Business Logistics 420 Public Transportation

1
Business Logistics 420Public Transportation

• Lectures 10 Description and Critique of U.S.
  Federal Transit Programs

2
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

3
History of Federal Role in Transit Funding

• The Early Period
• Prior to 1960 -- just talk about the condition of
  transit -- especially the railroad
• 1960 -- First Government Funding for RD HUD
  (Dept. of Housing and Urban Development)
  Demonstration Grants 25 million)

4
History of Federal Role (Continued)

• 1964 -- Urban Mass Transportation ActThe major
  piece of federal legislation
• Capital Assistance -- 2/3 federal share
• Demonstration grants -- 100 federal
• University grants -- 100 federal
• Planning grants -- 80 federal
• 1970 -- Major funding increase and capital
  share changed to 80

5
History of the Federal Role (Continued)

• 1974 -- 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
• 1978 -- Operating Assistance for rural areas
  under 50,000 population)

6
History of the Federal Role (Continued)

• 1982 -- Gas tax used for the first time to fund
  transit (0.01/gal. Placed in transit trust
  fund)
• 1990 -- Additional gas tax dedicated to transit
• 1991 -- ISTEA (Intermodal Surface Transportation
  Efficiency Act) allowed for flexing of highway
  funds for transit

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History of the Federal Role (Continued)

• ISTEA also changed name of Urban Mass
  Transportation Administration to the Federal
  Transit Administration
• 1992 -- additional .02 for transit
• TEA 21 of 1998 (Transportation Equity Act)
  preserved all transit programs and greatly
  increased funding

8
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

9
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)

10
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

11
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

12
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

13
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

14
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

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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

16
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?