Business Logistics 420 Public Transportation Lectures 10 : Description and Critique of U.S. Federal Transit Programs

Lecture Objectives Provide an overview of the history of federal policy and programs that provide financial support for public transit Provide a brief description of current federal programs Provide an appreciation of the pro and negative transit funding arguments

History of Federal Role in Transit Funding The Early Period –Prior to just talk about the condition of transit -- especially the railroad – First Government Funding for R&D HUD (Dept. of Housing and Urban Development) Demonstration Grants $25 million)

History of Federal Role (Continued) Urban Mass Transportation Act The major piece of federal legislation –Capital Assistance -- 2/3 federal share –Demonstration grants % federal –University grants % federal –Planning grants -- 80% federal Major funding increase and capital share changed to 80%

History of the Federal Role (Continued) Federal Operating Assistance for Urban Areas –Major resistance to this move –Funds distributed to urban areas by formula based on population and population density –Federal share up to 50% Operating Assistance for rural areas under 50,000 population)

History of the Federal Role (Continued) Gas tax used for the first time to fund transit ($`0.01/gal. Placed in transit trust fund) Additional gas tax dedicated to transit ISTEA (Intermodal Surface Transportation Efficiency Act) allowed for “flexing” of highway funds for transit

History of the Federal Role (Continued) ISTEA also changed name of Urban Mass Transportation Administration to the Federal Transit Administration additional $.02 for transit TEA 21 of 1998 (Transportation Equity Act) preserved all transit programs and greatly increased funding

Typical Federal Transit Budget (Fiscal 2000) Total FTA Budget $5.8 billion Formula Grants (Capital or operating)$2.8 billion Discretionary Capital$2.5 billion Planning and Research$.1 billion

Criticism of Federal Programs Need to distinguish between capital and operating Criticism of Capital Programs –Gold plated systems (due to low local share) –Too much emphasis on rail (again, due to too little local funding) –Premature replacement of vehicles (because capital money was easy to obtain)

Criticism of Federal Programs (Continued) Criticism of Operating Assistance Programs –Philosophical A local, not a federal function Subsidy level depends on service level and fare policies that are local, therefore, subsidies should be local Reduces management incentives for efficiency

Criticism of Federal Programs (Continued) Criticism of Operating Assistance Programs –Practical Large portion of subsidy (68%) consumed by higher production costs -- most notably driver labor, benefits, administration Another significant portion (28%) used to cover inappropriately low fares and low ridership service to suburbs 4% used to cover general decline in ridership

False Dreams and Broken Promises -- An Anti-Transit Point of View Transit subsidies have not increased ridership Transit subsidies have not reduced congestion or air pollution or save energy Subsidies have not helped to revitalize cities (uses Buffalo as an example, but this is a poor example) Transit does not benefit the poor

“A Better” Approach Introduce competition in the provision of transit –Periodically bid out all transit services –Public and private sector can bid –Competition will reduce waste, improve efficiency

A Pro-Transit Argument: Does Transit Work? A Conservative Reappraisal The “1%” argument against transit is faulty Total ridership is the wrong way to measure transit Transit works where it is high quality and available Competition in providing service would be beneficial

Study Questions What are the key benefits derived from public transit service that make transit a worthy recipient of public funding? Briefly trace the history of federal involvement in public transit funding Identify key federal funding programs, what the funds can be used for and the federal share provided

Study Questions What are user-side subsidies? How do they work? What are the pros and cons of using this approach to providing transit subsidies? What are the arguments against federal funding of transit capital and operating expenses, or transit funding in general? What case can be made for funding transit according to Weyrich and Lind?