Subsidies As Usual for Mass Transit?

subsidiesby James A. Bacon

Glen Bottoms, executive director of the American Conservative Center for Public Transportation (ACCPT), takes exception to my recent post, “Eviscerating Rail Transit.” Although he doesn’t budge me from my main conclusion — that we need to stop building rail transit projects that cannot pay for themselves — he raises a number of worthwhile points that need to be part of any intelligent debate on the subject. Herewith is a slightly amended version of his e-mail communication:

Yep, rail transit has a deferred maintenance backlog but which is centered on heavy rail systems in the Northeast (and Chicago) that were built in early 1900s and woefully undercapitalized whether under private or public ownership.  Yes, Washington’s Metro has a deferred maintenance problem because its finances are subject to vagaries of its numerous funding partners in Maryland, the District of Columbia and Virginia.  Mindful of Mr. [Randal] O’Toole’s  “most devastating point” [that rail transit and streetcar enterprises in the United States have accumulated a $77 billion maintenance backlog] I might point out that U.S. highways have the same problem yet we see state DOT’s pursuing mega-projects such as the Columbia River Crossing (Oregon/Washington), and the Louisville bridges project (multiple bridges now predicted to carry less traffic than the original single bridge they replace) to name a few.  Need I mention Governor McDonnell’s highway 460 boondoggle or the proposed Charlottesville bypass using outdated traffic data to justify its construction?  I won’t get into the “Western Bypass” debacle.

FHWA figures show that highways cover (from user taxes and fees) only 51% of the cost of highways, the rest coming from general revenues from federal, state and local coffers.  Rail transit in this country covers about 54% of operating costs (buses about 28%).  While you are right that fares do not begin to cover capital costs, the economic development and under-girding of economic output in urban areas more than justify the construction of permanent rail facilities. 

While Mr. O’Toole loves to quote the statistic that transit carries a mere 2 -3% of all trips in a typical region, it truly has no relevance.  You can only take transit where transit exists.  And fully 50% of urban Americans do not have acceptable access to transit.  When you examine transit usage on a corridor by corridor basis, you get an entirely different picture.   For example, transit carries about 40% of rush hour traffic into Washington, D.C.  The BART strike, while regrettable, clearly demonstrates the importance of the BART rail system to regional mobility.   

Yes, transit is subsidized.  But so is every other mode in this country.  Supporting rail transit has many benefits.  [ACCPT Director] Bill Lind and I support rail transit (as did our mentor, Paul Weyrich) because it facilitates economic development, promotes pedestrian traffic and is a key ingredient in fostering cohesive neighborhoods.  It also reduces dependence on foreign oil.  Did Mr. O’Toole mention rail-sparked development?  No, of course not, because it does not fit his paradigm. 

Bill Lind and I collaborated with Rick Gustafson, president, Portland Streetcar and Eric Hovee, a Portland-based economic consultant to answer Randy O’Toole on many of the points he made in a critique of the Portland Streetcar project.  Click here to see our rebuttal to his study.  I think our arguments will give you another perspective and answers to Mr. O’Toole’s claims stated in your article.   I would update one statistic from our rebuttal.  The Portland Streetcar is now carrying almost 17,000 weekday passengers, having recovered nicely from the discontinuance of the fare free zone in downtown Portland.

While I find little that I can agree with in your article, there is one statement that I would agree is spot on:  “Unionized workforces hamper productivity and run up massive unfunded pension liabilities.”  I would point out that many transit services are well-run, efficiently managed, and have reasonable pension programs.  However, others are struggling mightily to get their pension programs under control.  They face the debilitating issue that politicians elected with the assistance of public employee unions are loathe to try to bring these pension programs under control.  BART is a good example of this, especially with regard to work rules.  But if the day of reckoning might be delayed, it cannot be avoided, even by municipalities.  Detroit is living proof of that.

Bottoms is absolutely right — road and highway projects in the U.S., and especially Virginia, are heavily subsidized. I railed non-stop against Governor Bob McDonnell’s transportation-funding plan that took road financing even further away from a user-pays system, and I have devoted extensive digital ink to criticizing the very Virginia road projects that Bottoms cites. On those matters, we are in 100% agreement.

