David R. Henderson  

Britschgi on Mass Transit

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EconTalk and Chalk: Implementa... Wise Wager?...

Reason assistant editor Christian Britschgi has posted an excellent piece critiquing another piece in the New York Times by writer Steven Hill.

Britschgi makes multiple good points. Here's one:

For starters, for all that he writes about Uber's low fares, Hill spills not a drop of ink on the fact that those public transportation services are themselves subsidized up to their eyeballs. Unlike Uber, whose losses are covered by shareholders voluntarily sinking cash into the company, transit subsidies come straight from taxpayers, whether they ride it or not.

I am aware of no transit agency in the United States that turns a profit. Few are even able to cover half of their operating expenses with traditional farebox revenue.

Take New York's Metropolitan Transit Authority (MTA), which runs the city's buses and subway system. It's the most heavily used transit system in the country, and it services America's most densely populated major city, yet it covers only 40 percent of its operating expenses through with farebox revenue.

Hill mentions a colleague who expresses a preference for a $5 Uber ride over a $2.25 bus ride. Hill asks his friend whether he'd make the same choice if that Uber ride was an unsubsidized $10. Given that MTA's bus service covers less than a quarter of its operating expenses with ticket sales, perhaps Hill should have asked his colleague whether he would prefer a $10 Uber ride or a $10 ride on the bus.


I recommend reading the whole thing.

I've been following Britschgi's work for a number of weeks now and he hits it out of the park a lot with both factual backing and clear writing.

UPDATE:
Christian Britschgi responded to my query about ad revenue based on commenter JFA's query. Christian writes:
[T]he stats I relied for my article came from MTA's 2018 financial plan. It lists yearly ad revenue from 2017 for the whole system at about $148 million. That's compared to about $6 billion in farebox revenue, so a pretty small portion of the budget overall. Ad revenue is included in "other revenue" which is about 4 percent of overall revenue.

He also gives a link for those who want to look further.


Comments and Sharing






COMMENTS (15 to date)
John writes:

Following up on the subway post, these are great points. Actually for anyone who's interested, some of the most obscene wastes of public funds are the commuter railways. Most egregious example I know is Sounder North in Seattle, subsidizing 630 daily travelers an average of $8k per year each(!).

Per my comment on the earlier post, it's worth noting that Hong Kong and Tokyo are able to run operationally profitable transit services. We should be demanding the same here!

I actually think focusing on transit does lose site of the fact that all transportation is highly subsidized (would love to bring it all to zero and see what happens!). But transit in the US certainly has inexplicably high costs both for both operations and capital investments, which makes it particularly hard to justify further investment until those problems can be solved.

Bob Knaus writes:

In the late 90's, the consulting firm I worked for did an engagement with the Vancounver (WA) transit agency. I interviewed the Director of Finance, who told me their farebox recovery ratio was 10% on bus routes. I asked "Why don't you just make the bus rides free, and eliminate all this accounting work?" He replied "The Board has considered it more than once, but we didn't want our buses to become the only dry place on a rainy day."

michael writes:

I think externalities are important here. Buses or trams are often electric or "clean" fuel. Pedestrians can cross streetcar tracks more easily than multi-lane roads, as trams have (much) more space between them. The externalities of Uber are the same as for normal cars, except for requiring parking. They still contribute to congestion and decrease localized air quality.

Matthias Görgens writes:

Michael, other externalities are increased land rents next to eg subway stations. A land value tax could rationally capture those and finance (some of) these projects, and it would not be subsidies.

Mark Bahner writes:
Buses or trams are often electric or "clean" fuel.

The buses in this part of NC are typically diesel...though Chapel Hill and Raleigh Durham Airport acquired a few all-electric buses in 2017.

The externalities of Uber are the same as for normal cars, except for requiring parking. They still contribute to congestion and decrease localized air quality.

In addition, my personal observations of the buses operating in Durham is that they are generally sparsely occupied. A diesel bus operating partly occupied is arguably much worse for air quality per mile traveled than a fleet of gasoline cars traveling the same number of passenger-miles. (A diesel bus probably emits thousands of times more soot per mile traveled than a fleet of gasoline cars driving the same number of passenger-miles.)

