Local Funding for Public Transportation Operations: Producing Inequitable Results?

» Less wealthy regions may be more likely to spend less on transit, leaving the poor there with higher transportation expenses.

One of the unique features of the American transit funding system is that the federal government chips in significant sums each year for capital expenses, such as for the purchase of new buses or the construction of new rail lines, but the law forbids significant involvement in subsidizing operating expenses. This means that local and state governments must find the means to pay for service day-in and day-out.

This could offer the benefit of a considerable range of local political decision-making: Some cities may choose to prioritize transit, while others don’t — people can choose to move between cities based on whether or not they want to take advantage of such transportation offerings. Yet the provision of transit for impoverished people is a redistributive service, and there is considerable theoretical support for the argument that redistributive public functions should not be funded by local governments. Cities that choose to aid their poor, scholars like Paul Peterson have argued, will simply attract more of the needy into their city limits; other municipalities without such aid will be able to escape with lower taxes and no aid to the poor.

A review of evidence from American cities on transit operations funding suggests that neither of these arguments is substantiated. Rather, the current funding system results in highly inequitable results that result in worse transit service in places with higher poverty rates and lower median household incomes. Differences in metropolitan wealth are highly positively correlated with levels of funding for transit service. In other words, the places where residents need transit service most are those that are providing the least of it. Median household incomes, at least based on the regions reviewed here, are prime determinants for the level of public services offered.

To conduct this quick study, I considered data from 15 American cities. I selected all central cities with populations of between 600,000 and 1,000,000 in the 2010 U.S. Census, producing a broad sample of cities throughout the country with varying demographic profiles.* I assembled data at the metropolitan (MSA) level (from 800,000 to 5.6 million in population) from local transit systems (for operating funding data), the Brookings Institution (for 0-vehicle households, metropolitan area poverty rates and median household income), the American Public Transportation Association (for ridership in July 2011), and the U.S. Census (for central city population, poverty rates, and median incomes).

Comparing statistics across this group of cities indicates that by requiring operating funding to be assembled at the local level, people living in poorer metropolitan areas are likely to be denied the quantity of transit services that their peers in wealthier regions are offered. This will only increase the transportation costs faced by people living there. This indicates that there is a strong equity argument to shift operating funding of transit services away from the local level and towards the federal government, which would be more likely to spread resources equally across metropolitan areas, regardless of local incomes.

Click on images above to expand.

The most devastating data, as shown in the charts above, demonstrate that metropolitan areas with higher poverty rates and lower median incomes are likely to spend less on operating their public transportation networks than peer cities with lower poverty rates and higher median incomes (R-squared correlations of positive 0.72 and negative 0.49, respectively). A 50% increase in the poverty rate is associated with a 49% decline in per-person transit operations funding. The differences in transit funding are even more significant when compared with differences in income. The regression shows that a 50% increase in regional median income is associated with a 220% increase in per-person transit funding.

This suggests not only that less-wealthy metropolitan areas do not have the funding capacity to ensure good transit for their populations, but that they are providing disproportionally less public transit than their wealthier peers.** Local funding results in considerably varied service provision, based almost directly on the wealth of each respective region.

Click on images above to expand.

This is not to suggest that people in poor areas are not able to get around at all. The evidence in the chart above shows that there is no correlation between the poverty of metropolitan areas and the rate of zero-household vehicles (R-squared correlation of 0.07). People who live in areas with poor transit offerings will simply find the means to drive. This comes with a grave consequence: Driving costs the average person more than using transit, so impoverished people in transit-poor areas are in effect forced to spend more for transportation than their peers in transit-rich areas.

On the other hand, there is a strong relationship between the number of zero-vehicle households in a region and the ridership on transit there (R-squared correlation of 0.66). The regression implies that a 50% increase in the rate of zero-vehicle households in a metropolitan area is associated with a more than five-fold increase in transit ridership. This suggests, perhaps unsurprisingly, that people are more likely to abandon their private vehicles when good transit is offered. Giving up on using personal cars lessens personal transportation costs, but ironically the evidence shows that this is more feasible in regions with lower poverty and higher median incomes. Regions that are already well-off are making themselves better off, while those that are poorer are reinforcing their economic problems.

