remaining $6. This doesn’t include capital expenses, but then, how much of these can 77 miles of track really have?

The answer is, when it comes to Caltrain, a truly unbelievable amount. In 2019, capital expenses were $405M, almost four times fares collected. All in, that $21 Caltrain ticket actually cost $73 in 2019. That’s almost $18,000 per year!

Back to that $15 per day, or $300 per month, commuter fare. No one actually pays that much out of pocket. San Francisco actually requires employers to provide a credit of the cost of a Muni A Pass ($98), and, further, provide an employee tax deduction for up to $270 (the federal limit) for money spent on public transit. Assuming a 40% state and federal tax rate, our commuter only paid the equivalent of $121 per month to ride Caltrain.

Let’s put it all together:

Who’s really paying for that ride? Mostly, taxpayers. The annual amount we spend allowing a single lucky commuter a year of long, sweaty commutes is enough, for example, to send 500 kids to a year of elementary school in a developing country. In the US, $14k/year pays the mortgage on an $300k house! The average home price in the US is around $200k.

Transit advocates have two, mostly bad, responses to these facts. The first is: “But roads are subsidized too!” In fact, the opposite is true, at least in California. In 2018, for example, our state received $16 billion (!) in gas tax revenues alone. This was so much more than was needed to maintain our roads that most of the money went to (surprise!) public transit subsidies, law enforcement, the “Department of Food”, Parks and Recreation, and other non-road related budgets. Drivers here provide subsidies – they don’t benefit from them.

The second response from transit advocates is: “But think of all the auto vehicle pollution we’re saving”! But that’s a false choice. It’s true that, absent Caltrain, some people might drive to work instead. But many others would move nearer their job, or telecommute. In fact, telecommuting is an option of such growing importance that the Metropolitan Transit Commission, which regulates transit in the Bay Area, recently proposed that 60% of commuters be working remotely by 2050 to reduce climate change. Once transit systems got wind of this, they quickly flexed their political muscle to get the project killed, which tells you a lot about their priorities.

And all that auto pollution? California is already phasing out gas vehicles, and many people – especially wealthy commuters – drive electric vehicles already.

Where do these phenomenal capital expenses come from? Caltrain’s electrification project alone, first conceived in 1921, is now projected to cost $3.2 billion, up from an initial estimate of $800 million. That’s 30 years of passenger revenue, for a single project, which will result in Caltrain having to increase its operating expenses by 33%. And there are a constant stream of smaller capital projects, from new control systems to bridge replacements. Maintaining Caltrain is very, very expensive.

Caltrain receives money from county, state and the federal governments, but in 2020 even those weren’t enough to cover the subsidies required to fund it. Enter Measure RR, a regressive 1/8-cent sales tax increase that is expected to provide around $100M in tax funds per year for the next 30 years.

The irony is that most Caltrain riders earn more than enough to pay the full cost of the fare. Former Foster City mayor Jim Lawrence, in speaking out against Measure RR, notes that 80% of Caltrain riders have household incomes over $200,000 per year!

A system in decline

Given the incredible subsidies commuters receive to take Caltrain, you might think people would be lining up to ride. After all, if you could get something – a car, or a vacation – that costs $18,000, for just $1,450 per year, you’d probably take it.

The problem is, more and more people are saying No to nightmare commutes, at any cost (source):

Even before covid-19, ridership had dropped over 20% from its peak in 2016. And that’s despite a booming economy and growing Bay Area population. The 2020 number there ends in June, so it does include 3-4 months of post-covid ridership data, but it’s clear where the numbers are headed.

Lower ridership, of course, brings the need for yet more subsidies. When you see the next proposed tax increase to subsidize a small number of rich people, think carefully before voting.

Ever heard someone say: “I wish we had more counties”? Me neither. While the population of California has grown from 4 to 40 million in the last century, it hasn’t felt the need to add a single new one. A single county – Los Angeles – contains 10 million people and covers 4,753 square miles. In contrast, the Bay Area, with 7.8 million people and 6,900 square miles, has not one, not two, not four, but nine.

Why should you care about counties? Ask anyone who thinks San Francisco’s enormous city budget is normal, and the first thing you’re likely to hear is: “But we’re also a county!”. Recent news stories that sheriffs in SF make as much as $450,000 per year is purely a county, not a city problem problem. So it’s worth looking at counties, why we have them, and how they serve to bloat our city budget.

Counties exist to govern the spaces between cities and towns, as well as the cities themselves. While you may think Los Angeles County contains only the the city of LA, most of its population and geographic area are outside the city. Similarly, the City of San Diego is less than 10% the size of the County of San Diego. Ditto for Sacramento, City and County. In fact, all of California’s 58 counties include areas outside individual cities – except one. San Francisco is the lone, redundant, completely overlapping city and county.

