News   Mar 28, 2024
 256     1 
News   Mar 28, 2024
 634     0 
News   Mar 28, 2024
 376     0 

How to Make Mass Transit Financially Sustainable Once and for All

M II A II R II K

Senior Member
Member Bio
Joined
Apr 24, 2007
Messages
3,944
Reaction score
1,061
How to Make Mass Transit Financially Sustainable Once and for All


Jun 5, 2014

By DAVID LEVINSON

theatlantic.svg


Read More: http://www.citylab.com/commute/2014...ancially-sustainable-once-and-for-all/372209/


The words "transit" and "crisis" have been associated in the American lexicon for nearly 60 years. It is time to recognize this as a chronic condition rather than a temporary event. Current strategies have not placed transit on a financially sustainable path. From the mid-19th century through the mid-20th, transit was privately operated, usually running on public rights-of-way (which companies often were obligated to maintain), charging a government-regulated fare. This model was hugely profitable for decades, until it wasn't.

- If you want to help poor people, give them money; or, failing that, give or subsidize transit passes, rather than subsidizing the wealthy under guise of aiding the poor. --- But the primary problem with transit operations funding is not that poor people are subsidized. Since the routes serving low-income travelers are often profitable (fares cover operating costs), it is that long-distance, inefficient suburban routes are very heavily subsidized by profitable or near-profitable urban routes.

- If the average farebox recovery is one-third, many routes are much higher and other routes are much lower. The lowest performing routes are typically in suburban districts, where transit dollars are spent as part of a political bargain to obtain some form of general revenue funding from suburban jurisdictions.

- Like any other enterprise, transit should be successful and cover its costs. This is entirely feasible if we change the model of transit finance from a branch of government to a regulated public utility, as is done in much of Europe and Asia. A public utility provides a service, and in exchange, it is compensated for that service. The compensation comes from consumers (e.g. users, riders), and from the public for any unprofitable services that it wishes to maintain for other (e.g. political) reasons.

- Just as the public sector pays the electric utility for street lights, it should pay the transit utility for services that the government insists on but that the transit provider cannot charge users enough for. The Paris transit system, RATP, charges local and national governments a "compensatory indemnity" for keeping fares below the break-even price. Governments recover this from an employment tax. Once profitable, the perception and mindset of the transit organization would change from a drain on society to an economic catalyst.

There are seven ways transit utilities could reverse the long decline the current governance model has provided:

• The transit utility can lower costs by competitive tendering for routes. Just as bus companies today don't manufacture their own vehicles, there is no economic requirement they run the buses themselves. The London model of bus franchises is instructive. Private firms bid to provide service on routes (and collect revenue) for a franchise period. If the route earns profits, they bid a positive amount. If the route loses money, they bid on how much subsidy is required for them to be willing to operate it. Transport for London monitors quality, collects fares (via the universal Oyster card), determines routes, and manages stops, stations, signage, and branding, so it appears as one unified system to riders. Bus ridership in London has risen significantly since competitive tendering.

• An independent transit utility can raise fares, with the approval of a public utilities commission, so that average farebox recovery approaches and eventually exceeds 100 percent. This should be accompanied by full cost pricing for competing transportation modes — in other words, higher gas taxes or road fares. Low-income users should get a direct subsidy from the public, not from the transit utility. This is akin to the universal service fund telephone utilities often offer.

• Transit utilities should require smart card use and encourage seasonal passes (perhaps subsidized by employers and universities as a benefit) to lower the marginal cost paid by transit users, reduce boarding times, establish a more stable revenue base, and increase ridership. This is much like unlimited minutes (or bandwidth) by your telecommunications provider.

• Each money-losing route should be cancelled or operated under contract by the transit utility in exchange for specific revenue from the jurisdiction that route serves. Transit organizations would at least break-even on the operation of the route. The "deficit" would shift from the transit utility to the public sector, which would have a clearer picture of the costs of its wants.

• Capital costs for new or rebuilt transit systems should be recovered from land value capture. Transit services create value they cannot fully capture themselves through the farebox (though they would capture more of this with higher fares). That value spills over to nearby land owners, whose property value increases due to the accessibility transit provides and thus the higher rents they can charge. The amount of value captured by the system signals whether the investment is worth making. If some of that value were captured, more revenue would be available to make investments. Transit utilities should have the authority to develop land at stops and stations, and to develop air rights over their tracks, and to contract with private developers to coordinate station locations. Local units of government desiring routes and stations should have the authority to implement local taxes to subsidize the transit utility for the cost of building the line. But the line should only be built if it can at least break even operationally. If the route cannot be funded from land value capture and farebox revenues, it should not be built.

