THE IMPERATIVE FOR REFORM
Number 14 August 1997
Adapted and Updated from a 1992 Presentation in Columbus, Ohio by Wendell Cox
There are real problems in transit. Air pollution and traffic congestion are largely related to peak travel periods --- to the work trip. And public transit's work trip market share continues to decline. Between 1980 and 1990, transit's work trip market share declined by 17 percent.
But it is more serious than that --- Among the nation's metropolitan areas of more than one million population: Transit's market share declined in 36, was stable in one, and increased in only two. The decline was more than 30 percent in 19 metropolitan areas.
- Columbus was down 36 percent
- Cleveland was down 41 percent.
- The purpose of public expenditure in transportation
- What transit policies are not working and why
- What transit policies would work better
- The principles we should observe to reach our objectives.
In all of this discussion, we should keep in mind the realities of our national economic situation.
It is not easy to raise taxes, and it is better to not raise taxes than to raise taxes. Why? Because all public revenues are generated by the private sector, and higher taxes limit economic growth, and the ability of the private sector to finance the public sector.
There is more to public services than transit and highways. There is increasing competition for scarce public funding, as existing services require more funding and new public service needs are identified.
In short, the demand for public services is great, but the supply of taxes is limited.
In this environment we hear calls for increasing public investment, especially in infrastructure. It is important that any public investment in infrastructure be productive.
The test of public investment in infrastructure is whether or not the economic benefits of a project exceed the costs.
If the costs exceed the benefits, then we are not dealing with public investment, we are rather dealing with consumption. Unproductive public investment (consumption) in infrastructure is counter-productive, creating future costs. It would be more productive to simply dig a pit and then to fill it up --- at least that way there would be no continuing cost.
THE PURPOSE OF PUBLIC EXPENDITURE IN TRANSPORTATION
The purpose of public expenditure in transportation is to provide the greatest mobility in return for the scarce public funding. With the problems air pollution and traffic congestion, we should also make every effort to increase vehicle occupancy ratios --- the number of person miles per vehicle mile. This is where transit comes in --- Transit can be an efficient means of moving more people with fewer vehicles. We should take effective actions, therefore, to entice automobile drivers out of their cars and into transit.
But the reality in transit falls far short of the theory. It is no easy matter to substitute transit usage for car usage. If we are to accomplish that objective, then we must understand what the potential customers of transit --- the automobile drivers --- want.
Frequency of Service: Customers want to have the ability to travel whenever they like. That means that service must be frequent, and it must be available virtually all day.
Speed: Customers want to get where they are going as quickly as possible.
WHAT TRANSIT POLICIES ARE NOT WORKING, AND WHY
About a year ago, Jean Love and I published a well received paper, False Dreams and Broken Promises: The Wasteful Federal Investment in Mass Transit. Ms. Love subsequently authored a similar article in Across the Board: The Conference Board Magazine (July/August 1992). In the earlier paper, we reviewed a number of myths that underlie transit policy, while precluding adoption of effective strategies. Today, I'll update review some of those myths to demonstrate the futility of present transit policies.
Myth #1: Transit Funding is Declining
You have all heard this one. During the Reagan years and the Bush years, federal funding for transit plummeted, restricting the ability of transit to maintain present service levels, much less expand. And it is true that between 1980 and 1990 federal funding declined in inflation adjusted terms. Reduced federal funding was an element of the "New Federalism," in which greater responsibility for funding many programs was transferred to state and local governments. And with respect to transit, the "New Federalism" was a great success --- because state and local governments replaced each $1.00 of lost federal funding with more than $6.00. Indeed, compared to major categories of public services at the state and local level, public transit received a larger percentage increase. The 1980s were not a time of fiscal distress for transit, the 1980s were a fiscal cornucopia.