What do counties do in 2020? It varies by state. An example will best illustrate the duties of those in California. Let’s pick the one most similar to San Francisco: Santa Clara.

The City of San Jose has a general fund (the part of the city budget doesn’t go to revenue generating departments like the airport) of $1.2 billion in FY 2020. San Francisco’s is $5.2 billion. But San Francisco is also a county, and while Santa Clara County, which San Jose is a part of, has an additional $8.1 billion budget, up from just $4.9 million five years ago. Here’s how that money was spent among the county’s two million residents:

The revenues for all this spending came from a number of sources – state and federal transfers, borrowing, taxes, and fees for services. The main takeaways here are the enormous amount of general spending (the $2B General Administration number includes about $200M of debt service) and other items, like the District Attorney’s office, that are duplicated county by county.

That’s the theme here – redundancy and duplication of effort. For example, the Santa Clara county spent $312 million on IT services to maintain exactly the same software apps that SF County, and the eight others in the Bay Area, had to purchase and support as well. If the Bay Area requires nine sheriffs, why does larger LA county do just fine with only one?

LA and many other examples show that some of all of the nine Bay Area counties need to be merged. And if we’re going to only merge one, let’s the pick the lone county in California that includes a single city, and nothing else. San Francisco is facing a $1.7 billion deficit next year. Combining counties is a simple and obvious way to lower the cost of city government without affecting critical services.

Wondering why San Francisco has so many homeless? Let the homeless explain it to you.

This post centers around a YouTube channel called “Invisible People”. Mark Horvath, who runs the channel, has interviewed a large number of homeless around the US over the past decade. Mark’s home base of LA is his most common filming location, though he’s done plenty of interviews in the homeless mecca that is San Francisco as well.

Note: the video links in the text below start at the part of each video where the topic at hand is discussed. You only need to watch 5-20 seconds of each one.

Mark mainly interviews what I call the “homeless elite” – the most lucid and photogenic segment of the population. Why the elite? Mark, formerly homeless himself, is unabashedly pro-homeless, and these people look and sound just like your friends and family. Their stories pull on your heart strings. You’ll have to look to other homeless channels for the unvarnished truth about street life. Mark won’t be interviewing Roman, covered in face tattoos, who mentions in passing that he killed his five-year-old. And elites just make for better television. His few videos with the non-elites, with their tweaked-out appearances and one-word answers, aren’t interesting to watch.

For our purposes, the elites are the perfect subjects – they offer articulate insight into how people become homeless, what they want, and paths to solving the homeless problem. Let’s take a look at what the homeless commonly tell Mark about their lives.

They wander – usually to where the drugs and services are

The homeless get around. This is probably the single thing you’ll hear most frequently in Mark’s videos. Sometimes they relate their travels in detail, sometimes it’s just a passing reference, but they don’t call them drifters for nothing.

What motivates the homeless to move from place to place, and sometimes settle down? There are a few main factors:

Drug availability. Mark Horvath himself speaks for many homeless when he says: “As drug users we migrate to where the drugs are”. If you look at where the homeless are clustered in your city, that’s also probably where the heroin and Fentanyl are being dealt.

Many of Mark’s subjects look so normal that it’s jarring when they slip in their drug or alcohol habit. But the stereotype of drug use and homelessness is very real. Listen to this young woman, who came to San Francisco for the homeless services, mention her many trips to rehab. Or have Jonathan explain it in six simple words.

As Mark chants in dozens of videos, “It’s hard to do homeless sober”. By the same token, it’s hard to do responsible living addicted. Many of these people choose getting high over the straight life, no matter how much intervention friends, family, and society attempt.

Law enforcement (or lack thereof). Ask a homeless person why he left Point A for Point B, and he’ll often tell you local authorities chased him away. A homeless man in an LA Times story about the removal of a homeless encampment in Orange County says it well:

This happens to us over and over. I go from one city to this city and now I’ll have to find another city

If your town has a welcoming attitude to people moving in and pitching tents on the sidewalk, you’re going to wind up with a large number of sidewalk tents. If the police enforce “sit lie” and other laws, you’re more likely to be Point A above.

In San Francisco, we have a District Attorney who seems to care more about the plight of the drug dealers on our streets than enforcing drug laws. What homeless addict would ever leave such a place?

Services. The homeless are perfectly rational, and will drift to where the government and non-profits provide food, housing, and other benefits. Wondering why the homeless cluster on Skid Row in LA? Listen to this guy for 30 seconds.

Which city has the best homeless services? Many will tell you it’s our own City By The Bay. Here’s an example. Here’s another:

I came here [San Francisco] from New York, and there’s a lot more services here, than New York.