Here’s the difference: Where Bottoms regards subsidies for roads and highways as a justification for subsidies to mass transit, I argue that we need to eliminate subsidies for all modes of transportation so projects can compete on a level playing field. If we eliminated subsidies for roads and transit, unsubsidized transit could well become more competitive than it is today. But that’s just my hunch. We can’t  know until we eliminate the subsidies.

Forcing transit to compete on equal terms, I suspect, would expose the desperate need to reform monopolistic, government-owned transit enterprises. We must eliminate the waste and inefficiency associated with union workforces. We must support rail with densification and urban design around rail stations to build ridership. We must address the obstinate refusal to raise fares to market rates, which short-changes revenue and leads to chronic under-funding of maintenance. Finally, we must capture some of the economic value created by rail projects instead of allowing lucky (or shrewd, or politically connected) property owners to keep it all. If we could address all of those challenges and eliminate all transportation subsidies, I believe that we would see a rail transit renaissance.

Conversely, maintaining Subsidies As Usual is unsustainable. Absent reform, we will continue to squander capital on road and transit boondoggles alike. State and local governments will build ever-growing maintenance & operations liabilities that they can ill afford. It is folly to make our transportation system a permanent ward of  increasingly indebted and financially stressed governments.

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17 responses to “Subsidies As Usual for Mass Transit?”

  1. our transportation funding regimes are just as dysfunctional and fouled up as our health care system and schools are.

    a key difference is that mobility is a fundamental concept and commerce infrastructure is one of the things that differentiates this country’s economy from others.

    We have a huge network of pipelines – and virtually all of them were made possible by government-sanctioned eminent domain. Our airports similarly are made possible by Federal, not private processes.

    the rails – most of them .. the rights-of-ways were either given to them by the Fed govt or made possible by govt eminent domain.

    same thing for roads … virtually no roads in this country were built privately with willing seller/willing buyer right of way acquisition.

    so it’s a myth to think that our commerce infrastructure is not subsidized.

    Fed Ex and UPS move their packages primarily on the highways rather than rail – in large part because the roads are ‘free’ whereas CSX and NS are going to charge to move those packages.

    Amtrak has to pay CSX to move passengers on “their” rail that was a direct result of the Federal Govt.

    but buses (like all common carriers) are free to use the public highway system – that is not only subsidized in terms of operations but was obtained on the cheap via eminent domain – something that would have been a huge cost if it had been obtained via willing seller/willing buyer means.

    If 18-wheelers had to pay tolls, would we move more goods by rail?

    probably not – as the cheaper-to-use highways have resulted in the railroad companies abandoning all but the most lucrative routes – so the reality is that a package that originates in Oregon most likely is going to get to Lynchburg on a 18-wheeler… not a train.

    all of these players have an interest in the current system – even if it is dysfunctional and like the health care system – any prospective changes to it is going to bring out the objectors.

    but the criteria to which we hold transit and rail to – is not the same criteria that we hold roads to… and that’s pretty clear I think

  2. reed fawell III Avatar
    reed fawell III

    America has a cultural problem with mass transit by rail.

    This became apparent to me when I saw Europe by rail in the 1960s. Back then a single Eurail travel pass took one seamlessly from the southern tip of Spain to far north of the Arctic Circle in Norway and Sweden. And it carried me most everywhere in between – including for example, across East Germany to West Berlin and across France to Brittany on the English Channel (long before the Chunnel that now connect Britain and France.

    And the Paris subway of the 1960s featured underground stations that were art galleries in miniature served by the quiet hiss to subways seemingly transported on air. Whether across town or across the continent, Europe had its act together, all of its complex rail transit system build throughout a Europe devastated by a world war only two decades earlier.

    Ever since then America has by and large only limped along on its seemingly ever troubled rail systems. And time does not seem to fix our cultural shortcomings and incompetence, but make them worse.

