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Yukonomist: Strange things falling out of the sky

Lately, hard-working Yukon News reporters have been scrambling to cover surprise stories that were not on the whiteboard at the weekly story meeting.

Lately, hard-working Yukon News reporters have been scrambling to cover surprise stories that were not on the whiteboard at the weekly story meeting.

The US Air Force jets from Alaska who defend Yukon airspace shot down – depending on who you believe – a UFO or Chinese surveillance balloon over the central Yukon.

The last time something was shot down over Yukon airspace was in the opening scenes of the James Bond film Moonraker in 1979.

Yukon landlords seemed equally surprised when new rent control regulations landed on them on Jan. 31, when the new Liberal-NDP “CASA” political pact was announced. Equally surprising was how the new rules went into effect the same day, the government equivalent of an Anchorage F-22 Raptor pilot punching the afterburner button.

But the most surprised, at least judging from quotes in the media, were City of Whitehorse officials discovering that CASA promised to make riding on their buses free.

The mayor said the city had not been consulted and was “surprised” by the announcement.

It is Whitehorse taxpayers who mostly pay for transit now. The city’s 2023 proposed operating budget has just over $6 million in expenses for transit, not counting capital expenditures. The transit revenue lines, from fares and other sources, add up to just $1.6 million.

Graduates of Yukon University’s Economics 100 course may also have been surprised by the announcement, which seemed uncontaminated by any contact with the concepts in a standard undergraduate economics textbook.

The first such concept is elasticity, which is a fancy word for how much demand will go up when the price of something goes down. Suppose 10 people from your street ride transit to work today, paying $2.50 per ride or $62 for a monthly pass. To cover the cost of free transit, the government does not just need to pay the equivalent that they pay now. It must also account for all the new riders that “free” induces to come out of the woodwork and start riding.

Depending on the route, the city may have to run more buses or leave people standing by the curb.

The second concept is opportunity cost, which refers to what else $6 million per year in territorial money could provide. More nurses or social housing, anyone?

The third concept is social equity. CASA spends scarce public money providing free transit to everyone, including people who could easily afford to pay. Does it really make sense to provide free transit to above-average-income people bussing to well-paid downtown jobs? What about free transit to the teenagers of households earning over $200,000 a year?

An economist would suggest they pay up for the service, and the scarce tax dollars be used for bus passes or social services for those truly in need.

The fourth concept revolves around government-owned companies. There are plenty of case studies of politicians deciding a government company should provide a service below cost. Commonly, this vote-winning gambit seems to work at first. But then, over time, since the government company doesn’t generate any resources of its own, it becomes dependent on future politicians raising their grants with inflation and periodically giving them big bucks to replace equipment.This is the road to run-down public services.

Will the Yukon government also commit to providing the capital for new buses in the future?

You could make an argument that free transit will get cars off the roads, reducing traffic and carbon emissions. There may be some truth to this, although the announcement did not include any traffic analysis on key routes or the cost per tonne of carbon abated. There might be far cheaper ways to achieve these goals, including by making major employers such as the Yukon Government charge for parking and plugins.

Infrequent buses and low route density are issues that hurt the popularity of public transit in Whitehorse. As I was writing this, I punched some addresses in Riverdale and Whistlebend into Google. In 46 minutes, I could grab R4. That journey would be 1 hour and seven minutes, including 35 minutes of walking to and from the bus stop. Or I could wait a bit longer, and take one that takes only 31 minutes with six minutes of walking.

Google also tells me it would take only 13 minutes if I drove.

Meanwhile, the next bus to get me from Whistlebend to the Canada Games Centre would take one hour and five minutes, with 26 minutes of walking and a bus transfer from R4 to R3 in the middle (and also including a side bus excursion to Kopper King and Raven’s Ridge by Fish Lake Road).

Today, riding the bus makes a lot of sense for some Whitehorse residents. If you live on Hickory Street in Porter Creek and work downtown around Fourth and Main, Google says it’s only 11 minutes once you get on the bus. A return fare will cost you $5, or less if you buy a monthly pass. Meanwhile, commuting by car, both ways, adds up to 18 kilometres. At Revenue Canada’s approved per-kilometre cost of 68 cents per kilometre including gas plus wear and tear on your vehicle, driving to work will cost you $12.24.

If you live farther from one of the few bus routes, or need a transfer, the numbers are very different.

It will be interesting to watch how the City of Whitehorse responds to CASA. Despite being surprised, they hold the negotiating advantage. The Liberals and NDP already committed to “free” transit.

Liberal and NDP strategists may be hoping they can just write a cheque to the city for the $1.6 million in fare and related revenue. But I don’t see why the city would agree to let the Liberals and NDP declare victory on free transit unless the territorial government covered the entire $6 million budget, plus an allowance for new riders brought onto the system by zero fares.

When city officials wargame their response, they can have some fun figuring out how to maximize the gas they can siphon from the territorial tank. Why stop at $6 million a year?

If they really wanted to have some fun paying back the surprise with interest, next week they could slap some “Thank you CASA!” banners on the buses and announce some new routes effective immediately.

Keith Halliday is a Yukon economist, author of the Aurore of the Yukon youth adventure novels and co-host of the Klondike Gold Rush History podcast. He won the 2022 Canadian Community Newspaper Award for Outstanding Columnist.