Business Logistics 420 Public Transportation

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Business Logistics 420Public Transportation

• Lectures 9 The Case for Public Support of
  Transit

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Lecture Objectives

• Understand of the case for public support of
  transit and the related issues
• Appreciate that transit funding is a policy
  choice not a mandate

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Questions that Must Be Answered

• Why subsidize transit?
• How much subsidy should be provided?
• Where should the money be obtained?
• Who should provide the subsidy?
• How should the funds be provided?
• To whom should they be provided?

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Why subsidize transit?

• At any level of government
• non-user benefits (externalities)
• income redistribution (equity)
• At the federal level
• strong cities are necessary for a strong nation
  and transit is necessary for a strong city
• federal government has easier access to funds
  than local/state governments
• prevents tax avoidance

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Benefits/Cost of Transit

• Goal -- to measure the benefits of transit to
  individuals and society and compare to the
  private and public costs
• Very difficult to accomplish -- no universally
  agreed upon methodology
• FTA staff members Lewis and Williams tried in the
  book Policy and Planning as a Public Choice Mass
  Transit in the United States (1999)

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Public Choice Transit Benefit Matrix
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Public Choice Transit Benefit Matrix (1990-93
savings)
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How much subsidy should be provided?

• No magic answer or ideal amount
• Usually the goal is to at least preserve existing
  services
• Depends on local community goals

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Where should the money be obtained?

• General vs dedicated taxes
• Tax source -- income, sales, property, fuel,
  other?
• Special issue -- the pros and cons of taxing
  highway users -- gas tax for transit

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Who should provide the subsidy?

• The users?
• Government
• Federal, state, local
• Question of what proportions -- a policy issue
• Private Sector

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How should the funds be provided?

• Categorical vs block grants
• Mode specific grants vs. general transportation

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To whom should they be provided?

• Provider side subsidy -- to the transit providing
  agency, e.g., SEPTA, CATA
• To the user -- user-side subsidy
• can target users needing the financial assistance
• can tailor subsidy to need
• can encourage competition and quality service
• Provider-side subsidies most common
• easiest to administer
• provides certainty of service

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Study Questions

• What are the key issues/questions that must be
  addressed when evaluating the desirability of
  transit subsidies and the methods used to provide
  them?
• What is the primary case used to justify transit
  subsidies?
• How is cost sharing of transit costs determined
  between users and various levels of government?

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Study Questions (Continued)

• What is the difference between categorical and
  block grants?
• What are user side subsidies and what are their
  advantages and disadvantages relative to provider
  side subsidies?
• What are the primary categories of benefits
  identified by Lewis and Williams?
• What is your assessment of their approach and the
  validity of their estimates?