Click on images above to expand.

Nonetheless, the relatively strong correlation between transit operating dollars spent per person in the metropolitan area and voting share in the relevant county for Barack Obama in the 2008 presidential race (see above; R-squared correlation of 0.66) suggests that through political action, people have the ability to alter the level of service offered by transit services in their area. More strongly Democratic-voting populations appear to benefit from better transit offerings.

There is a direct correlation between investing in improved transit and the rate of ridership in the regions evaluated (R-squared correlation of 0.85), suggesting that higher funding for public transportation services is associated with more users. This is hardly a surprising result (one would hope that transit funding is roughly proportional to the number of riders!), but it reinforces the contention that transit ridership levels are not simply a result of socio-economic conditions and land uses, but also a consequence of direct political decision-making about how much to spend on transit.

Click on images above to expand.

I also considered another possibility: That transit funding in regions is to some degree dependent on differences between central city and suburban populations within each metropolitan region. This question seems particularly relevant considering the recent situation in Detroit, in which suburban reluctance may have led at least in part to the canceling of a light rail line down Woodward Avenue. But a comparison between the central city share of zero-vehicle households (when weighed in terms of the city’s share of the metropolitan area population) and transit funding — where a larger share of zero-vehicle households in the city should theoretically indicate less funding — shows a weak positive correlation (R-squared of 0.34), which is unexpected. An increasing divergence between central city and suburban poverty rates and transit funding shows the expected negative correlation (R-squared of 0.33), indicating that a significant difference in poverty rates within the metropolitan area is associated with somewhat of a decline in transit funding, though it cannot account for most of the differences between regions.

This evidence is purely correlative, not causative. This means that I cannot conclusively show from these data that the lower level of transit funding in poorer metropolitan regions results from those regions’ economic difficulties.

Even so, these data suggest strongly that people living in cities with high poverty rates and low median household incomes are likely to suffer from inadequately funded public transportation systems compared to their peers in low poverty rate and high median household income metropolitan areas. This produces an inequitable funding distribution that further disadvantages lower-income households in lower-income regions by forcing them to resort to the use of expensive private automobiles rather than cheaper transit. This certainly should put in question the assumption that it is in the best interests of residents for funding decisions about public services to be made at the local level.

We should reevaluate whether it is reasonable for metropolitan areas to take responsibility for funding transit, or whether such funding concerns would be better placed in the hands of national government decision-makers, who might be more likely to prioritize equal spending on transit across regions.

* This list includes Austin, Boston, Charlotte, Columbus, Denver, Detroit, El Paso, Indianapolis, Jacksonville, Memphis, Nashville, San Francisco, San Jose, Seattle, and Washington. I did not include Baltimore because I could not find funding data for Baltimore’s transit services apart from those of Maryland in general, since the state has a unified transit system. I did not include Fort Worth because it shares its MSA with larger Dallas.

** One could also argue that the lack of transit provision is strongly correlated with a reduced median income in the regions studied.

30 Comments | Leave a Reply »
  • Ocean Railroader

    It really should be that if you are going to have the federal goverment give you money to build a new route than you should be the one to operate it with your own money which would allow a city to think more logically about building a new transit route. This from a natural view helps keeps cities from opening up routes that are money pits and would help allow them to keep no motivtation in closing down money pit routes.

    A example of this did happen in the City of Richmond’s GRTC transit system where they had three bus routes and a shuttle bus where one of these routes the shuttle bus was eatting $90,000 to $120,000 dollars a year and only 8 people rode it eatch day so what they did was cut it and give it’s operating funds to imrpove more better bus routes in other parts of the city. If this money pit of a bus route had been allowed to live off of federal funding or get funding from the fed there would have been no real movtivation to cut it. GRTC was also lossing this money out of their main oprating buget and the region’s funds so there was a natural motvation to get ride of this money pit. If this money pit had been allowed to live for even four years or five years it would have eatten down $400,000 to $500,000 out of the fed or the city buget.

