Should the Public Pay for Unprofitable Transit Routes?

A bold proposal to eliminate money-losing lines revives the question

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Robert Torzynski

This much is clear: America's transit systems are in trouble. As fellow contributor Matthew Yglesias pointed out earlier this week, cities across the country are struggling to fund public transportation. In support he cited proposed cuts to bus service in Milwaukee that could make roughly 13,500 jobs in the metro area inaccessible. Conditions are no better in bigger cities. The Long Island Bus system, recently privatized because the MTA couldn't afford to maintain it, faces certain fare hikes and service cuts. The MTA at large has an awful budget crisis on its hands, and it gets money from 8.5 million riders a day. The phrase "Only in New York" has become a parody of itself, as this old Onion headline suggests, but when it comes to U.S. transit systems, "Not Even in New York" shouldn't be taken lightly.

Far less clear is what to do about the problem. At its root is the fact that very few public transportation systems in the United States profit on their own. This dilemma recently led David Levinson, a civil engineering professor at the University of Minnesota, to propose a bold solution to America's transit troubles. Writing at his blog, The Transportationist, Levinson explained that while some transit routes do make money, those that don't drag down the budgets of entire systems. Levinson's solution is two-fold: first, keep profitable lines intact, and with them certain feeder routes considered critical to their success; second, let politicians decide whether or not to fund the routes that lose money — the "welfare" routes, as Levinson considers them — from the general public revenue.

In other words, public transit organizations would present the public with a bill for these money-losing services … and not be expected to pay for them out of operating revenue.

If the cost of those lines is deemed too expensive (i.e. the politicians are unwilling to pay for them with general revenue tax dollars), they should be canceled. Transit agencies would no longer be losing money, they would now be break-even or slightly profitable. They might even pay a dividend to their owners (the general public).

The proposal became something of a tempest in the teapot that is the transit blog world. (A list of responses, and Levinson's rebuttals, can be found here.) Broadly speaking, the criticisms of Levinson's concept fall into two groups. The first confronts the role of transit as a public good. Transit agencies have limited funding, and without question they must choose whether to spend this money on improving profitable lines or subsidizing low-ridership routes. But the idea of eliminating unprofitable routes suggests that the goal of American transit lines is to make a profit, and in many minds that simply isn't the case.

On the contrary, most low-ridership routes are subsidized by general tax funds as a public service — namely, to help low-wage workers reach jobs. "Levinson describes a situation in which everyone has the option to pay the true cost of transportation services, but in fact many do not," writes Yonah Freemark at The Transport Politic. "While it might be nice to imagine a world in which every individual has the ability to act as a rational actor in a fair marketplace full of decisions that reflect efficiency and true costs, we do not inhabit it." Indeed, the latest behavioral evidence suggests there is a clear "psychology of scarcity" that causes people deprived of something — be it money, time, or food — to behave less rationally than they would otherwise. Public funding of transportation addresses this reality, argues Freemark:

We can crusade for the elimination of transportation services that cannot pay for themselves and in the process eliminate essential mobility for people who need to get around now, all the while hoping that the poor will at some point be handed adequate funds to make economically sound decisions. Or we can recognize reality and admit that transit services are at their core not just transportation organizations but also welfare providers.

The other major critique of Levinson's proposal is that it reflects a double standard in American transportation. Many habitual drivers complain about paying for transit service because they believe they're already paying the full cost of road maintenance through gasoline taxes, when in fact automobiles are heavily subsidized by government policy too. Car use increases sprawl, pollution, and (though Levinson contends otherwise) congestion — real-if-tough-to-quantify social costs that remain invisible to drivers. In other words, argues Jarrett Walker of Human Transit, if society is going to ask transit users to pay for systems through unsubsidized fares, then it should ask the same of drivers:

If we propose a free-market view in which transit should be breaking even, well, I'd like to see this as well in a perfect world. But that would be a world in which government isn't heavily subsidizing transit's competitor, the private car — not just through road expenditures but through such interventions as minimum parking requirements and petroleum-based foreign policy. I would further suggest that current environmental crises argue for government to be biased away from the private car and toward modes that do less environmental harm, and that subsidies toward transit (i.e. accepting that transit "loses money") are one valid way of doing that.

Lost in the fury here is the fact that some transit lines find ways to make money that don't involve service cuts or fare hikes. The MTR system in Hong Kong makes an enormous amount of money — in the neighborhood of a billion U.S. dollars a year — largely (though not completely) because it acts as the real estate developer of the business and residences and offices and even shopping malls surrounding its stations. "These properties and businesses produce substantial cash, which keep the transit agency as a whole in the black," Alex Marshall of the Regional Plan Association recently wrote at citiwire.net. If you're wondering why American transit officials don't know about this technique, well, they do: The MTR recently used some of that extra black to lure away the head of the MTA. Only in Hong Kong.

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