Monday, April 16, 2007

How Much Financial Support for Public Transit is Enough?

The key premise of the RTA's Moving Beyond Congestion effort and the other related initiatives is that the region's public transit system is underfunded. It is undeniable that current operating funding levels are insufficient to support the current service levels, at least under the current fare and labor cost structures. But how much funding is sufficient? What are the indicia of sufficient funding for a public transit system in a given urban area? Is there an optimal level of funding relative to factors such as population density, urban wealth and the like?

A recent report on the gross domestic products (GDP) of the world's cities prompted me to attempt to derive one benchmark. I took the top 10 U.S. cities on the GDP list and then obtained the 2005 operating expenditures figures for the public transit agencies serving those cities, net of depreciation and debt service. (I excluded San Francisco/Oakland because of the difficulty in obtain operating expenditure information from the multiple agencies serving that area.) I then calculated the amount of money spent to operate each transit system as a percentage of the GDP of the urban area served by the system.

Here are the results (in billions of dollars):

New York
GDP $1133
Transit Operating Expenses $6.347
Percent 0.56%

Los Angeles
GDP $639
Transit Operating Expenses $1.053
Percent 0.16%

GDP $460
Transit Operating Expenses $1.879
Percent 0.41%

GDP $312
Transit Operating Expenses $0.903
Percent 0.29%

Washington D.C.
GDP $299
Transit Operating Expenses $0.978
Percent 0.33%

GDP $290
Transit Operating Expenses $0.967
Percent 0.33%

Dallas/Fort Worth
GDP $268
Transit Operating Expenses $0.322
Percent 0.12%

GDP $236
Transit Operating Expenses $0.381
Percent 0.16%

GDP $235
Transit Operating Expenses $0.323
Percent 0.14%

The analysis indicates that the amount spent to operate the Chicago area public transit system relative to this area's GDP is in line with the amounts spent on public transit by other urban areas relative to their GDPs. Indeed, it appears that this area invests a greater percentage of regional GDP in public transit than all other large U.S. cities except New York. The analysis certainly does not support the notion that the transit system in this area is underfunded relative to the transit systems in other U.S. urban areas.

I stress that this is a very rough analysis. I'm not a trained accountant and the financial statements from the transit agencies are not laid out in the same way. Consequently, my operating expense figures could be off. Likewise, I cannot vouch for the accuracy of the GDP figures, which come from PricewaterhouseCoopers. Certainly, transit system operating expenditures as a percentage of urban area GDP is but one of many possible measures of the optimal level of public transit funding in an urban area.

My primary purpose in putting forth this analysis, however, is to encourage some capable and enterprising souls to do much more thorough and rigorous analyses to help answer the question of what is the optimal level of public transit funding in this region.

It is, after all, quite possible for an urban area (and state) to over-invest in public transit. Putting a significantly larger share of an urban area's wealth into public transit relative to other urban areas may put that area at a competitive disadvantage. After a certain level of investment in public transit, there may be other public investments--both in hard assets (e.g., school buildings) and in human capital (e.g., health care)--that may provide a greater return for the urban area than more money in public transit.

Are we currently at a level of investment in public transit in the the Chicago area such that the expanded investments in education and health care proposed by the Governor and others will give this area a greater return than an increased level of investment in public transit?


Anonymous said...

real close--now index the supply to gdp per trips/all modes and per capita and you're there.....

Moderator said...


You are teasing us. It sounds like you have done this analysis. Please share the results and spare me the trouble of hours of rooting around the National Transit Database.


Anonymous said...

Ask PB. Alternatively--ask the RTA.

Rich S said...

I'd be out of my depth if I tried to do any detailed fiscal analysis, but as a general comment I'd say: now how do these levels compare with transit funding in Canada and Europe? When I ride the CTA, and when I look at the minimal public transit in my outlying city neighborhood (one marginally adequate north-south bus line and three east-west lines so widely spaced, so limited in service hours, and so unreliable that they amount to no practical east-west transit), I think it will be many years (and the replacement of nearly every politician in City Hall, Springfield, and Washington) before we have to wonder if we're investing enough.

Rich S said...

Oh, and I meant to add, many thanks for changing the blog's color scheme!

Justin said...

Huh - interesting stuff. I bet transit funding is more a function of government decisions than an inevitability of economic activity.

Also, remember transit's relationship with other urban transport modes. A higher % GDP spending on transit might mean less money spent on passenger transport altogether, and by extension "unlock" a larger GDP - check out slide 8.

Anonymous said...

It's unclear that GDP is a particularly relevant variable.

The need for public transit funding will vary with the differing costs of doing business (the public transit business, specifically) in different cities and the demand for public transit services. Each of these will vary widely from city to city, depending on the geography of the area served, the age of whatever infrastructure needs to be maintained, the private opportunity costs of not using public transit (i.e., driving or getting around less), and the public costs of not having public transit (e.g., greater auto traffic congestion and air quality problems that are mitigated by public transit).

A better way of measuring how much funding is "adequate" would be to compute the funding needed to meet a given set of service standards for "adequate" public transit.

For example, one might say that "adequate" public transit means ensuring that 100% of the city has a public transit route within a X minute walk, with a service frequency of at least once every Y minutes, with an average travel times of Z miles per hour, with all routes being accessible, etc. The "adequate" service standard would likely vary with the time of day.

Jake said...

true enough, "the transit system in this area is [not] underfunded relative to the transit systems in other U.S. urban areas". the reason this is a meaningless comparison is that public transit is underfunded *everywhere* in the united states. even new york outside manhattan is short on transit. it's not hard to beat the almost nonexistent transit systems in atlanta and houston.

public transit is an urgent priority because cars are bad for public health (pollution, accidents, making people more sedentary), they make cities less livable (sprawl, parking lots, strip malls), and worst of all they're one of the biggest causes of global warming. when we figure the financial benefits of transit, we have to include all the savings we get from lower health insurance costs, less money needed to build roads, and lower longterm costs to address global warming.

to greatly increase the transit budget we don't need to take money away from schools and hospitals. we just need to raise taxes on gas and divert the billions and billions of dollars we spend building and maintaining roads.

pc said...

re: Justin's point about total personal transportation costs as a percentage of GDP. CNT has some interesting analysis regarding "transportation affordability" -- personal expenditures on transportation in different cities. It appears to be inversely correlated with housing expenditures. I seem to recall that they've also noted that spending on autos is export and capital intensive: most money spent on cars is sent outside the region (Detroit, Saudi Arabia). Compare that with transit, whose primary expenditure is labor which has a much higher local multiplier value.