  • You are right that we should re-evaluate the way we provide funding to transit. However, it is also important that mass transit not be treated as “just a wealth redistribution” scheme. That is how you end up with the stigma of transit being “for poor people” and economic segregation by travel mode. We should strive for economic diversity in cities, so that better transit serves the interests of people from all socio-economic classes. That is how you get a real system working, and a real city too.

  • Here in Chicago, the entire rest of the City is well served by CTA Rail services (the ‘L’), and the Red Line Extension is Mayor Emanuel’s favored Major Capital Project.

    HOWEVER – Chicago’s Southeast Side and South Lakefront are NOT served by the ‘L’, and plans to provide ‘L’ service to the area http://bit.ly/GrayLineInfo are being IGNORED as strongly as possible by the City Administration because it would require CTA and Metra to work together to provide the service.

    Like asking Dracula to give blood.

    If they all have their way – CTA ‘L’ service will be improved in all quadrants of the City – E X C E P T the Southeast Side(which gets s**t) – Regardless of the RTA/CDOT “South Lakefront Corridor Transit Study”:
    http://www.cityofchicago.org/city/en/depts/cdot/supp_info/south_lakefront_corridortransitstudy.html

    This is a classic UNEVEN distribution of Capital Funds; hopefully to be resolved somehow, maybe with Senator Dick Durbin’s Chicago Lakefront Transit Study in 2012: http://durbin.senate.gov/public/index.cfm/pressreleases?ID=e77aeaff-16a0-496f-bc72-ddd9d7ab47d8

    • david vartanoff

      Agree totally. The refusal of METRA to interline fares w/CTA is shameful and perhaps criminal (Title VI) as well as an extremely short sighted use of existing infrastructure. A Chicago friend recently told me that in the Red Line rehab work of the next few years there will be major service disruptions/reroutes (a return of Englewood-Howard trains for example). This is a prime opportunity for restoring frequent headways on the Electric w/transfers from the buses made easier when the southern end of the Red Line is not fully operational.

    • I am much looking forward to developments in the upcoming year.

      The final Public Meeting of the RTA/CDOT South Lakefront Corridor Transit Study early in the year will yield their results:
      http://www.cityofchicago.org/city/en/depts/cdot/supp_info/south_lakefront_corridortransitstudy.html

      Sen. Dick Durbin’s $2 Million Transit Study of Chicago’s entire Lakefront from Howard to 103rd. St. will begin, hopefully to incorporate the findings of the prior CDOT Study: http://durbin.senate.gov/public/index.cfm/pressreleases?ID=c3a7a95b-6736-4b97-b33b-edc7a6e2f2f7

      Gov. Quinn in July signed a House Transit Bill 3547 which requires Metra, CTA, and Pace to implement by Jan. 2015, a new fare payment system that can be used to pay fares on all the Operating Agencies (and combine fares):

      http://www.illinois.gov/PressReleases/ShowPressRelease.cfm?SubjectID=1&RecNum=9528

      Whether they like it or not, some of these events will force them to confront the Agency Coordination question, and come up with answers.

      • david vartanoff

        Funny, when I moved from South Shore to the Germantown area of Philly in ’65, I discovered that the city government had recently bought new railcars (Silverliner IIs, IIIs),and paid for rehab including AC of older EMUs. That was nice, but far more revolutionary was a program of selling discount bus/streetcar tix as addons to the commuter tix. The extra cost was very cheap and encouraged using both systems all of which have since become SEPTA. IINM such intermodal fares no lo0nger exist.

        • FG

          The reason the “grey line” is ignored is that it’s a half-baked plan which doesn’t address the interface between suburban commuters and urban commuters (three different fare systems* on one platform, give me a break), doesn’t really add to mobility the way it’s promoters say (how will forcing a second transfer to the el downtown be beneficial?), the local economic job growth without other projects and doesn’t address the infrastructure changes that would be required at stations – the statement on your website about “There is N O need for costly and time consuming design and engineering, right-of-way acquistion, condemnation, demolition, clearing, materials acquisition, delivery, and major construction” is completely inaccurate. From your descriptions of how service would work, your plan requires completely NEW platforms and stations at ALL mainline stations.