Myth #2: Higher Transit Subsidies mean More Service
It is not unreasonable for people to think that higher taxes for transit bring a corresponding increase in public transit service. Unfortunately, the reality is quite different. Since 1970, public transit subsidies have increased from near zero to nearly $15 billion annually. Over that period, public transit costs per mile have increased at nearly double the inflation rate. But they shouldn't have increased even as much as inflation. In the private bus industry, costs per mile declined relative to inflation. For each new $1.00 in revenue, transit produced less than $0.25 new service (inflation adjusted). Transit is like a leaky bucket. You fill it up at the stream, and by the time you get back to the garden, most of the water is gone. If the bucket were not leaky --- if transit costs had been kept under control, double the service level could have been produced in 1990 without additional public revenues.
This dynamic is well illustrated by the recent experience in Los Angeles. In 1990 the voters of Los Angeles County approved a new tax that was to generate $160 million annually for higher levels of transit service. Within 18 months of voter approval, the county's largest transit system, the Southern California Rapid Transit District was seeking approximately $120 million of the expansion money to support pre-existing levels of service. So far they have been given $80 million, and a mechanism has been established to allocate the balance. Doubtless there will soon be calls for a new tax to add the service that was to have been added by the 1990 ballot initiative (which incidentally should have been financed by the proceeds of a 1982 tax increase, previously consumed by cost escalation).
Myth #3: European Transit Policies Should be Adopted Here
Some have suggested that we should emulate the "successful" transit policies of Europe --- that we should raise gasoline taxes so that a gallon costs $5.00 and that we should build extensive rail systems.
It is important to understand, however, that there are important differences between Europe and America. American urban areas are decentralized, with multiple centers, while European urban areas typically have a single dominant commercial center. A single commercial center provides the concentration of destinations that permit high transit ridership. But we are much different. For example, Joel Garreau's Edge Cities indicates that the Washington area --- home to the nation's most successful new rail system --- has 16 commercial centers ("Edge Cities") that are larger than downtown Portland, or Columbus. Rail transit is simply incapable of effectively serving such dispersed centers. This is clearly demonstrated, not by theory, but actual experience in city after city.
But if American urban areas are characterized by a lack of concentrated destinations, they are even more characterized by an absence of concentrated origins. US urban densities are between 30 percent and 90 percent below those of European urban areas. Moreover, US urban densities are minuscule compared to the Asian cities. For example, Hong Kong is probably the only city in the world in which transit really pays for itself. Hong Kong has 275,000 people per square mile. That compares to the 2,000 to 5,000 typical of US urban areas. At Hong Kong's population density, the combined metropolitan populations of Cleveland, Cincinnati, and Columbus could be contained within three miles of the Ohio Athletic Club. And Los Angeles' 15 million people could be accommodated within 7 miles. At Paris metropolitan densities, the population of combined metropolitan populations of Cleveland, Cincinnati, and Columbus would require no more than the land within six miles of this building.
But it is not just that America is not Europe, it is that Europe is becoming more like America. Public transit market share is declining or stable in most large European cities. Automobile usage is expanding rapidly, as Europeans become more affluent. Despite $5.00 per gallon gasoline, Europe is using automobiles more, and is suburbanizing. Finally, the streets of European cities are at least as congested by automobile traffic as those of American cities.
Myth #4: Gridlock
There is no question that we have too much traffic congestion. Yet there is a good deal of hype and hysteria with respect to traffic congestion. True, Los Angeles and San Francisco have serious traffic congestion. But there is more to America than Los Angeles and San Francisco. I recall being asked by a talk show host in Salt Lake City about solutions to "gridlock." I responded by recounting that I had been able to drive on a freeway through the central business district of the city during the morning rush hour without dropping below 50 miles per hour. There are more urban areas like Salt Lake City's than San Francisco.
As Alan Pisarski has put it, the American highway system demonstrated a high degree of resiliency during the last decade. The number of single automobile commuters increased by more than a third --- by 22 million. At the same time there was virtually no new construction of urban freeways. Yet the average work trip time increased by only 42 seconds. 42 seconds is less time that it would take to walk from your car in a park and ride lot to board a rail system. Who would notice going to bed 42 seconds earlier, or rising 42 seconds earlier in the morning. And with the slower anticipated economic growth of the 1990s, it is doubtful that things will get worse very soon.
