Broke in Philly

Philly businesses would have to offer pre-tax SEPTA passes under new City Council plan, potentially saving workers hundreds each year

Backers say the idea could boost ridership, improve safety, and increase transit equity.

septa-signs-trainstation
Mark Henninger / Imagic Digital
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As SEPTA struggles to coax more commuters back onto its trains and buses, City Council is putting forward a plan that would require businesses to help out while providing a potential tax break for workers.

Under a proposed law Councilmember Helen Gym is introducing today, Philadelphia companies with more than 50 employees would have to offer a transit benefit: letting workers pay for SEPTA passes with pre-tax salaries.

This could cut employees’ federal income tax bill by an average of $200 to $250 a year, according to Gym — and hopefully encourage more people to ride the system.

“The health and well-being of public transit relies on its usability by everyday, ordinary Philadelphians who are purposeful about getting to work, to school, to recreational opportunities, and more,” Gym told Billy Penn.

SEPTA currently sees about 530,000 passengers daily, just over half its pre-pandemic volume. The lack of riders has been costing the agency nearly $1 million a day in lost revenue.

Having more people on station platforms and vehicles can help address concerns about safety and cleanliness, plus improve SEPTA’s long-term financial viability, Gym said. A wave of “vulnerable populations” taking shelter in stations during the pandemic has made some riders uncomfortable, leading the agency to boost social service offerings and to close exits in some downtown stations.

By encouraging commuters to leave their cars at home and take a train, trolley or bus to work instead, Gym and other supporters say, the bill will also help reduce air pollution, greenhouse gas emissions, and street congestion, plus support the city’s Vision Zero initiative to prevent traffic deaths. Traffic fatalities in Philadelphia soared to 156 in 2020, the most in over two decades. Last year’s count fell just slightly to 133, according to the Bicycle Coalition of Greater Philadelphia.

Gym suggested savings from the pre-tax benefit could provide participants with a little bit of relief from inflation that has raised the cost of gasoline, food, and other necessities.

It will particularly help working-class commuters in service and other industries who can’t work from home and depend on SEPTA to get to their jobs, said Yasha Zarrinkelk, coalition manager at advocacy group Transit Forward Philly.

“Historically, we know that SEPTA riders are folks from communities of color as well as low-income riders,” Zarrinkelk said. “That’s money that can be used for groceries, for housing, for health care, you name it… It’s going to do a lot for transit equity within the city.”

Cost to businesses would zero out, city says

According to Gym, Philly would be one of just a few big cities around the country to mandate large employers offer the pre-tax benefit.

However, many companies in the city already offer it voluntarily. Employees pay for their transit passes with pre-tax salaries, reducing the amount of income they have to pay taxes on. The businesses also benefit by having to pay less in payroll taxes.

Administering the benefit carries a cost for employers, but the city’s Office of Transportation, Infrastructure, and Sustainability (OTIS) found the cost is less than the savings from the payroll tax reduction, said Christopher Puchalsky, OTIS’s director of policy and strategic initiatives. He said Mayor Jim Kenney’s administration helped develop the bill and supports its passage.

The proposed law is the latest of several recent efforts to make SEPTA cheaper and more attractive for commuters.

Last month, Drexel University, Penn Medicine, and Wawa agreed to buy unlimited SEPTA passes for thousands of their employees as part of a 6-month pilot. Separately, the agency offered a 25% discount on weekly passes “to welcome riders returning to the system” after a COVID surge subsided. Previously it made rides free for children under 12 and gave SEPTA Key cardholders one free transfer per trip.

“We’re lucky that we’re one of the few cities in the nation that has a transit system that reaches into a lot of places, but its sustainability only depends on riders,” Gym said. “And without riders that system cannot continue in the way that it has.”

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