          Simply increasing frequency on ME to every half hour/20 minutes, primarily in the evening, (especially S. Chicago branch) would be great, but with current finances for transit – i.e. service cuts and big fare increases it’s unlikely that any service increases will happen in the near to mid-term future. Long term this is a better, and more realistic, goal than CTA integration (beyond shared fare cards at some point in the future).

          Metra is in fact looking at a smart card type of setup but due to Metra’s station infrastructure installing card readers or fare gates would be exceptionally difficult, but certainly is in the works. The ME faregates were removed years ago because they were so problematic.

          Plus I note that you don’t live on the South Side, let alone in the City. Lisle was it? Which (and I am assuming here – that you are the GL webmaster) contradicts your website’s claim that you are a lifelong city resident?

          * “Grey Line”, Metra Electric Suburban Services and the South Shore Line.

          • david vartanoff

            The Gray Line proposal looks at a ROW w/ high service level potential (such as in my youth when base day service on the South Chicago branch was 20 minutes apart) sitting idle most of the day. It is as if the South Shore Drive or the Dan Ryan were restricted to a few tolled cars per hour and otherwise empty while connections to other expressways were inconvenient and cost extra tolls. Excuses for refusing fare integration in the era of stored value and unlimited use passes are bogus on their face. C&NW pioneered tix by mail/flash passes (1950s version of autoload) so that conductors no longer needed to punch each individual ticket, six decades later, Metra shows little initiative. Finally, not everyone on the South Side needs to go past the Loop although certainly more than in the past. But for anyone using a feeder bus to the Red Line, the slog to downtown is slow, and offering a faster trip at no extra fare is an improvement. When in the next several years major rehab work of the Red Line degrades service, something else will be needed.

            • FG

              Why should Metra show initiative regarding ticketing, most of it’s riders are happy with the way ticketing works as it’s a commuter service? The biggest rider complaint recently on Metra, which lead to increased conductor vigilance, was fare dodging which, with Chicagoans being as we are, would be horrific without conductor control or faregates, which would require rebuilding most stations.

              You are missing the point that increasing frequencies on ME as it is run now would be a better use of time and effort than rebuilding (which would be extensive with a CTA conversion) the ROW to CTA service “standards” and transferring branches, etc.

  • Donk

    So in other words, you are saying the CA and NY and other donor states should continue to subsidize everyone else.

    • david vartanoff

      The state v state problem is only a larger version of rich suburbs v inner city v rural counties w/excess representation in state senates. We could afford ALL of the transit projects AND services if we were not wasting trillions on unnecessary DOD expenditures and had a real economy (actual domestic production rather than US decals on Asian built items). The very existence of Title VI w/regard to Fed transit funding makes clear there is an issue because the well off ‘hoods are rarely (outside4 Manhattan) where transit has a large market share. This does not mean I support running empty buses, but as Oakland has experienced, when the economy is in distress fewer people use transit (and drive). Savaging service is almost as smart as savaging all of the other public services which are the sine qua non’s of civilised urban environments.

      • Nathanael

        The malapportionment of the US Senate and the gerrymandering of the US House, along with the insane Presidential nomination system and the electoral college, are major driving forces behind all the bad behavior of the federal government.

        How do we fix ANY of this?

  • DBX

    This smells to me like more piecemeal policymaking, rather than addressing the broader issue which is the extreme inequity in US municipal funding that has emerged since the end of the 1970s.

