Getting public transit off life support
The fiscal cliff will hit major transit agencies next year. Here's how they're preparing.
Happy Finance Friday, readers!
Transit use was on the decline by 2019, but the pandemic absolutely gutted ridership. While other forms of transportation have rebounded, the rise of remote work has left a permanent mark on public transit. Whether we call it an existential crisis or an inflection point, it’s evident that the way transit is funded and operates is changing.
This week, I'll touch on some key takeaways from a panel event featuring transit agency operators, experts, and former U.S. Transportation Secretary Anthony Foxx.
How transit agencies are managing billion-dollar deficits
Since dropping to a devastating 19% of pre-pandemic levels in April 2020, public transit ridership has recovered to more than 70% of pre-pandemic levels, according to the American Public Transportation Association (APTA).
Among the various transit options, rail, which is the most expensive to operate, is suffering the worst, while buses (cheaper to run) are doing far better. This dynamic has created a rigid situation when it comes to operating deficits because, while bus routes are easier to adjust to changing commuter patterns, rail is locked into the 20th Century hub-and-spoke model.
Transit agencies received billions of dollars in federal relief funding in 2020 and 2021, but those funds are running out next year while the multi-million dollar operating shortfalls will continue.
The panel discussion, hosted by the Volcker Alliance, included state transportation and legislative officials* from California, New York, and Pennsylvania. While budget shortfalls and the fiscal cliff are chief concerns, workforce retention and perceptions of safety are also challenges to operations.
Caltrans
Budget shortfall: $ 6 billion over five years
Ridership recovery: 67% (only 40% in San Francisco Bay Area)
New York Metropolitan Transportation Authority (MTA)
Budget shortfall (formerly): $600 million this year; $3 billion starting in FY 2025.
Ridership recovery: 70% weekday service; 80% weekend service
Southeastern Pennsylvania Transportation Authority (SEPTA)
Budget shortfall: $50 million this year; 240-$270 million annually starting FY 2025.
Ridership recovery: 62%
Despite the slow recovery, officials from the agencies framed the challenges as a time of experimentation and more collaboration between state and local governments to solve the issue of mass transit. “Cities... and transit are intrinsically related,” said Janno Leiber, CEO of the MTA. “We know that our futures are tied together; that the stronger our transit system is, the stronger the region.”
Indeed, MTA just recently reached a deal that was two years in the making to close its budget shortfall. The deal includes $1.1 billion raised from an increase in the state's Payroll Mobility Tax and $165 million from New York City to cover the cost of paratransit.
SEPTA is lobbying for increased funding, redesigning its bus network for better efficiency, and has instituted an employee-led efficiency savings initiative that has already identified $38 million in annual savings.
California’s budget deal includes $5.1 billion over four years for Caltrans, which includes $1.1 billion from state cap-and-trade funds and allows $4 billion previously set aside for capital construction to be used as operating funds.
For his part, Foxx suggested that in addition to state/local sources, the federal government should continue to “find ways to generate operating support for transit agencies. While perhaps not as generous as the COVID relief package, I think given the circumstances, any relief would be absolutely helpful.”
An on-demand transit future
Foxx also said he’d like to see transit agencies adopting innovations that mimic what the private sector is doing in the on-demand economy.
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