Should the Public Pay for Unprofitable Transit Routes? – Commute – The Atlantic Cities

Eric Jaffe at Atlantic Cities writes: Should the Public Pay for Unprofitable Transit Routes? – Commute (responding to my previous posts).
I am not sure he frames the argument right. In my view is as much about separating the transit agency from the welfare function as about whether unprofitable routes should be dropped. That is, transit agencies don’t do well as dual purpose agencies. Organizations, like products perform better with clear missions (Shimmer is a floor wax and a dessert topping) .
It would be much cleaner to give them a single mission: provide these routes and make money/break even. They would make money from customers on profitable routes, and from society at large on welfare routes that society explicitly chooses to subsidize despite their inability to make money. The operating agency should not be making welfare decisions, that is better done through an explicit public policy process.
Some worry about the explicitness, feeling (and I am not disputing) that if the money-losing routes could not be hidden, they are more likely to be cut.
Jaffe notes the public good argument. But ‘public goods’ are both non-rivalrous and non-excludable. Clearly transit is excludable, you pay a fare to use it. If it is congested, it is also rivalrous. Thus transit is actually a fairly clean form of ‘private good’ in the economic sense. There is obviously a social service aspect to this, I am suggesting to separate that out.
Jaffe also notes that streets, roads, and highways are subsidized. I don’t disagree there is some amount of cross-subsidy in the system (urban interstate travel subsidizes rural roads), but the user fee (i.e. the gas tax now, or even more precisely in the future, a mileage fee) pays for major roads, and could easily be extended to pay for all roads collectively (some might still not generate enough revenue (i.e. VMT) to be worth supporting). This involves raising the gas tax, which is somehow politically difficult in the US (although would be less so if coupled with a decline in the property tax and other taxes that also pay for roads). However were it raised, there would be sufficient funds to pay for the system collectively. That said, roads have benefits beyond auto drivers, everyone uses roads, including transit users, so it is specious to make this comparison. Property taxes are a second best solution, but is loosely associated with non-user benefits of road use given the user fees are too low on local streets.
I suspect no transit fare increase would be enough to pay for the entire fixed route transit system as we know it in the US, i.e. the demand would diminish sufficiently so as to keep the maximum revenue collected below what is necessary for the full transit system. This is why I suggest separating it out. There is a profitable core. We should try to figure out what it is.

Linklist: October 3, 2011

AFP at Google News London on war footing for Olympic transport battle “The eye-watering size of the transport budget for the Olympics speaks volumes about the size of the task — it is £6.5 billion (7.5 billion euros, $10 billion), compared with a budget for the Games of around £9.3 billion, not including transport.”

Kurzweil: Nissan teams up with EPFL for BMI-assisted driving “The car of tomorrow will scan your thought patterns and predict your next, says Nissan, which is collaborating with the École Polytechnique Fédérale de Lausanne in Switzerland (EPFL). Brain machine interface (BMI) systems developed by scientists at EPFL already allow disabled users to maneuver their wheelchairs by thought alone. “The idea is to blend driver and vehicle intelligence together in such a way that eliminates conflicts between them, leading to a safer motoring environment,” said Professor José del R. Millán, project leader.”

CNET: Ig Nobels honor study of horny beetles, why we sigh “And of course there are the tongue-in-cheek awards, including the public safety prize for experiments in which someone tries to drive on a highway with the sun visor flapping down over his face, blinding him. The mayor of Vilnius, Lithuania, Arturas Zuokas, got the peace prize for “demonstrating that the problem of illegally parked luxury cars can be solved by running them over with an armored truck,” according to the Ig Nobel statement.” hat tip: David A. King’s blog

Bloomberg via Strib: As cancellations take off, fliers have fewer options : “United Continental Holdings, Delta Air Lines and other large carriers have scrubbed nearly 104,000 flights this year through Sept. 21, or 2.36 percent of the scheduled total. A full-year rate at that level would be the highest since 2001, according to the federal Bureau of Transportation Statistics.”

Mission exempts churches from ‘driveway tax’

Brad Cooper at the Kansas City Star reports on their Transportation Utility Fee: Mission exempts churches from ‘driveway tax’ :

Mission is giving in a little on an innovative, but heavily criticized way to fund road work.
The city this week agreed to exempt churches and some non-profit groups from a transportation fee that was intended to collect money for roads based on properties that generate the most traffic.
Touted as an alternative way to pay for roads short of raising property taxes, the fee set off a firestorm of complaints last year from critics who labeled it a “driveway tax.”
It prompted two churches — First Baptist Church of Mission and St. Pius X Catholic Church in Mission – to bring a lawsuit to halt the fee. The churches were represented by the Alliance Defense Fund, an Arizona legal organization that advocates for religious freedom.
The churches accused the city of violating state law by imposing a tax dressed up as a fee. Their lawyer equated the fee to taxing churchgoers.
City Administrator Mike Scanlon said today that the council agreed to exempt the churches if the Alliance Defense Fund dropped the lawsuit. The ordinance approved by the City Council takes effect Oct. 11. Scanlon declined to comment on the lawsuit.
Last year, Mission became the first city in Kansas — and possibly in the Midwest — to impose what is called a transportation utility fee on property owners to help pay for roads.
The fee is based on how much traffic each property produces. It shifts the burden for financing roadwork away from single-family homes that may not generate a lot of traffic, to properties such as box stores and government offices, which generate more traffic.
Homeowners will pay $72 a year in fees while the local Target store will pay about $46,000. According to the suit, First Baptist has been assessed $970.77 and St. Pius $1,685.19.
The fee generates about $830,000 a year. The decision to exempt the churches and some non-profits such as charities will cost the city about $70,000, Scanlon said today. Other non-profits, like government buildings, would still have to pay the fee.
The fee is intended to help the city bankroll a 10-year, $30 million plan for improving city roads. The city also plans to ask voters this fall to extend a quarter cent sales tax to contribute to the road plan.
The transportation fee coupled with the sales tax could bring the city about $15 million. Mission will count on other sources, like the state and federal governments, to help pay for the rest of the road plan,”

See our paper: Junge, Jason and David Levinson (2010) Economic and equity effects of transportation utility fees. Presented at 89th Transportation Research Board Conference, January 2010, Washington , DC. Journal of Transport and Land Use (in press).

Disclosure: I did a very very small amount of consulting for Mission KS appearing via Skype at a workshop on this fee about a year ago.