Myth #5: The Love Affair with the Automobile
We have often heard about the American love affair with the automobile. If, indeed there is a "love affair" with the automobile, then we should first apply the remedy to those whom one might hope would be immune --- transit managers. Let us take away not only their corporate automobiles, but also their personal cars. Let them go to work, go to meetings, and do their shopping by transit. If transit managers can live without automobiles, perhaps there is hope for the rest of us. But that won't work, because transit doesn't go where transit managers need to go, and it doesn't go where the rest of us need to go either.
Moreover, a number of reports have been published that are critical of the automobile. Usually they attribute all sorts of "soft costs" to the automobile, to demonstrate that it is highly subsidized. My favorite is a report that attributes $68 billion annually to the automobile in law enforcement and fire protection costs nationally. The problem is that, according to the US Department of Commerce, all of the state and local expenditures for fire protection and law enforcement for all purposes doesn't even reach $45 billion. At the state and federal level, user fees pay more than the cost of building and maintaining the highways, and pay much of the cost of related law enforcement. It is true that local streets are subsidized through general fund revenues, but a careful review of history will reveal that local streets preceded the automobile (by at least two or three millennia).
It is an over-simplification to attribute America's low level of transit use to the "love affair" with the automobile. Our use of automobiles has to do with necessity, not with ardor. Our urban areas are dispersed and decentralized. The only transportation system that can possibly deliver us to our work in a reasonable period of time is the automobile. It is not surprising, therefore, that automobile commute trips take, on average, half the time as transit commute trips.
Myth #6: New Rail Systems Will Reduce Traffic Congestion and Air Pollution
The potential for rail systems to reduce traffic congestion and air pollution has gained wide publicity. We hear about how one rail line can carry the same number of people as eight, 16, or some other impressive number of freeway lanes. There is just one catch --- the people have to ride it. Too often transit planners have gotten demand and supply mixed up. A simple example illustrates the point.
Tomorrow, more than 90,000 people will fill Ohio Stadium to capacity. This crowd will converge on the stadium not because of the decision, made decades ago by the University regents, to build a large stadium --- the stadium will not be filled simply because it is there. Rather, Ohio Stadium will be filled because something that will happen there attracts a large number of people --- namely the football game between Ohio State and Michigan. It is no different in transit. The supply of transit seats (or standing room) drives demand no more than the supply of football seats drives football attendance. Transit, like a football stadium, is not an end in itself, it is the means to an end.
It would be as valid to point out that a single five mile long freeway could accommodate all of metropolitan Cleveland's daily transit ridership in 12 hours, Cincinnati's in six, and Columbus' in three.
As time goes on, the disappointing performance of new rail systems is becoming common knowledge. Capital costs are routinely higher than projected. Operating costs are routinely higher than projected; and ridership rarely meets projections.
Study after study has shown that urban rail systems attract only 25 percent to 40 percent of their ridership from the automobile. A US Department of Transportation report indicates that
The cost of diverting a single new rider to Portland's new light rail line is $5,000 per year --- enough to purchase a new Fort Taurus for each new rider every three years.
Light rail is particularly ineffective. The best new light rail systems carry fewer riders than productive bus routes. One reason is that they operate too slow --- often no faster than buses. Light rail is the form, but not the substance of rapid transit.
The work trip market share trends in new rail cities is pitiful. During the 1980s, urban rail systems were expanded or opened in 13 cities. Market share declined in 12 rail cities, was stable in one, and increased in none.
Despite building a $250 million light rail line, Portland's work trip market share declined by 33 percent.
Why Transit Policies are not Working
Transit policies are not working, because they are not meeting the needs of potential customers. This is so for two fundamental reasons:
Excessively Expensive Capital Projects: Transit agencies have demonstrated a bias for expensive high capital cost rail systems that are inappropriate to the American urban form. New urban rail systems may meet some needs --- for example they seem to enhance civic pride --- but if the purpose of new urban rail systems is to reduce traffic congestion and air pollution, then don't build them, because they don't that.
Excessive Operating Cost Escalation: Transit costs have risen far more than necessary. They have risen because transit operates as a monopoly, and is not subject to the cost controlling influences of competition. Competition controls costs. This is not a principle of transit, it is a principle of economics.