Mark Z writes:

On the question of externalities, it is possible (though I have only speculation to back up the theory) that ride-sharing reduces traffic density and driving in general. For example, I don't own a car, in part because Uber makes it possible to drive places when/where I need a car; and if something's nearby, I walk or bike or occasionally take the bus (my bus system is abysmal though).

If it weren't for Uber, I'd likely need a car for some things; and if I had a car, I'd use it a lot more for other things for which I now do not use a car. So I can see Uber et al. overall reducing the amount of driving done simply by reducing the rate of car ownership and thereby reducing gratuitous driving. Of course, to my knowledge, empirical evidence is inconclusive on the question of whether Uber increases or decreases driving overall.

mariorossi writes:

Doesn't mass transit subsidy private transport as well anyway? Without mass transit, New York would be complete gridlock. You'd pay not only in additional fares and parking, but in commute time as well. So it's hard to even know who benefits the most from mass transit subsidies. I am not convinced mass transit users are the main beneficiary.

Building enough road infrastructure to support a city like New York without bus/transit is likely physically impossible. Such high density city would likely be impossible. Is that really something to wish for? Such high density cities seem like massive economic engines to me. I really doubt mass transit doesn't pay for itself in that optic...

If I look at real estate prices (which are surely a significant market signal), I would think almost all trasit projects are breaking even. It's true that cost and benefits are not fairly allocated (and that can cause misallocation), but I am skeptical the total impact is negative.

Alan Goldhammer writes:

@mariorossi - your point is spot on. During my working career in Washington DC I rode Metro into work everyday. I was fortunate to live within walking distance and thankful that I did not have to endure the drive into town. Bus/subway transit works best in high density population/work areas. Parking for cars in such areas is limited and the potential for traffic gridlock is high.

In the DC area we have seen considerable real estate development around all the Metro stations. Unfortunately, the original planners of Metro (which began planning in the 1960s) did not anticipate the level of ridership and hence the two track system is sometimes prone to large delays if one of the tracks goes out of service.

Ed Hanson writes:

Did I calculate this right, over 7 billion dollars a year subsidy? That is not subsidy but redistribution. If transit is that important to New York, and I suppose it is, then people who use it will out of necessity continue to at a much higher cost. The subsidy can than be put into the system making it performance more reliable and, safe, and enjoyable for passengers. It seems to have become into a lock system of bureaucratic inertia.

Its a shame that it did not follow the Japanese model of private transit with no current subsidy and being profitable and extremely efficient.

Not to kick New York around, the Denver metropolitan transit district has terrible number of ridership, whose tickets have a higher subsidy. And can seem to pass new taxation and bonding at anytime to continue the farce. All this without the near the density problems restricting construction as New York.

JFA writes:

So 40% is covered via fares. How much is covered by advertisements? Probably not the rest but I would imagine a good amount.

David R Henderson writes:

@JFA,
How much is covered by advertisements? Probably not the rest but I would imagine a good amount.
Ah. Good point.

Floccina writes:

But what is the value of the area for the amount of time of road used? I think congestion charges based on road are used might be good. Tiny cars (like this: http://www.commutercars.com/) IMO would be best.

Alan Goldhammer writes:

JFA writes,

So 40% is covered via fares. How much is covered by advertisements? Probably not the rest but I would imagine a good amount.
I don't know the figure for New York but WMATA (the Washington DC system) brought in just over $20M for the one FY I could find with an estimated $24M for the current year. The link also discusses ways to increase such revenues and there is a proposal for selling naming rights; if they can do it for sports stadia, why not Metro stops?

Thaomas writes:

So long as vehicles are not charged for the congestion externalities that they cause when transiting and parking along public roads, it is hard to know if public transit systems are on balanced subsidized or not. With congestion pricing, there would be no need for public ownership, although one might still want to subsidize mobility for certain groups

Seppo writes:

What is the increase in land valuations and real estate taxes made possible by mass transit network in New York and similar cities?

What is the value of land free'ed by this increased density?

I think this question about mass transit is way more complex than just looking at ticket prices.

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