With annual subsidies of $50 billion covering 76 percent of its costs, public transit may be the most heavily subsidized consumer-based industry in the country. Since 1970, the industry has received well over $1 trillion (adjusted for inflation) in subsidies, yet the number of transit trips taken by the average urban resident has declined from about 50 per year in 1970 to 39 per year today.
Total transit ridership, not just per capita, is declining today, having seen a 4.4 percent drop nationwide from 2014 to 2016 and a 3.0 percent drop in the first seven months of 2017 versus the same months of 2016. Many major transit systems have suffered catastrophic declines in the past few years: since 2009, for example, transit ridership has declined by 27 to 37 percent in the Bakersfield, Detroit, Fresno, Memphis, Richmond, Toledo, and Wichita urban areas.
Four trends that are likely to become even more pronounced in the future place the entire industry in jeopardy:
- Low energy prices;
- Growing maintenance backlogs, especially for rail transit systems;
- Unfunded pension and health care obligations;
- Ride-hailing services.
The last is the most serious threat, as some predict that within five years those ride-hailing services will begin using driverless cars, which will reduce their fares to rates competitive with mass transit, but with far more convenient service. This makes it likely that outside of a few very dense areas, such as New York City, transit will be extinct by the year 2030, leaving behind a huge burden of debt and unfunded obligations to former transit employees.
Despite these trends, the transit industry’s main response is to seek greater subsidies to build, maintain, and operate transit, often relying on rail transit and similar modes that were obsolete many years ago and won’t be able to compete against driverless ride-hailing services. Instead, transit agencies should begin to prepare for an orderly phase-out of publicly funded transit services as affordable, shared driverless cars become available in the next decade.
This means the industry should stop building new rail lines; replace most existing rail lines with buses as they wear out; pay down debts and unfunded obligations; and target any further subsidies to low-income people rather than continue a futile crusade to attract higher-income people out of their cars.
Background
Across the nation, transit agencies are in financial trouble as ridership declines while costs rise. But these troubles merely foreshadow the real problems the transit industry will face in the next few years. It is quite likely that, outside of New York and possibly a handful of other cities, transit as we know it will go extinct within 15 years, and many transit agencies will leave behind a mountain of debt that local taxpayers will be obligated to pay.
Public transit is quite possibly the most heavily subsidized consumer-based industry in the United States. Federal, state, and local subsidies approaching $50 billion a year cover 76 percent of the costs of transit services. It is also one of the most useless industries, as much of what it does could be done for less money through other means.
Led by the American Public Transportation Association (APTA), a $30-million-a-year organization that puts out a stream of reports and press releases promoting more subsidies for transit, the transit industry has persuaded many that public transit relieves congestion, saves energy, reduces pollution, is a vital part of urban economies, and helps low-income people. In fact, in the vast majority of urban areas in the United States, none of these things are true.
Lumbering transit buses and railcars not only do not relieve congestion, they often use more road space than the number of automobiles they take off the road. They also use more energy and emit more greenhouse gases per passenger mile than the average car. In most urban areas they carry so few people that transit could disappear tomorrow and almost no one would notice (see Table 1). As for low-income people, studies have found that giving unemployed people access to a car will do far more to help them get and keep a job than providing subsidized transit.
In 2014, transit ridership reached 10.75 billion trips, its highest level since 1956. This is hardly a great achievement, however, as increased urban populations meant that annual transit trips per urban resident declined from 98 in 1956 to 42 in 2014. Yet the transit industry responded to this increased ridership by calling for more subsidies.
“The record ridership in 2014 is a clear message to Congress that the citizens of this country want expanded public transit services,” said APTA president Michael Melaniphy. “Congress needs to work together now to pass a long-term, well-funded surface transportation bill that invests in our country’s public transit infrastructure.”
