The status quo doesn't really have anything to do with it though. If it's optimal for them to spend $X on transit while also eliminating fares, then that's what's optimal whether they're currently spending $X or $0.2X.
> Off peak travel is generally also much less expensive, since you already have the buses and drivers doing peak-only shifts generally spend the middle of the day just sitting around. KC could run a lot more all-day service and garner a lot more ridership.
Which would tend to make it so that you would build more transit before you hit the point of diminishing returns, but that doesn't mean the point of diminishing returns doesn't exist, or that we shouldn't also eliminate fares. They're just two independent questions.
It's like asking whether we should increase the size of the child tax credit or subsidize solar panels. Maybe we should do both. Maybe we should do neither. But the answer to each question has more to do with whether its benefits exceed its costs than how you answer the other question.
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Off peak travel is generally also much less expensive, since you already have the buses and drivers doing peak-only shifts generally spend the middle of the day just sitting around. KC could run a lot more all-day service and garner a lot more ridership.