    A few of the many examples include: A DC subway system that is not financially viably because we are unable to build sufficient mixed use densities close enough to its subways stops to support the overall system, or operate it at anywhere close to its potential capacity. An Arlington County that cannot build several miles of trolley up Columbia Pike without spending 20 million dollars on 22 above ground “trolley stops.” A airport in Loudoun that spends $1.6 billion dollars on a Crystal Mover System to move passengers 2500 feet to airplane gates, a project so beset by troubles that only half of it gets built for twice the cost projections for the whole.

    Why can’t we fix this? The reasons are many. For one thing, our regulations and approval processes have become absurdly burdensome and are highly subject of undo political manipulation. Market studies and feasibility studies are corrupted to achieve conclusions that based not on facts but on special interest mandates and diktat.

    Our design, construction and management systems are also broken and corrupt. For example, Arlington says it takes 18 months to build a bus stop. 25 years ago I built a major high rise building in Arlington in 18 months. Management and construction processes and oversights now are designed to milk the job of public funds for the benefit of contractors of all sorts and varieties instead of being used for the purpose of building infrastructure on time & budget at the best price for the public benefit.

    Here again the reasons are many. One rampantly growing cause of all this dysfunction is the notion the public monies are not spend to build things but to stimulate the economy. So if there are no shovel ready projects we pretend there are billions of dollars worth of shovel ready projects and spend the money on those imaginary projects. This corrupts the whole system. It legalizes theft of public monies that go into peoples pockets rather than into buying concrete and building it into something useful, needed, and necessary. This wastes vast sums and it corrupts our public and private institutions, our competencies, our ethics, and our society.

    1. reed fawell III Avatar
      reed fawell III

      Despite these chronic problems encountered today, the power of mass transit (including subway and trolley) to jump-start and maintain vibrant mixed use urban growth and/or revitalize and failed and dying urban communities is firmly established and based on historic fact.

      The proven success of the trolley goes back into the nineteenth century in the Washington DC region. In the late 19th century the trolley:

      1/ revitalized the old town of Rosslyn in Arlington County,

      2/ it almost single handed powered Georgetown’s spread “up the hill and into the highlands northward above and beyond the Potomac River, and

      3/ at this same time, the brand new trolley going across the first bridge over Rock Creek opened up North West Washington to far denser development than otherwise possible, all the way to the Maryland line and beyond, including Chevy Chase to Chevy Chase Lake some six miles into Maryland.

      The trolley drove this highly successful urban growth so that it occurred earlier, faster, and with far more density than otherwise possible.

      Of course the subway was later major a catalyst to reviving the new down town Arlington, an event that also would have taken far longer, and suffered far more pain and loss before success without the subway. I say this as someone who build one of the first office buildings along that subway line.

      And now, in hindsight, it was likely a big mistake to allow the rise of the auto to fully replace the trolley on DC streets after the war. Facts bear this out. For the trolley not only then, but also today, can supplement the auto and subways and do things they cannot do, filling a roll between the auto and subway that fuels and sustains successful mixed use development. It can often add into the synergistic mix of transport options.

      But success is in the details that are great and highly varied. They ‘re different in each case so good integration into the particular scheme of each community is always a challenge that demands customized solutions and requires the tight discipline and management to get a synergistic result.

      So its like finding how parking fits into a much larger and more complex picture. For a sense of that see:

      1. the original suburb machine was rail not the auto.

        Rail formed hub and spoke networks radiating out from many urban areas and stations were built in the suburbs – because while some preferred city life, others preferred he suburbs.

        there were ring/spoke roads but they had so many at-grade intersections that they were not as easily used to get to the suburbs.

        rail never got configured as “rings” around urban areas.

        the “rings”/beltways came with the interstates.

        but the point is that cities and compact development did come first and suburbs evolved later and they did so because – that’s what a significant number of people wanted… i.e. a demand…. and the rails initiated it.

        I’ve come to believe that it was the advent of the interstates – not the auto by itself that changed the game.

        the interstates and the beltways became a “disruptive” force in mobility.

        and the beltway concept has grown beyond the US – it’s fairly standard now in virtually every civilized country.

        1. reed fawell III Avatar
          reed fawell III

          Yes, heavy rail came first, carrying folks long distances.

