fare play: trading off profitability and equity

This string (and here and here) about the profitability of public transportation is garnering some attention.

It’s timely, too, as we continue to face the fake-choice between revenue increases and service cuts in the NOW URGENT ALL OF A SUDDEN NOW NOW need to achieve a massive deficit reduction in the face of a dismal economy.

My personal leanings aside, the contrast between profit and public use as the objective of transportation systems is well worth examining.

The gist of both arguments is as follows:

PROFIT: David Levinson

Mass (or public) transit agencies are transportation organizations first, not welfare organizations. They should be considered public utilities rather than departments of government, which provide a useful service for a price to their users.

My thesis is that the local transit systems should identify and propose to retrench to the financially sustainable system, and present local politicians with a choice.

If local politicians want additional “equity” services, they should be presented with a cost of subsidy per line, and then can collectively choose which lines to finance out of general revenue, as this is primarily a welfare rather than an transportation function. In other words, public transit organizations would present the public with a bill for these money-losing services (the subsidy required in order to at least break even on operating them (i.e. the difference between their revenue and their cost), and not be expected to pay for them out of operating revenue.


Currently, transit agencies are not trying to break even, so they are not failing if they don’t.  If we propose a free-market view in which transit should be breaking even, well, I’d like to see this as well in a perfect world.  But that would be a world in which government isn’t heavily subsidizing transit’s competitor, the private car — not just through road expenditures but through such interventions as minimum parking requirements and petroleum-based foreign policy.  I would further suggest that current environmental crises argue for government to be biased away from the private car and toward modes that do less environmental harm, and that subsidies toward transit (i.e. accepting that transit “loses money”) are one valid way of doing that.

Profit and equity are on the opposite ends of the spectrum; yet there is commonality between these views as Walker acknowledges. Yes, transportation systems should work to provide transit to where jobs are, not being afraid to shed lines that are shedding public funds. In this sense, Levinson is perfectly correct, and a profit-driven transit model would be certain cull the unprofitable in order to stay in the black. However, Walker is also right. The demand for transport is  extremely distorted by heavy subsidization of private cars and the gasoline that powers them. Until transit agencies can tap into this projection of actual demand, how can profitability be evaluated? Perfect substitutes are so readily available that projecting demand (as has been found by no congestion alleviation with new highways) remains difficult.

Lastly, neither case considers transportation infrastructure as a driver of profitability. New transportation opens up new access to jobs, housing, retail, etc. If transit agencies were to evaluate their effectiveness only based on existing profit, they might miss the opportunity for new lines. For instance, on the South side of Chicago, I would guess (though I’d really like to Know This Fact and not be guessing), that many transit lines do not pay for themselves.   I am guessing that the current bus lines that serve the area (dependably a bit late, dependably a bit longer of a wait than you really want to spend being wind-whipped) do not generate the sort of high demand “profitable” line that would be used under Levinson’s model to make the case for the possibility of sustainable transportation. Some lines going into the downtown might, out of sheer necessity for many who need to get to and from work, but I’d guess that most commuters take the faster, more dependable Metra rather than depending on less reliable buses if they can afford the slight cost premium. The potential for profitability is clear: transit below Congress Ave. serves a constituent base that probably owns fewer cars, and is more dependent on the public transit system. To anyone familiar with the South Side, an El stop would be transformative, but I’m not sure that the current demand would be capable of telling the same story.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s