With Few Funds Available, What are Transit Agencies to Do?

» The manifest lack of support for an increase in funding for transportation at the federal level means public transportation providers will have to adapt to survive.

This month’s federal budget negotiations have been incredibly disheartening for those of us who believe wholeheartedly in the advantages of popular social welfare provision in the broader sense; the ease with which members of both of America’s two major political parties have dispensed with the goal of widening the provision of Social Security, Medicare, and Medicaid suggests that the sense that government can do much to reduce inequalities in our society has been pushed far enough aside as to be ignored in the meeting rooms of even a president representing the so-called left.

The timing of these discussions — premised on GOP skepticism of government spending and Democratic fears of advocating raising taxes — comes not coincidentally just a week after House Republicans revealed their proposal for a six-year transportation budget. If it was not clear last week, it is now: The cuts being proposed would be devastating to the nation’s transit agencies, depriving them of much-needed funds for the purchase of new rolling stock and the maintenance and construction of necessary facilities. Even if this plan, which would diminish already too-limited transportation funds by a third, does not get implemented, the context of the debt negotiations suggests that something much better is unlikely to be had.

This leaves the nation’s transit agencies in a treacherous bind, since local and state transportation funds have seen significant declines as well. Do they hold back on capital spending, hoping for better days sometime a few years from now? Or do they attempt to divert operations funds to capital, potentially threatening their ridership and certainly reducing service quality?

There is no easy answer to this question, but one almost inevitable fact is that transit agencies have four basic choices: Reduce service, increase fares, ask for new revenues, or attempt some combination of the aforementioned three. These are all bad options: The first will make public transportation less convenient for everyone who relies on it; the second will increase its cost; and the third will demand sacrifice from either taxpayers or other public services. With a flustered economy and limited likelihood of quick growth in the near future, however, these are what is available.

Service reductions are the simplest, but potentially most devastating, form of budget-balancing at a transit agency. Since most bus or rail routes are money-loosing — they require subsidies to operate — reducing the number of runs can save everyone money. This could mean eliminating certain routes or decreasing frequencies along the line. Indeed, reducing the number of riders can save money too, if the number of routes that can be eliminated because of lower ridership offsets any marginal loss in fare revenues.*

The problem with this approach is that it sets into play transit’s “death spiral;” fewer and fewer riders are attracted to the service as less convenient options are offered. Then, as there are fewer riders use transit, there is less need for services, resulting in more cutbacks. This situation can only be remediated with the significant and costly re-introduction of good services at an even more subsidized cost; and by then, full-scale use of a city’s transit system is difficult to re-establish.

But if transit systems play an essential role in the urban ecosystem — allowing density, providing environmentally friendly travel alternatives, reducing congestion, offering mobility and access for all — simply cutting back until “you can afford it” is not really an option. The reason we subsidize transit in the first place, after all, is that its societal benefits are more significant than the sum of the amount people are willing to pay in fares to ride it. Thus service cuts — unless performed carefully and only on the least-effective routes — can only play a minor role in an attempt to balance the budget.

The second option, increasing fares, is perhaps the most toxic of the options made available to transit users. Too many riders already think they are being overcharged for less-than-excellent travel options,** so convincing them that they should pay more for the same can be a difficult argument to win; a decline in ridership is likely to occur with any increase in fares.

One alternative is raising the fare not just to the level necessary to make up for the loss of other revenue but rather to a higher bar to pay for service improvements. If the typical user of the system understood the resulting improved frequencies and better routes, they might come to see the fare increase as not a problem but instead as providing a benefit. Starbucks gained traction in the beverage market despite its relatively high prices because consumers appreciated the better (or at least perception of better) coffee they could buy there.

That said, the significant low-income segment of transit riders means that an increase in costs to ride must also mean less mobility for the poorest segments of the population. In the midst of high unemployment and increasing poverty rates, in whose interest would such a policy change be advanced? If combined with reductions for those with limited incomes, though, a fare increase could be both publicly beneficial and economically progressive.

Then there is the final option: Increasing local funding to pay for transportation, a politically dangerous game. Few politicians relish increasing property and sales taxes — the two revenue sources most frequently used to fund local public spending. In many cities around the country, voters have been asked to approve more funding for transit projects, so you can’t just tell them that they must pay more now because of lower-than-expected revenues; more taxes must come with more promises of improvements, which voters may or may not perceive as likely to be fulfilled.

Among service reductions, fare cuts, or local tax increases, there are no good options; no matter what any city chooses as its preferred means to relieve its funding crisis, the next few years are likely to be difficult ones, full of diminished expectations and few improvements in service at transit agencies. With a dominant political atmosphere that prioritizes spending cuts over social services, what else is to be expected?

Update, 19 July: Many of the comments on this article have raised questions about the possibility of increasing efficiency and productivity as an alternative to fare increases or service cuts. To this regard, Alon Levy has an interesting post on the difference between short-term and long-term approaches to deficits in funding; Levy’s article points out that many of the solutions noted by commenters would be difficult if not impossible to implement in the short term.

* The fact that transit services often lose money poses a financial problem even in well-performing, high-ridership systems, where attracting new riders may be a good idea from a social, environmental, or political perspective, but not from an economic perspective, as the new fare revenues they bring in are not large enough to compensate for the cost of providing higher-frequency service or more routes.

** Few mention the fact that transit fares in cities with excellent transit systems are very similar to those in places with miserable ones. Why does it cost a similar amount of money to ride the buses in Chicago, for example, where a high-frequency grid of lines and easy neighborhood access are provided, as in Springfield, Illinois, where few routes and long waiting times are the rule?