The lamentable fact is that transit policies are not only not working, but they preclude adoption of strategies that could work. Bad transit strategies crowd out good transit strategies as surely as bad money crowds out good.
WHAT TRANSIT POLICIES WOULD WORK BETTER
There are readily available transit strategies that could improve transit's performance, thereby increasing the likelihood that transit could help reduce traffic congestion and air pollution.
Transit can usually purchase virtually the same or better service from the private sector, through competitive contracting (competitive bidding). Under competitive contracting, the public transit agency continues to decide where services go, how often they operate, fare structures, service standards, and safety standards. Usually the buses look the same, and customers don't notice any difference. In the US, competitive contracting is saving an average of 30 percent, with some examples of up to 60 percent.
Some transit services can be operated without subsidies.
Miami: A Federal Transit Administration report indicates that private unsubsidized vans were carrying nearly 50,000 passengers daily in the early 1990s. Unsubsidized operators carry more passengers than Miami's heavy rail system, built at a cost of more than $1 billion.
You will hear that unsubsidized services will "skim the cream," taking profits from public transit services. That was a fine argument in the years before extraordinary transit cost escalation. There is no longer any cream to skim. And, there is no question that public transit agencies dedicated to the public purpose will find ways to coordinate public and private services.
Highway Based Transit
Busways can do anything that new rail systems can do.
Ottawa, Ontario: A single busway carries 200,000 daily.
Northern Virginia's Shirley busway and HOV lane carries more riders than any heavy rail line carries into the Washington from Virginia.
2. Busway construction costs per rider average one-quarter or less those of either light rail or heavy rail systems.
Kain shows, incidentally, that the construction costs per rider of heavy rail are almost the same as the construction costs of light rail.
Rail advocates often point to the alleged operating cost savings attributable to rail --- theoretically achieved by reducing labor costs. Where rail operating costs appear to be lower than bus operating costs, you can be assured that the bus service is not being competitively contracted! But even if we could take the estimates of rail advocates at face value, it is impossible that the minuscule operating cost savings could negate the massive capital costs.
One of the disappointing findings from the 1990 US Census is that car pooling dropped substantially. However, it must be noted that little, if any, investment was made in facilities to encourage car pooling. Instead we were spending billions to build rail systems that are incapable of attracting large numbers of automobile drivers.
There is a fundamental reason for the superiority of busways and HOV lanes in relation to new urban rail systems --- it has to do with corridors. A rail corridor is very narrow. To commute by rail, the passenger must either live within walking distance (live inside the corridor), or must drive to a park and ride lot or ride a connecting bus. The transfer from automobile or bus to rail takes time, and is partially responsible for the inferior travel times characteristic of rail. On the other hand, busway and rail corridors are much wider. A bus may circulate in a neighborhood, and then get on a busway, providing a quicker trip by eliminating the need for a transfer. Similarly, a car pool can originate miles from the HOV lane, enter the lane and provide a quick trip because no transfer is required.
There is much to be said for highway based rapid transit --- busways, HOV lanes, and transit lanes on surface streets.
What do you call a system that 85 percent of workers --- 100 million people --- use every day? You call it mass transit. It is the automobiles on our highway system. We already have made the capital investment. We already own the vehicles. All we need to do is use what we've got better. No strategy other than a highway based strategy can possibly solve the problem --- unless we want to undertake a coercive policy of moving people back into dense central cities.
With all of this in mind, then, I suggest that future public transit policies must be based upon the following principles if there is any hope for transit to reduce traffic congestion and air pollution.
Customer orientation: Public transit strategies must be customer oriented. Customers must be attracted out of automobiles, not coerced. And coercion is not an option, and for any planners tempted to think that it is, you can bet that it would be soon followed by a populist revolt that would dwarf the tax revolt.
2. Spend no more than necessary: If a service or project requires public funding, then no more should be spent than is necessary. If a lower cost capital project can achieve the same purpose as a higher cost project, then the lower cost project should be chosen. If a private contractor can provide service for less, then service should be contracted.
3. Infrastructure spending should be investment, not consumption: Public funding should be expended on infrastructure only where such infrastructure is productive --- where its economic benefits will exceed its costs.