          Next came light rail in late 1900s. The electric trolley expanded cities for two reasons. Trolleys could carry more people better than a wagon or carriage. Just as importantly, it could carry more people better up steep grades. The latter fact expanded the town of Georgetown and the areas around Dupont Circle DC, up into the highlands of NW Washington DC. (same thing happened across the river in Arlington)

          The auto came later, particularly by reason of its cost to buy and operate. So the trolley was critical until after the world war 11. After that sprawl started its broader spread outward. In the early 1950s, I recall clutter stop and go traffic through DC all the way through Manassas, before you hit a clear road south on 29 to Warrenton Va.

          In 1954 or 55, I recall seeing my first Shopping Center. It was at Seven Corners, va, and built before the advent of the Interstate put sprawl into high gear a few years later.

    2. reed fawell III Avatar
      reed fawell III

      For other examples of our lack of ability to responsibly build public mass transportation infrastructure consider this.

      In 2006 the Metropolitan Washington Airports authority assured the public that should it manage the Dulles Toll Road then its tolls would increase at the rate of inflation to pay off the Silver Line Revenue bonds.

      The Average toll people pay today is 61 cents, MWAA said to Reston officials at the time. Under their proposal to take control the average toll rates would raise to $2.20 in 50 years, MWAA assured.

      Despite these assurances rates began to rise in 2008. By 2013 WMAA raised the tolls by 50% to $2.75.

      In January of 2014 the tolls will go up to $3.50. (some 85 years ahead of schedule.) This will pay for Silver Line construction cost overruns and also non Silver Line work such as the Dulles Loop Road to pay for what Dulles airport needs to jump-start its air cargo hub, all contrary to assurances to the public in 2006.

      1. reed fawell III Avatar
        reed fawell III

        The details of these MWAA assurances to the Reston Planning and Zoning Committee can be found in a march 2006 Connection newspaper article titled MWAA Promotes Dulles Rail Proposal.

      2. the interesting thing about the DTR beyond the audacity of the MWAA folks is that in the tollroad world there are supply/demand curves and at least in theory, there is a point where increased tolls bring in LESS money because the higher prices drives people to other alternatives.

        this was a big worry with the ICC when their studies showed that people
        would not use the road if the toll went too high so the toll has not advanced like the DTR toll has.

        it looks like the folks that use the DTR have few if any viable alternatives for their commute – which also, in my mind, offers insight on possible future toll roads that would connect newly-developed land in the exurbs to NoVa.

        1. reed fawell III Avatar
          reed fawell III

          Despite their constant claims to the contrary, MWAA jacks up the tolls on the Dulles Toll Road as necessary to pay for projects deemed helpful to the airport, such as the Dulles Loop Road west of the airport. This will serve the airport’s planned air cargo hub.

          To meet its budgets, MWAA manipulates traffic on the toll road to jack up toll prices. This is done by rising tolls until high tolls drives traffic off the toll road. Then it waits until off toll road congestion has become so intolerable, commuters are forced back onto the toll road despite the higher toll costs. Thus, these coercive tactics are being used to get the new $3.50 tolls to levied as of this coming January.

          As late at 2008 the average tolls on the toll road were .61 cents. MWAA has increased them to $3.50 to pay for the enormous Silver Line cost overruns due to MWAA’s mismanagement of construction. As mentioned, the latest toll increases also go in part to pay for the Dulles Loop Road, a project that has nothing to do with the Silver Line, and everything to do with the Airports Air Cargo Hub.

          The larger point is that MWAA and the Virginia Transportation Department have a growing vested interest in traffic congestion. It needs traffic congestion to keep raising tolls to pay for its wasteful habits, and keep building sprawl further out into Loudoun County.

          Thus traffic will remain forever congested unless the vicious circle be broken and replaces with better development practices. Its a vicious circle that has been ever expanding across Northern Virginia, creating ever more congestion ever farther out as far back as the early 1980s.

          In short, I believe that the State, MWAA, and special interests, need now to keep driving commuters into daily traffic jams into order to keep doing the kind business that gets politicians the money they need to win elections, and keeps their campaign contributors wealthy

          It this were not true, then northern Virginia traffic woes would have been solved decades ago.