• Utilities and transportation services can use private equity and bond markets to unlock value. If Uber is valued at $17 billion (or even one-tenth that), how much capital would a well-governed mass transit utility with actual users be able to raise?

• Since transit benefits local areas, it should be primarily locally funded and managed. Federal funding for transit has distorted investment to be capital intensive — favoring ribbon-cuttings for politicians — while resulting in neglect for local operations. While the rational local transit organization will take advantage of federal largesse, there is no good reason for federal involvement. Over the next few transportation legislative cycles, it is likely that federal grant programs (funding) will be transformed into loans (financing). Mass transit utilities would be better adapted to this new environment.

.....




3cf783670.jpg
 
Certain amounts of this seem logical as transit systems have become very top heavy bureaucratic nightmares with complete inertia and cost over runs being the norm not exception.

I can see not wanting to subsidize people who choose to live in the suburbs knowing they will have poor transit access but conversely many people live in these areas because they can't afford to live in the inner cities due to rental/housing costs. A low income person may be very dependent on transit but their low income inhibits them from living in well served transit areas usually in the inner city.

Also, trying to figure out what routes would be profitable and which aren't isn't as easy as it sounds. Certainly some routes are busier than others but even busy routes can have off times. A suburban rush hour route may have higher ridership than a busy bus route late at night or early Sunday morning. Which would you cut? Who do you tell that their service is being cut..........the one who chooses to live in the low density suburb or the one who decides he wants to go clubbing without drinking and driving.

Cutting low ridership routes may look good on paper but those riders will need to get to work/school/play regardless which means they will have to drive. That may look fine to a transit user at first until it dawns on them that those drivers is cramming onto the same streets as the bus you are on. Those people being forced to drive may save money would add huge amount to congestion meaning those who's routes are still intact may find their bus journey just doubled as the bus comes to a screeching halt due to heavier traffic.

There is no perfect solution and certainly transit agencies and politicians can make the situation far worse than they have to be but all actions have consequences, good and bad, and they have to be weighed carefully.
 
I think it's important to keep first and foremost in mind that public transit is not intended to be a money-making endeavour or venture. Transit is first and foremost a public service, and a very important one at that. Its purpose is to transport the moving public, whoever they may be, whatever their income may be, wherever they come from, and wherever they may be going. If transit can turn a profit while doing so, then so much the better. If it cannot, then it is simply a bullet that the governments which fund that transit will need to swallow, for all the good that transit does for the communities it serves. That is not to say that some efficiencies can't be found or made, and not to say that there cannot be tinkering with routes and frequencies and such if needed, but once we start looking at transit as something which should be able to turn a profit, we've lost sight of what it's truly about and what sorts of benefits it truly provides.
 
I think it's important to keep first and foremost in mind that public transit is not intended to be a money-making endeavour or venture. Transit is first and foremost a public service, and a very important one at that. Its purpose is to transport the moving public, whoever they may be, whatever their income may be, wherever they come from, and wherever they may be going. If transit can turn a profit while doing so, then so much the better. If it cannot, then it is simply a bullet that the governments which fund that transit will need to swallow, for all the good that transit does for the communities it serves. That is not to say that some efficiencies can't be found or made, and not to say that there cannot be tinkering with routes and frequencies and such if needed, but once we start looking at transit as something which should be able to turn a profit, we've lost sight of what it's truly about and what sorts of benefits it truly provides.
I must agree.
 
I think it's important to keep first and foremost in mind that public transit is not intended to be a money-making endeavour or venture. Transit is first and foremost a public service, and a very important one at that. Its purpose is to transport the moving public, whoever they may be, whatever their income may be, wherever they come from, and wherever they may be going. If transit can turn a profit while doing so, then so much the better. If it cannot, then it is simply a bullet that the governments which fund that transit will need to swallow, for all the good that transit does for the communities it serves. That is not to say that some efficiencies can't be found or made, and not to say that there cannot be tinkering with routes and frequencies and such if needed, but once we start looking at transit as something which should be able to turn a profit, we've lost sight of what it's truly about and what sorts of benefits it truly provides.

With any venture, whether public or private, you cannot continually operate it at a loss. There is no question that public transit in North America is operating at a loss. Measuring profitability of a route is only one measure of performance. It's the same measure that tells us subways in Scarborough are no go and to extend the Sheppard subway using LRT technology.

The real issue is that North America is still designed for the behavior of the individual. When you start designing cities using a holistic approach that considers human behavior (i.e. human geography) then your concerns about how to fund transit will disappear, because you will have modes of transit that support the needs of the people.
 
