In Seattle, the inner-city busses have zero fare. The trouble is that some of our more fragrant hobos use the bus as a rolling shelter to the detriment of those that appreciate bathing.
Specifically because of the problem mentioned, in fact.
That's not actually true. The Free-Ride Zone was discontinued due to budget problems.
Portland, Oregon also discontinued the "Fareless Square" free downtown transit because of this.
They tried it here in Uruguay, happened the same, and also the "Ni-Ni" youth (neither work nor study youth, a huge problem here) used them as amusement rides.