From 2014 to 2016, nationwide ridership declined by 4.4 percent. While this may seem small, some urban areas have seen catastrophic losses in riders in the past few years. Since 2009, transit ridership has fallen by 37 percent in Wichita, 36 percent in Memphis, 31 percent in Sacramento and Richmond, 29 percent in Detroit, 28 percent in Bakersfield and Toledo, and 27 percent in Fresno. Transit systems in Atlanta, Cincinnati, Los Angeles, Milwaukee, St. Louis, and Washington have all suffered double-digit declines since 2009. Moreover, data for the first seven months of 2017 suggest that declines are accelerating. 5
Although agencies in these urban areas may depend on fares to cover only 20 to 40 percent of their operating costs, a 10 to 35 percent drop in that share of funding still hurts. Today, transit agencies are furiously lobbying for more subsidies to make up for declining revenues from transit riders. In other words, agency responses to both increases and decreases in ridership are to ask for more subsidies.
In many cases, the agencies plan to use those subsidies in ways that will impose heavy costs on taxpayers for decades to come, including by borrowing money to build new transit lines or rehabilitate old ones. Instead, they should be attempting to find a dignified path towards shutting down their systems in ways that minimize disruptions to transit riders and costs to taxpayers.
New Times, New Strategies
It is not easy to accept that new technologies are replacing one’s core business, a prospect that is currently facing many retailers, such as Sears. Private companies such as RadioShack and Blockbuster Video have been able to wind down their operations without fuss, but owing to its self-perception as serving the public good, the transit industry continues to feel entitled to its $50 billion in annual subsidies.
Instead of caving in to demands for more subsidies, elected officials and policymakers should begin to prepare for an orderly phase-out of publicly funded transit services as driverless cars become available in the next decade.
First, transit agencies should stop building rail transit. Buses made most rail transit obsolete nearly 90 years ago, which is why more than 1,000 American cities with streetcars replaced those rail lines with buses between 1910 and 1972. Cities and regions don’t need to be saddled with billions of dollars of debt from construction of new lines that, thanks to shared driverless cars, will end up carrying few riders.
Second, as existing rail lines wear out, transit agencies should replace them with buses. The costs of rehabilitating lines that have suffered from years of deferred maintenance is nearly as great as (if not greater than) the cost of building them in the first place. In most cases, even in such heavily used systems such as the Washington Metro, buses can provide equivalent service at a far lower cost.
Unlike rail infrastructure, buses can be sold if and when shared driverless cars replace transit services, and driverless cars can use the same pavement used by buses today, so unlike rail, buses do not represent an irreversible commitment of resources. New York City is the one place where maintaining existing rail lines may make sense, but even there the use of electric buses in subway tunnels should be considered an alternative to spending billions on rehabilitating rail infrastructure.
Third, transit agencies that want to offer competitive services before driverless cars become available should plan express buses or bus rapid-transit lines that use lanes shared with other traffic. Dedicating existing lanes to buses increases congestion, while use of high-occupancy vehicle (HOV) or high-occupancy toll lanes can allow buses to avoid congestion while providing congestion relief for everyone else. As previously noted, very few corridors in the United States generate enough transit riders to require dedicated bus lanes, and most of those places are already served by heavy-rail transit, such as in New York and a few other cities.
Fourth, transit agencies should make a priority of paying down their debts and unfunded pension and health care obligations. Agencies should not saddle future taxpayers with those obligations, especially if there is a real chance that existing transit systems will be completely replaced by shared driverless vehicles.
Fifth, instead of subsidizing all transit riders, transit agencies should target future subsidies to low-income people. Census data reveal that a higher percentage of people who earn more than $75,000 a year take transit than any other income class. To the extent people believe that low-income people can benefit from transportation assistance, such assistance should be in the form of vouchers (similar to food stamps) that can be used with any transportation provider, from a ride-hailing service to an airline.
Conclusion
Transportation is a vital part of the American economy. Public transit, however, is not, especially outside of New York City, and shared driverless cars will make it even more redundant.
Whether or not shared driverless cars will put transit agencies out of business in the next decade, those agencies should stop wasting money on expensive and noncompetitive transit services and focus on providing basic, cost-effective services for those who need transit the most, while putting their economic houses in order by reducing maintenance backlogs, debts, and unfunded obligations.
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