• The transit utility can lower costs by competitive tendering for routes. Just as bus companies today don't manufacture their own vehicles, there is no economic requirement they run the buses themselves. The London model of bus franchises is instructive. Private firms bid to provide service on routes (and collect revenue) for a franchise period. If the route earns profits, they bid a positive amount. If the route loses money, they bid on how much subsidy is required for them to be willing to operate it. Transport for London monitors quality, collects fares (via the universal Oyster card), determines routes, and manages stops, stations, signage, and branding, so it appears as one unified system to riders. Bus ridership in London has risen significantly since competitive tendering

This is interesting - given TfL is basically responsible for every aspect other than operation, what does the increase in bus ridership has to do with cost? Now if you make the case that there is a significant improvement in service quality and/or fare reduction as a result of outsourcing then it's a different issue - but that wasn't mentioned as an outcome. As constructed, the claim is vacuous.

AoD
 
This is interesting - given TfL is basically responsible for every aspect other than operation, what does the increase in bus ridership has to do with cost? Now if you make the case that there is a significant improvement in service quality and/or fare reduction as a result of outsourcing then it's a different issue - but that wasn't mentioned as an outcome. As constructed, the claim is vacuous.

We have some experience outsourcing operations in the GTA. Both at Metrolinx (via GO for train operations) and all York Region routes. York Region uses 3 different bus operations contractors between 5 divisions/tender areas) in different ways. Some operators run and maintain buses York Region purchased, but the VIVA route equipment is more of a PPP agreement with the private operator also making a capital investment.

Looking at basic stats (fares, ridership growth, cost recovery/subsidy per passenger, ...) across various GTA Transit agencies, I would say York Regions methods are not working as successfully as they might have hoped.


TfL spent the better part of a decade learning how to monitor private operators and measure for contract success which actually impacts customer service. Other agencies applying those measurements to their own in-house staff have also seen improvements from the customers perceived service quality.

I don't mind contracting out but we need to learn how to actually measure service quality in Toronto first so we get results closer to TfL and not like York Region.
 
Last edited:
I think it is time politicians should stop drawing future transit maps as a means just to gain votes, instead of letting experts decide what areas need transit and where it makes financial sense.

Additionally, why can't the construction of subways be an internationally competitive tendering process? Considering it is all taxpayers' money, shouldn't we give it to the lowest bidder (with the same quality) instead of simply giving to job to expensive Ontario unionized workers as if they deserve it by birth right?
 
The problem with this idea is that it's pretty clear that Toronto council won't fund the TTC properly even in the face of massive overcrowding. Raising fares would allow the TTC to actually run enough service to meet demand. As it is, a Metropass is ridiculously cheap compared to the cost of driving and parking downtown during the week.

Like the author said, if you want to help the poor, give them money. Don't set transit fares for everyone at an arbitrarily low level and then starve the system of operating funds.
 
The only thing that seems to be outside of the realm of common sense in that article is the idea to create private equity and bonds to raise capital, which is a very interesting proposition, until you realize that it really only works if you can basically guarantee investors that they will get their money back...

Also Public Transit is a public service, if we wanted it to be profitable it could be profitable but I don't think we'd like the service very much, just saying...
 
The only thing that seems to be outside of the realm of common sense in that article is the idea to create private equity and bonds to raise capital, which is a very interesting proposition, until you realize that it really only works if you can basically guarantee investors that they will get their money back...

Also Public Transit is a public service, if we wanted it to be profitable it could be profitable but I don't think we'd like the service very much, just saying...

The "profit" motive might not be a bad thing, whether it is in a public or private provider setting - it basically meant that you build (hopefully) the right mode of transit where there is demand for it, and that would be a foil against Finch west subway and nonsense of that ilk.

What cities in North America have a more expensive monthly pass for transit?

I think what DDA is saying is that one should avoid distorting the economics of providing transit by moving the subsidy elsewhere.

AoD
 
Last edited:
I agree with most of the article, but with some caveats.

I don't think there's a particular need for successful transit systems to have a smart card fare system. A simple POP system based on normal tickets and periodic inspection would accomplish almost all the same goals at less cost (the history of smart card systems is amazingly boondoggle-ish).

The only really compelling benefit I could see for a smart card system, and which may not be feasible on a more conventional one, would be to implement congestion pricing. Especially in N. America, it seems like a huge amount of capital spending goes towards coping with limited and unidirectional spikes in demand. Look at Toronto, considering spending god knows how many billions to 'fix' congestion on Yonge SB for 1-2 hours a day. The most efficient solution would clearly be to charge extra to use transit during rush hour, rather than building new infrastructure.

I'd also say it could be tricky apportioning costs to different parts of the system. If someone takes a bus, transfers to a subway, then rides a streetcar, how do you calculate the cost of each different leg?
 

Back
Top