The “traveler” lifestyle. Some young homeless are proud vagrants. They’ll happily tell you they like being transients, often freighthopping from place to place. Wanderlust sure beats working. Mark invariably asks these people what their future holds, and they invariably shrug.

Beyond these motivations, the homeless drift for a grab bag of reasons, from the search for good weather to a promised job that never seems to materialize. One lady says she came to LA to see movie stars. While some homeless do in fact live near where they grew up, the odds that the homeless person on your doorstep is a local are slim.

Many have jobs or income, but won’t live where they can afford

Young travelers aside, the majority of the elite want to work. Many have jobs, or express a sincere desire to get one. Many have had prior careers spanning decades. Work provides money, friends and a purpose to the homeless elite, just as it does to housed people. Listen to this man:

The job keeps me sane. The job keeps me civilized.

Or this guy: “I love to work. I can’t not work”.

The problem is, they can’t or won’t pass the Walmart test – work where their income can afford a place to live. Many want a free lunch that just isn’t realistic – to enjoy the high wages in the most expensive parts of the US, but without paying the high rents there.

The homeless with income will tell you over and over and over and over and over that rents are too high for their income.

So that’s less that a thousand dollars – $994 to live on for a month [in Los Angeles]. And that’s exeedingly difficult to do.

Exactly. The homeless need help finding a place where it’s not so difficult. Listen to this working, able bodied man, sleeping on the streets of the Tenderloin, cry when he thinks of his son in Alabama. Where’s the logical place for him to go? This man understands the problem exactly – but still insists on living in a place he can’t afford.

There’s a progressive line of thinking that everyone should be able afford to live everywhere. Listen to this man 12 seconds into a local NBC video. He’s got a sticker that says “We are all San Franciscans” and says “something is wrong when you’re working in your city but you can’t afford a place to live”. That’s a pleasant sentiment, but expecting everyone in America to be able to live in San Francisco – a 7X7 square mile city where houses cost over $1M – simply isn’t economically feasible.

They have an alarming number of children

The ability for the homeless to procreate is staggering. They’ll casually toss the number of kids they have into conversations – two, four kids, six kids, eight kids, like it’s some kind of fertility contest:

Mark: you’re here with your 4 kids .

Emily, homeless woman: Mm hmm. And one on the way.

Unfortunately, the homeless have no incentive to use birth control, and every incentive to breed. “”Now that I’m pregnant I have a lot more resources that are willing to help me.” says homeless Amanda, who also mentions her other five children in passing. It’s not uncommon.

This perfectly intelligent woman has drifted to San Francisco and is enjoying taxpayer funded housing, food, transport, etc. She’s got a 16 year old, an eight year old, and (because, why not?), is eight months pregnant with Number Three.

Mark finds pregnant young homeless women and single mothers everywhere. Birth control is rarely at the forefront of conversations about the homeless. The result, in 20 years, will be a world wondering where all the unhoused young people came from. The examples are endless.

Remember Roman, who killed his five year old, with Jesse above? She’s expecting. That’s another human being that’s probably going to be supported with your tax dollars from cradle to grave.

Other issues the homeless frequently mention

A few other common themes come up when listening to Mark’s videos. Importantly, the foster care system acts as a feeder for the homeless population – many young homeless age out of the system at 18, and have no place to go. Listen here, here, here and here.

You may not be aware that the foster care system is essentially a business arrangement. Adults receive a daily fee – around $30 per day in the Bay Area per child – to care for kids. The day the child turns 18, the payments stop, and America’s homeless population increases by one.

Lack of realistic job expectations is another issue the homeless mention often. Many will tell you they’re musicians, actors, writers, or artists. Here they’ve confused hobbies with real careers that will provide the steady income needed for housing.

Pets are third common problem. Over and over, the homeless describe how their animals, usually dogs, prevent them being housed. This woman had a great life…until her landlord said no dogs. Watch enough interviews, and the mere mention of pets gives you a fair idea of why a person may be un-housed.

Conclusions – using this information to solve homelessness

I reached two conclusions from binge-watching Mark’s channel.

Give each homeless person two choices

Every person who imposes a cost on society by remaining un-housed needs two choices, The Good Place, and The Bad Place.

The Good Place has the opportunity for the things the homeless tell us over and over they want out of life. Dogs, friends, travel, safety, cigarettes, beer, creative expression, entertainment are all possible in the Good Place. Your stuff is not going to get stolen in the Good Place, the cops aren’t going to hassle you, and nobody’s going to force you into prostitution.