    The European countries which seem to inspire so many on this forum also tend to leave transit funding to local authorities. However, the vast majority have very strong arrangements for local government aid (although the conservative government in Britain is moving away from this, shafting poorer municipalities by ripping up the very egalitarian arrangements set up, oddly enough, by Margaret Thatcher). The bottom line is when a municipality’s overall needs are being met by a means-tested maintenance grant every year (so that those without adequate local tax revenue get compensated for that by central/federal/state government), they have the freedom to choose to fund transit properly (or not). The vast majority of major European cities choose to fund it very well, especially due to the extreme political difficulty of delivering new road projects.

    In the US, similar arrangements started to emerge during the 1960s and 1970s, with the federal government going over the heads of the states to directly fund municipalities. The Republicans hated this direct federal-local relationship from the start, believing it to be unconstitutional, and since 1980 we’ve seen a reversion to the old system of the federal government dealing with states and states dealing with cities. The problem with that is most big urban areas are split across state lines and suffer from awful working relationships between cities and suburbs, with the result that in most states rural interests hold the balance of power and repress funding for transportation of all kinds in urban areas. The only way of addressing this across the 50 states and 300+ urban areas is for the federal government to step up and take a direct role in means-tested support for the operating costs of local government — not unlike what we saw in the 1960s and 1970s.

    • Nathanael

      “the result that in most states rural interests hold the balance of power”

      Which is weird. Because even with the city-suburban split, the cities proper have total population dominance in California, Oregon, Washington, Massachusetts, Rhode Island, Maryland, …..

      • david vartanoff

        actually the Republican “soccer mom” suburbs are not very willing to pay for transit serving the urban cores they rarely visit either.

  • Danny

    We don’t have a transit funding problem in any of the major metropolitan areas in the US…not even Austin or Detroit. We have a transit wasted-spending problem, exacerbated by a land-use regulation problem.

    Our per-capita subsidy levels are certainly not substantially different than other countries, despite what progressives would tell you.

    What progressives don’t want you to know is that wasted spending and oppressive land-use regulations are their primary objective. Why? Because transit spending is wasted by their union buddies, and land-use regulation hurts developers, their enemies. The appeal for more funding is nothing more than a political smokescreen so they can continue destroying American cities in their pursuit for a more “progressive” society.

    • Nathanael

      Have you been smoking Fox News again?

      • Danny

        Call me an idealist, but I actually would prefer Switzerland’s entire transit system over the SF Bay Area’s.

        http://www.forbes.com/sites/stephensmith/2011/12/11/surprise-transit-in-the-us-gets-just-as-many-subsidies-as-transit-in-europe/

        I don’t care what you call yourself, but euclidian zoning restrictions that kill density and transit salaries that are a full standard deviation above the median salary makes for a regressive society…not progressive.

      • Nathanael

        It’s the “what progressives don’t want you to know” and “nothing more than a political smokescreen so that they can continue destroying American cities” that made me think you’d been smoking Fox News.

        What makes you think progressives oppose Swiss-style systems? We don’t, we like them.

        Hint: that guy in Forbes is misleading you, in a rather clever way, by abuse of statistics. One example: In Switzerland, transit salaries are pretty much just as high as here, by PPP, but *other industries pay more*, so they’re not as much “above the local median”.

        That does not show a problem with US transit, that shows a problem with *the rest of the US economy*. The US is being pushed into third-world status when it comes to wages and the treatment of workers, and this is being done by CEOs and those who support them.

  • Chris

    Two points: first, transit operations ought to be cheaper in poorer areas (lower wages for a labor-heavy cost structure). Second, public transit funding is only part of transportation spending and (as you point out) local politics are a big part of this – both in determining the funding level for transportation and how much of that is allocated to transit. The federal government’s role would not so much be to equalize funding, but to wipe out the influence of local democracy in limiting local public transit.

    As I’ve said before on this blog, inequity in purchasing power among individuals should be rectified with cash, directly to consumers. Big federal dollars for transportation, marketed in part as a way of improving equity, #1 break the transportation market (why do you think less efficient cars are so dominant in the first place?) #2 taint transit as being a welfare program (which ultimately results in less transit and less improvement in welfare as general consumers question why we would build infrastructure for poor people).