          1. typically toll roads have a max revenue ability. this is the point where tolls get high enough that people start using other means and the total revenue actually drops.

            this is a fundamental calculation for prospective toll roads to see what the inflection point is between “free” and the top toll that can be charged before volume starts to drop off.

            Not sure what they point is on the DTR but pretty convinced that MWAA will not stop increasing tolls until they reach this inflection point.

  3. DJRippert Avatar

    My, my – what intelligent commentary from Mr. Bottoms. Roads are more subsidized than mass transit? Rail covers 54%, roads cover 51% and buses cover 28%?

    My my – one would never guess from Jim Bacon’s commentary that buses are the most subsidized of the three major forms of ground transportation. One would never guess that rail was the least subsidized. Facts are stubborn things.

    Someday perhaps, Jim wil propose his approach to eliminating all forms of subsidy for transit. The only real answer to that question for roads is to put one of those little GPS black boxes inside every vehicle that uses the roads. Personally, I think that’s a very good idea – AS LONG AS THE FUNDS RAISED GO BACK TO THE LOCALITY WHERE THE DRIVING OCCURRED.

    Please don’t tell me you can support “user pays” without “provider gets”. The last thing we need is to send any more money back to Richmond for the asshats to “allocate” using the “Star Scientific formula”, if you know what I mean.

    1. PhilBest Avatar

      Your “roads” versus “rails” comparison is false. You are not comparing “roads” and “rails”; you are comparing “roads” and the total commuter rail system including rolling stock, energy costs, operating costs, staff, etc etc. The correct comparison would be between the total system of “automobility” and the total system of commuter rail.

      The subsidy cost of roads is about 2 cents for every person mile of travel on them. The motorist happily pays their own way on the vehicle, the fuel, the repairs, the insurance – which is some 20 cents upwards per mile. The subsidy cost of “automobility” as a system is well under 5%. “Externalities” might be as high as 20% of systemic cost if you are as biased as possible against cars.

      There would not be a single public transport system in the world that would come under 10 cents per person mile travelled on them for overall cost, and the very few rail based systems that actually cover their costs in fare revenue are approximately this efficient.

      Of course 10 cents per person mile of travel is a low cost. But MOST commuter rail systems in the world cost at least 20 cents per person mile, equivalent to the cost of an efficient small car that can go anywhere. The most mismatched rail based public transit systems can cost more than an SUV per person mile of travel – “investments” in systems like this is sheer lunacy.

      I dispute your assertion that rail “covers 54% of its costs”. Operating costs only, I will bet. There is no comparison between the rate of payback on capital investments in roads, versus capital investments in rail transit.

      Where rail based public transport systems make economic sense (eg in “global” cities), they would be able to pay their own way via fare revenue and contributions from the benefiting property owners. Everywhere that rail based public transport systems make economic sense, riders incomes are well above national average, and their trip destinations are some of the highest value property on the planet.

      If the costs cannot be covered this way in a given city, the transit system should be 100% bus-based, end of story. There is no social justification whatsoever for subsidy to rail based public transport from nationwide taxpayers, nationwide or regional car drivers, regional taxpayers or local taxpayers, or local bus riders.

      It is “cargo cultism” to assume as some activists seem to, that putting in a rail based public transport system will “make our city more like London or Hong Kong or New York”. Those cities are what they are because they are clusters of economic activity of a kind of which there are less than a dozen worldwide. They should all have paid for their own mass transit systems, but in some cases, NYC especially, a massive rent-seeking grab has been successful at the expense of car drivers paying petrol taxes.

      The property rent-seekers dislike buses because their routes can be changed. They do not care if the cost of a rail based system is $5 for every $1 of benefit as long as they are capturing the $1 and paying less than $1 of the $5.

      1. DJRippert Avatar

        Yoo hoo … Phil! None of those numbers are mine. I simply quoted the numbers from Jim Bacon’s article. In that article he quotes Glen Bottoms.

