Not all fees are created equal: Equity implications of ride-hail fee structures and revenues

Abstract

Ride-hailing is a source of opportunity and consternation for cities, adding both expanded mobility options and added challenges such as increased congestion. In an effort to curb congestion—and to tap a new source of revenue—some US cities and states have imposed fees on ride-hail trips. Fees are far from uniform; the fee bases, amounts levied, and use of these funds once collected range considerably between cities and states. Despite previous research that transportation fee and revenue outlay structures affect equity outcomes, no research to date has examined the equity implications of ride-hail fees. This paper addresses this gap in understanding and asks: 1) what are the geographic equity implications of ride-hail fee structures; and 2) how might equity outcomes vary by how fee revenues are allocated? I answer these questions using ride-hail fee policies from 24 US cities and states, and trip-level data from over 97 million ride-hail trips taken in 2018 and 2019 in the City of Chicago. Examining trips serving low-, middle-, and high-income neighborhoods, I analyze geographic equity implications under five different fee scenarios. Variable fee structures that reflect trip factors including trip distance, pooling, location, and time of day offer the most promising geographic equity outcomes. The examined fee scenarios would raise between $30 and $122 million per year for the City of Chicago; more than three-quarters of ride-hail fee revenues are generated from trips that begin or end in high-income areas and could represent a substantial redistribution of resources from high-to low-income areas and/or travelers depending on how revenues are spent. Cities or states seeking to implement or adjust ride-hail fees should identify concrete equity goals and design fee structures and revenue streams to meet these objectives.