  • Excellent article. One thing is missing though: Politics…but it seems like your selection of cities did take this into account, as they’re evenly divided. However, id be interested to see how political leanings affect the analysis.

    Austin*
    Charlotte
    El Paso
    Indianapolis
    Jacksonville
    Memphis
    Nashville

    Boston
    Columbus*
    Denver*
    Detroit
    San Francisco
    San Jose
    Seattle
    Washington

    *City politics probably clashes with state political leanings frequently

  • Chris

    From my experience being on a local transit board, Federal grants for capital projects only fund part of an area’s transit needs, so wealthier cities are probably able to get more Federal grants than poorer cities are, since the wealthier cities can come up with matching funds more easily, I’d think.

    Life just isn’t “fair”, is it.

    If cities are allowed to fund operations with Federal dollars, that would just mean fewer funds available for capital projects, as budgets aren’t really increasing these days.

  • Yonah,

    1. What do you mean by “equal spending across regions”? Equal by population? By ridership potential? By social need expressed in things like poverty rates? Big question.

    2. Obviouslym, poorer regions spend less on transit because they have less money, and therefore must spend less on everything. Since many other areas of city spending display the same pattern, you’re really arguing for a massive government intervention into urban financing in general, at least those areas that can make some claim to nationwide benefit (which almost everything can). So how do you get rural senators to vote for that?

    I think one of the main reasons for the outcomes you describe is that transit operations tend to rest on sales or payroll taxes, which are (1) regressive and (2) volatile, and thus causing major service reductions right around now. It would be interesting to see the same figures for Canada, where operations tend to rest on more diverse sources, or Australia, where all funding is out of state general funds and thus includes the full spectrum of sources, including low-volatility property taxes. Australia probably shows the outcome you advocate, at least within each state.

    Happy New Year!

  • Yonah, excellent work.

    Do you have any idea where to find info about multiple auto ownership by metro area?

    I ask this because I have a feeling that good, well-used transit also translates into a significantly higher percentage of one-vehicle households, e.g., making multiple vehicle ownership redundant in a lot of cases.

    This is potentially very important politically because it allows one to make a strong pro-transit argument for “middle class” voters, rather than relying just the sticky issue of “welfare” and “income redistribution.” The argument that “middle class” people will benefit as well as the “poor” will sell much more easily particularly when voters are asked for more money.

  • Marcella D.

    One of the major problems with central gov’t financing of operation costs of transit is that it creates all disincentives for a larger fare box recovery ratio. It creates a race to the bottom phenomenon in which cities, or metropolitan areas, lose all incentives to have leaner and more efficient transit networks in favor of large systems (= more ongoing funding) with low fare recovery.

    Just look at what happens in France, for instance.

    • Nathanael

      In other words, it creates the same problems which we have with the US highway system, which has massive federal maintenance (i.e. operations) funding and massive state-level maintenance (i.e. operations) funding, with very little in the way of tolls (farebox recovery) or local funding.

      Either we fund roads and railroads nationally or we fund roads and railroads locally. I can deal with either, though “locally” means it will be very hard to get from NY to California. What is *not* appropriate is the “thumb on the scales” in favor of roads which is still present — especially since roads are worse in pollution and land-use terms.

  • Brent

    “… suggests that through political action, people have the ability to alter the level of service offered by transit services in their area. More strongly Democratic-voting populations appear to benefit from better transit offerings.”

    Yea… This is rather specious reasoning. I would say that areas benefiting from better transit are more likely to vote democrat. While there is also the effect of democrats being more willing to fund it, the former is the more salient trend.

    You guys put up a graph of density vs % democratic about 10 months ago. It provided some interesting insights into the D vs. R rail/transit funding divide.

  • I actually think the current formula of heavy capital funding tends to encourage inequities in new projects because it relies on often-faulty ridership and cost estimates, rather than using the metrics of something that already exists. If services had to meet certain thresholds for federal operating funds that would be roughly the equivalent.

    The political problem — in particular the inequities between parts of an urban area — would be the same regardless of which aspects the state and local governments pay for.

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