Tuesday, September 1, 2009

Investment in Expanding Public Transit is a Tax Black Hole

Although it does not take a genius to realize that investment in public transportation in the U.S. is a counterproductive exercise, the pace of that investment continues unabated and the U.S. is determined to keep throwing good money after bad money in the futile effort that the trend will reverse itself.

What trend you ask? The trend of the share of trips done using public transit, or the market share of public transit. In 1910 it stood at 93.8% meaning that 94 out of 100 trips were made on public transportation. Forty years later, 1950, it dropped to 18.3%. Another 40 years later, 1990, it dropped to 1.9% and presently is somewhere around 1.6%. For every 1,000 trips, only 16 of those trips in the nation are done using public transit. The detailed trend can be found here: http://www.publicpurpose.com/ut-usptshare45.pdf

The companion story is public subsidy. How much were the local, state and federal taxes that in addition to fares helped public transit break even? There was good news, once upon a time. Until the late 1950s these systems were profitable and owned and operated by private companies. But after WWII their profits diminished and then the public took over (or created subsidized competing systems and drove the private operators out of business. )

This was the beginning of a large black hole of taxation. In 1970, the taxpayer subsidy to move one person one mile on public transit was 27 cents, so for a 10 mile trip the public paid $2.7 for each passenger who made that trip. That was the good news too because by the turn of the millennium, the public’s taxes paid about one dollar per passenger mile so the average 10 mile trip required $10 in taxes in order to sustain public transit. These are inflation adjusted costs. The trend of subsidy can be found here: http://www.publicpurpose.com/ut-ussby.pdf

An additional highly worrisome trend is the state of serviceability and safety of large existing rail and bus systems in the nation. Several hundred billion dollars are required for deferred maintenance, component replacements and technology upgrades of existing large systems in New York City, Washington DC, Boston, Atlanta, Chicago and San Francisco.

Ignorance of these trends creates a major mismatch in the allocation of funds for urban transportation. Hawaii mirrors this well. For example, between 1998 and 2008, Hawaii received $1.8 billion in federal funds for road, highway and bridge improvements, and $475 million for public transit. Even if Hawaii’s public transit share is three times as high as the national average, say 5% (this is a generous approximation), then public transit should have received 5% or so of the federal funds. Not so. It received 21%!

Another way to look at this is that we spend 21% on transit that serves 5% of the trips we make, and we spend 79% on roads that serve 95% of the trips.

The result of this funding mismatch is a decent bus system on Oahu that relatively few use, and terrible roads on Oahu that are counterproductive for our economy, and present an unsafe and unkempt condition for residents and tourists alike. Tiny sums have been allocated to effective alternatives such as bikeways and telecommuting. Or a ferry across Pearl Harbor.

If the proposed rail goes into construction and operation, then the share of funding for public transit will grow to about 40%. What would this accomplish? Nothing for the neighboring islands. On Oahu, public transit market share will grow 1%, from 6% to 7% over 20 years, if you believe the city's sales numbers for the proposed rail.

Nationally billions of dollars are likely to be spent in the next few years on public transit. Their net effect would be to increase market share by a tiny proportion. This is one of the worst tax black holes one can develop and a terrible transportation investment policy for the nation.