        Now, Jim Bacon hates everything. He’s like the Mikey character in the old Life cereal commercials. “Mikey won’t eat it. He hates everything.”. So, when Bacon quotes a guy who likes rail transit, I listen.

        You have one opinion, Glen Bottoms has another. Frankly, I thin the narrow opinion you and Jim Bacon have regarding rail transit is sad. I lived off of Wilson Boulevard in Arlington in the early 1980s when the newly opened Metro line turned a dump into one of the most valuable pieces of real estate in the state. You can argue to your heart’s content but it happened as all of us living there saw firsthand.

        1. reed fawell III Avatar
          reed fawell III

          Don –

          What Phil is missing is likely the idea that if you took the subway out of the BR Corridor, you could replace it’s critical function of promoting growth in BR Corridor with cars and roads. And, of course, this single use substitution would not work for a whole variety of reasons inherent in the physical place and the innate behaviors of those who us it daily. And of course the RB subway ripples wealth throughout the region. And its particularly critical the flaws that were built into system a far away as Shady Grove Maryland.

          In any event, math applied to individual modes of transport alone and in the abstract, does not explain what is going on in BR.

          The magic of RB corridor is how of the different modes of transport blend together, creating a synergistic whole far larger than its parts. This cannot be reduced to math. It’s where art and craft, judgement and experience, come into critical play.

          One lesson is I suggest: in such cases of complexity involving the interplay of various transport modes and subjective behavior of human users, never rely on math alone while at same time holding everything else at work as a static equal. Streets, cities, towns, mixed uses, life does not work that way, and cannot be explained, much less, predicted that way.

          Like, you said, some things must be seen with ones on eyes, however trained or untrained those eyes might be.

          1. DJRippert Avatar

            C’Mon, Reed. Yes – it took good planning to get the most from Metro. Arlington exhibited that good planning while Fairfax County, for many years, did not. However, even Fairfax County has gotten into the act of late. The scattered development around the Dunn Loring Metro station in Merrifield is finally being replaced by much smarted mixed use development. Even on Huntington Avenue, where I grew up, the Huntington Metro is starting to force more intelligent development.

            If you take the 10 places in Northern Virginia with the best mixed use development patters, nine are near Metro stations. Coincidence?

            How much more money in property taxes does Farifax County get from the area around the Dun Loring Metro station then they got 20 years ago? Why doesn’t that count toward the benefit of mass transit?

            Meanwhile, there are plenty of areas in Northern Virginia where there are no nearby Metro stations and development is scattered, traffic is a mess, etc. McLean is one such area. While I like McLean a lot (and lived there for several years) it does not exhibit efficient development patterns.

            I know the anti-mass transit crowd hates to admit this but Transit Oriented Development is working in Northern Virginia.

          2. reed fawell III Avatar
            reed fawell III

            Don – best I can tell you’re preaching to the choir.

            Its not whether one is better than the rest – roads, subways, trolley, whatever- its how all the many tools are selected and used to put the whole thing together. The more tools that are selected with imagination and then used with skill, the more juice you put into what’s built.

            Most of our mistakes come from common human error, usually no one is looking at the big picture, then enforcing with conviction the proper execution of detail.

            Screw ups are part of life. But now far too many are never held accountable, much less required to perform for excellent results. So folks make screws up, and sloppy self-serving process a goal and a habit, and are never held accountable for it. In fact often they are rewarded for both. Hence we never learn. And now we are well into some 40+ years of this stuff. And its now overwhelming us, despite hopeful exceptions.

  4. we have lots of numbers here and it would be nice to see some background on how they were derived.

    for instance, the mileage reimbursement rate is

    55.5 cents per mile for business miles driven
    23 cents per mile driven for medical or moving purposes
    14 cents per mile driven in service of charitable organizations

    from the IRS: ” The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

    so it would be good to provide the source of the asserted data.

    there’s more reading at the IRS site related to computing the costs of operating an auto including the Modified Accelerated Cost Recovery System.

    my own prejudices are that wheeled mass transit vehicles are likely more cost-effective than rail, and more flexible in adapting and evolving whereas rail tends to rely on the location of the rail to drive development.

    rail is permanent infrastructure … buses are not.

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