Silva Jardim, Brazil

The town of Silva Jardim, in the State of Rio de Janeiro, is a small town (in terms of population, but in terms of extension is the fifth biggest town in that State) that adopted free fare in its public transport system since February of 2014. Before that, the public transport system was outsourced and ran by private companies. There were a lot of problems with the buses when the system was ran this way, so the mayor decided to make the transport directly ran by the town government and tax-funded, making it completely free for passengers. The system now counts with 8 bus lines and 10 vehicles, being two for emergencies.

Source: http://tarifazero.org/2014/06/27/rio-de-janeiro-silva-jardim-implanta-tarifa-zero-no-transporte-publico-do-municipio/#more-6418