If able, you’ll need to work a 40 hour week in The Good Place. The Good Place is probably in an inexpensive part of the country, where you income (often Social Security checks) can pay the rent. Support services will be there to help. You’ll have health care, and a way to get to work. If you aren’t able bodied or minded, you will be taken care of, and your Good Place may be a slightly different setting, like a group home.

The Bad Place is a prison cell. It’s that simple.

Despite America’s love of guns, the odds of being murdered in the US in a given year are tiny, about one in 20,000. That’s because killing another person, except in self defense, is absolutely forbidden. It’s something every child is taught, and the punishment is extremely serious. We need to treat homelessness in a similar way. They key is the deterrent effect – it is indeed expensive to keep one person in prison, but that threat prevents another hundred from breaking the law.

On the flip side, we have an obligation to give everyone a path to the Good Place. That’s going to include a set of initial and ongoing services – from drug and alcohol counselling to health care to possibly job guarantees to ensure steady income in places where rent is affordable. Listen to this woman, homeless in Marin county, explain it. If you’re ready to get clean and get back into society, society needs to provide you a path to that.

The good news is, many people have a Good Place they can go back to. Listen to this perfectly intelligent woman living in a tunnel under Las Vegas tell you where she’d rather be. San Francisco’s Homeward Bound program has helped over 10,000 people return to their homes.

The critical point is that the people can be incentivized toward or away from homelessness. As you might choose between two jobs based on a number of factors, people implicitly choose between a housed or unhoused lifestyle.

Take Larry. A former accountant, Larry is well spoken and clearly intelligent. He could pass the WalMart test with flying colors. So why is he camped out on Venice Beach? Larry will tell you he’s got a good group of friends, food stamps, and a cash benefit check he can use to party with. Hear it in his own words. The cops don’t appear to give Larry much trouble, so why not spend your days soaking up the LA sun?

In his new life, Larry is probably not going to be living on Venice Beach, sleeping late and partying. He may wind up in St. Louis or Bakersfield showing up for his job at a grocery store five days per week. Almost 62 years old, Larry will qualify for Social Security benefits soon – but he’ll still have to live in a place where those benefits can afford housing. Allowing society to foot the bill for Larry’s existence must be absolutely forbidden.

Focus on the 18-26 year old segment of the population

You’re looking at two homeless people: 66 year old Ben, and 20 year old Amy. Ben is collecting Social Security soon, and is nearer the end than the beginning of his life. His remaining cost to society is limited.

Amy’s going to be on the streets for another 50 years. She’s going to have four kids, all of which are going to end up in foster homes, two of which are also going to end up homeless. Without intervention, what financial burden will she impose on the rest of us? The number is surely in the millions. It should be obvious where our limited service resources should go.

Take Alyona, 19, on the streets of LA, trying to go to college. Imagine the cost of intervening to help her now, versus letting the streets grind her up for a few years.

Homeless youth understandably lack many of the adulting skills the rest of us take for granted, from budgeting to finding a track to the right career. They’ve also yet to reach mental maturity, and are prone to bad decisions – there’s a reason people under 25 have a hard time renting a car.

Birth control is a major component of this solution. I’m not talking about forced sterilization, but plenty of education, as well as cash or other incentives, for those who can’t be responsible parents not to procreate. Unwanted kids have a way of producing more of them. We know such programs work.

There are some programs to help people at this critical age. In 2012, California passed AB 12, for example, extending benefits for foster children aged 18 through 20. But as we know from Mark’s videos, far more help is needed.

Implementing the two ideas above is going to be initially expensive – the payoff happens over a period of decades. It will require a Federal solution – any state or local system of benefits is doomed to failure, since it will only attract homeless from the rest of the country. This is exactly what we see in San Francisco.

A more immediate question might be: what can and should San Francisco do today, without such national solutions? That’s a topic for another post.

It ain’t rocket science.

To be a housed person, you need two things: a source of income, and a budget that affords a place to live on that income. For able-bodied, working age people, this is known as the “Walmart test”, since you can work 40 hours per week at most Walmarts in the US, at any job (their minimum wage is $15/hour), and afford rent in that area.

You’re not going to be living in a palace on $15/hour with no overtime. You’re probably going to have roommates if you’re a single person. But other than in the most expensive urban centers in the US, you will be able to find a safe place to live, and with a healthy diet. And remember this is bare minimum. In a country as rich as America, there are plenty of opportunities to do better.

Beyond able-bodied people, there are two other groups: retirees, and disabled people. And here it works exactly the same way – you must live where you can afford on your benefits check(s).

For situations where the numbers still don’t add up, there are plenty of options, including Section 8 and public housing. But you must be willing to work if able, and you must be willing to live where you can afford.

To end homelessness, we need to expect folks to pass the Walmart test.